Direct Labour Organisation, Hackney

– in the House of Commons at 1:45 pm on 6th May 1988.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Durant.]

Photo of Mr Brian Sedgemore Mr Brian Sedgemore , Hackney South and Shoreditch 2:48 pm, 6th May 1988

There was a moment this morning when I thought that 550 MPs had turned up to hear my Adjournment debate. However, the Chamber is emptying rapidly and I hope that that is not a reflection on the quality of this very important debate.

The debate arises from a decision taken by the Secretary of State for the Environment on 31 March when he decided to close Hackney's major new-build direct labour organisation. Only two things of worth can be said about that decision. The first is that it was taken as the House was rising for the Easter recess, and was taken then in order to avoid political embarrassment for the Government. As such, the decision can be described as shoddy and irresponsible and, to use a favourite word of the Prime Minister's, gutless.

The second is that the first news of the closure went not to Hackney borough council or to either of the two hon. Members who represent Hackney but to the hon. Member for Pembroke (Mr. Bennett) in answer to a planted written question, and we must ask the Minister why. I think that the answer is that the Minister is known as a Right-wing political extremist and he needed another Right-wing political extremist to table the question for him. I go to Pembroke regularly, two or three times a year. Farmers there are not very happy with the hon. Member for Pembroke, and neither am I. If he concentrated more on what was going on in that part of the world rather than telling the Preseli district council that it ought not to be getting grants from the Government, he would not get such bad local press.

The background to the debate is that the Minister is known for his fanatical views on privatisation. He is prepared to push privatisation, whatever the consequences and whatever the loss of jobs, the damage to the social fabric, the loss to the public purse or the harm to the integrity of the Department of the Environment and the constitution. The House was shocked to learn that, as a result of his fanatical policies, both personally and in his capacity as Minister at the Department of the Environment, he is under investigation—for misconduct in relation to public funds—by the National Audit Office as a result of a complaint lodged with that office by a member of the Public Accounts Committee.

I have seen the papers, and it is a shocking case. The Minister appears to have put out a private contract to Cluttons for £40.000, when the Property Services Agency in-house could have carried out the contract for £1,300. We are about to witness a major political scandal, just as the closure of the DLO in Hackney is a major political scandal. I would not be surprised if the Prime Minister had to sack the Minister, who is sitting there smiling smugly, before many months are out.

The DLO was closed by a direction of the Secretary of State for the Environment under section 17(4) of the Local Government, Planning and Land Act 1980. No one who knows the Secretary of State's previous convictions will be surprised to learn that the direction was, and is, unlawful, and will in due course be deemed to be unlawful in the courts unless the Government—I do not believe that even this Government can do this—can control the judiciary. It is unlawful in a number of respects, and I hope that Mr. Davies, the assistant secretary who signed the direction, is in the Civil Servants' Box. He may have many virtues, but judicial ignorance accompanies them.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

Order. The hon. Gentleman knows better than most hon. Members that he should not refer to persons beyond the Bar or behind the Chair.

Photo of Mr Brian Sedgemore Mr Brian Sedgemore , Hackney South and Shoreditch

I accept your admonition, Mr. Deputy Speaker. I used to work in the precursor of the Department of the Environment and used to sit in that Box advising Ministers. I will leave the Minister to ponder on the sad judicial fate that awaits him.

I ask the House to bear in mind the Secretary of State's sad history in the courts, because that history is about to be repeated. It makes any godfather in the Italian Mafia appear positively respectable. In 1985, the annus mirabilis of this law-breaking Secretary of State, he acted unlawfully, according to the courts, in the Severn bridge toll case, in the GLC lorry ban case and in the London Regional Transport levy case. In the GLC case, the High Court judge described the Secretary of State's actions as unlawful, irrational and procedurally improper". In another case, Mr. Justice McNeill, in the High Court, described the Secretary of State's actions as, "unreasonable, irrational, unlawful". That is what we shall find in the case of the closure of Hackney's DLO.

When the Secretary of State was at the Department of Transport, his actions were deemed unlawful in no fewer than seven out of 11 cases for judicial review. In December 1986 the Secretary of State had the temerity to come before the House and introduce amending legislation that involved the unlawful expenditure of billions of pounds in relation to the rate support grant. If ever there has been a Secretary of State who has affronted the constitution and the judicial position, it is the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley). He, like the Under-Secretary of State, should lose his job if the Government believe in integrity.

For the moment, it is 600 workers in Hackney who will lose their jobs while the Secretary of State retains his. I understand that 78 per cent. of the 600 are local and that 45 per cent. come from the ethnic minorities. Their jobs will be picked up by privateers, price fixers and jerrybuilders in the private sector. The Minister should explain why he wants to help profiteers, price fixers and jerrybuilders in the private sector as opposed to local people in Hackney.

There are one or two ironies about the Government's decision. First, the direct labour organisation that is to be closed is a profitable enterprise. In the jargon of the Minister, it produces a first-class product. It meets with the wholehearted approval of its customers, who are the tenants who inhabit the 45,000 council properties in Hackney. Even worse from the Minister's point of view is the irony that the movement from losses of £5 million over two years to profit in the succeeding years make it a paradigm for Thatcherism. Why is this paradigm for Thatcherism—a loss-making organisation that has become a profit-making firm—being closed at a time when it is doing everything that the Government want it to do?

The Minister may smile, frown or laugh, and so may the Government Whip, but there has been an admission from councillor Joe Lobenstein—admittedly he is not a very bright councillor, but he is a fairly amiable person—that the organisation has become profitable. He claims that that is a result of Mrs. Thatcher's policies. Joe Lobenstein is the leader of the Conservative group at Hackney, which is a group of two or three. If the Prime Minister has taken action to make the organisation profitable, or has made the council take that action, why has the Minister chosen this moment to close it?

It is ironic that the Minister is seeking to wreck the best trained work force in the building industry of any company, public or private, in Great Britain. Everyone is astonished at Hackney's training scheme. Everyone, except an ungracious and uncivilised Minister, praises it. No one can believe that it is possible to have a building industry in which 200 trainees are employed and work actively on the production or improvement of homes. These trainees have produced some of the best results that anyone can remember in recent years in local government. I defy the Minister to tell the House that the schemes that I am about to mention, which have been built largely by the 200 trainees, are anything other than excellent and fully approved by the tenants who live in the accommodation.

I refer especially to the building of Powell house in 1983. In 1984 there was the building of the Broadway market. The second phase of the Stonebridge estate was built in 1985. The Lauriston road project was built in 1986. The Stonebridge park scheme in the Lea View estate was given an extraordinary reception the length and breadth of the land. It has received universal acclaim. What will the Minister say about that? Will he chose to close his eyes and adopt some myopic Nelsonian stance? Will he choose to look through the wrong end of the telescope and claim to see nothing? The irony is that the Minister claims that he wants to save money, but the truth is that the ratepayers of Hackney will lose vast quantities of money.

In the past three years the direct labour organisation of the borough has made £500,000 in profit. That is not my main argument in its favour. The cost of closing the direct labour organisation and the extra cost of completing the projects will be something like £8·5 million. The Minister should consider that extremely carefully, because if he does not do so, the High Court of Justice will and he will get his just deserts. The figure of £8·5 million is a conservative estimate of the price of retendering some £23 million of work—which will be outstanding on the date that the Minister has said the direct labour organisation can no longer function—together with the cost of closure.

I first came across the Minister when I was a councillor on the London borough of Wandsworth. I know about his pontifical ignorance and his complete lack of knowledge of what goes on in the building industry. If the Minister seeks to close the direct labour organisation, give it a year to shut up, and leave it with £23 million of work outstanding, does he not understand—he should because I believe that he has connections with the building industry—how the price fixing works when retendering takes place? Does he not understand how a cartel in the building industry operates? Does he not understand how monopolistic profits are squeezed out of organisations such as Hackney borough council and will continue to be squeezed out because of the stupid, silly, awful way in which the Minister and his colleagues have gone about this matter? They have no case. If the Minister does not understand that fact it will certainly be understood in the High Court because it is not amused by Ministers who are prepared to pour £8·5 million of public money down the drain.

The Department of the Environment asked for a special report from the London borough of Hackney. I shall not comment on it because it is too long and complicated to go through. Since that report was given to the Department in 1986 it has never—to its eternal shame—questioned the borough about the contents of the report. Why? It has ignored the trend from loss to profit. Why? It has ignored the fundamental reorganisation that has taken place—the reorganisation of working practices and managerial structures—the doubling in profitability, and the changes in industrial relations. Why?

When I worked for the precursors of the Ministers for Housing and for Local Government it was axiomatic that Ministers and civil servants tried to help local government. Now it seems to be some type of bloody warfare. The tenants are on the receiving end of absurd diktats from Whitehall. Why did the Department of the Environment and its Ministers not discuss some of the matters with the borough? If they believe that they have powerful, overwhelming arguments in their favour, why did they not bring them to the fore? There could have been some sensible, rational discussion. Why has reason left the Department since the Government took office in 1979?

One of the answers is again provided by Tory Joe of the borough of Hackney. He gives the game away and tells us why the Minister is acting thus. In the Hackney Gazette and North London Advertiserof 15 April 1988 Tory Joe said: When I was first elected to the Council of the old borough of Stoke Newington in 1962, I argued that building work should be put out to private tender. Now 26 years later, I have achieved my aim. A 26-year-old vendetta has been waged by a rather ageing, pathetic councillor. That is backed up by another vendetta—the ministerial vendetta. The Minister is as aware as every other Government Minister that the building industry is a major contributor to Conservative party funds. That has, sadly, damaged the integrity of this country's constitution.

Many hon. Members will recall what happened over Cementation and the things that went wrong in very high places. That was a shabby act. The Secretary of State for the Environment and the Minister have both acted shabbily as well. I do not mind if the Minister pours £37,000 plus of taxpayers' money down the drain. However, I object to the Minister pouring down the drain £8·5 million of the money belonging to the people living in the poorest borough in the United Kingdom according to the DOE's own indices. It is a public scandal that the Minister is prepared to take and waste their money. Yes, the Prime Minister always says that it is the people's money. Why is the Minister wasting the people's money, our money?

The Minister could not find his way to the London borough of Hackney if he tried. Since there have been ministerial changes in the Department of the Environment the visits have stopped. We used to have some helpful visits from Ministers in the past. However, we get no helpful visits from the Ministers who have taken over.

There appear to be no depths which the Minister will not plumb on the issue of privatisation. There is virtually no tactic to which he will not aspire, no legal or moral calumny in which he will not engage. Under the Minister, local government has become the pits. There is no longer any financial propriety or any sensible local democracy with local decision taking.

I want to make one final serious point to the Minister. The Minister provided a written reply to the hon. member for Pembroke in which he said: The borough claimed to have made a surplus on its major new works account in 1985–86 following losses of £3·2 million in 1983–84 and £1·75 million in 1984–85. My right hon. Friend is now satisfied, however, that the claimed surplus is spurious."—[Official Report, 31 March, 1988; Vol. 130, c. 719–720.] I do not know whether some clever, debating academic from Oxford university has joined the Department of the Environment and thought up using the word "spurious" or whether it was a Minister. However, what does the Minister mean by spurious? I take it to mean false.

I showed the written reply to one or two hon. Members and asked them what they thought the Minister was getting at. I also spoke to some officers of the London borough of Hackney. I was told that they thought that the Minister was claiming that the accounts submitted were dishonest and that the books had been cooked. I am certain that if the Minister has any understanding of the English language he will be aware that many people will have read the reply in that way. I am surprised that answers now appear which seem to suggest that respectable officers with integrity cooked the books or behaved dishonestly.

I do not want to go through the accounts of that period. I am not an accountant, but I am an economist and I understand them pretty well. However, I spoke to the chief executive of the London borough of Hackney and put my points to her. I also spoke to the director of finance and put my points to him. I spoke also to the building manager, Mr. Pat Quinn, about this allegation and to Miss Babcoe the accountant who is now going through the books and revising the profits down, but who still insists that there are profits.

Perhaps the most interesting of those people was Miss Babcoe. She told me that she was going through the books although she had not prepared the original accounts. She said that if she had wanted to cook the books, she could have done a much better job than was alleged to have been done.

There is no question but that Hackney had produced the books as it saw fit and proper with a due regard for the truth of the figures. However, the claim that the figures are spurious shocked me because there is no conceivable way in which the Minister could make that claim as he cannot have seen enough of the books to decide properly. I was further shocked by the fact that the district auditor is looking into the accounts of the period and he must decide in a judicial capacity whether he thinks the figures are spurious. That is a heavy handed way of trying to intimidate the district auditor who is trying to act in a judicial capacity. That is a major scandal which requires answering by the civil servants at the DOE and by the Minister.

The district auditor is a quasi-judicial figure. He is not employed by the Department of the Environment, although the Department may pay his salary. To try to intervene and virtually force the district auditor to declare figures to be other than they are is only the kind of government that we have come to expect from this Minister.

I do not expect the Minister to stand up and behave in a sensible, proper, responsible fashion, and say that he is prepared to reconsider. I merely warn him that the courts of this country may do what the Executive will not.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

Order. I assume that the hon. Lady has the consent of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) and the Minister.

Photo of Diane Abbott Diane Abbott , Hackney North and Stoke Newington

On the night of the general election last year, the Prime Minister said: We must now turn our attention to the inner cities. She has indeed. She has done so rather in the way that Hitler turned his Luftwaffe on the inner cities. The purpose and content of the attention that she has kindly paid us over the past 12 months has been to devastate our communities, and the announcement of the abolition of our direct labour organisation is part of that pattern.

I want to concentrate on three main points. The first is the effect of the abolition of the DLO on tenants. Unlike the Minister, who has sat and giggled and yawned his way through the entire debate, I have first-hand knowledge of the housing problems of the people of Hackney. My caseload at my weekly surgeries is three quarters composed of housing problems, and I know the misery, grief and rage that are caused by problems with repairs and improvements to estates. There is no doubt that the abolition of the DLO will lead to a sharp decline in the service to tenants.

Some improvement schemes may have to he curtailed, and the quality of work will undoubtedly fall. Such estates as the Lea View estate, an award-winning estate in my constituency, illustrate the kind of work that the Minister wants to bring to an end. As my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore) said, the abolition will cost Hackney £.8·5 million—money that could be better spend on building and repairing homes for the thousands in my constituency who experience appalling housing conditions. When the Minister has stopped laughing, he should think on that.

My second point concerns the loss of jobs. I stress that I am talking about an area where the official unemployment rate for adult males is one in four, and it is much higher among young black people and young people generally. It is in the context of that terrible unemployment rate that the Minister proposes to cut 600 jobs at a stroke—jobs that are now done largely by local people, many of them black. Will those people get the jobs from the contractors that he wishes to bring in?

Finally, let me ask the Minister why he is bringing forward the measure. As has been explained, the profitability of the DLO has risen and is rising. It is efficient; it has extremely high standards; it has done award-winning work. It is our contention that the Minister's real reason for attacking our DLO is to help his friends such as McAlpine and Wimpey—major contributors to Tory party funds. If the Government want to help their friends in the building trade, why do they not invest in housing? Why smash up our DLO?

The announcement is of no help whatever and it will not contribute an iota to the terrible, pressing, tragic housing crisis in Hackney. It is motivated not by the facts, but by mindless political spite. The wrecking nature of the announcement, and the detrimental effect that it will have on employment and housing standards, illustrate the real nature of the Prime Minister's project for the inner cities.

The announcement has no basis in any analysis of the facts. It has everything to do with the most squalid and mean party politics. It will be of no help to my constituents. All that it will do is push the terrible housing and unemployment problems of Hackney into a further downward spiral. I ask the Minister, even at this late stage, to reconsider his decision and to withdraw his announcement.

Photo of Christopher Chope Christopher Chope Parliamentary Under-Secretary (Department of Environment) 3:14 pm, 6th May 1988

I have been left with four minutes in which to reply to the debate, which has been notable for extravagant and abusive language verging on the hysterical. It has included attacks on the integrity not only of myself but of my right hon. Friend the Secretary of State. I hope that inner-city issues will be addressed with rather more seriousness and gravity than has been used by the hon. Members for Hackney, South and Shoreditch (Mr. Sedgemore) and for Hackney, North and Stoke Newington (Ms. Abbott).

I do not know whether it galls the hon. Member for Hackney, South and Shoreditch that he was not on Wandsworth council at the same time as I was. Yesterday marked the 10th anniversary of the Conservatives taking control of that council. I remind him that, when the Conservative party took over the council, it took over an inefficient direct labour organisation that has now been reformed. We now have a much more efficient construction service working for the people of Wandsworth. I shall not dwell further on the issues of Wandsworth, but perhaps that is one of the reasons why the hon. Gentleman is so steamed up this afternoon.

The debate has given me the opportunity to explain the background to part III of the Local Government, Planning and Land Act 1980. which confers on the Secretary of State the powers that he has used in this instance. It is not often that the topic is fully discussed and, therefore, it is not often that the House is given a clear picture of the way in which policy has developed and, in particular. of the degree of restraint that has been exercised by the Secretary of State since the Local Government, Planning and Land Act came into force.

Part III of the 1980 Act governs the operation of local authority building and maintenance direct labour organisations. In broad terms, DLOs are required to compete for most of the work that they carry out. They must make a 5 per cent. return on the capital that they employ. When DLOs fail to meet the required rate of return, the legislation empowers my right hon. Friend to ask authorities to provide a special report on the failure. If he is not satisfied that the authority is taking adequate steps to put matters right, my right hon. Friend is empowered to order the closure of the DLO.

In the first six years of operation of the legislation, DLOs recorded over 600 failures to meet the 5 per cent. rate of return. My right hon. Friend and his predecessors are constantly accused of taking every opportunity to attack direct labour organisations. The facts, however, speak for themselves. During that entire period, only 20 special reports have been requested. In most cases, the Secretary of State concluded that, in the light of the explanations provided, he should allow the DLOs to continue in operation. In one case—that of Newham— he has, in effect, agreed with the authority's own decision that the DLO in question was incapable of operating profitably, and issued a closure notice accordingly.

In only three cases—Haringey, Lambeth and Hackney—has the Secretary of State issued a closure notice in opposition to the views of the authority concerned. In those cases, he did so for good reasons.

The four closure directions were made following losses that totalled over £15 million. They are massive losses by any standard, made possible only by doctrinaire insistence on providing what are quite simply subsidies paid with ratepayers' money. If the government were to provide subsidies on that scale for a few loss-making private builders, one can only too readily imagine the outbursts of righteous indignation that would be forthcoming from the Opposition.

The only unreasonable thing to do with organisations of that degree of inefficiency is to let them carry on acting as a drain on the public purse. Opposition Members dutifully rehearse the litany of reasons why all is not as it seems, and why, despite the obvious case for closure, even the most appallingly mismanaged DLOs should indeed be let of the hook.

The hon. Gentleman could have referred to the Arden report, which was a voluminous report into inefficiency in Hackney. Before he criticises my right hon. Friend, I remind him that he helped to set it up. Perhaps he should have regard——

The motion having been made after half-past Two o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned accordingly at eighteen minutes past Three o'clock.