'.—

1. (1) This section has effect for the purposes of specifying criteria which shall be fulfilled before the introduction of any new regime of compulsory competitive tendering under the provisions of this Act.
2. (2) No order shall be made under section 8 below unless the Secretary of State is satisfied on reasonable grounds that the following criteria will be fulfilled by any such order—
1. (a) that the tendering procedures introduced under any such order arc consistent with any Directive of the European Community and that no liability will arise in respect of any local authority under any such directive as a result of any difference between the provisions; and
2. (b) that the quality of local authority services to which any such order applies will be improved as a result of the order, and that any procedure to be established enables local authorities to balance considerations of quality and cost in the most effective and efficient manner.'—[Mr. O'Brien].

Brought up, and read the First time.

I beg to move, That the Clause be read a Second time.

Labour Members consider part I of the Bill to be as important as part II, as we showed in Committee when we expressed our deep concern about compulsory competitive tendering and its extension by the Bill. We wish to draw attention now to the fact that there are other factors that the House should bear in mind when considering the extension of CCT.

The new criteria for tendering are worthy of further consideration. The new clause states: This section has effect for the purpose of specifying criteria which shall be fulfilled before the introduction of any new regime of compulsory competitive tendering under the provisions of this Act. It is intended to give safeguards to local authorities in connection with the new CCT clauses. It continues: (2) No order shall be made under section 8 below unless the Secretary of State is satisfied on reasonable grounds that the following criteria will be fulfilled by any such order—

1. (a) that the tendering procedures introduced under any such order are consistent with any Directive of the European Community and that no liability will arise in respect of any local authority under any such directive as a result of any difference between the provisions; and
2. (b) that the quality of local authority services to which any such order applies will be improved as a result of the order, and that any procedure to be established enables local authorities to balance considerations of quality and cost in the most effective and efficient manner."

Clauses 8 to 11 enable the Secretary of State to extend CCT to other council services and to change the existing rules and regulations for CCT. We are fully aware that local authorities are already compelled to invite tenders for building and maintenance work and for other blue collar services such as school cleaning, school meals, refuse collection, and so on.

The document, "Competing for Quality", is divided into two parts. The first, "A clearer framework for compulsory competitive tendering", deals with the changes to the tendering rules to tighten up procedures and give the Secretary of State additional policing powers. For example, the Government will be able to take quicker and more effective action against local authorities which appear to the Secretary of State not to be complying with the CCT requirements. That is one reason why the Minister should favourably consider the new clause. If the Secretary of State is to receive new policing powers, we must ensure that there are safeguards for local authorities in the tendering procedure as compared with the EC directive.

Also, in regard to "Competing for Quality", the extension of CCT details the Government's plans for further CCT of police support services, for example, the maintenance of vehicles and home-to-school transport. Those issues were referred to in Committee. We also drew attention to our concern about library services and other managerial services such as engineering, architecture, legal services, and so on.

In Committee, when we outlined our concerns about the extension of CCT in respect of managerial services, we requested information on why the Government were so intent on including those services in the powers that they already possess in the 1980 and 1988 Acts. Why did they want to extend compulsory competitive tendering to other managerial services? The Government implied that no service should be provided by the public sector. That is significant. The Minister of State has made it clear that the Government intend to ensure that no services shall be provided by local authorities and that they will enable other organisations to provide them. Why do the Government dislike local government providing services? Perhaps the Minister will explain.

The Government's policies infer that the management of services provided by and on behalf of local government should be provided by people in business whose only purpose is to make money. New clause 20 safeguards the interests of local government and of those who rely on and work in local government, including legal services and the quality and cost of those services covered by the tendering exercise. In addition to safeguarding the interests of people who rely on and work in local government, we want to ensure that the quality and cost of the provision of services are also safeguarded in any tendering exercise. The new clause states that the tendering procedures introduced under any such order are consistent with any Directive of the European Community and that no liability will arise in respect of any local authority under any such directive as a result of any difference between the provisions". Local councils should continue to be able to balance cost and quality considerations in the most effective way when considering tenders, and the quality of local authority services should be improved. That is the basis of the new clause. We want to ensure that cost and quality are balanced in any tendering exercise and that if there is to be compulsory tendering the quality of services is improved.

In Committee my hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett) outlined what would be the impact of the forthcoming EC directive after it is introduced in July 1993, with particular reference to stage 1, which covers the fitness of the contractor in any tendering procedure. The Minister concentrated on stage 2 of the directive, conveniently overlooking stage 1. In the United Kingdom the provisions of stage 1 of the EC directive should be given consideration. As that was not considered in Committee, we ask the Minister favourably to consider our request today and to respond to our anxiety about what will develop as a result of stage 1 of the directive.

9.30 pm

There is case law in which it is held that public authorities are under an obligation to give effect to Community law even when it conflicts with national law. I draw attention to the fact that it is on record in case law that EC directives which supersede the national law on tendering procedures apply to public authority contracts, as they do to contracts for local government services.

We have seen how the Government act towards local authorities which try to defend the Laws of the land. We saw how the Government acted on shop opening hours. Local authorities were trying to uphold the law of the land. When the matter was raised in the House, the Government did not wish to take part or intervene in the matter. I have tabled the new clause because we can see that there will be difficulties in interpreting the obligations of local authorities under Community law when it conflicts with our national laws. We ask the House to accept new clause 20 to safeguard the interests of local government.

We have the impression, and I am sure that people outside also have the impression, that the Government just do not want to know when the pressure is on to help local government. New clause 20 will safeguard the interests of local government and should be included in the Bill. Local authorities must uphold Community law. We would act wrongly if we did not include a safeguard for local authorities in the Bill.

In Committee we defended the decision taken in Another place on the future of compulsory competitive tendering because it was in the best interests of the provision of services under the compulsory tendering procedure which applies at present. We consider that it would be in the best interests of local government to extend that decision to the new provisions in the Bill. The Government negated the change made to the Bill in the other place and reintroduced clause 8 to reinstate the double envelope procedure, which was dealt with at length by the Minister of State. It means that the quality threshold is designated and contracts are thereafter awarded to the lowest bidder. So the Secretary of State will set the quality threshold for services which are to be put out to tender. The contract will then be awarded to the lowest bidder. We are concerned about that level of quality threshold. It is not in the best interests of people who rely on local government services for the quality of those services to be set here in Westminster when they will be provided in local authority areas.

The Lords Amendment unified cost and quality considerations. In the best interests of providing services and ensuring that they meet customer demand, there should be a unified cost and quality involvement in tendering. That principle should not merely apply to the new legislation but should also extend to tendering which applies to the blue collar worker sections of present legislation.

Another reason why we are asking for safeguards against European Community legislation is the experience of the past. The London borough of Wandsworth accepted tenders from two companies—Initial and Exclusive—which supposedly competed to win contracts to clean housing estates. When they obtained the contracts they immediately merged with two multinationals, BET and the Hawley Group, which controlled 60 per cent. of all local government refuse collection and street cleaning contracts at the time. Experience shows that there have to be built-in safeguards for local government. Another example is the Merseyside development corporation, which was condemned for poor management. The Committee cited the letting of the Liverpool garden festival site to a company which went into liquidation, leaving debts of £5·5 million. The affair reflected badly on MDC's management and the Department of Environment's monitoring. If that can happen under CCT, there must be some safeguards for local authorities when they are involved in such tendering.

In Committee, we referred to the involvement of compulsory competitive tendering in housing. The right hon. Member for Selby (Mr. Alison) referred to the need for a cost evaluation of compulsory competitive tendering when considering reorganisation.I suggest to the Minister that Conservative Members have the same concerns that we have about the cost and evaluation of quality in CCT under any tendering system. If it is right for Conservative Members to ask for a cost evaluation in the reorganisation of local government, it is right for us to ask for cost and quality evaluations when awarding contracts under the CCT procedure. The Minister of State referred to "an unbreakable bridge" between Government and people—I think that that was the phrase.

We considered the question of compulsory competitive tendering for housing on more than one occasion in Committee. We asked for the details of the survey that was carried out under the consultation procedures. That survey should have been published in January, but we have not received it. The survey should contain provisions for tenant and co-operative rights under the CCT procedures. We were assured that consideration would be given to tenants and to tenants associations. They are protected by current legislation and I seek the assurance that that protection will continue under CTT procedures. If the existing laws are breached, and the new regulations under the European Community directive do not come into force until after July 1993, I hope that suitable provision will be made for housing. That is important because our communities are short of houses for rent, there is a record number of repossessions and a shortage of housing in rural areas. The CCT and housing management procedures will not solve those problems.

Clause 8 requires the Secretary of State to make orders only if he is satisfied, on reasonable grounds, that the criteria outlined in the clause have been fulfilled and that the orders contained in the clause have been adhered to. That is important when we consider that as a result of the EC directive no liabilities on local authorities will arise from the tendering procedures. Again, our aim is to safeguard the services and the interests of local authorities.

Against that background, it is clear that the new clause will benefit everyone involved. If the Government have any intention of defending and safeguarding the interests of local government, they should accept the new clause.

I honestly do not feel that we have broken much new ground since we debated these matters in Committee.

The hon. Member for Normanton (Mr. O'Brien) asked about the European Community draft directive. As I said in Committee, we are satisfied that there can and will be no conflict between our proposals for the structure of compulsory competitive tendering procedures for professional and technical services and the relevant EC directives. The draft EC directive on public services contracts provides that, subject to the provisions of national law, public authorities can choose between the lowest price tender evaluation procedure or the economically most advantageous tender evaluation procedure.

Under the terms of the EC directive, the double envelope tendering procedure described in our consultation paper is a method of structuring the economically most advantageous tender evaluation procedure. It will allow local authorities in constructing a quality threshold to take account of the type of non-price criteria referred to in the EC directive—quality, technical merit, aesthetic and functional characteristics, technical assistance, service, delivery date, and period of completion.

Subsection (2)(a) of the new Clause seeks to import into the Bill considerations which are implicit, the expression of which would suggest a conflict where none can exist. In any case, no Government can act contrary to an EC directive that is in force and nor can any local authority.

There is a conflict between what is meant by "economically advantageous" and the double envelope involving a tendering list followed by lowest cost. The Treasury put out a directive relating to procurement policy and Department of the Environment circular 16/90 interpreted that by saying: There are only two alternative criteria: 'lowest price' and `most economically advantageous tender'. The criterion chosen should normally be the latter as, if the lowest price is chosen, contracting authorities will not necessarily obtain value for money as defined in the Government's consolidated guidelines or public purchasing policy. That shows that there is a clear choice between what is economically advantageous and the lowest tendering price, reflected in the EC regulation and recommended in the Treasury's works directive.

I see no conflict between what the hon. Gentleman said and what I said. I told him that there were two alternatives—the lowest price tender and the economically most advantageous tender. "Lowest price tender" speaks for itself. "Advantageous tender" evaluation takes into account other factors, beyond price, and I referred to some of them—quality, technical merit, aesthetic and functional characteristics and so on.

Evaluating a bid which first passes a quality threshold and then wins on price is a way of structuring the economically most advantageous tender evaluation procedure. An economically most advantageous tender evaluation procedure must contain within it factors both of quality and of price. What is being proposed in the double envelope technique is that the two should be structured. I shall come shortly to why the Opposition were so keen that those two factors should not be separated.

The Opposition are keen that the two are combined so that price and quality are weighed in conjunction with each other, not separated out to make them exclusive in the way that the double envelope would do.

The Opposition are keen to fudge compulsory competitive tendering. Labour Members have always been keen to do that. They are afraid that we shall have two sets of objective criteria, first a threshold of quality which is defined and which tenderers will or will not pass, and a second stage which they must pass on price and provide the lowest price.

The Labour party objects to that because it makes the competition absolutely overt and clear, and it cannot fudge that in favour of the direct supply organisation. On the other hand, if Labour can wrap the two together so that it all becomes a matter of subjectivity about quality —so that it can take not the lowest price but possibly the highest—it can be fudged in favour of the DSO.

The purpose of Labour Members in all of this was apparent throughout the speech of the hon. Member for Normanton (Mr. O'Brien). He talked about safeguarding the interests of local authorities. We are concerned about local government and local authorities, but we are primarily concerned about safeguarding the interests of local people, and providing them with services of the best possible value.

The hon. Member for Normanton said that we were taking new powers to extend compulsory competitive tendering. That is not so. The 1988 Act already provides that we may extend compulsory competitive tendering into new areas. Clause 8 of this Bill is designed to enable us to evaluate separately cost and quality, and that is anathema to Labour, for the reasons I have given.

We did not imply, as the hon. Member for Normanton said, that it was inappropriate for no services to be provided directly by local authorities in the future. Our consultation document makes it clear that, as we move gradually into the area of core services, we acknowledge that local authorities will wish to provide some services directly. That is why we have set out, within that consultation document, a possible technique by which we can judge that part of the core services of a local authority that it would be appropriate for it to continue to provide in house, while ensuring that part of its services is contracted out so that it can he the subject of competition.

The hon. Member for Normanton frequently referred to the need for quality and price to be balanced. That is a euphemism. He simply wishes to confuse the choice so that it will always be possible for local authorities that are so inclined to choose the direct service organisation and, in the process, deny local people the opportunity of the best value for money.

If that is a Labour party invention, why did the Audit Commission, commenting on "Competing for Quality", say about design services: A 'second envelope' decision based solely on price could lead to lesser quality buildings"? In other words, the Audit Commission considers the double envelope scheme to be a flawed way of proceeding on competitive tendering, even if the Government do not accept that.

Throughout the Committee proceedings I said that I was willing to listen to different ways of structuring that. I said that I did not necessarily stand by a double envelope technique as the be all and end all. But I strongly believe that we need to consider the questions of quality and price separately. We put in the consultation document one way in which that could be done. If there are other ways, I have always said that I would benefit from the advice of professional bodies, and we have been looking forward to receiving that advice and considering it carefully. However, we shall not return to the system that the hon. Gentleman favours, of simply rolling quality and price into one amorphous ball so that any subjective judgment can be made by any local authority and it can award all the contracts to its own direct service organisation.

We are keen on that because we know the game that the Labour party is up to. We know about its dogged Opposition to compulsive competitive tendering since it was first introduced. We know that it has fought tooth and nail to ensure that direct service organisations can keep the contracts, whatever the cost to local people. Some Labour politicians over the years have been honest enough to admit what is going on. Keva Coombes, the former leader of Liverpool council, said: Frankly, we've put the interests of the providers of the service, the work force, above the interests of the tenants". He also said: 'The Council's problems are not down to resources', rather inefficiency. 'It costs four times more to pick up a piece of litter in Liverpool than it does in other areas'". He then said: We are the worst landlord in Liverpool, probably in the country. All the new building has taken place and been run by a central unit and all despite the housing department. It takes genius—voids gone up, rent arrears soared, and the breaking of the law on racial equality". That is the nightmare of local government under the Labour party where compulsory competitive tendering has not been brought to bear.

Why should not compulsory competitive tendering apply where the private sector is involved and direct service organisations are excluded? In Committee, just before the closure motion on Clause 8 was moved, the Minister said that if no direct service organisation was involved Compulsory competitive tendering provisions would not then apply: they apply only where a local authority is considering using its direct service organisation"—[Official Report, Standing Committee D, 11 February 1992; c. 305.] Why, if the private sector alone is involved, does compulsory competitive tendering not apply and the proper comparisons of cost do not apply? Why do they apply only if the local authority chooses to involve its own direct service organisation in tendering?

If a local authority has chosen to go out to the private sector for a piece of work, it stands to reason that there is no advantage to that local authority in awarding the work to a particular contractor as none of them works for it. Subject to the views of its auditors, who may review what it does subsequently, the local authority awards the contract where it will obtain the highest quality work for the lowest price. Only where the authority wishes to use its own in-house work force to compete does the compulsory competitive tendering regime apply.

The hon. Member for Sheffield, Brightside (Mr. Blunkett) comes over all innocent as though wondering why that should be. I refer him back to the quotes from Keva Coombes, the former leader of Liverpool council. The hon. Gentleman knows perfectly well the devious steps taken by Labour authorities up and down the country to fix competition in favour of in-house direct service organisations. That is the answer to his question, and it is a perfectly obvious one.

Is my hon. Friend aware that, under the present regime, Lancashire county council lost the citizens of Lancashire about £600,000 by giving way to an in-house tender—I believe that it was for school meals? We want to do away with such practices.

I am sorry to hear what my hon. Friend says.

The Bill will not only extend the compulsory competitive tendering regime through the possibility of considering quality and cost separately in relation to new ranges of services, but will enable the Secretary of State to specify a series of practices that he considers to be uncompetitive. Therefore, the practices that have been taking place in a number of local authorities to fix the competition in favour of the direct service organisation can be ruled out in future by order of my right hon. Friend the Secretary of State. We shall be able to specify a series of practices, of which we now have a growing number of examples, which until now have been used in order to distort the competition, not only in favour of the direct service organisation, but against the benefit and interests of the consumer. That is what the debate is all about.

The legislation is about providing services to local people for the best possible value for money, recognising that that money has to come from local taxpayers and that the best value services can be provided through competition. Just this week, we have had another example of the advantages of compulsory competitive tendering. A recent survey on the cleanest cities in Europe gave the lie to the Labour party's denigration of our capital, as London came second in the table.

The part of London surveyed in order to show that it was the second in the league in Europe was not, surprisingly enough, Hackney, Lambeth, Southwark or Haringey, but Westminster—the very heart of our capital, where the services were put out to tender some time ago.

If the Minister is so convinced that compulsory competitive tendering is finding favour, where is it doing so? It is not finding favour with any of the local authority associations. The Royal Institute of British Architects and the National Council for Voluntary Organisations are both opposed to it. Everyone outside the House is opposed to it. From where does the support come?

I think that the hon. Gentleman must keep his head under a bushel. Local authorities up and down the country are ahead of the Government. The Bill merely brings up the rear. Compulsory competitive tendering will simply bring into line those local authorities which have not taken up voluntary competitive tendering. If the hon. Gentleman has contacts in local authorities, he should know that local authorities throughout Britain are seizing the opportunity of competitive tendering as a good chance to manage their resources more efficiently and to find the best value for money for their local taxpayers. I make no claim that the legislation will influence the best authorities in the country, which are already far ahead of us and are showing the limits of what can be achieved by putting their services out to competitive tendering.

The new Clause constitutes a naked attempt by the Labour party once more to resist the process of competitive tendering; once more to resist the introduction of competition in local services; once more to defend the unions in local government, because they are in hock to those unions; and once more to deny decent services to local taxpayers. We will have none of it, and that is why we reject the new clause.

Compulsory competitive tendering is a subject of wide concern outside the House. I have already said that the local authority associations are opposed to it. Of course the best local authorities want competitive tendering, but they do not want it to be made compulsory: they want choice, because they are nearest to the people. Let us look, for example, at the quality of our architecture. It is no wonder that the Royal Institute of British Architects is opposed to compulsory competitive tendering—

It being Ten o'clock, MR. Speaker, pursuant to Order [17 February], put the Question already proposed from the Chair.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 203, Noes 275.

Question accordingly negatived.

Mr. Speaker then put forthwith the remaining Questions which he was directed to put at that hour.

Question put, That the remaining amendment standing in the name of a member of the Government be made to the Bill:—

The House divided: Ayes 275, Noes 202.

Question accordingly agreed to.

Amendment No. 5, in clause 1—Publication of information as to standards of performance—page 2, line 11, at end insert— '(2A) The Secretary of State may by order made by statutory instrument vary the period for the time being specified in paragraph (b) of subsection (2) above so as to fix the latest time for the publication of information in accordance with that paragraph at any such time, within the period of nine months after the end of the financial year in question, as may be specified in the order; and a statutory instrument containing an order under this subsection shall be subject to annulment in pursuance of a resolution of either House of Parliament.'—accordingly made.

Order for Third Reading read.—[Queen's consent signified.]

Motion made, and Question put, That the Bill be now read the Third time.—[Mr. Portillo.]

The House divided: Ayes 269, Noes 201.

Question accordingly agreed to.

Bill read the Third time, and passed, with amendments.