To ask Her Majesty’s Government what plans they have to review (1) the comparative costs, and (2) the effectiveness, of the provision of public services in England by (a) local authorities, and (b) private contractors.
Local authorities are required to support continuous improvement through the delivery of their functions under the Local Government Act 1999. They decide how to run services. Services can be outsourced, or delivered jointly with another authority, provided that quality and value for money are maintained. As public bodies, they are subject to the Public Contracts Regulations 2015. Central government provides funding, improvement support and overall oversight. There are no current plans for a central review.
My Lords, this Question was prompted by the Government’s choice on test and trace to turn to multinational companies and expensive consultancy firms instead of making use of the expertise of local government and local public health officers. But it applies more widely: after 50 years of outsourcing, and having acquired experience on outsourcing local transport, probation services and others, will the Government not consider that the time has come to conduct an independent inquiry—or would they prefer an inquiry to be undertaken by an ad hoc Lords committee, for example?
I think the specific question relates to test and trace; I am sure that is part of the review of our response to the pandemic. But as a former local authority leader, I agree with the noble Lord’s comments about the experience that local government has in the competitive tendering of services.
My Lords, given my local government interest, I know it is not how services are provided but if services can be provided. For example, social care—a service provided by both public and private organisations—requires an extra £2 billion a year. Does the Minister agree with the Conservative County Councils Network, which says that council tax will need to rise by 8% each year so that basic social care needs can be met?
My Lords, it is for every council to decide what level of council tax it needs to set. Obviously, there is a latitude to increase council tax by up to 2% to help support the additional social care costs, but the Government have set out their plan to increase funding to social care, as the noble Baroness knows.
My Lords, many of us who remember the days when local authority direct labour organisations had a monopoly on public services such as refuse collection welcomed the decision in the 1980s to open these services to competition—a decision that has not been reversed since. Given all the pressure on local authorities today, is now the right time to encourage them to invest manpower and capital to re-enter this market?
I agree with my noble friend. There has been a tremendous success in the competitive tendering of services that has driven down cost and increased value for money for the taxpayer, and also seen an improvement in the delivery of local services. It is not surprising that £64 billion is now paid out by local government to private companies to deliver those services. Although local authorities have the powers to trade and charge, they should think very carefully before they decide to move back to the situation before the introduction of competitive tendering.
Does the Minister think there are any features of some services that make them completely unsuitable for outsourcing? I am thinking of life and death matters such as firefighting or test and trace; extremely vulnerable service users in prisons or secure academies; or natural monopolies such as polluting water companies.
As the Fire Minister, I certainly recognise the importance of the delivery of the vast majority of our fire and rescue services through people who are currently employed by local government. As a former council leader, I know there is a whole host of statutory areas where you would seek to deliver services through people who are directly employed. But increasingly there are areas where you can drive down costs through competitive tendering. That also gives in-house services the opportunity to compete with the market to see whether they can deliver those services more effectively. Competition does drive down costs and increases the quality of the services provided.
The noble Lord, Lord Flight, is not present, so I call the noble Baroness, Lady Blake of Leeds.
My Lords, could I point to a case in Shropshire? The Conservative-run council has spent £1,000 a day on a pothole consultant. Does the Minister believe that this private contractor represents value for money?
I am not going to get into the use of consultants by a particular council, irrespective of the administration currently in control. A number of councils, both Conservative and Labour, have been subject to Secretary of State interventions because they have failed to fulfil their best-value duties. I point to the most recent intervention in Liverpool City Council, where, sadly, we have had to step in.
My Lords, I declare my positions as a vice-president of the LGA and the NALC. Would the Minister agree that, in this age of shocks, when resilience is becoming more and more of a crucial issue—we addressed this in the last Question, on HGV drivers—eventually, if things go wrong and companies collapse, like Carillion, or fail to deliver services, as happened with the green homes grant, the Government have to step in and are always the final service of last resort? Surely we should stop pumping public money into private hands—taking all those risks of collapse that we have seen so often with private companies—cut out those extra costs and simply allow local governments to deliver services for local people?
My Lords, it will not surprise you that I do not agree with that. Some £64 billion-worth of money is being spent by local government on the delivery of very efficient services through the private sector, but you have to be very careful about how you engage. There are plenty of examples where local authorities have not used competitive tendering but have chosen to enter into partnerships, which have had tragic consequences in the last year because of the pandemic. So I encourage local authorities to be judicious, fulfil the guidelines that are supplied around procurement, go through sensitive competitive tendering and check the creditworthiness of those whom they choose to bring on board.
Many of the firms to which the functions of local authorities have been outsourced are motivated by considerations other than public service: the profit motive is dominant. I am aware of one firm, to which the traffic and parking services have been outsourced, that has been issuing spurious penalty charge notices for traffic offences. Their operatives are working under an incentive scheme. Their supposition is that many people will automatically pay the penalties, fearing that, if they do not, the charges will be doubled and they may be taken to court. Do the Government have any desire or means to address such abuses?
My Lords, revenue from parking is ring-fenced, and most local authorities would never incentivise any staff who are doing this to start to fine—
As someone who spent 16 years in local government, I certainly know that we ensured that we never incentivised our staff in relation to the volume of tickets and the revenue that they could collect. It is important to increase productivity and to have sensible oversight of these matters.
My Lords, on what the Minister just said, as a former councillor I know that such incentives do apply in some local councils. In any case, in any likely future review of government strategic effectiveness in the allocated cost of public services, will the Minister consider ring-fencing relevant funds for some specific services, such as those for domestic violence, social care for people living with disabilities and mental health conditions, and drug services for young people? Secondly, with regard to the private sector, will the Minister ensure that all contractors are fully cognisant of, and compliant with, our ambitious equality standards, including on their senior management and boards?
My Lords, a significant amount of the councils’ budget is already ring-fenced, including adult social care. It is for local councils to determine how they spend their resources to ensure that they meet local needs. The core spending power in the most recent local government settlement increased from £49 billion to £51.3 billion in this financial year. The ring-fencing of budgets can have the deleterious effect of forcing councils to do something that is not necessarily in the immediate interests of their local residents.
My Lords, all supplementary questions have been asked, and we now move to the next Question.