Clause 47 - Abolition of requirement to contract out waste disposal functions

Clean Neighbourhoods and Environment Bill – in a Public Bill Committee at 2:30 pm on 25th January 2005.

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Question proposed, That the clause stand part of the Bill.

Photo of David Ruffley David Ruffley Opposition Whip (Commons) 2:45 pm, 25th January 2005

This seems to be an innocuous clause, because it is short, but I am concerned about why it appears in the Bill, as it represents a change of policy, based, I suggest, on some political or economic dogma on the part of the new Labour Government. I do not know whether they are desperate to show their anti-Conservative—

Photo of David Ruffley David Ruffley Opposition Whip (Commons)

I am more than happy to give way to the hon. Gentleman.

Photo of Mr Matthew Green Mr Matthew Green Shadow Minister, Office of the Deputy Prime Minister Local Government & the Regions, Young People, Non-Departmental & Cross-Departmental Responsibilities

My understanding of dogma is that it occurs where one course of action is insisted on. Whatever the politics of the clause, I should have thought that it ended dogma, because it ends a requirement that local authorities follow one particular course and leaves it up to them to choose.

Photo of David Ruffley David Ruffley Opposition Whip (Commons)

I shall not detain the Committee on this point, as we need to make progress. The hon. Gentleman can talk about the control of dogma when we come to part 6, if he wishes, but I want to get to the meat of this clause.

The explanatory notes attempt to give an explanation for the clause. They say that

''Waste disposal authorities must carry out their waste disposal functions by means of letting contracts. The contract-letting procedures for waste disposal authorities required by the 1990 Act lack flexibility or the opportunity for waste disposal authorities to carry out their functions in other ways to secure continuous improvement in the way in which their functions are exercised, having regard to a combination of economy, efficiency and effectiveness.''

I am none the wiser after reading that. I would be grateful if the Minister said where and why the lack of flexibility occurs.

I am not sure which bodies have made complaints or representations to the Government which have led them to repeal the relevant provision of the 1990 Act. Indeed, the information that I have received is that those working in the industry believe that the decision to repeal the Act's divestment provisions does not send a positive signal to private sector investment in new waste management infrastructure. I hope that the Minister will also respond to that point.

There are plenty of examples of private sector companies that have made long-term capital and other investment in securing some of these let contracts. What assessment did the Department make of the effect of that on some of those businesses? Will some of them that have to work out notice periods find that the investment that they have undertaken in good faith is now threatened? Will any contracts be prematurely terminated as a result of the change? What   consultation did the Department have with the private sector parties to the let contracts before going ahead with this reversal of policy?

The Government rightly celebrate private sector involvement. I know that a bit of a private spat is going on between No. 11 and No. 10 about the extent to which market forces should be allowed into the delivery of public services, and that is a private unhappiness on which I do not want to intrude, but we hear about it all the time. For people in my party, the market is an invaluable mechanism for driving up standards, efficiency, economy and value for money for taxpayers. In light of that, I should be grateful for an explanation of the rather opaque explanatory note and of what consultation the Department conducted and what soundings it took in judging what effect the clause would have on private sector investors.

The public and private sectors in the part of the economy that we are discussing have worked together to develop much more integrated approaches to waste management. I have been told that Project Integra in Hampshire is an exemplar of its kind. I fear, although perhaps the Minister can allay my fears, that in making the change, the Government are jeopardising the involvement of the private sector at the margin. I am not suggesting that the private sector will run away from the contracts. That would be a ridiculous caricature of my position. However, it seems to me that at the margin, some private sector companies—small and medium-sized enterprises—may be disadvantaged by the operation of the clause. I look forward to hearing the Minister's reply.

Photo of Ms Sue Doughty Ms Sue Doughty Shadow Minister (the Environment), Environment, Food & Rural Affairs

I share the concerns about how a council will gradually move away from its current contractual arrangements if it wants to do so. We all recognise the importance of long-term investment, but a stack of issues arise from the existing position. County councils, particularly disposal authorities, are labouring under expensive contracts that are hard to change. Quite rightly, targets on waste arising from European legislation and the agreed need to recycle more and to reduce the amount of waste going to landfill change regularly, but it costs an arm and a leg to change anything in a contract.

The clause does not say that county councils or disposal authorities have to change their contract, but it provides flexibility for councils that want to consider other options. Many councils—possibly waste collection authorities within a disposal authority with which they do not see eye to eye—may want to make separate arrangements because they think that they can get a better, more sustainable deal for the residents of their area. These projects involve huge transaction costs. Local authorities face millions of pounds of legal fees in dealing with the contracts. On occasion, the cost of bidding is enormous.

There seems to be a difficulty in getting standard private finance initiative contracts that councils can use, so everyone is designing and drafting each contract anew every time. More support from the Government is needed, so that people know what should be in a PFI contract and can work much more   efficiently. It is madness to waste money on avoidable legal costs because information on best practice in PFI is not provided.

We support the clause and will be interested to hear the Government's answers on any change facility. However, we also want to see much more support from the Government in ensuring that, where such contracts are put in place, any experience of, and guidance on, changes in contracts is made available, so that if a waste disposal authority wants to change the terms of its contract in light of new information or new requirements placed on it, it can do so without running up excessive costs. That should be happening now.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

On the face of it, the explanation is simple: we want local authorities to have flexibility and choice in their arrangements. That is in no way a criticism of the services provided by the private sector. I have seen a range of excellent examples of innovation and investment by private contractors working with local authorities. On my regular visits to look at rubbish tips the length and breadth of this country I have been more than satisfied with much of the work that has been done. The issue is one of dogma. My hon. Friend the Member for Ludlow (Matthew Green) is absolutely right: dogma is when one takes a decision and is not prepared to consider any alternatives. The original assumption was that local authorities would not have options.

Clause 47 repeals section 32 and schedule two of the Environmental Protection Act 1990. Local authorities will now be able to carry out their functions by choosing from a wider range of partnerships with other local authorities and the private sector. We are not seeking to exclude the private sector from that. I can assure the hon. Member for Guildford (Sue Doughty) that authorities will no longer be obliged to follow the prescriptive contract letting procedures in schedule 2 which add cost. We want to keep the costs and bureaucracy associated with tenders at a minimum.

In answer to the question asked by the hon. Member for Bury St. Edmunds (Mr. Ruffley), I can say that the LGA has pressed strongly for this change. We had extensive consultation on it in 2001, and it was clear that this is what local authorities wanted. The whole landscape of waste management has changed through private sector involvement. It is much more sophisticated now, and rightly so. It is part of the Government's strategy, and it requires a great deal of investment. There is an element of risk which many local authorities are more than happy to share with the private sector. Many local authorities have entered into 25-year contracts with private sector companies. Part of the rationale for that is because the companies are making a large capital investment and they require a reasonable period to get a return on it. I understand that. The detail of the contracts is a matter for local authorities.

We have spoken to the Environmental Services Association about the measure, and we sought to reassure it that we are not seeking to exclude the private sector in any way. I have a great deal of respect for the ESA, and we have a good relationship with it.   We have a good dialogue about dealing with waste issues. I am pleased to see the investment that has been made to deal with waste issues in line with the policies and strategies that we have driven forward as a Government I would not wish that to end.

The clause would allow waste disposal authorities to go into partnership with each other and possibly with the private sector. There could be private sector partnerships with private waste disposal authorities. Indeed, many local authorities may decide that it is in their interests to have private sector companies managing all their waste disposal. That is fine with us as a Government. All we seek to do here is allow local authorities to choose what is best for them. We can provide support to them on the details of the PFI through the waste implementation programme.

I am keen to see common templates and to reduce the number of issues arising from the PFI programme, but many local authorities design their PFI structures to meet their local requirements. That is also part of the objective because authorities vary And there are different solutions available to them. They may choose energy for waste, in-vessel composting or one of a whole range of technologies. They may want to boost general composting, recycling or doorstep collection. That is fine. The considerable PFI funds that we make available also demonstrate that we are keen to work with and encourage both the private and the local government sector.

Question put and agreed to.

Clause 47 ordered to stand part of the Bill.

Clause 48 ordered to stand part of the Bill.