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Clause 21

Localism Bill – in a Public Bill Committee at 1:00 pm on 3rd February 2011.

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Photo of Jack Dromey Jack Dromey Shadow Minister (Housing) 1:00 pm, 3rd February 2011

I beg to move amendment 45, in clause 21, page 18, line 28, after ‘statement’, insert

‘and a low pay policy statement’.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss the following:

Amendment 46, in clause 21, page 18, line 31, at end insert—

Amendment 47, in clause 21, page 18, line 32, leave out ‘The statement’ and insert

Amendment 48, in clause 21, page 19, line 3, at end insert—

Amendment 49, in clause 22, page 19, line 5, after ‘statement’, insert

Amendment 50, in clause 22, page 19, line 5, after ‘must’, insert ‘each’.

Amendment 51, in clause 22, page 19, line 6, leave out ‘it comes’ and insert ‘they come’.

Amendment 52, in clause 22, page 19, line 11, after ‘statement’, insert

Amendment 53, in clause 22, page 19, line 14, after first ‘statement’, insert

Amendment 54, in clause 24, page 19, line 29, at end insert

Amendment 55, in clause 24, page 19, line 30, after ‘statement’, insert

Amendment 56, in clause 24, page 19, line 40, after ‘statement’, insert

New clause 1—Pay transparency statement by local authority contractors—

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

Amendments 45 to 56 would ensure that councils publish a low pay policy statement alongside their statement on senior pay. New clause 1 would require local government contractors to provide pay transparency statements if the value of their contract or contracts was in excess of £250,000.

Let me make it clear that the Opposition fully support greater transparency in the pay of senior officials in the public sector. The measures to increase pay accountability in local government are to be welcomed. Taxpayers have a right to know how their money is being spent, and there is clear evidence of excess in too many local authorities. However, of those people who earn more than £150,000, in excess of 90% work in the private sector. Much of what has happened in the public sector has been driven by tearaway pay at the top in the private sector. None the less, that does not justify the decisions that too many councils have made about the pay of their senior officers.

The Government are keen on propagating myths about pay in the public sector, so let us nail those myths before we get to the substantive issues. First, the Government would have us believe that all public sector workers are well paid, but the truth is that a quarter of those living in in-work poverty are employed by the public sector. Secondly, the Government would have us believe that all public sector workers have gold-plated pensions, but the truth is that the average pension is £4,200 a year. Thirdly, the Government would have us believe that local councils can spare front-line services simply by cutting executive pay, trimming waste and sharing back-office functions, but the truth is that they cannot. Birmingham city council faces a cut of £170 million to its budget in the next financial year alone, and we are already seeing front-line services—from youth services to social care—cut to the bone.

Let me stress once again that we welcome the proposals on senior pay. However, we strongly believe that there should be a rounded approach to transparency in local authority pay that is fair and consistent. If we are to believe the Prime Minister when he suggests that the Government wish to

“extend transparency as far and as wide as possible”,

I am sure that Government Ministers will wish to support the amendments and help us to shine a light on good and bad practice at the bottom as well as at the top—wherever taxpayers’ money is being spent.

We believe that the amendments would bring about greater transparency and therefore help the Government in their stated objective of curbing excessive top pay. How will a highly paid chief executive officer be able to defend excessively high pay if the public can also see what the lowest paid members of staff earn in contrast? How will a council be able to defend an outsourced contract as good value if the pay transparency statement shows that those working on the contract are excessively paid? I agree with the Secretary of State that:

“The public should be able to see where their money goes and what it delivers.”

However, why should not that include those being paid excessive amounts through procurement contracts, or those being underpaid with taxpayers’ money?

The low pay policy statement that the amendments would introduce would, rightly, allow local authority employees to see what percentage of them were paid the minimum wage by the authority—the minimum national rate—and what percentage were paid 10% and 20% above that level. That will empower employees to determine whether their authority’s pay policy has a fair distribution. Pay transparency incorporating both low and high pay would bring a welcome focus on internal relativities of pay. That would enable local people to assess, as the Government have argued they should, acceptable levels of senior pay in local authorities. It would also, crucially, enable them to assess whether their local authority was paying its lowest-wage workers at an accepted threshold. The London living wage has sought to address that point. I have stood on platforms with Boris Johnson, the Mayor of London, and the Deputy Prime Minister from which we have collectively advocated the value and virtue of the London living wage.

I am sure that Ministers agree that taxpayers would not want to be the beneficiaries of services provided by workers who they considered to be underpaid, just as much as they rightly want to see value for money at the top. Transparency should cut both ways: fairness at the top and fairness at the bottom. Fairness at the top and bottom must both be included whenever taxpayers’ money is involved.

It cannot have escaped the attention of Ministers that their implementation of a senior pay policy in local government creates a double standard because the same logic is not applied to contractors providing goods and services to town halls in excess of £250,000. We all know that Ministers like to pretend that there is no link between the public and the private sector, but the truth is that significant sums of public money go to private contractors that then provide goods and services for taxpayers. The local government procurement market represents a total of £34.2 billion. Are taxpayers not entitled to transparency? Should they not know where the money is going?

Photo of Brandon Lewis Brandon Lewis Conservative, Great Yarmouth 1:15 pm, 3rd February 2011

I have two questions about new clause 1, to which the hon. Gentleman has started to refer. First, surely the transparency that residents want to ensure that their money is well spent relates to the value for money of the contract, rather than the pay of the people working under it. If the contract is good value, it is good value. My second question, which leads on from that, is that if the Opposition are saying that they want to impose public authority regulations around transparency on private companies,  why did they not do so through the Companies Act 2006 when they were in government? Have they assessed the possible impact of new clause 1, given that the 2006 Act puts different responsibilities and different legal requirements for transparency of pay on private companies from those outlined in the amendment?

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

The hon. Gentleman’s first question demonstrates a rather poor view of what local residents expect. Let me give a commercial example. I have worked with major companies in the private sector such as the supermarkets and the ethical trading initiative. There is an increasing recognition that those who buy from high street stores and supermarkets want to know how employees in the supply chain—domestically or internationally—are treated. Such a welcome trend in public opinion should be supported.

Photo of Brandon Lewis Brandon Lewis Conservative, Great Yarmouth

Surely we are coming back to the point we discussed this morning about the difference between local accountability—letting local councils make a decision and acting for their residents—and top-down control, which the provision would bring about.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

With the greatest of respect to the hon. Gentleman, the principle is clear. If there is a demand for transparency, which we support, why not have transparency for both top pay and low pay whenever taxpayers’ money is expended?

Photo of Brandon Lewis Brandon Lewis Conservative, Great Yarmouth

Will the hon. Gentleman deal with my question about the impact of new clause 1, given that the Companies Act puts different requirements on companies for pay transparency?

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

Without wishing to bore hon. Members will a great deal of historical detail, I was involved in work in 1997-98 with the CBI, the Business Services Association and various contractors that led to welcome changes to the regime of compulsory competitive tendering. The CCT, which was a centralist measure, was abolished, and there was an insistence that local authorities should take work-force matters into account. Subsequently, following a proposal from two major private sector organisations, I chaired the TUPE forum through which public, private and voluntary sectors worked together with the trade unions and other stakeholders to update the Transfer of Undertakings (Protection of Employment) Regulations 1981. Let me give one other example. Together with the private, voluntary and public sectors, I was personally and deeply involved in discussions around the two-tier code. Some welcome progress was made with, I am pleased to say, a large amount of consensus on the part of not only employees and their representatives, but employers.

Photo of Brandon Lewis Brandon Lewis Conservative, Great Yarmouth

I appreciate the hon. Gentleman’s generosity in giving way again, but I ask him the same question again. He has not dealt with the question I asked; he just talked about something else. It was very interesting, but he did not answer my question.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

I am glad the hon. Gentleman finds it very interesting. No doubt he will make a speech in due course explaining exactly what he means because, with the greatest of respect, at the moment his comments are somewhat delphic.

May I return to the issue of taxpayers being entitled to transparency? We know from the evidence given to the Committee that a whole number of witnesses certainly seem to think it is necessary. Mayor Jules Pipe thought the measure was very relevant if, under the Bill,

“we are moving into another series of outsourcings”.––[Official Report, Localism Public Bill Committee, 25 January 2011; c. 55, Q93.]

He thought it should be applied to contractors and “down the chain.” Councillor Gary Porter agreed, saying:

“Yes, really. I do not see a problem in making anybody whose business benefits from it accountable”.––[Official Report, Localism Public Bill Committee, 25 January 2011; c. 12, Q11.]

Professor Stewart from the Institute of Local Government Studies, in his characteristically robust fashion, said:

In America, there is interesting talk that, if you privatise a public service, it is not just privatisation, but an element of publicisation”.––[Official Report, Localism Public Bill Committee, 25 January 2011; c. 40, Q59.]

I remember hearing a speech by a Republican Senator on this very issue. Like Professor Stewart, he addressed the issues intelligently.

Neil McInroy, from the Centre for Local Economic Strategies, also agreed, saying:

“I think that, in terms of procurement, one needs to go even further. A whole range of employment and environmental practices of suppliers of public goods and services at local government level need to be porous, open, and transparent.”––[Official Report, Localism Public Bill Committee, 25 January 2011; c. 13, Q13.]

There is that word again: transparent.

The witnesses in the evidence sessions were not the only ones concerned about the matter. The Information Commissioner, Christopher Graham, has warned that the Government are risking eroding the accountability of the state as services are outsourced:

“We’ve got to think through the implications, we can’t be so starry-eyed that we can’t see the downside. There is a potential for services to become less transparent and less accountable.”

Indeed, that issue featured in the debate on NHS reforms earlier this week. Last week, we learned that Gus O’Donnell, the head of the civil service, has initiated an investigation to assess the democratic impact of some of the Government’s measures, including, we understand, the Localism Bill. We also understand that Sir Bob Kerslake, the permanent secretary at the Department for Communities and Local Government, will investigate “the accountabilities issues” thrown up by the plans.

Gus O’Donnell has said the issue was “absolutely crucial” to the project’s success. The Prime Minister himself, if he is true to his words, seems to agree. He has said:

“So much of it is locked away in a vault marked sort of ‘private for the eyes of ministers and officials only’. I think this is ridiculous. It’s your money, your government, you should know what’s going on.”

The Deputy Prime Minister appears to agree. He has said:

“Free citizens must be able to hold big institutions and powerful individuals to account. And not only the Government.”

It would be unfair on Ministers and their colleagues in the Department for Communities and Local Government not to allow the Committee to hear their views on transparency. The Secretary of State has told us:

“The public have a right to know how their tax pounds are spent”.

The Minister of State, Department for Communities and Local Government, the right hon. Member for Tunbridge Wells, has said:

“When public money is being spent, people should always be able to know how much is being spent and on what.”

I totally agree. The Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst, has told us:

“It is vital that we all look at where every penny is spent and that citizens are engaged in making these decisions”.

I totally agree; that is wisdom from the Government ministerial Bench. The question is whether it will be translated into legislation. Even today, the hon. Member for Bradford East said, in a telling contribution, that he did not believe in the word “must”, other than where it referred to disclosure. He also said that such information “must” be made publicly available. Again, I agree with that wisdom from the Government Back Benches. Will that wisdom be translated into legislation?

Photo of Greg Clark Greg Clark Minister of State (Department for Communities and Local Government) (Decentralisation and Cities) (also in the Department for Business, Innovation and Skills)

The hon. Gentleman says that he agrees with my hon. Friend the Member for Bradford East, so will he say that the word “must” should be used only when it comes to transparency? Is that his agreement now?

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

Maybe I have got this wrong, but I thought that an absolutely central tenet is that the Government are insisting that local authorities “must” have transparency. They must have transparency on top pay. No doubt when the Minister responds he can tell us why it is top pay—and not low pay—in the public sector alone, and why it is not top pay and low pay where contractors are employed on contracts worth more than £250,000. There is a fundamental inconsistency in the Government’s approach. I agree with the Churchillian rhetoric; the problem is that it stops well short of where it should.

Photo of Greg Clark Greg Clark Minister of State (Department for Communities and Local Government) (Decentralisation and Cities) (also in the Department for Business, Innovation and Skills) 1:30 pm, 3rd February 2011

I am grateful to the hon. Gentleman, but I am looking for the consistency in his approach. He praised my hon. Friend the Member for Bradford East for his Churchillian wisdom in specifying that “must” should apply only for transparency. Is that his view?

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

We have rightly been focused on the difficult balance that needs to be struck between setting local authorities free on the one hand, and, where it is legitimate, prescription on the other. We think that there should be prescription on transparency. The Government think that there should be prescription by way of 142 Henry VIII powers maintained by the Secretary of State.

Photo of David Ward David Ward Liberal Democrat, Bradford East

I am unhappy with the accusation of being wise; it does not sit comfortably with me. The “must” that I referred to was disclosure of what the authority was doing, which would include whether it was being transparent, not the disclosure of transparency. There is a difference.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

I was brought up a Catholic, but I am not a Jesuit. My view is simple: the Government are right to demand transparency on top pay in the public sector. We argue that they have been utterly inconsistent in not taking that further, as the amendment seeks to do. Perhaps Ministers still need convincing of the wisdom of their case. Why is there a need to focus on low pay and, indeed, contractors? In the present economic climate, as VAT increases, inflation rises and transport costs rise, things will become more expensive, particularly for those at the lower end of the scale. Britain’s lowest-paid workers are already feeling the squeeze, and will increasingly feel it.

Photo of Fiona Bruce Fiona Bruce Conservative, Congleton

The mischief that the clause seeks to address is the fact that there has not been restraint on the upper levels of pay in local authorities. Although many of us would agree with the hon. Gentleman that it is right that any worker is paid a fair wage, the clause does not seek to address that point.

Does the hon. Gentleman not recall, as I do from my local authority experience, that in recent years an extremely protracted process was undertaken by councils to accommodate the requirement to compare the worth of different types of work? In my council, it involved hundreds of members of staff being interviewed, employment roles being compared and wage levels set. That was a totally transparent exercise in which the authority’s employees in every area were interviewed and comparables were set. The problem was that no comparables were available for those at the very top of the organisation; therefore, it was difficult to set any kind of bar. That is why this clause is so important, but I believe that what the hon. Gentleman seeks to address—transparency in respect of lower paid workers—has already been addressed.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

Forgive another historical reference, but I was chairman of the local government union when the single status agreement was concluded in 1997. Another time, another discussion. Would that it had been implemented properly. But the hon. Lady is absolutely right to say that many local authorities all over Britain sought to get it right and made comparisons, not before time, to ensure equal pay for work of equal value, which is crucial. I absolutely take that point. The hon. Lady rightly refers to the “mischief”—I do not disagree with her use of the word—of unacceptable top pay in the public sector, but we also seek to address unacceptable low pay in the public sector. That, too, to use the hon. Lady’s word, is mischief.

Photo of Fiona Bruce Fiona Bruce Conservative, Congleton

The mischief that we are seeking to address relates to transparency. It already exists, and is recorded, in respect of most of the pay levels in an authority, including the poorer-paid levels, because of the process that has already been gone through.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

The Government are rightly telling every local authority to come clean, to be transparent and to let the people know—and to let them know, in particular, how the highest-paid are paid. The public expect transparency from this Parliament on high and low pay, and we believe that transparency on the obscene differentials between the top and bottom of the public sector will help the Government to curb unacceptable high pay. Everything, we argue, centres on the effectiveness of the Government’s proposals, and they simply do not go far enough.

Photo of James Morris James Morris Conservative, Halesowen and Rowley Regis

Is not another potential unintended consequence of new clause 1 that small businesses, which often complain about their inability to compete for local authority contracts due to the complexity of the procurement process, will have a disincentive to engage with local authorities due to the provisions that the new clause places on the threshold for contracts and disclosure? Small businesses, even today, have to go through a series of hoops and formal processes to get on local authority procurement lists.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

I have spoken to small businesses about our proposal and their big concern is not the modest requirement that they should, within three months, publish the highest and lowest pay in the contract in question. They are far more concerned about the impact of cuts to local government budgets. Of the £37.2 billion for procurement, £20 billion goes to small and medium-sized enterprises, so I hope that the hon. Gentleman, in championing small businesses, as I do, will work with us to change the Government’s approach of savage, deep, quick cuts to local government expenditure.

Many low-paid people are already feeling the squeeze. A recent New Policy Institute report shows that there has been a rise in in-work poverty. More than 13 million Britons—22% of the population—now live on less than 60% of the median income, despite at least one adult in affected households bringing a wage home. Of them, 5.8 million are in deep poverty, surviving on less than 40% of the median income, which is less than £192 a week for a couple with two children under 14. These people are working, yet too many of them still face poverty. The idea that work alone is the way out of poverty is fanciful. We also need to focus on work and low pay. We all agree that excessive pay at the top of local government should be properly scrutinised, but how can that be sensibly and fairly done other than in relation to low pay at the bottom?

The Local Government Association estimates that of the 1,744,700 employees in mainstream local government jobs, 60% earn less than £18,000 a year. Moreover, according to the LGA’s figures, more than 400,000 council workers earn less than the living wage, and of those, more than 250,000 earn less than £6.50 an hour. The hon. Member for Congleton will know from her own experience that they are some of the most valuable members of our communities.

A quarter of those living in in-work poverty are employed by the public sector. The outsourcing of public service delivery has all too often contributed to the depression in pay levels. The Government have themselves estimated that 1 million public service workers now work for the third sector and private providers. Those staff are concentrated—not exclusively, but predominantly—in low-wage sectors such as cleaning, portering, catering, low-skilled manual work and care work. Do we not want the cleaners, care workers and teaching assistants of this country, whoever they work for, to earn a living wage? We Opposition Members feel strongly about that.

I must say that the decision of the Minister for the Cabinet Office to scrap the two-tier code for central Government, which regulates the employment benefits of new staff recruited to work alongside former public sector workers in outsourced services, suggests that the  Government think otherwise. The two-tier code was essential in stopping companies that are bidding for public sector contracts from competing on how low they can pay their staff in future. Having worked with contractors in local government over many years, I must say that there are many reputable companies that fear the consequences of being undercut by rogue competition.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

My hon. Friend will recall the detailed discussions on the two-tier work force and the points forcibly made by several of the most reputable private sector employers that are interested in outsourcing. They wanted to ensure that they competed on quality and in how they delivered services; they did not want a race to the bottom. They feared that if there was no code in place to protect wages, there would be precisely that, as less responsible companies sought to gain a commercial advantage by going for low pay.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

My right hon. Friend—a former Minister—is absolutely right. I vividly remember some of the contributions made, including those by an admirable man who was the chairman of the CBI local government panel. He argued strongly that Transfer of Undertakings (Protection of Employment) Regulations 1981 and 2006 did not go far enough, because they protected employees at the time of transfer, and he said that it was necessary to ensure that companies did not win bids by, for example, undercutting on pensions for new starters. He also said that if companies such as his did not have that protection, they would inevitably lose out to the rogues. That is why those measures were put in place, and it is deeply regrettable that the Government are proceeding down the path of unfairness to future public servants on the one hand and unfair competition on the other. The code has been scrapped for central Government, but not yet for local government. I suspect that that is because it will take a change in the best value regime, and we hope that the Government will not proceed down that path.

To conclude, a decent wage is of value not only to employees, but to the users of services. I remember standing on a platform with the chief executive of British Aerospace, and we both said the same thing, which was that how workers are treated is crucial to the quality of the services that they provide or the product that they produce, and that the difference between the average and the world-class lies in the extent to which the endless potential and creativity of employees is untapped. His point, with which I agree, is that pay is an indicator, although not the only one, of how staff are valued, and it has a profound effect on the loyalty and trust that they feel towards their organisation. It is therefore only right that we set out clear principles of fair pay.

I agree with the hon. Member for Congleton about the importance of equal pay. Councils and their contractors—all employers, in fact—should voluntarily seek to employ people on a decent or living wage. The group of amendments would shine a light on low pay and where taxpayers’ money goes. We need fairness at the top and the bottom, and in the public and private sectors. Those must be the objectives behind the drive for accountability and transparency.

Photo of David Ward David Ward Liberal Democrat, Bradford East 1:45 pm, 3rd February 2011

One purpose of the Localism Bill is to re-energise local government. A common refrain heard in local government when one knocks on doors is, “Why should we vote for you when you’re all the same?” Although we try to argue that that is not the case, unfortunately it is increasingly true. It is becoming more and more difficult to be different in local government.

One concern I had about the inclusion of more and more “musts” is that each one reduces the ability of a local authority to be different. At election time, it would be good if we could knock on a door and say, “If I am elected and my party takes over the leadership of the council, we will introduce a low-pay policy,” or—looking at amendments 57 and 58—“We will promote democracy and introduce a right to petition.” We could put that in our leaflets, as opposed to being the party that will not do such things. There would be a difference; there would be a choice.

The hon. Member for Birmingham, Erdington, made a point about the entitlement to transparency. I think I am entitled to good service if I go into a shop, and if I do not receive it, I will make a choice. I will make a decision on whether I continue to shop there. If I am faced with two political parties, one that offers me transparency in the form of a low-pay policy and one that does not, I will make a choice. That is how it should be. In effect, if someone agrees with what the council is being asked to do, the “musts” remove the possibility of there being bad councils. However, it is the right of electors to elect bad councils if that is what they want.

On disclosure, I have consistently held the position—to reiterate an earlier point—that the “must” should not be about whether there is transparency, but about whether the existence of transparency is disclosed and whether a particular authority intends to introduce it. I find it difficult to think through the benefits to local electors of private sector transparency. If there were two contracts, and one could be offered either to a co-operative, or to a company with a millionaire boss and 20 employees on the minimum wage, what would we do with that knowledge? Will it make us accept a contract from a co-operative that is more costly to the local electors? It might seem fine for us to know more about the pay scales within a private sector company, but what will we do with that information? Will we accept, to the detriment of local electors, a contract that is more socially acceptable but more costly?

Photo of Heidi Alexander Heidi Alexander Labour, Lewisham East

I am not completely familiar with the way in which Public Bill Committees work, but I am very keen to speak on this issue because I care about it deeply.

I support the amendment. Like my hon. Friend the Member for Birmingham, Erdington, I fully support the annual publication of senior pay policy to show what that the people at the top of an organisation are earning. Equally, it is completely right that the Opposition have tabled an amendment to say that such scrutiny should apply from top to bottom.

I would like to say a few words about the backdrop to the clause 21. Time and time again, Ministers have talked about the fat cats at town halls. They argue that if their salaries are reduced, the problem of the deficit will magically be tackled. From my local authority experience,  I can say that that is not the case. I spent six years representing a ward in Lewisham and I was Lewisham’s deputy major for four years. The authority employs some 4,000 staff and has a wage bill of about £270 million. The wage bill of the chief executive and the executive director’s team comes to about £1 million. I recognise that that is a lot of money, but those people do some of the most important jobs in this country, which is a point that has so far been lacking from the debate.

Let us consider the responsibilities of an executive director for community services. That individual is responsible for making sure that our leisure centres are safe and for ensuring that the social care packages provided to elderly and vulnerable citizens are made up of the right sort of support. An annual statement setting out that individual’s job title and pay does nothing to elucidate the nature of their job, their responsibilities and their accountability to the local population.

Photo of Alun Cairns Alun Cairns Conservative, Vale of Glamorgan

Does the hon. Lady agree that many of these executives should earn more than the Prime Minister?

Photo of Heidi Alexander Heidi Alexander Labour, Lewisham East

I would turn that question on its head and ask whether the Prime Minister earns enough. There are thousands of lawyers, accountants and management consultants in London who earn more than the Prime Minister within five or six years of graduation. The Prime Minister does a very difficult job, as do people in local authorities. I respect the work that they do and they should receive proper remuneration. Before coming this afternoon’s sitting, I read about a case a number of years ago involving a council employee in Barrow-in-Furness. He went to court on corporate manslaughter charges in connection with an outbreak of legionnaires disease at a leisure centre. A person in such a job has a huge responsibility, which I believe should be reflected in their pay.

There is a danger in this debate that we forget about the really important job that senior people in local authorities do. Although this analogy does not work perfectly, I cannot help but think that this is somewhat like asking how to reduce the wage bill at Manchester United. The Government would say, “Get rid of Alex Ferguson,” but we all know that the real cost is in the team—the people out there doing stuff. I know that our street sweepers and care workers are not paid what Wayne Rooney and Ryan Giggs are paid, but I would love them to be, to be honest, because they are the real heroes of this country, and we should do all that we can to encourage people to work in local authorities. Another of my concerns about the whole nature of this debate is that by insisting on senior salary policies, we might generate the idea that we are interested only in how much people earn, as opposed to the value that they offer society.

I read in the House of Commons briefing paper on the Bill that the Chartered Institute of Personnel and Development says:

“If pay transparency is going to allow taxpayers and their representatives to hold public sector employers to account, then simply publishing job titles, salary levels and establishing arbitrary pay multiples is not going to be enough; they also need to know whether the pay of these employees reflects their contribution to the organisation. Otherwise the focus will be on the ‘how much’ rather than ‘the what’.”

I completely concur with everything that the CIPD says.

Finally—if I may ask the Committee to indulge me further—I ask hon. Members to consider the implications of such a conversation about local authority pay for the recruitment and retention of the brightest and best. After working in a local authority for a long time, I know that the number of people under the age of 30 working in local authorities can, in some parts of a council, be counted on two hands. According to work force data, only 6% of people who work in local authorities are aged 24 and under.

When the milk round goes around the top universities, I think that we want people to be saying, “I aspire to be the chief executive of a local authority because I can make a huge difference to people’s lives.” People go into public service for many different reasons; it is not only about the pay. Certainly, as a London MP, I can look at comparable jobs with equal responsibility in the private sector. I suggest caution and restraint in this discussion and that we think about what these jobs really involve.

Photo of Nicholas Dakin Nicholas Dakin Labour, Scunthorpe

I thank my hon. Friend for raising the debate to a better level, in a sense, by building on the case made by my hon. Friend the Member for Birmingham, Erdington. People working in local government are carrying out significant jobs and they deserve our praise and support, and to be valued.

This debate is very much about values, and I live in hope—I am a hopeful and optimistic person—that the Government will take on board the amendments, which propose a sensible way forward and show the sort of leadership for which the country is asking. This is an opportunity for leadership, as well as an opportunity to recognise the great work that people do in local government and the great challenge for our age of closing the inequality gap. Everybody knows—there is agreement across the House—that closing that gap will save us money in the longer term, as is shown by lots of evidence and research. When we publish details of top pay, we should also publish details of the lowest pay because that would shine a light on the issue of equality and inequality and ensure that it is part of what is being driven forward for the leadership of our country.

I do not feel that the Government will object to the improvements set out in the amendments. The proposal improves on the statements that the Government have set out in the Bill. Transparency about the top pay and the lowest pay in an organisation will show the right sort of leadership for those who are contracted to carry out significant public sector work. The country is asking for such leadership, so it is the sort of leadership that we should show, because it will demonstrate our values.

I value the honest debate that we have had so far, and I am optimistic that the Government will see an opportunity for leadership by taking this proposal for fairness forward. It would help us to show the public that we are serious about closing the inequality gap and about people earning a living wage. As the evidence tells us, the proposals will benefit not only those people, but everybody else.

Photo of Julie Elliott Julie Elliott Labour, Sunderland Central

I agree with my hon. Friends, and I want to talk about the impact that not having transparency for contractors with the public sector can have on service provision.

Before I became a Member, I spent 11 years as a trade union official representing many tens of thousands of members in the public sector—local government and the health service—as well as in private companies. I saw the direct effect that a lack of transparency had on the level of service. I can give an example of cleaners in the health service. Owing to rising costs, a contractor was seriously struggling to keep within the bid that they had put in for the contract, so it kept reducing the pay for hospital cleaners. As a result, the hospital could not keep its cleaners, because they were being paid something like 90p an hour and as soon as they could get a better-paid job, they left. The time spent training those people—which is six weeks in the NHS for cleaning such important places as theatres—and the investment in providing the facilities and equipment for them to do the job was completely lost, and such work had to continue on a rolling cycle. Subsequent legislation stopped the practice

There is a danger of having a lack of transparency in private companies. Transparency should go from top to bottom. If companies are good, it does not matter whether they are in the private or public sector. If they are providing a service to the public that is funded by public money, which is in effect what such contractors are doing, the transparency should be there for all to see. Driving down contract costs at the expense of people’s wages, and their terms and conditions, creates the inherent danger of problems with service provision. That is why having top-to-bottom transparency protects the public and the services they receive, whether directly from public bodies such as local authorities or the NHS, or from contractors paid from the public purse. We need to look carefully across the piece to ensure that the provisions we are considering are fair, transparent and equal. If we do so, we will end up with good legislation, but if we do not, we will just give ourselves problems for the future.

Photo of Ian Mearns Ian Mearns Labour, Gateshead 2:00 pm, 3rd February 2011

I want to participate in the debate because we need to sound the clarion for the people whom we, as citizens, all employ in our local authority services. Such people go to work every day and are give of themselves unbelievably selflessly as they provide public services throughout the country. If we ask an ordinary citizen, “What does the council do for you?” their stock answer will be, “They empty the bins,” but is so much more than that. Although we are in a time of cuts across a range of public services, we should never miss an opportunity to celebrate the people who provide those public services that are so vital to our everyday lives, and quite often to the lives of the most disadvantaged in our society.

Each day, hundreds of thousands—if not millions—of people throughout the country look after our children, care for our elderly and disabled, keep our streets clean, collect litter, provide library services, care for our citizens in their homes, tend our parks and gardens, ensure our swimming pools and leisure centres are clean, safe and well-managed, and, of course, remove our everyday waste. They even bury our dead. At the top end, they also provide strategy, leadership, and advice and guidance to elected members, and they are capable of managing big departments in local authorities to make sure that the services from which we all want our citizens to  benefit are provided. It is important that we celebrate those people, but it is also important to ensure that there is transparency for all people who work in local government—both contractors and in house—so that everyone can see exactly who is benefitting, and in what way and from whom, from the services with which we want our citizens to be provided.

Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government

It is a pleasure to see you back in the Chair, Mr Amess. May I say at once that I understand and sympathise with many of the important points that have been raised in this debate, which has perhaps ranged a little more widely than the terms of the clauses and the amendments themselves? I will endeavour to concentrate on those amendments and clauses, but I appreciate the significance of ensuring that there is fair pay for people in our public services. The Government are firmly committed to that.

I shall deal with the amendments and how they relate to the clauses. I am glad that the Opposition Front Benchers welcome the clauses as they are drafted. I think everyone would support that, with the possible exception of the hon. Member for Lewisham East who seemed to have some doubt about the matter.

Photo of Heidi Alexander Heidi Alexander Labour, Lewisham East

I assure the Minister that I am not having doubts about the clauses. I simply want the conversation to be constructed in a mature fashion and for there to be recognition that those at the top of local authorities do an important and responsible job. I do not want the conversation to reflect badly on those individuals.

Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government

I do not think one word said by anybody in the Committee suggests that. The important point to remember is that to require transparency in the pay of senior staff is, by no means, to diminish the value of those who work there. Those two points are not in the slightest contradictory. Indeed, the important role played by senior staff means that it is right there should be transparency in the salary levels of those in leadership roles.

I say to my hon. Friend the Member for Bradford East that I appreciate his concern about the “musts.” Of course, what we are doing in the clauses is not to prescribe what a council’s policy or levels of remuneration should be; we are simply prescribing that there should be a policy. What it is, how it is phrased and what arguments are made are entirely matters for the relevant council. If, for example, the council wishes to set out in its policy the reasons why it thinks appropriate remuneration should be paid and the nature of the job, that can be incorporated in the policy. To that extent, the “must” relates to the having of the policy, not the way in which it is drawn up. I hope that the Committee will support those elements of the amendments.

It is also worth considering the approach suggested by the hon. Member for Birmingham, Erdington to lower pay. Given that we have accepted the importance of transparency on senior pay and the fact that the full council must vote on the policy—this brings us back to the point made by my hon. Friend the Member for Bradford East—every elected member has the opportunity  to vote and be held to account by their electors for the policy they adopt. That seems to be consistent with localism and transparency.

On the question of lower pay, although I am sympathetic to attempts to shine light and gain transparency on the issue, I ask the hon. Member for Birmingham, Erdington to hesitate and consider whether the amendments as proposed would achieve that objective in the best possible way. I do not say that we should not continue to explore these issues, but the important points made by a number of my hon. Friends in interventions should not be ignored. Much has already been done to improve transparency. Of course, the changes that my hon. Friend the Member for Congleton referred to have already had a valuable impact and it is also worth remembering that the Government have set up a review under Will Hutton to specifically look at these pay levels. It might be premature for us to be legislating to opt for a particular means of dealing with the issue in advance of that commission’s report.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

When the Minister says that he has sympathy for the motives behind what we are proposing, I know that he means it, given that he comes from a Macmillanite tradition of Conservatives in local government. If what he is suggesting is that the Government are sympathetic to the principle, considering that Will Hutton is due to report in a matter of weeks, is the Minister prepared to consider what we have proposed and introduce his own amendments to ensure transparency for low pay as well as high pay?

Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government

I am grateful to the hon. Gentleman for what I take as genuinely a very great compliment. I appreciate that. I cannot say what we will do in advance of Hutton reporting, but we will certainly undertake to reflect upon Hutton in the context of the Bill. I hope that that is a sensible point to make. We want to be constructive about the matter.

At the moment our concern with the code is that any system we adopt to encourage transparency at all pay levels should be proportionate, because there is a potential burden on local authorities. It can be dealt with, but it is important to keep it proportionate. In particular, in advance of the Hutton commission’s report, it might be premature at this stage to be legislating specifically on multiples, which is the purpose of amendment 48. The hon. Gentleman knows that the Prime Minister and the Chancellor of the Exchequer specifically asked that the Hutton commission makes recommendations on how to ensure that no public sector manager can earn more than 20 times the lowest paid person in the organisation. That is why we should wait to see what the public say on that point before committing ourselves.

It is also worth bearing in mind that clause 23 provides for the issuing of guidance. We intend to ensure that, whatever happens, that guidance reflects the fact that councils may extend their policies not just to senior pay, but to pay levels further down the organisation. I hope that is a constructive response to the hon. Gentleman’s amendment, and I would ask him to consider withdrawing it on that basis. We will revisit the issue.

The difficulty with new clause 1 is the extent to which one can impose that requirement on contractors. My hon. Friend the Member for Bradford East made the  point that there are balancing considerations between the required value of the contract and the other issues related to it. We require that spends of more than £500 be published online, which is the bottom line in which most members of the public will be interested. I accept that there are other considerations, but I do not think one could put councils in exactly the same position as, say, a shopper in a supermarket who wants to be sure of buying fair trade food, or something of that kind, because the shopper has the opportunity to take their custom elsewhere, to buy a different product or to shop at a different store. That is not comparable with the case we are discussing.

The bodies that contract with local government to provide services are separate legal entities and their staff are subject to their own pay arrangements. The local authority is not their employer and they may be contracting with a range of authorities. They might have contracts that extend beyond the public sector, too.

Photo of Julie Elliott Julie Elliott Labour, Sunderland Central

But it is perfectly legal, when one puts a contract out to tender, to ask for rates of pay to be included in the information provided in that tendering process. It is not difficult to do, and it is often done by many parts of the public sector already. It is not a difficult thing to include; it is quite straightforward. It is not onerous for the companies that are putting in tenders.

Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government

It is rather different when Government are doing it. Commercial considerations and commercial confidentiality sometimes arise where there is such provision. It is not necessary to go further than that at this stage. If the local authority wishes to contract on that basis, it is a matter for them; it should not be a matter of Government prescribing how a local authority draws up the terms of its contracts.

Photo of Brandon Lewis Brandon Lewis Conservative, Great Yarmouth

Is there potential for conflict if central Government pass such legislation, because it potentially contradicts the Companies Act. Legislation is different from the contracts that local authorities enter through the tender process.

Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government

My hon. Friend makes a fair point, because there are differences. There are safeguards under the Companies Act and, for the reasons I have set out, it would be premature to seek to extend these provisions to contractors in the way that has been proposed.

The Hutton commission is about to report, and we are more than happy to revisit the whole issue in the context of that report, which I hope will not be too long.

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

For clarity, in saying that they are more than happy to address the whole issue, are the Government prepared to look at our combined proposals for public sector pay and the pay of contractors and table amendments on Report? If that were to be the case, it would truly be a constructive response.

Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government

As the hon. Gentleman knows, the Hutton report is on the general concept of pay. That is what we are prepared to look at. I am not trying to be  obstructive, but we need to reflect on whether it is appropriate in relation to contractors. There are other considerations, but we would certainly be prepared to look at the situation in relation to the Hutton commission’s report.

Photo of Nicholas Dakin Nicholas Dakin Labour, Scunthorpe 2:15 pm, 3rd February 2011

May I press the Minister on the matter? I think that he is saying that it is perfectly acceptable for an individual local authority to ask for that information, but he is not happy for the Bill to state that all local authorities must ask for it. There is no impediment to a local authority asking for the information, but he believes that that is not the right thing to do.

Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government

That is a pretty fair analysis. It is appropriate to prescribe that there will be a policy, but we do not seek to dictate the detail of it. Similarly, we do not think it is appropriate to prescribe to local authorities how they enter into such contacts. If they choose to do so, that is between them and the people with whom they contract.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Communities and Local Government)

I am grateful for the Minister’s comments about revisiting this in the light of the Hutton report, but I wonder about the time scales. The community empowerment part of the Bill, which we will debate next week, puts local authorities in the position of receiving bids from all kinds of different bodies. We have already touched on the fact that certain councils want to outsource everything. If we are going to keep an eye on this and revisit it, we need to remember that the landscape is changing fast. Some public services will no longer be run by public bodies, which is a real cause for concern.

Photo of Bob Neill Bob Neill The Parliamentary Under-Secretary of State for Communities and Local Government

With respect to the hon. Lady, Hutton is about public sector pay, not about the contracting arrangements. We must be cautious not to extend it too far, but we are prepared to revisit the principle that Hutton is likely to enunciate in the context of the Hutton commission’s report. Against that background, I hope that the hon. Member for Birmingham, Erdington will withdraw the amendment.

Jack Dromey rose—

Photo of Sir David Amess Sir David Amess Conservative, Southend West

Order. Before the hon. Gentleman responds, I advise the Committee that because the debate has been wide-ranging there will be no clause stand part debate. If hon. Members want to get things off their chest, they must do so now. When the hon. Gentleman responds to the Minister, will he indicate whether he wants to move any of these amendments, which are scattered all over the place, formally at a later date?

Photo of Jack Dromey Jack Dromey Shadow Minister (Housing)

Thank you, Mr Amess.

May I make a comment about the debate? My hon. Friends the Members for Lewisham East and for Scunthorpe are to be congratulated on introducing balance to the debate. We have sought, rightly, to ask about low pay and top pay, but a remorseless negative commentary tends to come from the Government about those at the top end of the public sector. We must  distinguish between two things. On the one hand, it is unacceptable for megabucks to be paid, as has been the case in some local authorities. On the other hand, it is not right to brand everyone who earns above a certain sum of money, irrespective of how valuable they are to the local authority and irrespective of the immense commercial skills that they may have acquired elsewhere in the public and private sectors. I know that some good, long-serving local government officers have frequently felt insulted by the tone of the debate.

It was also right for my hon. Friend the Member for Gateshead to celebrate who local government employees are and what they do, and I will provide one of many examples of such people. I remember running into a wonderful home help outside Sainsbury’s in Castle Vale in my constituency. She had been in the shop on a Saturday just before Easter, buying Easter eggs for the half a dozen people whom she was due to visit the following week. I asked her why she was doing it, and she said, “They’re wonderful. I look after them in their homes, and most of them are never visited by anyone else. No one will give them an Easter egg.” I asked who was paying for it and she said, “I am, of course.” That is the kind of person whom we have working in local government.

Following the Minister’s constructive response, we will withdraw amendment 45 on the assurance that we will return to the matter on Report, in the light of the Hutton report. At this stage, we will not move new clause 1, which specifically focuses on the same principles of transparency being applied to the private sector. That is the right way to proceed because we hope that the constructive tone the debate has set can be followed through in dialogue between the Front-Bench teams. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 21 ordered to stand part of the Bill.

Clause 22 ordered to stand part of the Bill.