Localism Bill

Baroness Hamwee Excerpts

Monday 10th October 2011 Lords Chamber

[Lord Beecham]

My Lords, I certainly support the amendment of the noble Lord, Lord Greaves, in respect of the proposal that two or more employees could issue a challenge to the authority, which I would much rather were not in the Bill at all. Failing that, my Amendment 197CB, would at least require a majority of the employees affected to support such a move. I really hope that the Government will take that seriously. It does not seem appropriate that two or more employees—it might be a director or deputy director; it could be people lower in the organisation—could simply take a decision which would affect a considerable number of people without their consent and outsource a whole section of the local authority. That seems wholly unreasonable and not at all compatible with the general thrust of the Bill, which looks to secure support for a range of measures on the part of communities. I hope that the Government will acknowledge that there is an issue here and will accept one or other of the amendments. My preference would be that of the noble Lord, Lord Greaves, but, failing that, I would be delighted to accept his support for the fallback position.

However, I am less persuaded by his Amendment 197DA. I quite take the thrust of his intention, but I am not sure the wording is very compelling. The amendment refers to the body concerned being required to be,

“actively engaged … in the area in which the relevant service is being provided”.

Let us take as an example a county area and services for the elderly or domiciliary care. There might be an organisation in one corner of the county carrying out that service. It would hardly meet the description of being,

“actively engaged in the area”;

that is, across the area in which the relevant service is being provided. It is difficult to define in the way that the noble Lord seeks.

I am therefore unenthusiastic about the way in which the noble Lord reaches his objective, although I am bound to say that I am not sure that I can offer a better alternative. However, in respect of the previous two amendments, the Government need to rethink their position to facilitate at the very least a majority decision by those who would be affected by a move of two of their colleagues. I cannot see any logical reason why the Government should resist that.

[Baroness Hamwee]

My Lords, I have later amendments on the same issues. In relation to Amendment 197DA, I would like to say to my noble friend that I think that experience in the particular activity that is at issue is less important than the geographical link. I take his point about wanting a connection, but I am not quite convinced that it is the particular connection that he has mentioned. However, by and large I am entirely with him on this issue.

The noble Lord, Lord Lucas, framed this in terms of urban needs, and I myself am very much an urban and suburban person. He also mentioned the comfort of state provision. Since this debate has morphed into discussion not just about two employees, but about whether two employees might, as it were, sell out to Tesco, it does remind me that there is often a very sharp divide on this issue. People do not like Tesco, but they do like being able to shop in Tesco, which creates quite a dilemma.

My question for my noble friend is whether there is any room for local variation in a local authority’s response to such an expression of interest? I will come to my other questions when we come to my amendments later.

[Lord True]

My Lords, there is a gentle sense of irony in the representative of the workers’ party, and my noble friend who is yearning for the days when his party stood for worker control, expressing so much concern at the prospect of employees, however few—less than half, I gather, is unacceptable— expressing an interest in undertaking a function. It seems to me that we are witnessing major change in communities and local government and that it is perfectly reasonable, indeed it is already happening all over the country, that groups of workers and employees are coming forward with propositions to set up social enterprises, to take on existing bodies and to take on other activities. I am sorry that I was not in the Chamber to welcome the withdrawal by my noble friend of regulation in the previous group of amendments, which I do welcome. Yet here we are being pushed to prescribe and put blocks in the way of people putting forward expressions of interest simply on the basis that they might be employees of the organisation and, still worse, that they might secretly be in cahoots with capitalism.

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[Lord Greaves]

My Lords, this is the other group of key amendments in this part of the Bill. I speak to four others in the group, and there are two more in the group from my noble friend Lady Hamwee. These amendments are all about the process of procurement once an expression of interest has been accepted from the relevant body. The problem is that once the expression of interest is accepted, the procurement procedures roll forward automatically. The kind of procurement may vary according to the scale of the operation. It could be very small—for example, taking over a local pocket park. It could be modest, such as meals on wheels in a village. It could be a bit larger, such as running a village hall, an estate community centre in a town or a local library. It could be quite substantial, such as providing adult domiciliary services across a district, refuse collection and recycling across a large borough, or county library services. So the challenge, at least in theory, could apply to a wide range of services.

All these processes will have to be carried out according to basic standards such as openness, transparency, non-discrimination, equal treatment and proportionality, which, apart from anything else, are imposed by the relevant European directive, which was transposed into the public contracts regulations in 2006. As I understand it, and perhaps the Minister can confirm this, the underlying system is unchanged relating to contracts by local authorities that contract out services.

In addition, we have the standards of auditing and supervision by, at the moment, the Audit Commission, by the system that will replace it, by the councils’ own standing orders and by financial regulations. As I understand it, the community right to challenge contracts will all be bound by existing regulations in this way. The key cut-off is imposed by European rules and public contract regulations. Those regulations are set out in euros so the monetary threshold varies a bit according to how the euro goes up and down, but I am assured that it is around £156,400. That is the threshold over which the annual value of a service must be open to tender throughout the European Union.

The fear and the danger is therefore that the community right to challenge could open the way to a new and rather random form of compulsory competitive tendering and the takeover of relevant services by large commercial companies, even if that might be against the wishes of the principal council—the “relevant authority”, in the jargon of the Bill—and the community group, the parish council, the charity or whichever relevant body put forward the bid.

Again, we have had a large number of government assurances. Ministers at all levels have stated time and again that that is not their intention with this provision. If councils want to test the market, as they are able to, they should do so clearly and deliberately, not by accident under the community right to challenge. That is what Ministers in the Government assure us is their position. However, it is not clear how that can be prevented in the Bill as it stands. May we have a clear statement that the Government do not intend the community right to challenge to be a way in for large commercial companies, and that clear guidance will be given to councils on how this can be prevented? May we please know how it can be prevented?

Meanwhile, the amendments suggest two possible ways forward as safeguards. Amendment 197EZA says that the relevant authority can reject an expression of interest for a service above the annual cost at which a full tendering process is required. In other words, if it goes over that threshold, that can be a reason for saying, “No, we’re not going to put it out to tender because of the consequences”. In practice, this is the £156,000-odd threshold imposed by the public contracts regulations.

Amendments 197EB, 197EC and 197ED would allow a council, instead of going for competitive procurement by tender, to carry out a full and open public service review. New subsection (3A), which we are proposing, reads:

“A service review carried out for”,

this purpose,

“must include a consultation process with the relevant body, users of the service and any bodies representing them, employees engaged in providing the relevant service and their representatives, residents of the area and such other persons that the relevant authority considers appropriate”.

In other words it would be a very open, transparent and, one hopes, effective process, looking at how the service was provided to see whether the challenge from a particular group could in fact provide the service more effectively, economically and advantageously for the community.

These amendments may not be the best ways to provide safeguards against the problem that we have identified, but that there is a problem seems to be the case. There does not seem to be an answer to the problem that if you go for a competitive procurement you are bound by the European rules and regulations, and if it is a service that is worth more than £156,000 each year, then there is a real risk that you are putting it out to a commercial company. I beg to move.

[Baroness Hamwee]

My Lords, I have Amendments 197FA and 197FAA in this group, and I am well aware that my noble friend at the Dispatch Box will tell me that what I am proposing is not lawful. What I am proposing is that a local authority can apply its own criteria essentially in assessing the expressions of interest, and include whatever restrictions and requirements it thinks appropriate—to very much the same aim, the same end, as my noble friend. I have no expectation about the amendments being accepted but, like him, I am looking for reassurances.

My noble friend the Minister said in response to the previous group of amendments that an expression of interest by two or more employees would not be a proxy for a commercial organisation, and referred to that in terms of abuse. I wrote down what he said about that but confess that, having printed off the policy statement to which he referred some weeks ago, I have completely forgotten about it, and it is probably somewhere in a pile of papers on my desk at the moment. What he said was that those expressing an interest would have to show that they are capable of providing a service, that they had engaged with the staff, and that what they were doing was not vexatious or frivolous. I have to say that I would have thought that any commercial organisation will very easily satisfy those criteria.

A concern to which my noble friend Lord Greaves has not referred is that having set up the arrangement—and this of course is not just something that would apply to the two employees; it could apply to a community body as well—it could then sell the business or dispose of the shares in the company which it had formed to run the service. I have not seen any way in which this could be prevented. I suspect that I would be told that it would be improper to prevent it. But it concerns me that it is taking this proposal a good deal further than appears on the face of the Bill.

I turn to subsections (5) and (6) of Clause 71, the first dealing with an expression of interest, the second dealing with a procurement exercise. Both talk of the authority considering—and I will come back to that term—whether the activity would,

“promote or improve the social, economic or environmental well-being of the authority’s area”.

Well indeed, and well and good. But consider: it is not bound to apply those factors. It needs to consider them. I dare say that means that it must be able to show how it has considered them.

Turning to subsection (7), we are told that this,

“applies only so far as is consistent with the law”.

There is no particular assurance at all here, if I may say so. Subsection (7) refers to the procurement exercise but I am worried that an authority may well read this as applying to the expressions of interest as well. In general, I suspect that local authorities will need quite a lot of reassurance over how they apply these provisions.

I speak only for myself in this. I am finding it difficult to articulate some of the unease that is almost more instinctive than technical. However, general expressions of reassurance and consolation may not go quite so far, technically, as to amount to real reassurance. I have rambled enough. I hope that the House has a sense of my unease.

[Lord Kennedy of Southwark]

I shall be brief. The amendment moved by the noble Lord, Lord Greaves, raises important concerns. The other amendments in the group seek a process to deal with these concerns. Without these amendments or something else, it is all rather open to interpretation, which is not a good place for us to be. I agree with the comments of the noble Baroness, Lady Hamwee, about the sense of unease.

The amendments in the names of the noble Lords, Lord Greaves and Lord Tope, and my noble friend Lord Beecham, are absolutely right. They make provision for a consultation process with the users of a service, their representatives and residents of the area. If the noble Lord, Lord Shutt, is unable to accept these amendments, will he tell the House when he responds how he squares that with his previous remarks about localism? I genuinely feel that the Bill is confused. In some cases it gives power to the local community, in some cases it takes it back. There is a lot of regulation. It is all a bit confused here. I would be grateful if the noble Lord could address that point in particular.

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Moved by

[Baroness Hamwee]

197FC: Clause 72, page 62, line 7, at beginning insert—
“( ) A relevant authority that is considering an expression of interest from a relevant body may require the body to provide any information that the authority considers desirable in connection with its acceptance or rejection under section 71(1).”

[Baroness Hamwee]

I shall not speak at much length. This amendment was tabled at the last stage as well. It would provide for a relevant authority being able to require whatever information it thinks desirable. I dare say my noble friend will confirm that it is not necessary to state this because it is implicit or provided for elsewhere. The reason I am moving it is because I want to quickly comment on some of the things he said in response to the last group. As it was Report stage I could not come back on them then. He said, “It’s all about community”. But what my noble friend and I are saying is that we fear that it is not. I very much welcomed his comment that guidance might well say, “Make your own minds up”. That is exactly what one would want to see. But I wonder if I could suggest to him that guidance might include some sort of flow chart which would assist authorities to understand what they can do and what they cannot do, and what direction they have got to be thinking in. I also say that my noble friend Lord Greaves’s point about how a procurement exercise allows for a tender from the authority—from the in-house service—is very serious. It may be one of those things where the answer is so obvious that none of us can see it because it is blindingly obvious. If it is not obvious, and if it is not answered in a way in which the Minister will understand we would regard as satisfactory, then it is so serious that we must not lose sight of it. We should not discard it now and we should return to it at Third Reading to ensure that it is entirely clear. I hope that will not be necessary. I beg to move.

[Lord Shutt of Greetland]

These matters are grouped together. I thank the noble Baroness. There are four amendments in the group and two have not been moved. This is the third one and I take it that the fourth will not be moved. On that basis I respond to my noble friend Lady Hamwee.

Amendment 197FC would enable a relevant authority to ask a relevant body for any information it considered desirable in deciding whether to accept or reject an expression of interest. The amendment is unnecessary. Clause 69(1) already enables the Secretary of State to specify in regulations the information to be included in an expression of interest. The majority of respondents to the consultation broadly agreed with our proposals on this and the policy statement placed in the Library of the House sets out the information we intend to specify be included in an expression of interest. This information will enable the authority to decide whether there is one or more grounds for rejection. If expressions of interest do not include any of the required information, we would expect relevant authorities to take a common-sense approach and simply ask for it.

This amendment would enable authorities to place additional requirements, and potentially a disproportionate burden, on relevant bodies, and treat expressions of interest from different relevant bodies differently, which would be unfair and could potentially leave authorities open to challenge. If the experience of implementing the community right to challenge shows that a relevant body may need to provide further information to enable authorities to take a decision on an expression of interest, then we can consider whether we need to amend the regulations to allow for this.

In the circumstances, I trust that my noble friend will feel she does not need to press this amendment. Following her other comments about guidance, I am sure that the resources of the department will provide guidance, flow charts and material in any form that clearly gets over to authorities the information that they need. As I have indicated all along, I believe that all these proposals are right, but, in the event, it is about trust and it is about communities; it is not about exposing big contracts to organisations under the umbrella of something which has been done for communities. I trust that everyone has got that trust and that it will work in this way.

[Baroness Hamwee]

I thank my noble friend for that response. Of course, I shall not press the matter, but I note that he talked in terms of the Secretary of State making regulations which will allow for certain information to be requested. I am looking for a little more individuality than that. However, I shall use this opportunity to add a coda to my point about the in-house service and procurement. I am not asking for an answer now, but I shall put the question on record. In order to take part in it, would the in-house service have to form a separate, new entity in order to be able to bid? That would seem to involve a lot of extra bureaucracy and work, which I do not think any of us would want to see. I shall put my noble friend out of his agony and beg leave to withdraw the amendment.

Amendment 197FC withdrawn.