Michael Heseltine – 1992 Speech on the Local Government Bill

The comments made by Michael Heseltine, the then Secretary of State for the Environment, on 20 January 1992.

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

Judging by the representation on the Opposition Benches, that is an uncontroversial statement. As this Government’s local government policies unfold, and fewer and fewer members of the Opposition parties turn up to oppose us—or even to listen to us or criticise us—it has become self-evident that we are winning the intellectual debate day after day.

The Bill is about preparing local government for the 21st century. It involves a review of all local authorities so that we can bring local government closer to the people. It involves the extension of competitive tendering, which will continue the disengagement of local authorities from direct service provision and which will promote their strategic and enabling roles. The Bill requires the publication of standard performance measures, which will give local electors the information that they need to judge their own council’s performance.

The new local government commission for England, which is proposed in part II, will review the structure of local government. It will have a rolling programme of reviews, examining the shire counties area by area, and assessing the case for unitary authorities in those areas. We know that most local authorities want unitary status and we believe that such status will provide a better structure for the future in most areas. However, it will be open to the commission to recommend that there should be no change to the existing structure in some areas. We have already made it clear that we do not intend that either the county or the district tier of the local authorities be abolished as a whole. People want local councils with which they can identify and local people will be given a significant voice in the commission’s reviews. I expect to see more unitary authorities with a strong local identity.

Mr. Anthony Nelson (Chichester)

I apologise for asking my right hon. Friend to give way so early in his speech, but I intervene on an important point. Will my right hon. Friend confirm that what really matters is the quality and cost of the local government services that are provided to the people whom we represent, yet nothing in the Bill specifically refers to that need as a criterion for change? Before a costly and traumatic reorganisation of the structure of local government is embarked upon, is it not necessary to show ordinary people that demonstrable improvements are available to them as a result of that change and that, without those improvements, there is no case for change?

Mr. Heseltine

My hon. Friend raises a most important point. If he studies the draft guidance that we have issued for the local government commission, he will see that we have placed considerable weight on the need to demonstrate that there is an economic case for change. I know that my hon. Friend will be as concerned as I am to consider that part of the legislation which provides for an extension of competitive tendering and which gives the Audit Commission the ability to reveal comparisons between one authority, and one service, and another, which is what he is interested in achieving. I shall come to that part of the Bill in a few moments.

Sir Charles Morrison (Devizes)

I too am sorry to interrupt my right hon. Friend but, as his reply to my hon. Friend the Member for Chichester (Mr. Nelson) referred to the economic case for change, does he agree that if there is such an economic case for change, it must be made on the basis that where there are unitary authorities, which, as a matter of principle, I strongly support, those authorities must be of an adequate size? If we have endless small unitary authorities, we shall simply add enormously to administrative costs.

Mr. Heseltine

My hon. Friend has raised an interesting issue that will involve the House and local government practitioners in much debate in the years ahead. As my hon. Friend and I remember all too well, that was the argument that was made in the early 1970s when it was suggested that we should establish a minimum size standard to cope with the provision of certain services. However, at that time we did not give sufficient attention to the concept of an enabling authority, which has the possibility of buying in services from larger, perhaps neighbouring, authorities. Therefore, it is possible to have both a larger-scale provision of services and more local, smaller-scale authorities which buy in and then provide services. It would be wrong for us to block the option of seeking to have an advantage of scale, through private sector or other public sector providers, while placing the structure much closer to individual people.

Mr. Tam Dalyell (Linlithgow)

On a factual point, will the Secretary of State confirm that the Government are looking positively and constructively at the de minimis provision, and at providing an increase from the current level of £100,000 to about £250,000, which was promised in the debate on 17 December last year?

Mr. Heseltine

I hope that the hon. Gentleman will forgive me for being unable to identify the issue to which he refers. However, if he writes to me, I shall do my best to respond in specific terms. The de minimis provision with which I am familiar cannot be the one about which he is talking, which is the old cut-off point below which capping did not apply. As I do not wish to fail to provide an adequate response to the hon. Gentleman, perhaps he will let me know exactly what de minimis provision he has in mind.

Mr. Dalyell

I am talking about the Scottish authorities and their concern about de minimis provision.

Mr. Heseltine

In that case, the hon. Gentleman can be absolutely sure that he will receive the diligent reply from my hon. Friend the Under-Secretary of State for Scotland, the hon. Member for Eastwood (Mr. Stewart), to which he is accustomed.

Mr. Robert Adley (Christchurch)

I am sorry to have to intervene in my right hon. Friend’s speech when two important questions have already been asked of him. I hope that he will not be too bored to hear again my concern that we do not make the same mistakes that we made in 1972. Is he aware that there is still widespread anxiety that, when his Department establishes a commission, there will be a hidden agenda on, say, size or functions? What can he say to those of my constituents, especially in Christchurch, the priory of which celebrates its 900th anniversary in 1994, to assure them that, contrary to the universally expressed wishes of the local citizenry, they are not likely to be subsumed into some suburban, subtopian and grotesque unit of local government, which they would detest universally, to a man and to a woman?

Mr. Heseltine

I cannot believe that my hon. Friend would suggest that I, of all people, have ever had a hidden agenda—[Laughter.] Well, I can assure my hon. Friend that the horrendous spectres which he has waved before us and which the local government commission will doubtless address do not in any way form part of our plans for the future of local government. I hope that my hon. Friend will find that a constructive reply.

Trying to address the issue of local accountability will be a crucial task for the local government commission. We are pleased that Sir John Banham, with his experience at the Audit Commission, has agreed to become the chairman of the new commission when he stands down from the Confederation of British Industry this summer. As I have already said, we have issued a draft of the guidance that we propose to give the commission. Copies have been made available to all hon. Members and we have invited views on the draft by the end of this month.

The guidance should require the commission to assess community identities and the impact and effectiveness of any proposed new structure. It will be important for the commission to consider the most effective exercise of functions and the delivery of services, consistent with community identities and the wide public interest.

The commission will be able to obtain advice from other expert organisations, and particularly from the Audit Commission, to assist it in its work. However, it will be the following matters that will influence decisions.

I cannot stress too often that money spent on excessive public relations campaigns will be wasted cash. Although I have said this before, perhaps I may trespass on your tolerance, Madam Deputy Speaker, by repeating this advice to local authorities. They will not enhance their case by employing expensive public relations consultants to spend the local people’s money trying to create a synthetic case, which will be looked at in great detail and dispassionately by the local government commission when it begins its work.

Mr. Eric Martlew (Carlisle)

I have listened carefully to the Secretary of State at the Dispatch Box today. His speech was similar to that which he made when he told us that he would get rid of the poll tax. Is what he is trying to say an apology to the people of Britain who have been struggling under a local government system that has never really worked, ever since the Conservatives put it through the House in 1972? Is it not an admission of failure that he has had to come to the Dispatch Box today and introduce the Bill?

Mr. Heseltine

If what the hon. Gentleman suggests is true, the only apology that is necessary is from the Labour Government who ruled Britain for significant periods after 1972 and did nothing whatever to put the defects right. Once again, when reform is required, it is a Conservative Administration who address the issue.

Mr. Derek Enright (Hemsworth)


Mr. Heseltine

If another apology is required, it is from the hon. Member for Dagenham (Mr. Gould) for psyching up the level of community charge bills and encouraging local authorities to increase their expenditure, to add another burden to the tax increases with which we are already threatened by a future Labour Government. [Interruption.] Although few Opposition Members are present, I hope that they will allow me to make progress with explaining to the House the merits of yet one more piece of refreshing Conservative legislation.
The Bill sets out a framework for the procedures that the commission will follow in conducting its reviews, including the arrangements for consultation with local authorities, local people and other interested organisations. The commission will initiate a review, with publicity. If appropriate, it will outline proposals or options. There will then be an opportunity for local authorities and other interested parties to put their views.

The commission will then prepare draft recommendations and invite comments on them. We are particularly anxious that local people should put their views on the local government structure that they want to see in their areas. Once the commission has considered comments on the draft recommendations it will draw up final recommendations which it will publish and submit to the Secretary of State for the Environment. If necessary, I can ask the commission to carry out further investigations or, indeed, to supply more information. Finally, an order implementing the commission’s recommendations will be laid before Parliament.

As well as conducting reviews of local government structure, the local government commission will take on the work of the Local Government Boundary Commission. It will be responsible for any reviews of boundaries and electoral arrangements which are needed as a consequence of structural review. It will also be able to carry out separate reviews of local government boundaries or electoral arrangements, at my request.

As now, there will continue to be reviews of electoral arrangements at mandatory intervals of not fewer than 10 and not more than 15 years. Therefore, the Bill also provides for the abolition of the Local Government Boundary Commission for England. Any reviews begun by the Boundary Commission but not completed by the time that it is abolished may be transferred to the new Local Government Commission. Our aim is that the commission should consider the structure of local government area by area so that it can make tailor-made recommendations for each area about the most appropriate structure to meet that area’s particular needs and circumstances. That calls for flexibility.

Therefore, the Bill provides for parliamentary orders to change the structure of local government area by area. Such orders will be subject to affirmative resolution procedures.

Mr. Paul Channon (Southend, West)

When my right hon. Friend says “area by area”, what does he mean? When the commission gets down to its job, will it look at a county at a time or, in some cases, units smaller than a county? How will the commission decide which areas to select for review?

Mr. Heseltine

My right hon. Friend raises an interesting question. We do not anticipate that the areas will be smaller than counties. Indeed, we expect that they will usually include several counties. Undoubtedly, there 41are areas where local ambitions or requirements might indicate that cross-county boundary reorganisations are appropriate. For example, in certain areas old counties disappeared. They might reappear and county boundaries might have an effect on the matter.

Part II of the Local Government Bill also contains enabling powers, subject to Parliament, for setting up a residuary body or bodies, or a staff commission or commissions. As the House will know, such bodies have been found helpful in previous reorganisations. But we intend to set them up only if the need for them is clear.

Part I of the Bill deals with competitive tendering. It is almost uncontested by local authorities—at least in private—that competitive tendering has powerfully changed local services for the better.

Mr. William O’Brien (Normanton)

What of quality of service?

Mr. Heseltine

If the Labour party intends to abolish competitive tendering, that is an additional interesting revelation about its policies. I am only too anxious to give way if anyone wishes to suggest that there will be no more competitive tendering. It is obvious that the winds of change have blown such socialist nostrums from Labour Members’ minds. Competitive tendering is one more item on the long list of items that the Conservative party has implanted in the national culture of how to deliver services.

Mr. Allen McKay (Barnsley, West and Penistone)

Does the Secretary of State agree that there is a difference between competitive tendering and compulsory competitive tendering?

Mr. Heseltine

Yes, there is a difference. In the case of voluntary competitive tendering, Labour authorities do not do it. In that of compulsory competitive tendering, they do.

Research by the Institute of Local Government Studies has shown that work awarded through the competitive tendering procedures costs 6 per cent. less on average, and that in general standards are maintained or improved.

Mr. David Blunkett (Sheffield, Brightside)

Will the Secretary of State confirm that only 40 authorities were surveyed by the Institute of Local Government Studies? On page 132, paragraph 13.36, in its conclusion it says: Confidence in the financial assessment of the impact of competition must be limited. Outturn figures for the post-tender period are not available. The changing accounting practices that have resulted from competition have made the provision of information and comparisons of cost before and after competition difficult. In other words, it said that it did not really have the evidence, but it took a good stab at it.

Mr. Heseltine

If the hon. Gentleman is so sceptical about the benefits of competitive tendering, why does he not have the courage to pursue the logic of the argument and say that his party will get rid of it? He knows, as everyone knows, that competitive tendering, imposed where necessary by the Government, has shaken up service delivery standards in local government like nothing that we have seen in recent decades. That is why the Conservative party has the courage to say so, and intends to extend competitive tendering. We will obtain better value for money and higher quality services, despite the worst attempts of the Labour party to frustrate that aim.

The costs have materialised at 6 per cent. less on average and in general terms standards have been maintained or improved. But that is an average position. The truth of the matter is that there are many more extreme examples. No one in the House will forget the state of the city of Liverpool when its trade unions, encouraged by the Labour party, tried their customary strong-arm tactics against the Labour council of the time. We had the unedifying sight of pile upon pile of rubbish towering in the city centre streets. When the city went to tender, the in-house team bid £7.9 million. The private sector bid £3.9 million. The private sector cleaned up the city.

Liverpool was not the only dramatic example. When we used our powers to force Camden council to re-tender its street-cleaning and refuse services, it replaced an ineffective and costly in-house service with a private sector contract that swept the streets and saved the local taxpayer millions of pounds.

So the question remains whether those who oppose compulsory competitive tendering seriously believe that without that process those cost savings and management improvements would have taken place in many local authorities. There is a stunned silence from the Labour Benches because Labour Members know in truth that those improvements would not have taken place without compulsory tendering. The fact is that in the past too many authorities ran their services more for the convenience of their work forces than for the communities that they should have served.

Where authorities, on behalf of their chargepayers, wish to employ an in-house team for these services compulsory competitive tendering has forced them to demonstrate that their team can do the job as efficiently and effectively as an outside contractor. That discipline has meant that they have had to knuckle down and get on with the business of providing services for the citizen, and not jobs for the boys.

We now have to extend competition into local authority white-collar services.

Mr. John Maxton (Glasgow, Cathcart)


Mr. Heseltine

Here we go again. The question is again asked immediately. The Labour party says that it will not prevent competitive tendering in respect of the services to which it now applies. I shall be very interested to hear whether the Opposition intend to prevent its extension and thus deprive people of the further enjoyment of improved services.

Last November we published a consultation paper entitled “Competing for Quality—Competition in the Provision of Local Services”. That document proposes initially to extend CCT to a number of construction-related professional services, such as architecture and engineering, and then eventually to bring the stimulus of competition to a range of core corporate services, such as finance, legal services, personnel and administration. The consultation paper made it clear that we recognise that the existing CCT procedures under the Local Government Act 1988 may need revision for such services.

For the activities already covered by the 1988 Act local authorities decide on the quality of services that they want and then set specifications for the job. Once they have received tenders it is up to them to ensure, in a fair and objective fashion, that tenderers can meet their specifications. But in the case of professional and technical services considerations of quality are more complex and more difficult to measure. It is for that reason that we are prepared to consider a modified tendering procedure with a separate quality threshold and double-envelope tendering. This would enable authorities to look at the prices tendered by those who come up to the standards that they and their local communities require and then to judge on the basis of price alone. It is our intention that this Bill will provide powers to modify the existing CCT procedures for the professional and technical services to take account of this and other concerns.

As it stands, clause 8 does not not do that. Instead, it purports to provide a wholly inflexible and unusable power which could not address the particular concerns relating to professional services. It would treat quality in architecture on the same level as quality in refuse collection. I give notice that, in Committee, we shall table amendments to restore the necessary flexibility to this power.

Mr. Dalyell

I wonder whether the Secretary of State can answer a question that bothers West Lothian district council. In the event of the authority’s having misgivings as to the capability of the lowest tenderer to maintain a quality service, what remedies are available to it at the tender-evaluation stage? This is a matter that bothers serious people.

Mr. Heseltine

The hon. Gentleman is perfectly right, and I have just answered his question by my reference to the concept of double-envelope tendering, whereby quality thresholds are set and firms have to ensure that those are met. Above the quality thresholds, it is a question of price. The hon. Gentleman raises a perfectly legitimate question, but it is one that we have anticipated and answered.

Mr. Allen McKay

On the question of quality, it is well known that firms submit tenders even though architects would advise that those firms could not do the job. On paper the costing looks good, but practical experience is another matter. In such a case, would an authority, on the advice of its officers, be able to eliminate a tender?

Mr. Heseltine

The hon. Gentleman must be fully aware that invariably officers advise against competitive tendering techniques. They invariably produce a range—

Mr. Allen McKay rose——

Mr. Heseltine

I have twice given way to the hon. Gentleman, and I want now to reply to his questions.

If we had not introduced the rigour of competitive tendering regimes, we should not have seen the dispersion of activity towards the private sector. Local government, if it had had the will, could have done these things on its own initiative. However, it took legislation to change the minds not only of local politicians but of local officials and, in particular, of the trade unions behind them.

Mr. Allen McKay rose——

Mr. Heseltine

I have dealt with the issue, and I wish now to move to the third aspect of what I have to say.

Clauses 8 and 9 contain enabling provisions, and they will not affect local government activities until we bring secondary legislation before Parliament. The consultation paper sets out a number of ways in which we intend to use these enabling powers if Parliament grants them. We shall carefully consider responses to the consultation paper and shall bring forward our proposals for secondary legislation in due course.

I should like now to come to a question that has been raised by Conservative Members—local authority performance standards. Everybody knows that service standards vary. We know about authorities in whose areas rents are not collected and repairs are not done. We know about the bins that are not emptied and about the streets that are not swept. We know that costs too vary. The whole House must know that, in general, costs under Labour authorities are higher than costs under Conservative authorities. It is still true that, on average in local government, a vote for Labour costs the individual payer £80 a year extra.

The citizens charter White Paper promised that electors would be given the information they need to enable them to judge the services provided by their local councils and the costs. Those electors should know that it costs 8.69p per head to collect the rubbish in Tory Wandsworth, and 23.28p—nearly three times as much—in Labour’s Camden. They should know that it costs £10,000 per km to maintain the roads of Labour’s Lancashire, but only half that in Tory Lincolnshire. We know that these variations exist. [Laughter.] I am not surprised that hon. Members find it funny that services in Labour-controlled areas should cost so much more.

Dame Elaine Kellett-Bowman (Lancaster)

Is my right hon. Friend aware that when the Conservatives were in charge of the Lancashire county council the standard and maintenance of our roads were well above the national average but that they are now below the national average?

Mr. Heseltine

But not in cost. As we should expect, my hon. Friend makes a most eloquent point.

We all know that these variations exist, but the electors should not have to rely on stray admissions to find out what is going on. I refer, for instance, to the admission of Keva Coombes, the former leader of the Liverpool council. In July 1990 The Independent quoted him as having confessed: The council’s problems are not down to resources, rather inefficiency. It costs four times more to pick up a piece of litter in Liverpool than it does in other areas. Some hon. Members—you, Madam Deputy Speaker, and I among them—will remember Maureen Colquhoun, an ex-Member of Parliament and an ex-councillor in Labour Hackney. She summed up the situation in Hackney in these words:

There was only one reason for Hackney council losing seats at the 1990 elections—the total failure of the Labour Group … to deliver services. The record is shameful. She went on to make another observation—and this is a matter of which I have experience and in respect of which I know how she feels. She said: Tenants were not treated as people at all. These are the words of a former Labour Member of this House describing Labour in local authorities.

We do not think it good enough to rely on these accidental admissions, so clauses 1 to 4 provide the basis for systematic comparisons. Standards of service and costs should be reported on a common basis determined by an independent body. That is what the Bill provides, and the Audit Commission is already preparing proposals that will allow the public to compare the cost in their area with the cost in other areas of services of similar standards.

Mr. Blunkett

The Secretary of State has made comparisons. Does he believe that all comparisons are fair? Would he say that it is fair to compare the costs for collecting a single tonne of rubbish? Will he confirm that in Wandsworth it costs £39.28 to collect a tonne of rubbish, in Westminster it costs £21.33, but in Haringey it costs £16.62 and in Newham £19.08? Will he confirm that in Chiltern, a Tory-controlled authority in Buckinghamshire, it costs three times as much to collect the rubbish as it does in Labour-controlled Milton Keynes, down the road? If there are to be comparisons, will they be across the board, so that we can see the kind of rubbish that the Secretary of State is talking?

Mr. Heseltine

As on so many other occasions, having listened to what I have had to say, the hon. Gentleman has come round to agreeing with me. We shall give him exactly what he wants—all the statistics for all the services for all the authorities. I am delighted to tell the hon. Gentleman that, because now he will come through the Aye Lobby in support of our Bill. We have another convert on the Labour party Benches.

Mr. Enright

Will the Secretary of State also look at the statistics on additionality in RECHAR areas?

Mr. Heseltine

The hon. Gentleman is as aware as I am that this matter is being carefully considered by the Government, and when we have something to say, we shall make a public statement. However, to the best of my knowledge, that policy is not covered by this Bill. If I am wrong, I should be grateful if the hon. Gentleman will correct me, because I have nothing about it in my briefing notes.

Mr. Bob Cryer (Bradford, South)

If it is not in the Secretary of State’s briefing notes, he cannot say anything about it.

Mr. Heseltine

No. If it is not in my briefing notes, it is not there.

Mr. Christopher Gill (Ludlow)

Before he leaves accountability, will my right hon. Friend agree that, whatever the proposed changes that are made, accountability will be achieved only if responsibility and authority are vested in the same pair of hands? Whatever he does in this review of local government, will he ensure that that principle is scrupulously adhered to?

Mr. Heseltine

My hon. Friend will have heard what I said earlier about the local government commission because it is with the intention of seeing the emergence of more unitary authorities that we are introducing the Bill. My hon. Friend will therefore be able to support us with enthusiasm.

The Audit Commission has issued a paper—”The Citizens Charter: Local Authority Performance Indicators”, and I have arranged for copies of it to be placed in the Libraries of both Houses. The paper sets out the Audit Commission’s preliminary thinking on how it would set about its new tasks. The paper is most important and one that the House will want to consider with great care. As I have said, all the figures will be published and the resulting publicity will be a powerful motivator. Authorities will no longer be able to hide behind vague definitions of standards and vague assessments of costs.

Let me make two things clear. First, standards of performance are central to the provisions in clauses 1 to 4 and to the future development of the so-called league tables. There was some confusion about this matter in the other place. The Bill makes it clear that the subject matter of comparisons is to be standards of performance achieved, as is set out in clause 1(1) at the beginning of the Bill. The criteria of comparisons follow, and are cost, economy, efficiency and effectiveness.

Secondly, the requirement for the Audit Commission to give directions to local authorities requiring them to give the public information on their performance in no way detracts from the freedom of authorities to decide for themselves what standard of service to provide. The Bill is concerned about the reporting of levels of service delivered. This will enable the public to make their judgment on whether their authority is delivering good value for money.

Clauses 5 and 6 implement another aspect of the citizens charter. In too many cases, local authorities do not respond to their auditors’ reports and recommendations. Clause 5 imposes on bodies a new duty to respond promptly, formally and in public to auditors’ public interest reports made under section 15 of the 1982 Act.

There are doubts about the ability of the Audit Commission to publish information about individual authorities—in other words, to name names. Clause 7 will enable the Audit Commission to disclose information on which bodies fail to comply with the requirements of performance standards or contravene the accounts regulations—for example, by failing to publish their accounts on time—or are subject to an auditor’s report. They could also disclose the contents of such a report and the body’s response. I see no case for shielding authorities which do any of those things from the publicity that their performance should properly attract.

Both in the citizens charter provisions and in the proposals for structural reform, the Bill puts the interests of the people first. It will provide voters with the facts about the way that councils discharge their responsibilities. It will extend the benefits of competitive tendering and it will lead to a local government structure that takes account of the needs of each area and of the views of local citizens. I believe that it will lead to a significant advance in the quality of local government, and I commend it to the House.