Select Committee on Health Minutes of Evidence

Annex 2



  The modernisation and improvement of public services is a major plank within the programme of Government. We wholeheartedly support the philosophy of pluralism of service provision within the public sector whereby the best of the public and private sector come together to deliver high quality, value-for-money services to local citizens.

  Since the ECJ ruled on the application of the Acquired Rights Directive 1977 to outsourcing in 1993 through the Schmidt judgement transferred staff have had guaranteed terms and conditions and staff taken on during the contract have been employed at market rates. This has been done in agreement with the client in order to give greater flexibility and to increase value-for-money.

  It would not be possible to price new staff at local authority pay rates or their equivalent within the current price structure. Furthermore, there would be serious constraints on the contractor's ability to achieve savings as the contract develops over time. These savings are built into the PFI financial model at the outset, and failure to deliver them will affect the financial structure of the project.


  Over the summer there were discussions between member companies which resulted in a proposal for an alternative way forward which would not result in a "Fair Wages Resolution", to which we would be implacably opposed. This model is similar to that which was considered prior to the General Election by officials and Ministers. It has the advantage of being contract driven in response to a Government Policy Statement (similar to Staff transfers in the Public Sector) and, thus, able to respond to the desire to treat staff fairly without removing the flexibility of PCs to continue to bring value-for-money to the table and to respond to changing client requirements.

  In the light of the statement at the Labour Party Conference by Stephen Byers and the subsequent press release by DTLR, we now put forward this model as a possible "starter for 10" to meet the concerns expressed and to deal with these issues in the short and long term. We shall, of course, be responding to the consultation in due course, but felt it would be helpful to place these thoughts before Ministers at this stage in the process.

  The following proposals are designed to represent a significant movement towards the concerns of the trade unions. It would be difficult to see how they could recommend their rejection as being in their member's interests. It is important that the proposals should apply to staff involved in both "hard" and "soft" services. This would help ensure the support of the more moderate trade unions.

    1.  Hard and soft service staff to transfer to the private sector operator. The trades unions to be involved in the selection process and client bodies to be obliged to take into account the past track-record of bidders in industrial relations matters. [This is similar to the MoD "Code of Practice for TUPE Transfers in MoD contracts" Clause 10]

    2.  Since it is not possible for transferred staff to remain within the PCSPS or NHSPS, transferred staff to be given membership in the proposed BSA Group GAD Pension Scheme which will be as comparable as is possible to the NHSPS. This Scheme is currently being developed by Prudential Corporation Plc and is the subject of discussions with GAD and HM Treasury. It should be available before the end of the year.

    3.  All staff to transfer under TUPE with a guarantee of no changes for the lifetime of the contract without the agreement of the employees. (Exceptions would have to be made for changes imposed by legislation)

    4.  Unions to be consulted on terms and conditions of new recruits, excluding pensions, and to be able to negotiate with PC regarding these.

    5.  New employees to be hired on terms and conditions broadly equivalent to the original protected terms and conditions. It will be essential to ensure that such a requirement is included in the bidding process and that any increased costs arising from this requirement are adequately built into the contract price. They must not be allowed to become a disincentive to future PFI projects.

  Private contractors are already having to deliver better quality services for less cost than DSOs where services are tendered under outsourcing, PFI or PPP contracts. It is inevitable that these proposals, whilst promoting a more harmonious industrial relations climate, would increase employment costs. It would therefore be essential for the unions to agree to co-operate on a contract-by-contract basis in changes to working practices, shift patterns, etc, so as to increase the pace of change in delivering quality and efficiency improvements. (The recent proposals to relax changes to terms and conditions by virtue of ETO reasons will be helpful in this regard.)


  These proposals raise issues of equal pay across the workforces of private contractors as a whole which will have to be addressed. Such arrangements must be limited to the contract in question. It would not be acceptable to private contractors that, by paying new staff in public sector contracts on broadly equivalent terms to transferred staff, all other equivalent staff across the company had to be paid at similar rates. This would be highly damaging to business and unacceptable to other public sector and private sector clients. If there is a problem under employment law, this can best be addressed jointly with Government. The current review of TUPE would be an excellent place to address this issue.

October 2001

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