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Column Number: 219
Standing Committee G
Tuesday 24 February 2004
(Afternoon)
[Part II]
[Mr. Edward O'Hara in the Chair]
[Continuation from column 218]
Clause 19
Charging
4.30 pm
Mr. Hammond: I beg to move amendment No. 53, in
I suspect that the Minister has already helpfully hinted why the amendment is unnecessary. I shall be delighted to hear him tell me that it is unnecessary because the powers relating to our objective already exist in the Local Government Act 2003.
I declare at the outset that I was put up to tabling this amendment by a fire authority that believes that it will be prevented from charging more than cost recovery rates for valuable consultancy services that it delivers, and wishes to continue to deliver, to third parties on a commercial basis. The amendment is designed to exclude from cost recovery-only charging services that are provided in competition with other professional consultants. I have used those words deliberately to try to define the activities that we have in mind. We are talking not about giving advice to vulnerable people in their homes, but about input to architects and engineers in the design of buildings, or advice and consultancy to property developers and property owners in maintaining and managing their fire and escape plans—services that it is perfectly proper for them to contract from a third party specialist such as a big civil engineering firm, for example, or a properly qualified fire and rescue authority.
There is no reason to preclude the fire and rescue authority from making a profit on that kind of competitive work. In addition, it would be inappropriate to require fire and rescue authorities that provide such consultancy services in competition with the private sector to operate as not-for-profit competitors. That would be grossly unfair to the private sector. As the Minister will remember, we had a similar debate on the trading powers of local authorities when we considered the Local Government Act 2003.
If the Minister were to tell me that the objective that I seek to achieve through amendment No. 53 is already available to fire and rescue authorities through the trading powers in the 2003 Act, that would be fine; but
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if he were to tell me that the exception would be available only if authorities achieved excellent status, that would present some problems. Clearly, it is not possible to operate a consultancy on a commercial basis if activities have to be turned on and off from one year to the next—if a fire authority had to say ''This year, we shall do £2 million-worth of arm's-length commercial fire consultancy; next year, we will not be allowed to do any. We would like to take it up again the year after, when we are again excellent, but will not be able to because our customer base will have disappeared.''
There needs to be some way of dealing with that problem. I see no reason why we should not exclude from the restriction on cost-plus recovery work that is clearly third-party competitive work, tendered in the marketplace against other competitors and provided to commercial third parties. I hope that the Minister will clarify the situation.
Mr. Raynsford: The amendment deals with the provision by authorities of fire safety advice on a consultancy basis. It would provide an exception to the principle that authorities can do no more than recover their costs, thereby enabling them to engage in the provision of consultancy services on a commercial basis. It includes the restriction that any such paid consultancy must not cut across an authority's duty to provide general fire safety advice. However, I notice that the amendment does not seek the wider safeguards that we provided in the 2003 Act, which required any such trading by local authorities to be conducted through a company structure, so that there was a level playing field in terms of taxation for providers in the public sector and those in the private sector. I suspect that on reflection the hon. Gentleman will probably agree that that further safeguard is necessary if there is to be a genuinely level playing field and if the kind of allegations about which he is reasonably concerned are not to arise.
I am aware that several authorities already have a significant presence in the market for detailed fire safety advice. For our purposes, such work is probably best labelled ''consultancy''. Section 3 of the Fire Services Act 1947 grants authorities wide discretion in the charges that they set for such work, and some have interpreted that as enabling them to charge more than the full cost of giving advice in certain circumstances. The recent Select Committee report noted that further consultation was needed, and clause 6(2) acknowledges the possibility of drawing a distinction between advice that it is reasonable to expect an authority to provide and additional advice that it may offer. Establishing how the distinction should be drawn is a vexed question on which we sought views in the consultation document that we issued earlier this month. I am satisfied that, if such a distinction can be drawn, we already have powers under section 95 of the 2003 Act to allow authorities to trade in consultancy through a company. However, until we have a better understanding of the responses to the consultation exercise, it is premature to attempt to deal further with the matter.
On the hon. Gentleman's specific points, it is not only excellent authorities that will be granted
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entitlement to trade under the powers in the 2003 Act. The Government's policy is that weak and poor authorities should generally concentrate on improving their own service performance rather than seek to trade, and we intend to give a general approval to authorities categorised as excellent, good or fair. No decision has yet been taken on whether a comparable regime would apply in the case of the fire service, but the principle that the general trading permission should, to some extent, be related to categories of performance seems right. However, we also recognise that it would not be realistic for the power to trade to be turned on and off annually, depending on a change in category. Some flexibility and acceptance of the ability of authorities to continue at least for a period of time if they suffer a loss of status in the comprehensive performance assessment hierarchy may well be appropriate. Those issues all need to be considered further. Given that explanation, I hope that the hon. Gentleman will accept that the clause is the right way forward.
Mr. Hammond: I am grateful to have had the opportunity to raise that issue and get the Minister's response to it. It can be dealt with in the consultation process, although to allow opportunity for parliamentary time to discuss it, we had to raise it in the context of the Bill.
Although the Minister did not commit himself, I am reassured. Firstly, he said that the power to trade in those circumstances is likely to be extended to excellent, good and fair authorities. We will come on to deal with the fact that, in the context of the Bill, authorities will be marked not according to how well they discharge their functions, but according to how faithfully they comply with the Government's framework document. That is not a measure of excellence that we would necessarily recognise. Secondly, I am reassured by the Minister's recognition that trading cannot be turned on and off. It is a tricky issue. I suspect that it would take a year or so to deal with it, and I hope that the Minister has had representations on that issue from the authorities involved.
Finally, the Minister commented on the use of arm's-length companies. I suspect that those fire authorities that suggested that we raise the issue in Standing Committee will be most displeased to learn that I now agree with the Minister on that point. Using an arms-length company and ensuring a level playing field for tax and premiums is the right way forward. I do not suppose that would be hugely welcomed by those authorities that have been receiving revenues without having to have a separate structure. It is obviously important to ensure a level playing field. I am grateful to the Minister for his reassurance on that point. I hope that a sensible regime comes out of the consultation—one that allows the one or two potentially world-class consultancy operations in our fire and rescue community to prosper and reduce the burden on council tax payers by making good profits on their consultancy business.
I beg to ask leave to withdraw the amendment.
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Amendment, by leave, withdrawn.
Mr. Hammond: I beg to move amendment No. 55, in
clause 19, page 9, line 24, after first 'the', insert 'marginal'.
This is a probing amendment. It would insert the word ''marginal'' before ''cost'' in line 24. The amendment thus suggests that authorities be limited to recovery of marginal cost. That may not be what the Government intend, and the term ''marginal cost'' in the context of fire and rescue operations may not be obviously self-defining. The purpose of the amendment is to probe the Government on how they intend to operate the regime of limited recovery of costs.
In an organisation such as a fire and rescue authority, which needs to be able to respond to an emergency—I do not want to raise anybody's hackles by phrasing that in the wrong way—there is, by definition, surplus capacity of significant amounts of time as personnel await the occurrence of an incident. It is therefore difficult to talk about marginal cost. The manpower is there anyway, so it would be absurd if the costs that could be recovered were simply the costs of the petrol used getting to and from the incident. It would probably also be inappropriate to charge for the cost per hour of the wage and salary bills of the crews attending.
There are complicated issues around the recovery of costs where a range of activities are undertaken. If I have correctly understood subsection (5), it intends a balancing of the books to take place for each class of event for which charging occurs, rather than for a pool of charging across the whole authority. Rescuing cats from trees will constitute a set of books that balance over the year, and getting people out of lifts will be a different activity that must balance across the year. The same crews, appliances and overheads will be involved, all of which will also be used in non-chargeable work. Has the Minister discussed proper accounting with bodies such as the Chartered Institute of Public Finance and Accountancy so that we can understand what we are discussing when we read that
''the authority's income from charges does not exceed the costs to them for taking the action for which the charges are imposed''?
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