Fourth Standing Committee on Statutory Instruments, &c.


Wednesday 12 July 1995


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The Committee consisted of the following Members:

Chairman: Sir Alan Haselhurst

Coe, Mr. Sebastian (Falmouth and Camborne)

Davies, Mr. Quentin (Stamford and Spalding)

Etherington, Mr. Bill (Sunderland, North)

Evans, Mr. Nigel (Ribble Valley)

Field, Mr. Barry (Isle of Wight)

Fox, Sir Marcus (Shipley)

Heppell, Mr. John (Nottingham, East)

Hill, Mr. Keith (Streatham)

Hordern, Sir Peter (Horsham)

Howarth, Mr. Alan (Stratford-on-Avon)

Jenkin, Mr. Bernard (Colchester, North)

Keen, Mr. Alan (Feltham and Heston)

Pickthall, Mr. Colin (Lancashire, West)

Stevenson, Mr. George (Stoke-on-Trent, South)

Tyler, Mr. Paul (North Cornwall)

Walley, Ms Joan (Stoke-on-Trent, North)

Watts, Mr. John (Minister for Railways and Roads)

Wells, Mr. Bowen (Lord Commissioner to the Treasury)

Mr. M. Hennessy, Committee Clerk

3 Fourth Standing Committee on Statutory Instruments, &c. Wednesday 12 July 1995


Draft Contracting Out (Highway Functions) Order 1995

4.30 pm

The Minister for Railways and Roads (Mr. John Watts): I beg to move, That the Committee has considered the draft Contracting Out (Highway Functions) Order 1995. The order, under sections 69 and 77 of the Deregulation and Contracting Out Act 1994, will enable the Secretary of State for Transport to contract out certain of his statutory functions as the highway authority for the trunk road and motorway network. The powers are needed for two purposes. The first is the replacement of the present maintenance agency agreements with local highway authorities by a new model contract, for which both local authorities and private companies could compete. The second is our intention, under the private finance initiative, to procure a comprehensive construction and road management service from private contractors, commonly known as DBFO—design, build, finance and operate—contracts. Eight of those contracts are being tendered competitively at the moment. The order will give DBFO companies the powers that they need to carry out their responsibilities for managing their commissions effectively. I am also consulting on a separate order under the Local Authorities (Goods and Services) Act 1970 to permit local highway authorities to tender for subcontracts let by DBFO contractors. I emphasise that local authorities will continue to be eligible for the work that they are currently doing on the management and maintenance of the network, subject to competition. When private companies take on DBFO commissions, the further order I shall promote will open up to them this area of work from which they would otherwise have been excluded. The powers available to the Secretary of State under section 6 of the Highways Act 1980 to delegate the day-to-day functions, such as management and maintenance, to agents are confined by section 6(8) of that Act to agency agreements made with local highway authorities. Private sector contractors may not enter into such arrangements, which limits our ability to test value by competition. A consultation document, "Trunk Roads and Motorways: Review of Agency Arrangements", was issued by the Highways Agency in April. That also set out proposals for the new agencies under which the new-style 4 contracts might operate. The intention is to allow local highway authorities, or consortiums of them, to compete with private companies for the work. A copy of the draft order was included in the consultation document. For DBFO contracts, arrangements will be slightly different, as in each case major new construction is required, lying beyond the normal capacity of the local highways authority. The main contract will be between the Secretary of State and the managing contractor responsible for delivering the construction and then managing it. We welcome the wish of local highway authorities to have the opportunity to bid for subsidiary contracts let by DBFO companies to maintain DBFO roads. Contractors also want the freedom to have access to those services that they feel would be procured most efficiently from the local highway authorities. As I said earlier, we are consulting on a seperate order, which I shall introduce as soon as possible. The underlying purpose of our policy is to widen the range of options for managing and maintaining the network. The Secretary of State will remain the responsible highway authority and nothing in the order will reduce the range of those responsibilities. The order will allow us to provide a better service to the travelling public through a wider selection of management arrangements and I commend it to the Committee.

4.34 pm

Ms Joan Walley (Stoke-on-Trent, North): I want briefly to put on the record our opposition to the proposals. If we are having a great public debate on transport, it is crucial that that debate should be co-ordinated with an integrated approach. I have seen the responses from the Association of Metropolitan Authorities and the Association of County Councils, which is responsible for highway functions and which currently provides an enormous amount of Highways Agency work. There is unanimous feeling among members of those bodies that the consultation promised by the Department on the future of transport has not been taken into account and that this proposal is putting the cart before the horse. We should be trying to provide a coherent and co-ordinated approach to all aspects of roads-building, planning and, particularly, maintenance. We should not hive off one part of the work and deal with it in a fragmented way. There is unanimous opposition to the proposal, from the local authorities concerned, specifically to the fact that the consultation was carried out before the views of the Highways Agency were expressed rather than after, so there has been no proper consultation. That is an important point. There is also concern that the order will give the Secretary of State the necessary authority to implement the Government's stated intention to transfer the management of sections of the Queen's highway to the private sector. It appears that the private sector will not be accountable to Parliament, or any other elected body, in the way in which the Department of Transport and local authorities are. 5 I listened carefully to the Minister's assurance that the Secretary of State would retain overall accountability, but it is difficult to envisage how that will be the case under the new arrangements. The public do not perceive many differences between different parts of the road network. They are aware that motorways are a different category, but they do not make any distinction between those who have overall control of different parts of the trunk road system. I am sure that my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) is aware of the situation in our area, where the county council has just submitted a report on the first years of operation of the New Roads and Street Works Act 1991, identifying that a large number of complaints have been registered with the local authority through the Highways Agency about the private road works carried out for the utilities. Part of the problem is that under the New Roads and Street Works Act 1991, particular defects, such as faulty signing and guarding, do not fall within the remit of the local authority. Specific defects are excluded from the remit of the trained structural engineers of local authorities under the present arrangement for public utilities. With huge parts of the trunk road system privatised, if the company that won the contract—be it Trafalgar House or any other—failed to put up proper signs or diversions when there were roadworks, how would the public know to whom they should go? Under the proposed arrangements, they would not go to the local highways authority. The fragmention of responsibility for highway matters—not just maintenance, but potholes, cycling, diversions and road safety—will result in nobody knowing to whom they should complain or where they should go to put a matter right. What consultation has there been with the police? They have considerable responsibility for dealing with the circumstances surrounding roadworks or any works being carried out on the highway. Pushing the matter forward ahead of the debate that we are due to have about transport fails to address the issue of accountability, which should be addressed. The existing arrangements, whereby power rests with local authorities, offer greater accountability than does the order because it privatises large areas of road maintenance. We are also concerned about consultation. The Association of Metropolitan Authorities has strongly put the point that the Highways Agency did not consult local authorities, as it normally would, prior to the consultation document going out. If that consultation had taken place, many concerns that are included in the consultation papers could have been addressed. It is regrettable that the local authority associations had no opportunity even to comment on the document before it went out for a very short period of consultation. Many councils have made the point to me that eight weeks for consultation is not long enough. The committee cycles of local authorities, which may operate on an eight-week cycle, did not give the authorities the opportunity fully to endorse formally the comments on the documents that were made, in many cases, by the county surveyors. Not only has the consultation put the 6 cart before the horse, but it was not even carried out properly; local authorities had no opportunity to comment. There is no evidence of the necessity for change. I understand why the Government are determined to set up the DBFO initiative quickly. I also understand that without the FO part, DBFO is not possible, but no case has been made for changing the arrangements in this way or for transferring powers that currently rest with local authorities to the private sector. The Government cannot claim that current public provision is inefficient because a thorough report was issued by the Audit Commission—"Making Markets: A Review of Client Role for Contracting Services." That report revealed that local authorities achieved substantial financial savings on service provision and improvements in their delivery prior to the introduction of compulsory competitive tendering. In winter maintenance, the recent round of term contract tendering has demonstrated the cost of effectiveness of the existing arrangements. If everything is working well in terms of local authorities' local highways responsibilities and the work that they carry out on behalf of the Highways Agency, why must the arrangements be changed? Presumably, the only reason for change is that the private sector, having got its hands on the design-and-build part of the DBFO, wants to ensure that more work will be forthcoming. That work will be taken away from local authorities, which have spent a great deal of time and effort setting up the infrastructure to enable the work to be done in the most cost-effective way. We are also concerned about local expertise. Local authorities' local expertise does not come about overnight. It is the result of the extensive local knowledge and professional expertise that highways authorities bring to the task of maintenance, as well as the close links with other activities such as traffic management. The arrangements that we are debating will break down that local expertise. Although the Minister says that local highways authorities will be able to be subcontractors in the bids submitted by private contractors, the result will be fragmentation which will destroy and dismantle the accumulated local expertise. Local expertise is vital in achieving the integrated framework for transport that we all want. I should be interested to know how the Minister justifies these changes on the basis of value for money, and what comments the Treasury has made. The transport policy that we want to have in future should be based on reducing new traffic generation wherever possible. If the design-and-build options that are currently being discussed are to be paid for out of the public purse on the basis of the free flow of traffic—the more traffic journeys made, the more money will be paid to the contractors running the design-and-build—what savings will result from transferring the finance-and-operate part of the DBFO package to the private sector? It seems that no savings will be made. The lack of co-ordination that may result in the long term could be costly. 7 We are concerned about safety. The order will treat networks separately, which will increase the safety risks that are involved when trunk roads and adjacent local roads are treated out of phase. Motorways are easily recognisable, but most people are not immediately aware when they pass from a trunk road to a local highway. Questions of road safety should be dealt with in a cohesive way that involves integration rather than fragmentation. Presumably, contracts will be of interest only to a limited number of private firms. We therefore suspect that competition will be limited. Short-term contracts do not allow the benefits of continuity to show clearly. The present system, which involves local authorities and the Highway Agency, works well and do not see why it should be changed. With regard to local accountability, it is not clear who will monitor the application of the order. Does the Highways Agency possess the expertise and the resources to deal with the relevant powers adequately? Those powers are being devolved from local authorities, which have methods for monitoring and auditing them. Complaints have been made about the way in which the New Roads and Street Works Act 1991 has been implemented by public utilities in Staffordshire. When the relevant powers are transferred from the Highways Agency and local authorities to the private sector, similar problems will arise in other local authorities. How will the Highways Agency oversee continuity and assess ways in which to solve problems? I have known for the past 48 hours that we should be debating the order, during which time I have spoken with people in Suffolk county council and Dorset county council who have expressed concern about accountability. Suffolk county council expressed its concern to the Highways Agency about the apparent disregard for cost-effectiveness and local democracy shown by the proposals that are described in the consultation document. The concern about lack of accountability is shared by most local authorities. When the relevant powers are in the hands of the private sector, we shall have, in effect, a privatised road network. No one will be responsible for dealing with problems. The surgeries of Members of Parliament will become increasingly busy because people will not know whom to approach about the emergencies that often arise on roads. For the reasons that I have given, we oppose the order which has not even been justified on financial grounds. The Government have said that they want full consultation about future transport policies. However, the haste with which they have brought forward the order suggests that they have not consulted properly about the new transport policies that they give lip service to wanting to introduce. We want accountable highway services and a proper relationship between Government and local authorities. We do not want the expertise that has been built up over the years to be destroyed by this order. For those reasons, we oppose the proposals.


4.50 pm

Mr. Watts: In response to the hon. Member for Stoke-on-Trent, North (Ms Walley), I should explain that the proposals do not pre-empt any decisions that might be made about the shape of the highways network; nor do they pre-empt discussions about trunking and detrunking. New agency contracts will have the flexibility to take account of any changes agreed subsequently. These powers are enabling. The order provides a menu of powers that the Secretary of State can delegate and which are flexible enough for a la carte agency contracts to be concocted. The hon. Lady raised important points about accountability. The crucial factor is that the Secretary of State remains the highway authority. The maintenance agent, whether a local highway authority or a private contractor, is still accountable to the Secretary of State through the Highways Agency and, thus, to Parliament. Nothing changes. The fact that the maintenance agent may be a private contractor rather than a local highway authority does not change his accountability to Parliament.

Ms Walley: I have listened closely to what the Minister said. At the moment, if something goes wrong with a road and if the local Highways Agency has the agency agreement to carry out the repair work, we have a one-stop shop. Local people know to whom they can go to register a complaint. Contractors working on roads in my constituency frequently do not bother to put up proper warning signs that work is taking place. With such problems, it is possible to get through to a one-stop shop to get something done and a road made safe. But different contractors will be working in different ways all over the country, dealing not with an area but with one route through an area. How will the Secretary of State satisfy himself that local people know whom they can contact at, for example, 11 o'clock at night to ensure that a private company put right what has gone wrong?

Mr. Watts: Maintenance agencies will not work on just one route through a swathe of country. Maintenance agencies will cover substantial parts of the network, probably more than they do now, because at the moment they are constrained by administrative boundaries of county councils and metropolitan districts, not by transport corridors. The incident cited by the hon. Lady of roadworks not being properly signposted or guarded could be taken as an indication by the agent managing the contractors to which he has sublet the work that they are not doing a good job. On the matter of consultation, I cannot appreciate the need to consult on whether to consult. How many pre-consultation consultations should we have? Consultation about the shape of new agencies is still under way and does not conclude until the end of September. That matter is not yet determined. The order provides a menu of powers that can be delegated to construct an a la carte agency tailored to the needs of a particular part of the highway network. The hon. Lady asked why there is a case for changing the agency arrangements. The new contracts will be open to competition. Where substantial efficiencies are available from the local highway authority that might 9 not be available in the private sector, as may be the case in many instances, I would expect local highway authorities to be able to compete and win the work. But at the moment we have no choice. We are only empowered to let an agency agreement to the highway authority in whose area a particular part of the network in situated. We have Hobson's choice: we can either manage all the work directly from the Highways Agency or we can let it on a delegated basis to the one local highway authority, but we have no choice at all and, therefore, we have no opportunity for testing the value for money provided by a particular agent. I am sure that, in certain parts of the country, local highway authorities will win the new contracts in fair and open competition, which will be of benefit to all.

Ms Walley: I am thinking of a situation in which two local authorities that are close together form a recognisable geographical entity, such as in East Anglia. For example, take my constituency, which is in the middle of the west midlands conurbation. We do not know whether we belong to the west midlands or to the north-west. Surely local authorities will be at a distinct disadvantage, because one local authority with one defined area will not be able to have an input over a wider geographical distance. That will put local authorities at a disadvantage, which will undermine the cost-efficiency of their other work on local highways.

Mr. Watts: It is perfectly possible for consortiums of local authorities to bid for new maintenance agencies. I cannot accept that the delegation of maintenance powers should be determined by local authority administrative boundaries. I must look for ways in which the trunk road and motorway network can be managed and maintained most efficiently and in the interests of travellers. I am sure that local authorities are capable of co-operating with each other. Indeed, we know that they co-operate to a considerable extent already. As I said in my opening remarks, DBFO responsibilities can be subcontracted to local authorities. I have introduced this change, which was not part of the original intention of establishing DBFOs, as a result of constructive discussions with some of the local authorities that will be involved in the first tranche of DBFOs and following discussions with contractors. Contractors recognise the expertise of local highway authorities, especially in such difficult areas as winter maintenance, and wish to be able to subcontract such work to ensure that the best use is made of existing experience and skills.

Mr. George Stevenson (Stoke-on-Trent): While the Minister is talking about co-operation between local authorities, I should like to ask him whether it is envisaged that local authorities will be able to form consortiums with the private sector or whether that will be restricted in DBFO applications.

Mr. Watts: No, local authorities cannot form consortiums with private sector contractors for maintenance agencies, but they can form consortiums with other local authorities to bid for work. Without the order, they would be unable to compete with private contractors for agency work because, at present, they are 10 restrained from entering into competition. The same is true of DBFOs. As the Committee will already know, local authorities are currently unable to bid for subcontracted work from the private sector. We are making this change because it is common sense and accords with the wishes of local highway authorities and contractors. The hon. Lady raised the question of DBFOs and asked whether the intention was to generate more traffic to increase the shadow toll revenue. It is certainly not our intention to encourage more traffic to use particular DBFO roads. The reason why we want to relate payments to traffic flow is to give a strong incentive to the contractor to ensure that he maintains the road open for free-flow use by traffic. He will suffer a penalty as a result of reduced revenue flow if he does not construct the road to a good standard and then maintain it efficiently, in a planned way, to minimise disruption to road users. That is why we have decided on that means of remuneration. It is as important for the Highways Agency to monitor work carried out by a local highway authority as it will be for the agency to monitor work carried out by a private contractor. I see no distinction between those two examples. Whatever the agent's indentity, it must be accountable for the work that it carries out and it must be monitored to ensure that it does the work properly. It makes no difference to me whether the agent is a private sector company or a local highway authority. I believe that we shall deliver significant benefits and that we shall be able to test value for money by opening up the management and maintenance of the trunk road network to competition and by allowing local authorities to compete for subcontracted work for DBFO operators. I believe that we are acting in the general interest.

Question put:

The Committee divided: Ayes 6, Noes 3.

[Division 1]
Coe, Mr. Sebastian Fox, Sir Marcus
Davies, Mr. Quentin Watts, Mr. John
Field, Mr. Barry Wells, Mr. Bowen
Keen, Mr. Allan Walley, Joan
Stevenson, Mr. George

Question accordingly agreed to.


That the Committee has considered the draft Contracting Out (Highway Functions) Order 1995.

Committee rose at two minutes past Five o'clock.



Haselhurst, Sir Alan (Chairman)

Coe, Mr.

Davies, Mr. Quentin

Field, Mr. Barry

Fox, Sir Marcus

Hordern, Sir Peter

Howarth, Mr. Alan

Jenkin, Mr.

Keen, Mr.

Stevenson, Mr.

Walley, Ms

Watts, Mr.

Wells, Mr.