COMPETITION RULES: THE LOCAL GOVERNMENT ACT 1988

AuthorMike Radford
Publication Date01 November 1988
DOIhttp://doi.org/10.1111/j.1468-2230.1988.tb01784.x
LEGISLATION
COMPETITION RULES: THE LOCAL
GOVERNMENT ACT
1988
INTRODUCTION
THE
1987-88
parliamentary session was dominated by legislation
intended to impose a fundamental change on the traditional
relationship between local authorities and those for whom they
provide services. Not surprisingly, public attention was focused
primarily on those measures considered central to the Government’s
legislative programme: reform of the system of local government
finance and reorganisation of the provision of education and
housing. Consequently the potential significance of the Local
Government Act
1988
(“the
1988
Act”) has been largely overlooked.
Like many similarly named predecessors, the
1988
Act is a
collection of diverse and miscellaneous measures,* but at its heart
lie provisions which the Secretary of State for the Environment
described as “a further significant step in two of the Government’s
major objectives-introducing greater competition and securing
greater value for money” in respect of local government
service^.^
In pursuit of these ends the
1988
Act introduces an extension of
compulsory competitive tendering together with the imposition of
new tendering procedures, conditions and requirements. Taken
together, these are likely to have a profound effect on the role of
local authorities in the provision of services.
BACKGROUND
Local authorities have always been empowered to contract with the
private sector for the provision of services. In practice most have
chosen to rely on directly employed staff to provide their core
services, and the private sector has been invited to tender, in the
main, only for specialist work or to assist at times of high demand.
Only in the last few years has this arrangement been called into
question; hitherto there was a consensus between central and local
government, and across party lines, that it was the most effective
way to deliver public services. In
1980,
however, the principle of
compulsory competitive tendering for local government services
was introduced by the Local Government, Planning and Land Act
Local Government Finance Act 1988; Education Reform Act 1988; Housing Act
1988; Housing (Scotland) Act 1988.
*
These include: a new power allowing local authorities to provide financial assistance
for
privately let housing accommodation (ss.24-26); amendments to the law governing
local authority publicity (s.27); the widely debated prohibition on local authorities
intentionally promoting homosexuality (s.28); an extension of the local ombudsman’s
jurisdiction (s.29 and Sched. 3); and the abolition of dog licences (s.38).
Nicholas Ridley, H.C.Deb.,
Vol.
119, col. 79 July
6,
(1987).
747
748
THE MODERN LAW REVIEW
[Vol. 51
1980 (“the 1980 Act”), which applied to authorities’ building and
maintenance work.4
The Conservatives came to power in 1979 committed, in the
words of their election manifesto, to providing “safeguards against
unfair competition from direct labour.” Ostensibly this policy was
based on proposals by the Chartered Institute of Public Finance
and Accountancy aimed at improving the financial management
of
local authorities’ direct labour organisations
(DLOS),~
but the 1980
Act’s tendering provisions were also intended to promote contracting
out
of
services to the private sector. According to the Secretary of
State for the Environment, the Government’s objective was both
“to introduce a tight and effective accounting system” and “to
ensure that a larger proportion of building work is carried out by
the private sector.” Competitive tendering, he told the House of
Commons, would achieve this:
“Authorities will no longer be able
to
give work to their direct
labour organisations merely because they exist. They will have
to get the building work done in the cheapest and most
effective way. There is no doubt that these disciplines will
result in a contraction of direct labour activity as local
authorities come to appreciate the relative cost and advantages
of direct labour and private
contractor^."^
It is important, however, to keep the Government’s objectives at
that time in perspective. There was nothing new in the principle or
practice
of
competitive tendering: and the 1980 Act applied to a
relatively small, albeit important, area of authorities’ activities. The
Government gave
no
indication that it was conscious of embarking
on a new policy initiative which would become
so
important to its
future strategy. Indeed, while it was always keen to encourage
contracting out of services, it accepted that local authorities should
retain their traditional discretion to determine how services were
provided locally. In 1980 the Minister for Local Government
explained the prevailing attitude: “Ministers have made clear the
Government’s conviction that there is scope for greater private
sector involvement in the provision
of
public services, but it is
for
local authorities to make decisions in the light of their own
circumstances.”s The following year a report produced by the
Treasury re-affirmed this view: “The decision
to
contract out the
provision
of
services is the responsibility
of
individual local
authorities.
”9
Part
111
(ss.5-23); see also, in respect
of
passenger transport services, the Transport
Chartered Institute
of
Public Finance and Accountancy,
Direct Works Undertakings
Michael Heseltine, H.C.Deb., Vol. 967, cols. 404 and 405 (May 17, 1979).
Compulsory competitive tendering
for
the supply to local authorities
of
goods and
materials, and the execution
of
works, was already well-established; see Local Government
Act 1972, s.135(2)(3).
145, May 1982),
p.3
Act 1985.
(Accounting)
(1975);
Direct Works Undertakings (Maintenance)
(1978).
Tom King, H.C.Deb., Vol. 937, col. 125 (Written Answer) (June 24, 1980).
H.M. Treasury,
The Public Sector for the Public
(Economic Progress Report
No.

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