Blair to retain 'capping' for local councils

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Political Correspondent

A Labour government will effectively keep laws forcing local councils to contract out their services, in yet another move by Tony Blair to remove what he sees as an electoral liability - at the expense of upsetting many in his party.

In a speech to council leaders next month, the Labour leader is also expected to toughen his plans to retain "capping" of local council spending.

The Conservative law on compulsory competitive tendering (CCT) is hated by local council unions, and Frank Dobson, Labour's spokesman on local government, won a standing ovation at last year's Labour conference with a strong pledge to abolish it.

Mr Dobson claimed CCT cost the taxpayer pounds 2 for every pounds 1 it saved councils because lower wages cut tax revenues and required extra benefits. Mr Blair's office felt he had gone "too far", and opened top-level talks with Labour council leaders about how the principle of competition could be retained.

Peter Greenwood, chairman of the Labour-dominated Association of District Councils, told a council leaders' conference in Harrogate, North Yorkshire, yesterday that CCT should be replaced by "a clear statutory duty on local authorities to pursue best value for the public we serve".

The key phrase "best value for the public" is expected to be included in Labour's pre-manifesto, to be launched by Mr Blair next week.

In talks with Mr Blair's office, council leaders have agreed to a legal requirement for councils to set up a committee charged with a duty to secure best value. While councils would no longer be under a direct legal obligation to invite bids to run services, the law would give local residents the right to challenge any council which did not do so and could not show it was securing value for money.

Mr Blair is believed to argue that, after a Labour government brought in a national minimum wage, contractors would not be able to compete by paying poverty wages, and that the objections to CCT would fall away. Under Labour, all workers would also have the right to trade-union representation. But a source said: "It is difficult to get support for CCT through Labour groups [of councillors] because of the intense propaganda against it over all these years."

Instead, Mr Blair's advisers believe that they have found a way of refocusing legislation on the objective of CCT rather than the mechanism. But some tension remains between Mr Blair and Labour council leaders over the terms of "fair employment" conditions which councils would be permitted to specify in contracts.

Pat Doyle, leader of Hull council and spokesman for all leaders of Labour district councils, sets out the new policy in an article in today's Municipal Journal. He uses the phrase "fair competition", and describes it as "a useful spur to maximise performance". He also makes it clear that CCT would not be abolished until new "best value" legislation was enacted.

Mr Blair's advisers are also working on proposals to hold local referendums on increases in council tax above capping limits

Gordon Brown, the shadow Chancellor, is believed to want even tighter central control of local spending than last year's policy document, which proposed "reserve powers to cap a council's tax raising" in "exceptional circumstances".

Mr Blair is expected to announce these policy changes in a speech next month to the inaugural meeting of the new Local Government Association, to be attended by the leaders of almost all English councils.