Best councils to get new powers as 'public-service entrepreneurs'

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Britain's best councils will be allowed to take over the services of their poorly performing counterparts under plans announced by the Government yesterday to create "public-sector entrepreneurs".

Stephen Byers, the Secretary of State for Transport, Local Government and the Regions, also said town halls would for the first time be given the chance to bid for work in the private sector. Mr Byers confirmed the moves as he revealed the details of a wide-ranging review of the controversial "best-value" regime for local authorities.

Under the review, ministers would also end "two-tier" workforces for councils, where staff hired by private firms are on lower pay and worse conditions than their colleagues in the public sector.

The Government announced that the review would refer to plans to allow high-performing councils to take on new work from fellow councils and private firms. The changes would mean that the system would allow a new category of public-public partnerships, alongside the much-criticised public-private partnerships (PPPs).

Present legislation prevents councils from running services for any organisation other than their own, but ministers are determined to reward best practice.

Councils which excel at services such as housing benefit or council-tax administration could expand to take over other councils. Those authorities which have impressive graffiti-removal schemes or refuse-collection services could take on private or voluntary sector work. Any income received from taking over another local authority service or other work would be ploughed back into town hall coffers.

The idea is sure to be welcomed by Labour councillors, many of whom have felt that the "best-value" regime simply entrenched the "low-price, low-quality" ethos of the Tory compulsory competitive tendering system.

The guidance, which will come into effect from next April, will be overseen by Nick Raynsford, the Local Government minister, with a team from the Audit Commission, the Trades Union Congress, private firms and charities. The Department for Transport Local Government and the Regions said yesterday that the review would look for "public-public" partnerships to allow rewards for best practice to be shared among authorities.

It also confirmed that it was prepared to introduce legislation to outlaw situations "where there is firm evidence of unfairness in the terms and conditions of staff".

Sir Jeremy Beecham, the chairman of the Local Government Association, said he was pleased the review was being completed speedily so its recommendations could be implemented for the next financial year. "The principle of a level playing field between public and private options for the delivery of public services is welcome," he said. "We have long argued for the Government to remove barriers to direct-service departments competing for work outside their own authority."