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The Parliamentary Secretary, Cabinet Office (Alex Burghart)
I beg to move,
That the draft Procurement Regulations 2024, which were laid before this House on 25 March, be approved.
This statutory instrument represents a significant legislative step in implementing the Procurement Act 2023, which seizes the opportunity, following Brexit, to develop and implement a new public procurement regime for over £300 billion-worth of public contracts. The new regime helps to deliver the Prime Minister’s promise to grow the economy by creating a simpler and more transparent system that will deliver better value for money, reducing costs for businesses and the public sector.
The regulations bring to life and set out the practical detail necessary for the functioning of many of the Act’s provisions. They address many of the points of practical detail that are more appropriately set out in regulations given their detailed nature and propensity to change and need updating from time to time. Many of the measures set out the detail required to be provided in notices required by the Act, which allow contracting authorities to conduct their public procurement in an open, transparent and informative manner. They include the particular contents of various notices that will be used to communicate opportunities and details about forthcoming, in-train and completed procurements.
Sir John Redwood (Wokingham) (Con)
Does the Minister think the regulations are duly simplified so that it is feasible for the self-employed and very small businesses to have access to contracts? Is there any provision for breaking down contract sizes so that the self-employed and small businesses have more opportunity?
Alex Burghart
My right hon. Friend asks a pertinent question—one that was at the forefront of Ministers’ minds when the legislation was drafted and as it made its way through both Houses. A number of provisions in primary legislation are there specifically to increase the chances that small and medium-sized enterprises, which are more likely to be British, get a bigger share of the £300 billion-worth of public procurement. Those provisions include everything from the online procurement system that we are building—which will increase transparency and allow greater notification of pipelines, helping small and medium-sized enterprises to prepare for those procurements—to reduced red tape, which will take the burden off those SMEs and reduce their barriers to entry. We are hopeful that a lot of local businesses in his constituency and in mine will benefit from this landmark piece of post-Brexit legislation.
The contents I was describing would typically include the contact details for the contracting authority, the contract’s subject matter, key timings for the procurement process, and various other basic information about a particular procurement that interested suppliers would need to know. The provisions also cover the practical measures that authorities must follow when publishing those notices, such as publishing on a central digital platform and handling situations in the event that the platform is unavailable.
Beyond transparency, the instrument includes various other necessary provisions to supplement the Act that will be relevant in certain situations. We provide various lists in the schedules so that procurers are able to identify whether certain obligations apply in a particular case, including a list of light-touch services that qualify for simplified rules, and a list of central Government authorities and works that are subject to different thresholds. The regulations disapply the Procurement Act in relation to healthcare services procurements within the scope of the NHS provider selection regime, which has set out the regulatory framework for healthcare services procurement since its introduction in January this year.
The regulations also set out how devolved Scottish contracting authorities are to be regulated by the Act if they choose to use a commercial tool established under the Act or procure jointly with a buyer regulated by the Act. The provisions of the regulations apply to reserved procurement in England, Wales, Northern Ireland and Scotland, and to transferred procurement in Northern Ireland. The Welsh Government have laid similar secondary legislation that will apply in respect of devolved procurement in Wales, and if the devolved body carrying out that procurement mainly operates in Wales, elsewhere.
The Government have consulted carefully with stakeholders throughout all stages of the reform process, and we published our response to the formal public consultation on these regulations on 22 March. That consultation was a great success, evoking a good response from the various representative sectors, and confirmed that the proposed regulations generally worked as intended. Many stakeholders urged that certain matters be clarified and explained in guidance and training, which is a key part of our implementation programme that is being rolled out across the UK. The Government response demonstrates that we have listened to feedback, and confirms a number of areas in which the consultation led to technical and drafting improvements.
Once the instrument has been made, contracting authorities and suppliers will need time in order to fully adapt their systems and processes before go-live. As such, the Government have provided six months’ advance notice of go-live of the new regime before these regulations come into force, which will happen on 28 October this year.
Alex Burghart
I would be delighted to give way to the right hon. Gentleman.
John Spellar
I thank the Minister for giving way—at least it will enable him to draw breath—but could I ask a straightforward question? To what extent is this instrument going to enable British industry and British services to compete on a level playing field, in which we prioritise our domestic producers like every other country in the world does?
Alex Burghart
The right hon. Gentleman knows what is coming, because he asked me this question a number of times during the passage of the Act. We are doing two main things: the first is that we are greatly simplifying our procurement processes, which—as he heard me say a moment ago to my right hon. Friend the Member for Wokingham (Sir John Redwood)—will particularly work to the advantage of small and medium-sized enterprises. However, the right hon. Gentleman must be cognisant of the fact that we have a number of international trade agreements with countries all over the world, in which we have agreed to compete with them on a level playing field. The only way in which we could deliberately give advantageous opportunities to British companies vis-à-vis those arrangements would be to break those trade deals. I am sure that is not what the right hon. Gentleman is proposing.
John Spellar
We have a lot of time and a thin House. I presume that the United States is also a signatory to the same trade treaties, yet it has the “buy American” legislation, which is very strong and very effectively enforced. In the area of shipping, for example, it also has the Jones Act, which says that anything being shipped between ports in the United States has to be carried by American vessels. The United States is working under the same treaty, so why is it able to do that, while we, for some reason—perhaps deep Treasury dogma, or long-standing civil service prejudice against industry—cannot?
Alex Burghart
If the right hon. Gentleman looks at the details of the trade deals that we have with other countries, he will see that by and large, those trade deals have been created in order to further commerce and trade between two countries, and agree that there will be areas in which there will be a level playing field between our country and that other country—that is often the basis of a trade deal. The United States is the world’s leading economy and has been for over a century, and can sometimes strike deals or come to arrangements that other countries that are not the world’s largest economy cannot. I am afraid he will have to go and do his own research on American trade deals, but I can explain to him why we have the procurement system we do and why, because of the steps we have taken in this legislation, we will be creating additional opportunities for small and medium-sized enterprises in his constituency as well as in mine. That is much for the better, and it is a much better situation than we found ourselves in while we were still in the EU, with a very cumbersome, slow-moving and long-unreformed system of procurement to which we had been shackled for about 40 years.
For the avoidance of doubt, Members will want to be aware that this statutory instrument has been corrected to remove drafting references and a couple of typographical errors that were mistakenly added during the publishing process. I hope that colleagues will join me in supporting these regulations and will approve this SI today.
Dame Nia Griffith (Llanelli) (Lab)
Labour Members will not be opposing the regulations, which provide the detail needed for the Procurement Act to come into effect later this year. As Members across the House will recall, there was a need for a new procurement Act to reform the EU law-based procurement regime following the UK’s exit from the EU and to consolidate various procurement regulations into one place. For those reasons, we did not oppose the Procurement Bill on Second or Third Reading.
The purpose of the Procurement Act was to create a simpler, more flexible commercial system that better meets our country’s needs after having left the EU, while remaining compliant with our international obligations. However, as we have made clear in this House before, we are concerned that the Procurement Act was a wasted opportunity to reform procurement. In spite of our attempts to strengthen and improve the Bill with our amendments, the Procurement Act, when it comes into force in October, will unfortunately allow the same wasteful approach to emergency contracting rules that we saw during the pandemic, when friends of and donors to the Conservative party were given the first bite of the cherry while decent, skilled local businesses were denied the same opportunity. Billions of pounds of public money was wasted while excellent small and medium-sized businesses were overlooked. Nothing in the draft regulations will address that concern.
We also made it clear that we were very disappointed that the Act failed to mandate social value to secure investment in good British businesses, and I have to say that I was disappointed by the answer the Minister just gave to my right hon. Friend the Member for Warley (John Spellar). The procurement policy of a Labour Government would be rooted in getting value for money for every pound spent. Our national procurement plan would reward businesses that create jobs and pay their taxes, slash red tape for disadvantaged SMEs and claw back money from contractors that fail to deliver.
The statutory instrument is required to implement the new public procurement regime established by the Procurement Act 2023. It specifies what information should be included in the notices that contracting authorities must publish as per the requirements of the Procurement Act, and where and how these should be published. Other regulations in the statutory instrument impose requirements as to how contracting authorities should obtain specified information from suppliers, and provide further detail about how certain organisations and contracts are to be regulated. It gives details about how the Act covers Welsh and Scottish procurement in relation to reserved matters, and clarifies the disapplication of the Act in relation to regulated healthcare procurement.
Turning to the specific measures in the regulations, there is clarification about the various notices that will be published on the central digital platform. The platform was set up by the Minister for the Cabinet Office, and I hope it is progressing well. Notices that must be published there include planned procurement notices, tender notices, dynamic market notices and transparency notices. There is further specification of the information that should be included in the notices, with the purpose being to increase transparency and make the procurement regime more accessible to smaller businesses.
Measures that improve transparency and increase access to procurement opportunities, particularly to small and medium-sized businesses, are very much to be welcomed. The challenge will be in how to make these notices and the digital platform as user-friendly as possible, with all the relevant information easily accessible and searchable. As we move forward, it would be helpful if the Minister updated the House on progress in meeting the requirements of the regulations and on what impact they have on the number of small and medium-sized enterprises that bid for contracts. Goods purchased from small and medium-sized enterprises often mean providing local jobs, and local jobs mean that people can stay in their home towns and not have to move away for work, and importantly that they will spend their money in their local areas thus boosting the local economy.
The regulations also set out the details for supplier information requirements that will enable the creation of a supplier information system, the purpose of which will be to hold commonly used supplier information and allow it to be shared with contracting authorities, with the laudable aim of reducing the burden for suppliers, who have to provide the same information in relation to every procurement. Anyone who talks to businesses will say just how frustrating it is to have to supply the same information time and again. That is a particular burden for small and medium-sized businesses which simply do not have the capacity to deal with endless red tape. Measures that help to reduce that burden are very much to be welcomed, but again the challenge will be in the design and operation of the system. It should become a useful tool that saves repetition, rather than becoming a burden in itself, with businesses struggling to upload the necessary information.
The regulations also specify a list of services that may form the subject matter of what are called light-touch contracts, which would enjoy a less onerous regulatory regime, with the aim of encouraging organisations such as social enterprises and mutuals to bid for contracts for certain social, health and other person-orientated services. The key issues will be to maximise transparency and to ensure sufficient regulation to protect and get value for money for the public purse while at the same time encouraging a wider range of organisations to bid for contracts. The regulations specify that the Act does not apply to what is termed “regulated health procurement”, which is governed by other legislation.
The UK’s commitments under the World Trade Organisation agreement on Government procurement require us to have one financial threshold that applies to central Government authorities and another for the procurement of goods and services by local government and wider public sector bodies, as well as a specific threshold that applies to procurement for what are termed “works”—construction procurement that reflects the typically higher monetary values involved in procuring construction. The regulations therefore set out lists of which bodies are defined as central Government authorities and construction-related services that constitute “works”. These regulations set out further requirements in respect of what happens at the awarding of contracts and thereafter, with regulation 31 setting out what the assessment summary should contain, including an explanation as to why the particular scores were given against each criterion.
There are some innovative measures, and we welcome those that help to make the whole process more transparent. Regulation 37 sets out the information required in a procurement termination notice that is published when a contracting authority decides not to award a contract, and regulation 40 sets out the details to be included in a contract change notice, including the grounds on which modification will be made.
The regulations also change the frequency of reporting on the prompt payment of invoices by Government bodies from one year to six months and spell out requirements in respect of the contract performance notice, including the details required when used to report poor performance or a breach of contract. The explanatory notes clarify that these regulations do not include a statutory review clause, as they do not regulate an activity carried out by a business for the purposes of the business, but rather that they place obligations on the public sector. However, feedback and monitoring are crucial to ensuring both that we are getting value for the public purse and that the regulations are working effectively for business, including reducing the burdens on business and encouraging a wider range of businesses, particularly small and medium-sized enterprises, to bid for contracts.
I note that the approach to monitoring this legislation will be through feedback from contracting authorities, suppliers, industry representatives and professionals. As I noted earlier in my remarks, what is important is not just the content of the regulations but the way in which the requirements are implemented. The smooth operation of the supplier information system and the ease of access to the digital platform where the notices of procurement opportunities will be posted are crucial. I note that the Government have given the required six months’ notice of the coming into force of the Procurement Act on 28 October, when public bodies and businesses will be required to follow these regulations. It would be useful if the Minister kept the House updated about the implementation of the Act, and going forward, its impact, including, importantly, the impact on the uptake of procurement opportunities by small and medium-sized businesses.
Sir John Redwood (Wokingham) (Con)
It is difficult to come up with a good system that has the right balance, because the taxpayer’s interest is very much in favour of economies of scale and availability, while the small business struggles to meet the possible volumes of a successful bid for a contract and to satisfy all the criteria that the large company finds easy to manage. I am grateful for the fact that the Minister and the Government generally have been thinking rather more about how small business and the self-employed can make a bigger contribution and how contracts can be broken down into more manageable sizes, both in primary legislation and now in the detail.
John Spellar
The right hon. Gentleman is absolutely right on that, but very often the primes get the contract and subcontract to the SMEs and put on a huge on-cost and profit margin. Those SMEs are therefore never able to grow properly, and they are stifled, because Whitehall prefers to deal with very large conglomerates.
Sir John Redwood
There will be that bias. Sometimes it is right, and it is always understandable, but Ministers and, above all, the senior officials implementing this new policy will have to bear that in mind. They will have to try to correct for the ease of going for a large company solution, where all the boxes will be filled impeccably and all the right things will be ticked, although that can lead to a contract disaster, because getting the electronic responses right is not the same as delivering the right good at the right price in all the right ways.
I have another worry. We are in an era of exciting and rapid change. Technology is changing even more quickly than over much of our lifetimes so far, as the Prime Minister was mentioning in his remarks this morning. None of us can be sure what opportunities artificial intelligence will produce in wider digitalisation, but we know that digitalisation will make an increasing contribution to, and have an impact on, service provision. So much of government is about the provision of personal services and administrative services, and so much of that can benefit from the intelligent application of these exciting new technologies, but they need careful handling.
The big problem in public procurement is when the innovators are moving so quickly that the invitation to bid is about things that are out of date; they are what the system has been used to handling and the state feels comfortable with. The state can define the old products and old services perfectly well, because it has experience of them, whereas maybe what is needed in certain cases is the innovative product or service. I remember innovating in industry in the past. Often, we had to be willing to license a competitor of our own breakthrough, to give people comfort that there would be some competitive check on costs and availability. Such things are complicated to model and to build in to big procurement systems, such as the state. It means that the state tends to lag and the private sector makes much more rapid advances, because people take more risk and are prepared to change what they wish to procure when they see something better. In the case of the state things have to go through many committees and many memos, and it is probably easier not to bother or to wait a few years until something has happened.
I do not have any easy answers. I understand that the Government and the Minister have the best of intentions, and they have come up with rules that they think are more flexible, but the proof of this pudding will be in the eating. I just emphasise that we need a system that is flexible enough to understand that sometimes it does not know what it wants, or does not know what is available, or that something that is available might be better than the thing people thought they wanted.
My final observation is that we have lost a lot of the self-employed in recent years for one reason or another, but the issues over tax status are part of the problem, with the toughening of the rules over IR35. I worry that a lot of self-employed people will struggle to get any work from the Government, because it is much easier for those procuring just to say, “It’s too much hassle; we would be to blame if this person were taking liberties with the tax system, and although they say they are compliant and self-employed, we aren’t so sure.” Of course, someone can become genuinely self-employed only if they win enough independent contracts. If a big part of procurement is not allowing them to win state contracts, it is much more difficult for them to become genuinely self-employed.
Sarah Champion (Rotherham) (Lab)
The right hon. Member makes a very good point. The self-employed have been telling me about the amount of administration they have to do even to be in the running. Also, they do not tend to find out about contracts. I hope that the regulations will extend their promotion and the length of time, and that the Government try to break down those contracts into smaller chunks, so that small British businesses can genuinely be in with a chance.
Sir John Redwood
I entirely agree. That is where the more transparent and simpler system will be very good, and we should give that a good trial. I am concerned about someone who is genuinely self-employed struggling to prove that they are sufficiently self-employed, and whether the state would want to take less risk on that. Again, I would like the Minister to put a stronger case to the Treasury that, perhaps, to have more successful self-employed people working for the state under contract, we need to review how we enforce and police their tax status.
Mr Deputy Speaker (Sir Roger Gale)
I call the Scottish National party spokesperson.
Dave Doogan (Angus) (SNP)
The SNP does not oppose the draft Procurement Regulations 2024. Their context is a deeply unwelcome Brexit reality from Scotland’s point of view, but they are largely uncontentious and little more than one would expect under the framework established by the Procurement Act 2023. However, that framework is unsatisfactory to some extent, not for what it gives effect to but for what it does not safeguard against. The Act fails to mandate sufficient tax transparency for large multinationals bidding for public contracts—a profoundly basic requirement for those seeking to profit from public expenditure to be transparent about their own tax position and, therefore, it is a significant failure in the framework. The Act also fails to appropriately protect workers’ rights—never more important for workers in the UK, who face a growing threat to their employment rights, having been stripped of EU protections. It does not properly uphold the priority of social benefit from such contract awards.
Vitally, the Act fails to close the loopholes that allowed for the appalling Tory VIP lane for the procurement of personal protective equipment during the pandemic. If there is no institutional learning from that glaring and seismic misappropriation of public funds, it prompts the question of whether the omission is by dint of incompetence or by design, given the repeated denials of this Tory Government with respect to that particular crisis.
John Spellar
Some underlying reasons for the PPE failures were the lack of industrial capacity, the complete inability to communicate with industrial capacity, and the endless reliance on middle men who rushed off to China. Firms in this country could have done the job but had no way of getting access, as back-door routes were used, which dominated a lot of the newspapers.
Dave Doogan
The right hon. Member made a number of important points, not least that we allow the atrophy of our industrial base at our peril, particularly in times of crisis. It unduly compliments the Government to suggest that there was only an inability to communicate with ordinary firms in the United Kingdom—I am afraid that the circumstances around the Tory VIP lane were far more sinister than that. With that, I will make some progress.
A third of public expenditure—some £300 billion annually—is spent on public procurement, so it is essential that its regulation is not simply minimalist administrative housekeeping, but an ambitious plan to improve public procurement continuously. In the absence of any such ambition in these regulations, we can clearly see the sloping shoulders of a dying Administration content to pass on their responsibility for forging a public procurement system that benefits taxpayers, local suppliers, industry and service users alike to the next UK Government—God help us.
The SNP and Scotland more generally must, under the current constitutional settlement, concede to be bound by the regulations, for the time being at least. In so doing, however, we note that the Tory Government promised in 2019 to get Brexit done, yet they are still fumbling around with fundamental and basic legislation five years later, trying to implement what was their pipe dream, but is a bona fide nightmare for ordinary people across these islands. Still further regulation will be required to give full effect to the Procurement Act 2023, but it seems unlikely that it will be the same Government standing there to advance it.
John Spellar (Warley) (Lab)
I would like to make a couple of observations before I get on to the main thrust of my argument.
First, I regard the regulations as a great missed opportunity. It is not that the actual regulations themselves are not acceptable—they are probably an improvement—but they do not deal with a whole number of core failures in public procurement in this country. We have just discussed the covid era. I had a firm in my constituency that produced safety apparel for the catering industry. It knew exactly how to produce gowns; it had skilled cutters and machinery. There was no way of getting through the bureaucracy, which of course had been subcontracted to Deloitte, which also got a massive cut out of it. There was a real failure to engage with industry and, as the hon. Member for Angus (Dave Doogan) pointed out, a failure to maintain the industrial base—although I would gently point out to my friend that procurement from the Scottish Administration has not always distinguished itself over recent years either.
The right hon. Member for Wokingham (Sir John Redwood) rightly pointed out that very often Government procurement policy deliberately moves against SMEs because it aggregates contracts, for example, for repairs and maintenance in defence. Instead of being done by local firms, they are aggregated into one large contract, which only the big national facilities companies are able to do. Of course, they subcontract out the work and we know—we have just had a considerable number of reports about defence accommodation—how woeful their record is on delivery. That is a further problem that, I regret, is not addressed in the document, or in the Minister’s rapidly delivered speech.
That is the point: there are no penalties for failure. Recently, the Defence Committee received a letter from the Defence Secretary saying he cannot, under Government procurement rules, take into account past performance in assessing a contract. Mr Deputy Speaker, if you give work to a builder, he bodges the job, he comes back and tenders with the lowest price and you are governed by Government procurement, you have to take that, even though you know the history is that he cannot do the job. We see that very much in IT contracts, where firms fail time and time and time again. It is a shame that the right hon. Member for Rayleigh and Wickford (Mr Francois) is not present because I am sure he could talk at length about a company that is, rightly, his bête noire in that regard.
There is a fundamental failure of philosophy at the heart of Government and the regulations do not address it. That is also why I think this is a missed opportunity. They are based on a philosophy and theory that do not relate to the real world. I intervened on the Minister to talk about trade deals and he went on about the United States being able to strike particular deals. The core of international trading relations—and a lot of it that deals with public procurement is mentioned in the document—is World Trade Organisation agreements. I accept that there has been a deep fundamental failing within the WTO, which was to admit China to the organisation and then not to insist that it followed its rules, until basically it became too big to fail and too big to take on. I accept that there was that failure. But every other major industrial country looks after its own, often very effectively.
We heard all this during the debates about the European Union. I used to have to say, both to Eurosceptics and to Euro-enthusiasts who were ascribing either our problems or our salvation to Brussels, that the problems were not fundamentally in Brussels—they were in Whitehall. I remember once saying to a senior civil servant—a good one, by the way—during an argument about an issue related to this that, if the British civil service had fought the corner of Britain as hard as its French, German, Italian and other counterparts fought theirs, the British public would have been much more content with the EU. The British undermined it because they would not be good Europeans: they would not behave like the rest of Europe.
Let us consider the issue of police vehicles, which I raise regularly in the House. If we go to Berlin, Paris or Rome, we see that all their police vehicles—apart from the Carabinieri Land Rovers—are made in their own countries. If there is free competition and a superior product is available at a better price, surely one country should dominate? Not a bit of it.
Another argument that we have regularly concerns the fleet solid support ships. The Government insist on putting the contract out to international competition, and the bulk of the ships will be built in northern Spain. When France and Italy decided to procure similar vessels, it was made very clear that they had better be built in yards in France and Italy.
Sarah Champion
My right hon. Friend is making a very good speech and I fully agree with what he is saying. One of the ways in which Europe manages to support its own industry is by applying weighting to social value, ascribing the highest value to the very act of providing jobs for local people. That is something that we could be doing.
John Spellar
It is true that the social weighting applied here is insufficient, but European countries also send a clear subliminal message to competitors, putting up, as it were, a sign saying “Just don’t bother.” When Germany did procure a design for naval vessels from Holland, the prerequisite was that they had to be built in German yards.
Sir John Redwood
Is there not also a strong national security argument for procuring all defence items in Britain and creating a more competitive market at home to have honesty on prices?
John Spellar
That is exactly right. One of the arguments for buying steel from, mainly, Sweden—and possibly from France—was “We do not produce steel of that quality here”, but if we do not provide the orders for that quality of steel, our plants will gradually stop producing it, and we will also lose the skills. That has been a constant row. The same has applied to trains. When I was a Transport Minister, Alstom came along, having taken over the Washwood Heath factory, and said, “Our problem is that when we go to corporate headquarters, we will be told that if we want to sell trains in France we must produce them in France, and if we want to sell trains in Germany we must produce them in Germany. Britain will buy from anyone; where do you think the investment goes?” That has been a regular theme.
During the period of Labour government—and I fear that it is probably still the same with this Government —we heard Ministers say, “We have to abide by these rules because otherwise we cannot expect other people to do so.” I say, “Join the real world, the world in which people do fight their corner, the world where people battle for their corner!” The real, deep irony is that the failure to protect our industry is also a failure to protect our industrial communities, and to protect not just the livelihoods but the life of those communities. We talk about left-behind towns, which are very much at the heart of this issue, but it has also happened to quite an extent in America. It drives a populist feeling that people decry, but which they have been instrumental in bringing about.
If the argument that we have to follow some theoretical rules, rather than be part of the practical world, was wrong previously, which it certainly was, it is even less sustainable now. What the Ukraine conflict has shown is the need for industrial capacity. When I say “industrial capacity”, I do not just mean a plant; I also mean trained personnel. I do not just mean scientists, high technicians and skilled trades—semi-skilled production workers with the ability to make the machines work and to turn materiel out are also a core part of this.
We have seen that drain and drift away, so when we are faced with an existential crisis and Ukraine is on the frontline for freedom against an aggressive and assertive Russia, it becomes incredibly difficult—regardless of whether we will the money out of the Treasury, which I accept is important—to get production ramped up because of the lack of skills throughout the economy. I accept that some of the equipment in the second world war was less technically advanced, but the allies were quickly able— America was astonishingly quick—to move civil capacity into war production. Although we often focus on the “whizz bang” stuff—the hi-tech stuff—a lot of it is about good machining, which requires those abilities and that capacity.
When I argue for maintaining capacity in the UK, it does not mean that we should not co-operate with other countries, but we should do so on the basis of ensuring that our interests get dealt with as well, which will be mutually beneficial in the long run. If we are able to play our part, we will have that greater industrial capacity, but we cannot be the universal donor. We also have to have a degree of reciprocation and investment coming into the UK.
As I said, I accept that the changes introduced by the regulations are an improvement, but they have still not broken the psychological grip inside the civil service, which is not interested in industry and does not rate it, even in the face of the Ukraine crisis and the world dividing up into trade blocs. I am asking not for Britain to be an outlier, but for Britain to become part of the international community, behave like a normal country and have prosperity spread out much more across the country. I think it is called levelling up—we even have a Department that is supposed to be dealing with that.
Mr Toby Perkins (Chesterfield) (Lab)
I pay tribute to my right hon. Friend, who has been a doughty campaigner on this issue in all the time I have been in Parliament. I agree that we are not looking for British exceptionalism; we are looking for Britain to catch up with the kinds of practices that we know are commonplace in many other countries that are part of the European Union. We need to make sure that supporting UK manufacturing is part of the policy aims of our procurement strategy.
John Spellar
I absolutely agree. Hopefully then, we will achieve what Mr Churchill argued for in the early part of the last century. When he was Chancellor of the Exchequer, he wanted to see industry more content and capital less proud. By “industry”, he meant both firms and the workforce. We would have much more content and stability in this country if the Government were prepared to use the enormous power that they have. We often talk about the Government as a legislator and an administrator, but the Government as customer is enormously important. That can drive progress and change, but it can also drive equity. I ask the Minister to reflect on that and, in the short time left for this Administration, to start a change of thinking in Whitehall to make it easier for us to play a proactive role rather than a merely reactive one. The prize is enormous, both for our prosperity and for our content.
Sarah Champion (Rotherham) (Lab)
I thank the Minister for bringing forward the regulations. I know that he is passionate about this area and really wants to do the best for British businesses, so I hope he takes my comments as helpful, rather than as a challenge—or perhaps as a positive challenge.
Every year, the Government spend over £300 billion on public procurement. A significant proportion of that goes to multinational corporations, and in 2020 alone £18 billion of public funds went to overseas suppliers, rather than supporting their UK counterparts. A consequence is that SMEs are effectively shut out of the public procurement system, with big corporations winning 90% of contracts deemed suitable for small and medium-sized businesses. This means that SMEs miss out on £30 billion-worth of contracts annually, and despite repeated Government promises to buy British food, this is just not happening.
British businesses are being let down by the procurement system. The British steel industry, of which Rotherham is a proud hub, is one of the industries suffering from this lack of Government support. The UK steel industry employs over 40,000 people and directly contributes £2.9 billion to the economy. However, steel contracts continue to be handed out to foreign companies. The British Constructional Steelwork Association’s analysis of steel use in the HS2 project found that only 58% of steel contracts were awarded to British suppliers, despite the UK steel industry having the capacity to carry out 100% of the work.
For these reasons, I was proud to bring forward my private Member’s Bill, the Public Procurement (British Goods and Services) Bill. It was developed with a cross-sector group of experts, to whom I pay tribute. The Bill sought to encourage the Government to award more public contracts to British farmers, British manufacturers and British producers by increasing transparency regarding contract awards. This would be done by requiring contracting authorities to publish in contract award notices how they had complied with various requirements in the Bill.
I am therefore genuinely pleased to see that a large section of the regulations is dedicated to contract award notices. Notably, I welcome the inclusion of pipeline notices, planned procurement notices and preliminary market engagement notices, which will allow businesses to better prepare for bids for public contracts. During the development of my Bill, I was told that publishing contract award notices was time-consuming and laborious. That might be true, but the rewards to British businesses surely outweigh the admin, so I am hopeful that today’s legislation will open up more public contracts to SMEs.
However, I reiterate a point made by my hon. Friend the Member for Llanelli (Dame Nia Griffith): we must make sure that the hub is as easy and accessible as possible. The regulations are not perfect and we are keen to see improvements. I would like to see the inclusion of more measures to back British farmers, uphold good employment practices and better support SMEs through public procurement. As the Minister will know, UK Departments currently have to report where steel is procured from. That is a welcome step, and I firmly believe that the UK food industry would benefit from a similar intervention.
The UK public sector spends around £2.4 billion a year on food procurement, yet there is no accurate measure of the amount of food procured from British suppliers, which is of huge concern to our farming industry. Due to the lack of central Government policy on farming and food, public bodies are effectively establishing their own policies, potentially to the detriment of British farming. To address these issues, my Bill would have compelled contracting authorities to publish what proportion of the food being procured originated from UK suppliers. This was designed to encourage more public contracts to be awarded to our farmers.
The economic benefits of backing British farming are obvious, but there are also ethical benefits. We are a world leader in animal welfare standards, and an increased focus on buying British food would contribute to cruelty-free procurement becoming the norm. I was proud that the National Farmers Union, the Countryside Alliance and the Royal Society for the Prevention of Cruelty to Animals helped me to develop my Bill, and I hope that the Government will look favourably on this specific measure and implement it in the future.
I am disappointed that the regulations do not include an obligation for contracting authorities to support good employment standards, good working practices and social values. I worked with the TUC when developing my Bill, and it informed me of the dire state of some employment standards in public procurement. To remedy this, I worked with the TUC on a measure that would have encouraged the awarding of public sector contracts to employers that treat their staff well and that would have stopped bad employment practices, such as fire and rehire, being tolerated within public procurement.
My Bill would have required contracting authorities to consider how they might act to support good employment standards and working practices, and it would have placed an obligation on them to include in contract award notices how they have complied with this requirement. I urge the Minister to reconsider and to include this in the regulations.
Despite making up 99% of UK businesses, SMEs do not receive their fair share of public contracts. The National Federation of Builders told me that one of its members has not secured a public sector contract for over a decade, even though it is well qualified to deliver and has kept on applying. The member found the hugely time-consuming process off-putting, and when it did not receive the contract, it received no feedback on why, which would have helped it to make the next application better.
Sadly, that situation is replicated across many sectors. I therefore ask the Minister to consider implementing a requirement for contracting authorities, when procuring goods and services from SMEs, to consider how they might improve an area’s wellbeing and to report on how they have complied with this obligation.
When spending taxpayers’ money, as much as possible should be spent on supporting British businesses and British jobs, as other countries do with their own industries. We were told that British businesses would be the first in the queue for UK Government contracts once we left the EU. The 2019 Conservative manifesto even stated, with regard to food procurement:
“When we leave the EU, we will be able to encourage the public sector to ‘Buy British’ to support our farmers and reduce environmental costs.”
That is yet to happen, so can the Minister confirm how the regulations will seek to address the barriers specifically around farming?
I urge the Government to implement the changes that my hon. Friend the Member for Llanelli and I have outlined today, because we all want British businesses to do much better. I wrote to the Minister, at a previous Minister’s request, about my working party coming to meet him to discuss how guidance could help British businesses to secure these contracts. I have yet to receive a reply, and I would be very grateful if he could provide one.
Jim Shannon (Strangford) (DUP)
I thank the Minister for his opening speech, in which he mentioned all the devolved nations. It will be no surprise to him that I will focus on Northern Ireland.
The previous speakers all spoke about the importance of public procurement to the economy of the United Kingdom of Great Britain and Northern Ireland. We are all very aware that the Procurement Act 2023 is due to come into force in October, with secondary legislation required to implement certain of its provisions. I again wish to highlight the importance of the devolved nations’ specific circumstances. The Act applies to us, and it is important that Northern Ireland has as much access and input into the United Kingdom’s procurement process as possible. The hon. Member for Rotherham (Sarah Champion) spoke about SMEs, of which we have an abundance in my Strangford constituency and across Northern Ireland, and it is important that they have that access. They are the backbone of business.
I have always been a big supporter of securing locally sourced British contracts, and that has been heightened since we officially left the European Union. It is about securing more jobs for our constituents, strengthening our economy across the United Kingdom of Great Britain and Northern Ireland, and ensuring good value for money. Northern Ireland has witnessed that our shipping costs to sustain contracts with businesses inside the United Kingdom are considerably more expensive than in the other devolved nations. It seems that Northern Ireland is at a disadvantage. Perhaps the Minister can tell us what will be done to address that. Understandably, we cannot always rely on a train or lorry journey, but we want to do our part and play our role in the public procurement process, so I ask the Minister what more can be done to support shipping affordability for east-west contracts.
During the passage of the Northern Ireland Protocol Bill through this House, the Democratic Unionist party put great emphasis on the importance of east-west connections economically, culturally, historically and financially. To build on that, we believe there should be a focus on east-west contracts. The Minister who responded at the time indicated that that was what the provisions would be about, but it is important for the Minister before us today to tell us more about what that means.
There have been issues with international procurement in the past, in respect of where we have secured certain contracts—for example, in ensuring that the materials we rely on are not subject to human rights violations such as forced labour, child labour and unsafe working conditions. Such violations have been witnessed in the clothing retail industry to produce affordable clothes, which are incredibly popular but often have a moral price that is too high. I declare an interest as the chair of the all-party parliamentary group on international freedom of religion or belief. Human rights and freedom from persecution for religious minorities across the world are very important to me. In this House, we must ensure that we are not acceding to the purchase and manufacture of affordable clothes when their price is morally too high. There are many opportunities for the United Kingdom to pave the way and to be a front runner in supporting local, domestic procurement contracts in many different industries, such as health, defence, apparel, transport and much more.
Northern Ireland seems to be on a different level to the rest of the United Kingdom. The Minister indicated his wish to address that issue, and I look forward to hearing what he will say. Northern Ireland needs equality and a level playing field. The opportunities for Northern Ireland must be the same as those for Scotland and Wales, and for all of this great country of England as well. It is no secret that we already face a greater expense in shipping costs, so I would be grateful if the Minister could clarify what is being done to support Northern Ireland in relation to that.
Mr Deputy Speaker (Sir Roger Gale)
I call the Leader of the House, Alex Burghart.
Alex Burghart
Gosh—the Leader of the House? One day, Mr Deputy Speaker.
It has been a pleasure to listen to hon. Members and to hear the widespread support for the regulations. There is widespread recognition that they are a great improvement on the regime that we have swept away. They form part of one of the landmark pieces of legislation since our departure from the European Union.
We heard support from across the House for a procurement system that greatly supports small and medium-sized enterprises. As I said in my opening remarks, that was at the forefront of Ministers’ thinking as the Procurement Bill was devised. It was very much in the minds of the businesses and the contracting authorities that we spoke to as the legislation was put together. The right hon. Member for Warley (John Spellar) gave an excellent speech and referred to Churchill’s wonderful phrase that industry should be “more content”. From the extensive consultations we have undertaken to prepare the legislation, we know these regulations will make “industry more content”, and that this is very much what businesses have been asking for and looking forward to.
There are a number of things that will help small and medium-sized enterprises, not least transparency and our new online system. The hon. Member for Llanelli (Dame Nia Griffith) said, quite rightly, that the system must be easy to use. One of my first jobs as an adviser to Government was in child protection. I remember the disastrous integrated children’s system that was in place under the last Labour Government, which took hours upon hours out of social workers’ time. It was dreadful because it took them away from working with children and meant they had to follow a very bureaucratic process.
We must be committed to ensuring that people are able to enter data and use the system without taking away from the most important part of their job. The Procurement Act, the regulations and the supporting documentation also support social value. The national procurement policy statement, which we have published, is keen to make sure that we do not remain obsessed with the most economically advantageous tender, but instead move to the most advantageous tender. That is a broader understanding of what is useful to contracting authorities and to society, and enables the consideration of issues such as local jobs and local skills.
The right hon. Member for Warley mentioned skills, and he was quite right to do so. When I was Minister for Apprenticeships and Skills, I was very keen to make sure that we were building up high-quality, internationally competitive apprenticeships, which played to the skills that were going to be needed in the areas in which they were provided.
The right hon. Gentleman also spoke about levelling up. I saw one of the most powerful examples of levelling up when I was a Minister in the Department for Education. The Government created a freeport on Teesside, which was part of our job. The excellent Mayor of Teesside, Lord Houchen, who I am pleased to say has been wonderfully returned by his constituents, worked with business to build a hydrogen plant in the freeport. The deal that was struck was that the hydrogen plant would support local colleges in providing the high-quality apprenticeships that would get young people—and not so young people—the jobs in that community. That is levelling up: all parts of Government—both from Whitehall to a local level—working with providers of local skills and industry to make sure that people can be a part of the success story of their own communities. I am very proud that it is this Government who have helped to deliver changes such as this.
Alex Burghart
I am always delighted to give way to the right hon. Gentleman.
John Spellar
I thank the Minister for his positive remarks.
Cannot Government, as customer, prescribe ratios of apprenticeships within the contracts, particularly construction contracts, and stipulate, as was done at the Olympic Park, that if a company moves off site for whatever reason, including when a contract moves into a different phase, and a new company comes in, there is an obligation to transfer the apprentices across? That would be building a sustainable base for the future.
Alex Burghart
I am sure the right hon. Gentleman knows that that is often the case. We do have requirements for apprenticeships to be part of major Government projects. He quite rightly spoke about Government as an intelligent customer—intelligent not just in terms of getting the best price, but of getting the best overall value. I say to him again that the idea of having a system of most advantageous tender, not just most economically advantageous tender, was always at the heart of these regulations.
The right hon. Gentleman should look at the excellent work being done by the Crown Commercial Service. By bundling together purchases made by different parts of Government, we can make sure that we get best value—I mean value in the broadest sense. In the Cabinet Office—perhaps one of the less glamorous areas of Government—in which I am proud to serve, that work is under way, already saving British taxpayers billions of pounds and making sure that we have a better and more holistic view of what Government spend can do.
Work such as that, alongside legislation such as this, means that we are building a system in which not just industry is content, but Government and the taxpayer are too, as well as the small and medium-sized enterprises and the communities in which they sit. I recommend this motion to the House.
Question put and agreed to.
Resolved,
That the draft Procurement Regulations 2024, which were laid before this House on 25 March, be approved.