Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations 2019

Baroness Hayter of Kentish Town Excerpts

Thursday 14th March 2019 Lords Chamber

The other order, the one about electronic invoices, is again something we developed together with other European countries, valuably, but of course it is different in character because it is part of the ongoing work we are engaged in as current members of the EU, rather than being a special provision for EU exit. It introduces, in effect, the EU-wide regulations. It aims to modernise and reduce costs for public procurement invoicing and we certainly support that. It is welcome and has the potential to allow efficiency savings across the public sector, but British companies will lose out on EU funds to implement this if they have not already applied for them. It is not clear to me whether any provision will be made by the Government for those companies that move into this process later, when they can no longer take advantage of the Connecting Europe Facility—the CEF programme—from which funding is currently available for companies engaging in this kind of improvement. This seems to me something that is desirable and to be encouraged and is a reminder that our participation in the European Union has been the source of many benefits which we do not want to throw away: many of us would prefer not to be engaging in this operation at all, but if it is to happen, let us preserve the best of what we have achieved.

[Baroness Hayter of Kentish Town (Lab)]

I join the congratulations to the Minister for the breadth of expertise he brings each time he does one of these. We will now test him with some questions.

I turn first to the Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations, which, as the Minister set out, require contracting authorities for 18 months after exit to continue to meet the obligations to third countries which have procurement arrangements with the EU. As he said, it is an obligation on which we legislated recently—it was actually in February of this year, just a few weeks ago. That SI also provided for the eight-month period concerning signatories to the WTO government procurement agreement.

I have just three points arising from that. One to which I know he will not want to reply concerns the complete chaos in government which makes this sort of change necessary. We do not know when we are going to leave; we do not know whether there will be a deal; we have no idea what sort of trade agreements will exist, either with the EU or with other countries; and we have absolutely no idea if or when we will see the Trade Bill back in the Commons, let alone on the statute book—and of course it is the Trade Bill that the SI in February would have covered. In fact, now that in this House we have made sure that the Trade Bill rules out being commenced if there were to be no deal—and that we have included in it a requirement for the customs union—I have a funny feeling that the Bill might do a slippery little disappearing trick. In a sense, that is symptomatic of where we are at the moment. We are having to do legislation on the hoof. It is two weeks tomorrow that the Government still seem to think we might be able to leave the EU, and we are still having to do these little amendments.

My second question, to which the Minister will probably be more willing to respond, is on the substance of this SI. I understand the purpose: it is, a bit like the noble Lord, Lord Beith, said, to make up for the botched idea of Messrs Fox, Johnson, Rees-Mogg and the others that coming out of the EU was simple and painless. In fact, it raises lots of issues, and my major concern is exactly that mentioned by the noble Baroness, Lady Neville-Rolfe. While these regulations preserve the rights of suppliers within the EU system to have fair access to UK procurement, there is nothing in the Explanatory Memorandum to indicate whether reciprocity has been negotiated. Obviously it could not be allowed for in a domestic SI, but we are hoping that it has been negotiated so that our UK suppliers will have equal access to the procurement markets of interest to them during the various transition periods allowed for in these regulations. Could the Minister clarify whether such reciprocal access has been similarly preserved, albeit understandably not in a bit of UK domestic legislation?

If it is not provided for, it looks on the face of it as if these regulations unilaterally maintain the openness of our procurement market to a number of countries across the world—allowing them access to enjoy the benefits of our procurement market, which I appreciate can also be good for our procurers—without any assured obligations in return. It would be a bit like throwing British industry under the proverbial bus, competing with non-UK companies here and unable to compete elsewhere. Given yesterday’s 7 am announcement on tariffs, which is already frightening a number of businesses, some reassurance here would be very welcome. I know that at an earlier stage the Minister in the other place simply said that he would “expect” reciprocity, but a Minister’s expectation is probably not sufficient for those companies that need a degree of certainty on this issue. They need to know whether they are going to be able to bid for outside contracts.

My third point—although I appreciate that it might be only the second to which the Minister wishes to respond—is that we know from the Department for International Trade that the Government are anticipating what they call a short gap between the “in principle” agreed accession to the GPA and the “in law” joining of the GPA by the UK. When we did the earlier SI, I think we were told that the gap was because a number of countries needed to agree to our signing up. Could the Minister update us on how long the Government anticipate that the gap would be? Is it days or weeks? I hope it is not months.

The second instrument is a deal rather than a no-deal SI about electronic invoicing. Rather like the noble Baroness, we support anything that promotes the uptake of electronic invoicing in public procurement. I will ask only a couple of questions. First, if we leave two weeks tomorrow—although that does not look likely—can we assume that the regulations would apply, albeit on a voluntary basis, until April of next year, and that they would therefore apply immediately on exit, introducing that common standard that was agreed by the BSI in 2017, which would come in immediately as a standard for government, albeit not for the other authorities for another year? Once they have been introduced, whether it is this year for government or over a longer period for other agencies, what would happen if we were outside the EU at that stage and its European standards were reviewed and amended? Does the UK remain a party to discussions that take place on the standards in the European Committee for Standardisation, where the BSI has been Britain’s voice? Will we retain, through the BSI, a role in the standard-setting done by that committee after we have left? Would we then be able, if we wished, to adapt our own standards and the regulations that go with them so that they continue to follow those in the EU, even if we are outside it, in order that suppliers in particular will use the same format for invoicing, whether they are invoicing in our public procurement system or in that of other countries?

Secondly, when my honourable friend asked a question in the other place she received no reply at that stage—but that was a week ago, so I hope that the Minister now has an answer. It touches on the issue raised by the noble Lord, Lord Beith, on what support might be available for small businesses. At the moment, the Connecting Europe Facility provided, I think, €430 million between 2014 and 2016 to help UK businesses adapt to these types of changes—but, obviously, after we leave that source of funding will not be there. While the regulations will always remain voluntary, so businesses will not have to do that, we also know that if they do not use electronic invoicing, their paper invoices might be settled a little more slowly than if they were able to use it. Therefore, even though these standards will remain voluntary for businesses, it is obviously important for their cash flow and liquidity that they are able to do the e-invoicing and adapt to it, and in particular to the new standards that will come in. Once we leave the EU and do not have access to the Connecting Europe Facility funding, will the Government commit themselves now to replacing that sort of funding for issues such as these, which are, after all, laid down in legislation?

Finally, as a final cheeky little question, will the Minister confirm that the Government always use e-invoicing themselves, including between departments?

[Lord Young of Cookham]

I am grateful to all noble Lords who have taken part in this debate. On the last question, the fast ball which the noble Baroness bowled, I shall have to take advice on the extent to which the Government use electronic invoicing when they invoice. Of course, under the regulations, we will be obliged to process e-invoices if they arrive, but it is a good question and I shall make inquiries on the extent to which we are up to speed on e-invoicing.

As I said, I am grateful to all those who have taken part and will try to go through the questions asked—not necessarily in order. The noble Lord, Lord Beith, asked what would happen if there was an agreement. The answer is that the SI would indeed be suspended, probably by the withdrawal Act. It would be switched off, as with a lot of the other no-deal SIs which have already been passed.

The noble Viscount, Lord Waverley, asked about the plan for the UK public sector and the arrangements for publication of notices on the OJEU TED. The withdrawal agreement provides for publication of notices on that site. If there is no deal, the UK has developed its own UK e-notification that will be ready for exit date if it is needed. This is called the Find a Tender Service—FATS. Details were set out in the Explanatory Memorandum to the first EU exit instrument and published in a procurement publicity notice, the latest of which was published on 7 February.

My noble friend Lady Neville-Rolfe asked what the impact of the SI would be. The basic thrust of the SI is to ensure that there is no change, so, to the extent that there already is a problem, it makes it neither worse nor better: it is neutral. On the issue of public consultation, because the SI imposes no new regulatory burdens on UK businesses and as, as I said, its purpose is to maintain, in so far as possible, existing obligations on contracting authorities as regards suppliers, it has no direct impact on the public sector or the private sector, so it has been unnecessary to undertake consultation with industry. I shall come to my noble friend’s other points in a moment.

The noble Lord, Lord Beith, asked why this will come into force immediately before exit day, whereas everything else comes into effect on exit day. This SI comes into force immediately before exit day because it needs to amend the first SI before that one comes into force at the start of exit day, so we need to cancel the SI to which the noble Baroness referred before it comes into effect. That is why that has to be done the day before, but we hope that none of this will be necessary. The provision will expire after 18 months, after which guaranteed access will cease for suppliers from countries with which we have not made a continuity agreement.

My noble friend Lord Arbuthnot asked about last night’s vote. I hope that the Government will respect the decision of the other place. As my noble friend knows, the legal default in UK and EU law remains that the UK will leave the EU without a deal unless something else is agreed. We are planning for all eventualities with this SI, but I very much hope, as I am sure my noble friend does, that there will be an agreement and we will not need to leave without a deal. As former Members of the other place—as are a number of those who contributed to this debate—I am sure that we hope that the view expressed yesterday there will be respected.

The noble Baroness, Lady Hayter, and other noble Lords raised the issue of EU funds being available to support. As she said, no small business will be obliged to use e-invoicing. I am afraid that I do not have a direct answer to her question. The Government have guaranteed that certain grants paid out by the EU before we leave will be funded by the Government up to a certain date. I do not have the details to hand to say whether that guarantee applies to this particular funding issue but I undertake to write to noble Lords with the details. On whether certain invoices would go further down the queue if they were not e-invoices but paper ones, we have very strict rules about the prompt payment of invoices, whether they are e-invoices or paper ones. Certainly as far as the Government are concerned, there would be no such discrimination.

[Baroness Hayter of Kentish Town]

Does that apply to the Cabinet Office, which I gather has a rather bad record on paying promptly?

[Lord Young of Cookham]

I did not catch the noble Baroness’s last words, but the Cabinet Office sets the targets so I would hope that it would be the first government department to ensure that it met them. If she has a specific invoice in mind, I will certainly make inquiries.

[Baroness Hayter of Kentish Town]

For the record, it was noted in the other place—this may well have been because of a glitch—that the Cabinet Office has one of the worst records on this matter. There were assurances that this would change but it is a bit frightening when the department supposed to be leading on prompt payments is not itself very good.

[Lord Young of Cookham]

I stand rebuked on behalf of my department. I will make further inquiries about our prompt payment record and write to the noble Baroness and noble Lords who took part in the debate.

I was asked what would happen to this SI in the event of Article 50 being extended. I think I answered that. The withdrawal Act confers powers to enable the Article 50 period to be extended pending further negotiations so that the definition of exit day can align with the date and time that the EU treaties cease to apply.

On the 18-month extension, if no deal with the EU is reached and we do not yet have powers enabling us to give effect to the UK’s obligations under its own international agreements, the 18-month extension of rights would begin from the new exit day.

My noble friend Lady Neville-Rolfe made the point that we may be more punctilious in enforcement than other countries, and asked how we can guarantee reciprocal access. As I said, the SI makes no change to the terms of trade she referred to, but we are working with other countries to agree continuity agreements. Many of our discussions are at an advanced stage; some have already been agreed. That will ensure that our access is reciprocated. We will also have guaranteed access to markets in GPA countries, which account for the majority of contract opportunities by value to which the UK currently has access. All our agreements contain provisions relating to remedies for suppliers that have been treated unfairly.

I have just received some in-flight refuelling concerning the serious allegation made by the noble Baroness, Lady Hayter, about prompt payment. She is absolutely right that there was a decline in Cabinet Office prompt payment, which was due to the adoption of a new invoicing system—straight out of “Yes Minister”. That problem is common in other departments. I think I updated either her or another Opposition Member in the House on our progress in that regard a couple of weeks ago. In fact, in recent months, we have come back up to standard in the speed of prompt payments, but I would be happy to write to her to set out those figures in detail.

Turning to whether we will still have access to EU procurement markets if we keep EU obligations, after exit, UK businesses will still enjoy guaranteed access to many of the same procurement opportunities in the EU covered by the WTO’s government procurement agreement through the UK’s GPA membership. This provides access to £1.3 trillion of contract opportunities annually. However, the EU-linked continuity obligations, which we are retaining in this instrument, are obligations towards non-EU countries and so do not have a bearing on UK suppliers’ access to public procurement opportunities in the EU.

The noble Baroness, Lady Hayter, asked when we are expecting formally to accede to the GPA. As I think she knows, the GPA committee formally adopted a decision on the UK’s accession to the GPA in its own right at a meeting in Geneva on 27 February. At the moment we are members through our membership of the EU. The Government intend to deposit their instrument of accession by exit day in a no-deal scenario. Once we have deposited the instrument of accession, there will be a period of 30 days before it takes effect. We are exploring solutions to mitigate the impact of any short gap in the UK’s GPA participation. That is the responsible thing to do and it aims to minimise to the greatest extent any impact on business. In fact, the Government are expecting the short gap in participation to have a minimal impact on UK businesses. In many cases, UK suppliers will have similar rights under the domestic laws of the relevant jurisdiction.

I was asked about the BSI and our continued membership of CEN. CEN is a European institution rather than an EU one. I have a press release from the BSI which states that,

“following the decision taken in the general assemblies of both organizations, BSI will continue to be a full member of CEN and CENELEC regardless of the conditions under which the UK leaves the EU, including in the event that the UK leaves the EU without an agreement”.

I hope that gives the noble Baroness the assurance she seeks.

[Baroness Hayter of Kentish Town]

My Lords, on CEN and CENELEC, I think the one that dealt with this was the standards one. If it is a different one, perhaps the noble Lord would care to write to me. I refer to the European Committee for Standardization as opposed to CEN and CENELEC, which deal with electrical safety. Some clarification by letter would be helpful.