Local Government: Ethical Procurement

Clive Betts Excerpts

Tuesday 15th March 2016 Westminster Hall

[Mr Clive Betts (Sheffield South East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate my hon. Friend the Member for Birmingham, Northfield (Richard Burden) on securing this debate. I want to put on the record something that will appear in the Register of Members’ Financial Interests when it next comes out. I recently visited the west bank and Jerusalem, the trip being sponsored by the UK branch of Fatah.

I want to emphasise some of the questions my hon. Friend asked. Does the guidance on pension investments and procurement change the law in any way? Does it in any way fetter local authorities’ decisions on best value in procurement? That is not simply about cheapness. We are not going back to the compulsory competitive tendering days. The last Labour Government brought in best value, which takes account of social and environmental matters, as the Government have confirmed. Does it in any way fetter the discretion of pension trustees to exercise their fiduciary duties, which go far wider than the narrow responsibility for public sector pensions? Will the Government confirm that the guidance for private businesses on their engagement with the settlements, on goods from the settlements, and on trade with the settlements, applies to public bodies as well? Can we have clarity on that?

During the 1980s, some local authorities sought to sever links with firms that traded with South Africa. I think local authorities were right then and I think there is a lot of shame on the Conservative Benches about the action that the then Conservative Government took in defence of the apartheid regime.

There is a story about what happened. Shell took Leicester city council to court because it said that by refusing to allow it to compete for a tender, the council was losing out on a potentially cheaper contract. Shell won in court. Sheffield city council decided not to put Shell on the tender list for a contract because of its dealings with South Africa and justified that because it had wider responsibilities for good race relations and to take account of the views of its citizens. Shell did not take Sheffield city council to court because it was recognised that it had behaved legally in taking those views into account.

The Secretary of State has said that the actions of councils have caused community division. The Minister must say precisely what examples he has of that division. The Government have a responsibility not just for race relations but, under the Equality Act 2010, for equality impact assessments and public sector equality. The Act requires public authorities to have regard to a number of equality considerations affecting race, and also religion.

The House of Commons Library has produced a good note, which says:

“A Minister must assess the risk and extent of any adverse impact and the ways in which such risk may be eliminated before the adoption of a proposed policy and not merely as a ‘rearguard action’”.

Have the Government done that? Where is the equality impact assessment? Do local authorities not have a duty to have regard to the effect on equality in their area in terms of both race and religion when considering whether to buy goods from the illegal Israeli settlements? Can the Minister explain what he thinks the effect will be on race relations in my constituency, which has a large number of people of Muslim faith from a background of Pakistan, Bangladesh, Yemen, Somalia and Somaliland? What would be the impact on them if they saw their council tax being used to buy goods from the illegal Israeli settlements? How could that possibly be good for community relations? That is where the division is in this argument and the Minister must come clean about the Government’s objectives, how they assessed them and whether they think local authorities have the wider responsibility that I contend they have.

--- Later in debate ---

[Dr Offord]

Those Palestinian workers are paid on average three or four times more than they could earn elsewhere. About 500 Palestinians lost their jobs in October 2015, when international pressure from the BDS movement led to the closure of SodaStream’s factory in Ma’ale Adumim. That demonstrates that the BDS movement only seeks to harm Israel, with little consideration of how its actions will affect the livelihood of Palestinians, even though Palestinians employed by Israeli companies enjoy substantially higher wages and improved living conditions than those employed elsewhere.

[Mr Betts]

Will the hon. Gentleman give way?

[Dr Offord]

No, I will not. Supporters of the movement claim to embrace the boycott tactic as a non-violent way to pressure Israel into negotiations. The campaign is clearly a biased effort to demonise Israel and place the entire onus for the conflict on one side—the Israelis.

--- Later in debate ---

[John Penrose]

The point is that although we are clear that the settlements themselves are absolutely illegal—I am happy to clarify the Government’s foreign policy—that does not necessarily mean that activities undertaken by firms that happen to be based there are themselves automatically illegal. A separate, case-by-case decision must be made about whether each potential supplier satisfies the rules. I will give more detail about that as I go, if I can.

We have flexibilities in our procurement rules. Some things are explicitly ruled out—

[Mr Betts]

Will the Minister give way?

[John Penrose]

I am running out of time. I will give way very briefly, and then I will have to make progress.

[Mr Betts]

We are back to the point about how to distinguish between one activity of an organisation and another when deciding whether to have a relationship with it. To go back to banks, for example, it was rightly decided not to have any dealings with Barclays back in the 1980s because of its particular link with South Africa. One could not distinguish between the money it lent to South African firms and the money that it lent to other firms. How then does the Minister distinguish between the activities of financial organisations now and their treatment of the settlements?

[John Penrose]

I am explaining how the law is, rather than how the hon. Gentleman might like it to be. As I said, we are clear that the settlements themselves are illegal, but a firm based or trading within one of those settlements may be operating in an entirely whiter-than-white, above-board fashion in how it treats its suppliers, staff and customers. Therefore, I suggest, one cannot assume that absolutely everything done in a particular place is implicitly wrong.

There are flexibilities in our procurement rules. Some things are explicitly ruled out. Discrimination is absolutely ruled out as a matter of law and policy. The problem with boycotts in public procurement is that they may often stray over the line from acceptable ethical procurement within the rules that I have described to become an act of discrimination. The principles of non-discrimination and equal treatment underpin the UK’s whole approach to public procurement policy—we have heard examples of that from other speeches already—and are mandatory under UK, EU and World Trade Organisation procurement rules.

Moreover, public policy that includes decisions on whether to impose Government sanctions on other countries is a matter reserved for central Government. We are devolving a great deal down to local government and other Parliaments within the UK, but foreign policy, particularly sanctions against other countries, is a matter still reserved for central Government. It is therefore the Government’s position that discriminating against any supplier based on geographic location is unacceptable unless formal, legal sanctions, embargoes or restrictions have been put in place by the UK Government here.

Despite those long-standing rules, we have been concerned to learn that some authorities have decided to impose local-level procurement boycotts, which is why on 17 February, as we have heard, the Government published guidance to remind authorities of their obligations in that respect. I hasten to add that it is not an Israel-specific policy, nor is it focused on the Israeli settlements, in line with the initial remarks of the hon. Member for Birmingham, Northfield. It is general guidance about procurement principles, so it does not address directly or in detail any questions about procuring from Israel or the illegal settlements. The Minister for the Cabinet Office highlighted the guidance when visiting some technology companies during his trip to Israel to reassure them that the UK Government marketplace is open to overseas bidders, despite what they might have read elsewhere.

Of course, the WTO Government procurement agreement has its limitations. It applies only to countries that have signed up to it. Israel is a party to it, so it clearly applies to Israeli suppliers, whereas the Government do not recognise the illegal settlements as part of Israel.