Public Procurement Processes

Wednesday 25th January 2023 Westminster Hall

09:30

[Mick Whitley (Birkenhead) (Lab)]

I beg to move,

That this House has considered reform of public procurement processes.

It is a great privilege to serve under your chairmanship, Ms McVey, and I am grateful to Members for participating in this important debate.

The House is considering the Procurement Bill, and I stress that I and my party fully appreciate the need for legislation on the issue. That is why Labour did not oppose the passage of the Government’s Bill on Second Reading. Indeed, I had entertained the hope that the sentiment expressed in the Green Paper that preceded the Bill that social value

“is critical to ensuring the social, economic and environmental benefits are delivered”

would find a place in the Bill itself.

I do not believe that addressing the needs of our communities across the country by embedding a requirement for a measure of social value to be integral to every contract awarded is either unreasonable or beyond our powers. After all, we are talking about public contracts that account for £1 in every £3 of taxpayers’ money spent, totalling £300 billion of public funds every year. That spending should bring direct benefits to the people of this country, not primarily to the corporations that win most contracts, and still less to those in tax havens who utilise loopholes in the law to siphon taxpayers’ money into offshore accounts. However, the Bill does not match the scale or scope of reform to public procurement procedures required to ensure that it addresses the needs of the British people following the UK’s exit from the EU. Nor does it provide guarantees that the danger of corruption will be permanently removed from the process of awarding contracts.

My objective in today’s debate is to highlight the Bill’s shortcomings and to propose ways in which we could achieve a change in legislation that resulted in a public procurement legislative framework that could radically improve our public services, boost our local economies and deliver real benefits and hope for the future to the people of so many of our left-behind towns, such as Birkenhead, the constituency I am privileged to represent. Moreover, through root-and-branch reform of the process, we could ensure that the strides we need to take towards our net zero target were quicker and longer.

Let me begin with an issue close to my heart. The Mersey ferries are an iconic and world-famous symbol of Merseyside. After years of transporting tourists and commuters alike across the river, they need renewing. The Mayor of the Liverpool city region, Steve Rotheram, won a grant for one to be replaced and the other refurbished. That is to be warmly welcomed, and I am as grateful as Steve was for the opportunity to retain and refresh such an important and historic transport system, but what happened next goes to the heart of the public procurement process. Unfortunately, it is not addressed by the Bill.

Birkenhead is a shipbuilding town and home to the world-famous Cammell Laird shipyard. In any rational world, it would make perfect sense to build and refurbish the ferries in the shipyard that sits on the river they will be sailing on. Sadly, neither the existing procurement rules nor those proposed in the Bill provide us with the means to ensure that such a rational decision is the one that gets made. The reason for that is simple: there is no provision for vital issues such as the impact on social value, the local economy and the supply chain to be taken into account in the awarding of contracts. Quite the reverse: under the Public Contracts Regulations 2015, the primary consideration in accepting a bid has to be

“getting the right supplier and best tender in accordance with sound commercial practice.”

That so-called sound commercial practice tied the hands of the Mayor of the Liverpool city region regarding the tendering process for the Mersey ferries. The Mayor, the trade unions, Cammell Laird and I, as the local MP, worked hard to find solutions, and eventually a joint venture was agreed between a Dutch shipbuilding firm and Cammell Laird, but under the existing rules the allocation of the work—the amount of work that could be awarded to each site—could not be agreed or decided by the Mayor, despite him being the contracting authority.

[Hywel Williams (Arfon) (PC)]

I am glad the hon. Gentleman is making that point about participation. The Senedd in Cardiff is introducing a Welsh procurement policy under the Social Partnership and Public Procurement (Wales) Bill, which is part of the agenda to involve trade unions and others when delivering public projects with certain objectives. I think he shares that aim, but does he share my concern that the Government’s recent attacks on trade unions and the right to strike could undermine that approach of introducing a broader range of people into the process of public procurement?

[Mick Whitley]

Public procurement is for all, not just the Government or privateers. This is all about social value.

The fact that a vital local employer in Birkenhead, a deprived constituency, was at the mercy of a Dutch company is a very good reason why the public procurement process needs to be reformed. Social value is not an empty phrase. Cammell Laird is the largest employer in my constituency. Birkenhead has an above-average number of benefit claimants, who struggle to survive, so work flowing into Cammell Laird is vital to turn despair and poverty into hope and prosperity, yet the opportunity to create such work was hindered by the legal restrictions surrounding the existing procurement process. That problem is not addressed by the Procurement Bill, because it excludes social value—a key measure of the overall value of any contract.

Value for money has come to mean the cheapest bid, not the best bid. As a result, Cammell Laird and the workers in my constituency suffered a blow. The bulk of the work of the ferries contracts goes through a Dutch company, which I have been told will be keeping its costs low and its profits high by outsourcing work on Mersey Ferries to Romania. That is a glaring example of how public money has not served the public good. I am pleased for the workers of Belfast and Devon that Harland & Wolff and BMT were included in a winning Team Resolute bid, but there is no guarantee of the amount of work they will get as a result of the contract.

[Kirsty Blackman (Aberdeen North) (SNP)]

On that point, is the hon. Gentleman concerned about the climate change impact—the carbon impact—of getting stuff and people from further away, the social issues that that causes, and the effect on the people who live locally?

[Mick Whitley]

The hon. Lady makes a good point, which I will cover a bit later.

Team Resolute is led by a Spanish ship company called Navantia, which is guaranteed to get at least 40% of the work, worth about £640 million. Ministers have confirmed that there is no limit on the jobs it can create in Spain. As for Navantia being part of a UK consortium, it is true that the bid includes Navantia UK, but here’s the rub: Navantia UK was created only in May last year as a subsidiary of the Spanish firm. It has no trading history, and its two directors live in Spain.

At the very heart of the problem lies the fact that a social value calculation is not included in the public procurement process. My call on the Government is simple: make it a compulsory component—make its inclusion in the consideration of all bids compulsory.

[Peter Dowd (Bootle) (Lab)]

Is my hon. Friend aware that in the other House, Members expressed concern that the Procurement Bill falls short of the Green Paper, in that there is no exact definition of key procurement principles, there are no specific requirements on climate objectives and, as he just said, there is no real emphasis on social value elements?

[Mick Whitley]

I thank my hon. Friend for that intervention; I am just about to cover that point.

Only by including a social value calculation can we ensure that every contract is transparent, and that its impact on local communities, job creation, the standard of jobs and the local economy is taken into account and plays a key part in shaping the final decision. Its absence from the Bill is even more surprising given the noise the Cabinet Office made in response to the consultation on the original Green Paper, “Transforming Public Procurement”. The Cabinet Office wrote last December that social value

“can play a big role in contributing to the Government’s levelling-up goals.”

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

Social value is not restricted to these shores. The hon. Gentleman will be aware that China has a very prescriptive regime, particularly in relation to people in Xinjiang province. In this country, Hikvision produces CCTV equipment for councils. Does he agree that the Government need to be much more careful about allowing such companies into the UK market?

[Mick Whitley]

Yes, I do agree with the right hon. Gentleman.

In December 2020, the Cabinet Office published a social value model that said there should be a requirement on Government Departments to evaluate social value when awarding contracts, and not, as previously, just to consider it. Yet when it came to publishing the Procurement Bill, there were no explicit references to social value, so Labour MPs and peers have raised it as something that should be integral to the Bill and the public procurement process.

Another problem with the Procurement Bill as it stands is that it contains no provisions to ensure that bad employers are prevented from winning contracts. Far too many bad employers exist and far too many of them profit from public procurement contracts. A decent Procurement Bill can address that with construction projects nationally and by legislating to tie local government contracts to a clear and fair employment charter of the kind that already exists in the Liverpool city region.

Contracting authorities should be obliged to build into every contract that involves even a penny of public money a cast-iron guarantee that fair employment practices and the right to trade union recognition will be respected. There are other aspects of public procurement, such as strict conditions regarding the need to meet our climate targets and helping to regenerate our country through a green industrial revolution, but I wish to finish on a very important principle that must be embedded into the reform of public procurement: a watertight mechanism to put an end to cronyism.

The Bill hands more powers to Ministers without any meaningful safeguards to ensure that decisions will not be determined by favouritism at best and cronyism at worst. This is not an abstract issue: it is, sadly, a real problem that has led to major scandals. While the country was rocked by the curse of covid, a VIP lane was opened to enrich friends of Conservative Ministers and donors to their party coffers. Taxpayers’ money was doled out without any proper scrutiny. As a result, orders of personal protective equipment were handed out to companies that had no track record of producing or providing medical equipment. More than half the £1.7 billion paid by the Government to politically connected VIP companies to supply PPE in the pandemic was spent on equipment that has not been used, according to new figures.

[Tim Farron (Westmorland and Lonsdale) (LD)]

The hon. Member is making a really important speech. He talked about NHS procurement, and social value must surely include saving lives. I chair the all-party parliamentary group for radiotherapy and last week we met oncologists, radiotherapists and cancer-centre managers. They say that one reason why we are not saving as many cancer patients’ lives as equivalent countries around the world is that we do not have a centralised procurement system for linear accelerators. As a result, we are 120 machines down on where we should be, and hundreds of machines are more than 10 years old. Does he agree that the Minister ought to consider central procurement, so that every part of the country has the up-to-date machinery to save lives through radiotherapy?

[Mick Whitley]

The hon. Gentleman makes a good point. The Government must be aware that the supply chains are too long. Instead of offshoring, they need to inshore.

Public money has been wasted on an industrial scale, and the ability of Ministers to throw taxpayers’ money away is now being codified in the Procurement Bill. Conservative peers voted down an amendment to ban the use of VIP lanes in the awarding of contracts. Together, my Labour colleagues and I will do our level best to change that and get the VIP lanes closed for good. The High Court has agreed with us and ruled the VIP lanes illegal.

[Peter Dowd]

I am sorry to interrupt my hon. Friend in mid flow. He has dealt with some specifics, but one of my concerns is that there does not appear to be any real assessment of how the measures in the Procurement Bill will fulfil its principles. For example, the Government want to launch new measures to promote jobs and new skills, but how many, and what sort of skills? They want to encourage economic prosperity and growth—God knows, we need it—but there is no indication of how. They want to tackle climate change and level up, but there are no indicators and no metrics at all to assess that. Does he agree that we need not just words but facts and assessment to back this up?

[Mick Whitley]

Yes, and the Minister should address that question in his response.

In summary, we cannot continue with a system under which one in six procurement contracts over a five-year period was found by the Fair Tax Foundation to have been awarded to companies with connections to tax havens. We cannot continue with VIP lanes. We need a system that is accountable and transparent and made watertight against cronyism; that places social value, local economies and fair employment practices at its heart; that enables the Government to recoup money from those who fail to deliver; that gives real opportunity to small, medium and social enterprises to win; and that recognises that outsourcing has been a complete failure and the time for a return to insourcing is overdue. Without extensive amendment, the Procurement Bill does none of those things.

[Esther McVey (in the Chair)]

I remind Members that they should bob if they wish to be called to speak. We will go to the Front Benchers no later than 10.33 am, mindful of the fact that Mick Whitley will need time to wind up the debate.

09:45

[Jon Trickett (Hemsworth) (Lab)]

I am pleased to speak under your chairpersonship, Ms McVey.

I congratulate my hon. Friend the Member for Birkenhead (Mick Whitley), who has made a great contribution to the debate. I agree with him that the procurement of services and goods during the pandemic was a disgrace. It is hard to avoid the word “racketeering” when we consider what happened. There was a time when suppliers would meet on the golf course—perhaps at the 19th hole, as they used to say—to rig the prices for providing services to local councils, and there was debate about whether that took place in freemasons’ lodges and elsewhere; now, it seems that they just pick up the phone to a Tory Minister or MP and it gives them access to the VIP lane.

One pound in every £3 of public spending goes on procurement, and possibly more. It is around £300 billion, which is an astonishing amount of money. The OECD, the European Commission and the United Nations have all said that procurement carries the biggest risk of corruption or fraud in modern states. Of the £12 billion that was spent on PPE, £4 billion was spent on contracts that failed to meet the NHS standards—a third was spent on supplies that were not fit for purpose. Some £10.5 billion-worth of contracts was awarded without any fair or open competition in a seven-month period at the height of the pandemic. We understand that there was a national crisis and huge pressure on the NHS, but notwithstanding that, something went badly wrong; everybody must agree with that.

[Peter Dowd]

It is interesting that a Government publication said:

“Value to the taxpayer should lie at the heart of our procurement decisions.”

Does my hon. Friend believe that there was value for the taxpayer in that particular process?

[Jon Trickett]

My hon. Friend is absolutely right to ask that question. No convincing answer has been provided as to whether value for money was achieved. In fact, it is as plain as the nose on your face that there was no value for money, and I will come to that in a second.

In recent decades, there has been a presumption in favour of outsourcing. That was never the case before. Britain used to be proud of its public service and of the high standards of ethics in the civil service and in politics. It is hard to share that pride these days. The presumption in favour of outsourcing contracts and obtaining services from the private sector has gone through the leadership of all the political parties, and it is time it stopped.

There are seven separate reasons why one should be cautious about that presumption. I hasten to say, though, that there will always be a case for some procurement from the private sector—for instance, police motorbikes will not be nationalised in the immediate future, so one can see that there is a case there—but the presumption should end. Let me briefly refer to the seven issues that it is important to consider.

First, the Government Procurement Service is not as professional as it needs to be. It is possible to get a university degree these days in good procurement practice. That is a necessity to ensure value for money for every penny spent, but the service is under-resourced and not as professional as it needs to be. That is not to criticise the civil servants who do a difficult job in difficult circumstances, but they are in danger of being flooded by the provision of contracts.

I worked in the private sector, as a plumber in the building industry. We were monitored by the main developers to make sure that we provided value for money. Quite often, I confess, we would see whether we could get extras built in on top of the money in the original contract. It was for the quantity surveyors who worked for the developers and builders to make sure that we did not get away with anything. Can we honestly say that every single line in every contract is monitored in the same way as in the private sector? I do not think we can. The reason is because staff are under-resourced, and we are under-resourced because we are outsourcing as an ideological decision rather than anything else.

Here is my second point. More often than not, there is no public comparator. When I was the leader of Leeds City Council, I would ensure that if something was going out to the private sector, there would be a public sector bid made by the council, which would not have a slice on top for profitability. I would then see whether the private sector could compete with the public sector bid. That is one thing that might be done, but there are no public sector comparators under the present neoliberal economic settlement, which we regard with despair, to be honest. Therefore, there is no guarantee that a cartel or group of racketeers is not fixing prices between them to rip off the taxpayer. We cannot be clear about whether that is happening, although without a proper procurement service, I am sure that it is.

My third point is this. No evidence has been produced anywhere in the world that outsourcing is cheaper than insourcing. It has been looked at by the Public Accounts Committee and various bodies throughout the world. What is striking is that larger global companies are now insourcing. They were outsourcing, buying in accountancy and legal services and so on. That is stopping. Why are they insourcing? Because it is cheaper and more effective, and delivers better value for money. Yet here we are with a Government that seem hellbent on outsourcing, for ideological reasons rather than to protect the public purse.

My fourth point is that the private sector puts in prices, but the first thing it does when it wins the contract is to drive down the pay and conditions of the staff employed. Wherever one looks, that is the case. I have experience of that in my constituency. We had a service for cleaning a school a few years ago. The first thing the company did was to cut wages and try to get rid of some of the staff. The staff went on strike, which went on a long time, and the school was filthy. That contract was frankly a disgrace. We all know that that happens everywhere. We see wages falling as a share of GDP. What is the process behind that happening? There are a number of processes, but one is outsourcing, driving down wages in order to increase profits.

My fifth point is this. A service provided in the public sector is motivated by the single ethos of public service. It tries to provide a service to the public without a mind to delivering profits and dividends to shareholders. There are two contesting ethoses—if that is the correct plural—in play. One is serving and enhancing shareholder value as a private sector provider; the other is public service. Well, I know what I want for the staff who treat me, my family or my constituents. I want people who are motivated by one thing only: providing the highest possible quality service. That is what motivated people. The three women I just talked about, who were cleaners and went on strike, were treated in a really shabby way. Their greatest concern was the kids left in the school. The toilets were not being cleaned. They would talk to me regularly about their guilty consciences at being unable to provide the service. They were interested in only one thing: providing a service to those children.

[Kirsty Blackman]

On the point about wages, does the hon. Member share my concern that, although we have control of public sector wages, the Conservatives are not keen on negotiating fair pay settlements? That means that public sector wages are actually being reduced and done down, compared with where they should be.

[Jon Trickett]

I totally agree with the hon. Member. We are seeing a fragmentation of the labour market and the driving down of people’s incomes—particularly of manual workers and others—and I resent it, on behalf of those people. It is not right for the country; after all, if wages are in long-term decline, the economy itself will be in long-term decline as well.

My sixth and penultimate point is about pay and pay ratios. What happens in the public sector—although we would have to say, if we were living in a purely ethical economic environment, that certain public servants are probably paid more than they ought to be—is that pay ratios accelerate the minute a service is outsourced, to the point where we see people earning massive multiples of what the lowest paid in the same service receive. That is not congenial to providing a public-oriented service, which is what we would want to see. Pay ratios in the public sector are accountable through Parliament to the public in a way that they are not once they have been privatised. Indeed, once a service has been privatised—outsourced—it is no longer subject to all the constraints that the public sector has to operate under. Indeed, one further point to make is that if I want to understand why a public sector service in my constituency or the country is deteriorating, I can submit a freedom of information request or ask questions in Parliament. The minute that service has been privatised, we cannot do that, so it is not accountable.

My final point is about the impact on the local and national economy. If we do not control procurement in a proper way, we are unable to direct it to local providers of services in a way that we would expect to be able to do with taxpayers’ money. That has an impact, too, on the local economy.

For all those reasons, this is an important debate, and I am glad that it was raised by my hon. Friend the Member for Birkenhead. It is beyond the legislation that is before us. We need an ideological shift; we need a presumption in favour of the public sector, not the private sector, and I hope that I have contributed in a small way to making an argument for that.

09:58

[Jim Shannon (Strangford) (DUP)]

It is a real pleasure to serve under your chairmanship, Ms McVey. I thank the hon. Member for Birkenhead (Mick Whitley) for introducing the debate. I often come to support him in his debates in Westminster Hall, and I am here today to do the same, because he raises important issues and I want to add my support. It is also a pleasure to follow the contribution of the hon. Member for Hemsworth (Jon Trickett), which also was full of detailed evidence and content.

The hon. Member for Birkenhead referred to the Procurement Bill, which is currently going through Parliament. It applies to the devolved institutions, including Northern Ireland; however, we maintain our own legal framework for Northern Ireland, so that might give us a bit more input in the process as we go forward. It is no secret that I am a Brexiteer like yourself, Ms McVey, and I am proud to be a Brexiteer. I have always been positive about the opportunities provided to us by leaving the EU, notably our chance to secure British contracts with British companies to secure jobs for our people—for my constituents and the constituents of everybody here. It is great to be here to discuss how we can encourage that through the procurement process. I particularly look forward to the Minister’s response. I am fairly sure that we are on the same page. That being the case, I will ask my question only at the end of my contribution. I am keen to get the Minister’s response.

It is always important that we take the correct steps for our economy in terms of where we produce our products and where we procure them from. Some say that we have made mistakes in the past—it would be unfair to say that we have not, especially throughout the pandemic—but the principle behind the Bill gives us an opportunity to change that. A classic example from Northern Ireland, which I have referred to, goes back to March 2022, when leading UK bus manufacturer, Wrightbus, announced its second international zero-emission bus deal in a fortnight, under which it will ship dozens of clean buses to Europe. That is really good news.

Wrightbus has signed a deal with the German bus operator Regionalverkehr Köln GmbH, or RVK as it is better known—that is easier for me to say than to try and speak German—to supply up to up to 60 Kite Hydroliner single-decker buses over the next two years. All of those buses will be fully built at the Wrightbus factory in Ballymena, north Antrim, supporting green jobs and the wider Northern Ireland economy. While that is a welcome step, I can remember a time—of course, my lifetime is maybe a bit more than others—when London buses were ordered from Egypt, despite the UK containing the world-renowned manufacturer Wrightbus. I congratulate my hon. Friend the Member for North Antrim (Ian Paisley), and thank him for his energy and commitment in pursuing Wrightbus deals, not just in the United Kingdom but across the whole world. His pushing for that company as its MP has certainly paid dividends.

Thankfully, the procurement of London buses was brought home and the superior manufacturing that takes place in Ballymena is securing additional projects, but my point is that we need a legislative change to ensure that contracts within the UK are weighted, with procurement taking into account the impact on the local economy. While we have to remain competitive, every Government contract must consider our own manufacturers; we are indebted to them, and should be focusing on them, outsourcing only when there are exceptional reasons for doing so. That includes British companies that operate outside the United Kingdom.

In addition, I recall from a debate I spoke in some time ago that it had been highlighted by the House of Lords that the NHS sourced materials made by the forced labour of Christians, Tibetans, Uyghurs and Falun Gong practitioners in Xinjiang, China, and the Government took steps to deal with that. That has also become an issue in international procurement: making sure that the materials we rely on are not made or processed by those subject to human rights violations such as forced labour, child labour, unsafe working conditions or illegal wages. Those human rights violations have become increasingly apparent in the apparel sector—clothes, handbags, accessories and so on—where young children are being trafficked into child labour and forced to produce affordable clothes. Those clothes will attract millions of people internationally, but the price—the human rights price, the physical price, the emotional price—is just too high.

Our national procurement policy statement will ultimately ask public authorities to consider benefits for the public, such as the creation of new jobs, improving diversity, and ensuring integrity and value for money. I put great stress on integrity, and I think it is important that we focus on that as well. Many think that we must procure internationally to be successful and diverse; however, I suggest that there are numerous opportunities in our own back yard that we can take advantage of. We should be focusing on those and supporting them, not to the detriment of elsewhere in the world, but certainly to the advantage of our own manufacturers.

I have mentioned the importance of defence and cyber-security procurement for the United Kingdom. Contractors such as GKN Aerospace, or Thales in the constituency of my hon. Friend the Member for Belfast East (Gavin Robinson), have the capacity to build our own products to the highest standard, and should be made aware of more procurement opportunities.

[Peter Dowd]

One definition of contract monitoring is the process of tracking the performance and status of contracts, to ensure that the obligations within them are being fulfilled as intended; it is not just about the purchase of a contract, but the monitoring. Does the hon. Gentleman agree that in the current climate, given the massive cuts that local government has endured over the past 13 years, it is being denuded of its ability to monitor some of those contracts, and that that issue has to be addressed as well?

[Jim Shannon]

I thank the hon. Gentleman for his intervention, which was succinctly put. I am sure that the Minister is taking notes, and I hope that he will reply to his request.

It is right that we oversee and ensure that local government, wherever it may be, has the same opportunity and is not precluded by financial or other restrictions. In Northern Ireland, we are fortunate to have some of the best cyber-security companies in the whole of the United Kingdom. There are some in south-east England that perhaps might be able to match them, but we have been at the fore in cyber-security, and that includes the two companies that I referred to. Thales, for instance, is at the fore in supporting the NLAWs—next generation light anti-tank weapons—being provided to Ukraine. Again, our cyber-security is excellent. Does the Minister agree that Northern Ireland must be included in the Procurement Bill? Its inclusion will bring significant benefits for the country and Northern Ireland businesses, as well as our great Union, which we are here to protect and promote.

To conclude, many would say that it is time that the Bill is put into law so that we can repeal the current EU-based procurement regulations and make our own. It is time to do that. After the UK’s exit from the EU, we should have the scope to create new home-grown procedures, select suppliers and award contracts. That will also allow for the advancement of smaller businesses. My constituency has many small businesses; it has some large ones as well, but there are a larger number, percentage-wise, of smaller businesses. They are the backbone of my constituency of Strangford and of the economy. I look forward to learning about the opportunities for us to do all that we can to ensure that this great nation, the United Kingdom of Great Britain and Northern Ireland, progresses together in the way that it should.

10:06

[Kirsty Blackman (Aberdeen North) (SNP)]

Thank you for chairing this meeting so admirably this morning, Ms McVey. I congratulate the hon. Member for Birkenhead (Mick Whitley) on securing the debate. I also thank all those who have spoken for having such easy-to-pronounce constituency names. I very much appreciate that none of them is a mouthful; that has worked out very well for me this morning.

I want to talk about a number of things that we are concerned about in the Procurement Bill, and that we are concerned about more generally in how public procurement works. Public procurement is devolved in Scotland; we are able to set our own procurement rules and legislation. None the less, the Bill impacts Scotland. Also, while we are part of this place and while we are part of this United Kingdom, for however short a period of time that may be, we very much want to improve the situation and ensure the utmost levels of fairness and transparency in the public procurement regime, whether or not we continue to be involved in it.

[Hywel Williams]

Of course, Scotland can chart its own course on this matter. Does the hon. Lady share my surprise that the Welsh Government have consented to the UK Government’s legislating on their behalf?

[Kirsty Blackman]

I absolutely do. It is disappointing, especially given some of the excellent things that are happening in Wales, particularly around the work of the Future Generations Commissioner and how that is embedded in what the Welsh Government do. To hand that over to Westminster seems a real dereliction of duty, and I am concerned that that is the direction that has been chosen.

The biggest concern that we have about the Procurement Bill is its significant impact on Scotland in relation to devolution and the implementation of trade deals, including the Australia and New Zealand trade deals. We agree that trade deals are reserved. Obviously, we want to be independent, and we will be signing our own trade deals then, but while they are reserved, we agree that that is what the devolution settlement looks like. However, the implementation of trade deals in Scotland touches on devolved areas. We should be able to implement the procurement rules that come out of trade deals ourselves. The Procurement Bill will allow UK Ministers to implement, through secondary legislation, procurement practices in Scotland, as well as in the rest of the UK. That should be the responsibility of the Scottish Parliament and Scottish Ministers, and the UK Government should put that in the Bill rather than reserving that additional power.

[Peter Dowd]

Does the hon. Lady agree that the Bill is taking back control to Westminster, not to the places that actually need it?

[Kirsty Blackman]

I absolutely agree. It is a further power grab, just like the United Kingdom Internal Market Act 2020. We have an agreed settlement that was put to a referendum in the first place. We have the Scotland Act 1998, which gives the Scottish Parliament its powers. This is within those powers. It is our responsibility—a responsibility that our parliamentarians in Scotland were elected to carry out—and that the UK Government are trying to take that back means that people in Scotland are not getting what they voted for. They voted for politicians in order to direct this, but their politicians are unable to do so because the UK Parliament is trying to take back control.

Turning to the issues that have been raised today, I will touch first on the EU principles that have been written into the Procurement Bill, which concern transparency, equal treatment, non-discrimination and proportionality. We agree that we should remain as closely aligned with the EU as possible in this regard, and that keeping those principles is absolutely the right thing to do.

[Jon Trickett]

I wonder whether the hon. Lady agrees with those learned commentators who said that EU rules actually preclude the use of procurement to achieve social objectives, and that that was an argument for Brexit rather than for remaining in the European Union.

[Kirsty Blackman]

I think a number of other states have done procurement in a more flexible way even though they are in the European Union. It is not necessarily the case that the way the UK did procurement prior to Brexit is the only way to do procurement within the EU, as a number of states manage to do it very differently. We all have to work within the global procurement agreement. That is part of the World Trade Organisation, which sets rules that, similarly, the EU procurement rules abide by. I am not aware that anybody has suggested that we should step outside that global procurement framework; whether or not they support Brexit, people are still keen to remain part of that.

On transparency and the comments by the hon. Member for Hemsworth (Jon Trickett) about the kind of ideological shift that is required, I agree that this is ideology. We can do procurement in a number of different ways—we can focus on external companies in the private sector, or we can reframe that and focus on the public sector. We can think about the best way to do it. On the basis that they are trying their very best to defund it, I have concerns about the current UK Government’s willingness to use the public sector, which seems completely ideologically opposed to what they would be keen to achieve. However, I agree that we should go further in that direction, on the basis that we can better implement and embed fair working practices because we have much more control over the terms and conditions of people who are directly employed by local authorities or other public sector bodies and we can be more sure they are employed in a fair way.

The right hon. Member for Orkney and Shetland (Mr Carmichael) mentioned Hikvision, which is involved in the Chinese Government’s detention camps and what is happening with the Uyghur Muslims through its facial recognition technology. Some 61% of UK public authorities use Hikvision cameras. That is not a small number. In Scotland, we have committed to getting rid of Hikvision cameras and ending our work with Hikvision, and the US has blacklisted it. The UK Government still have not chosen to do that, so I would very much welcome a commitment from the Minister that they will look at Hikvision specifically and consider what actions they can take to ensure that they are not supporting a company that is committing human rights abuses. It seems to me that the Procurement Bill fails to take into account some of those abuses, despite pushes by the Lords to make that happen.

Again, climate change issues are not embedded in the Procurement Bill. It does not take into account the climate change targets in Scotland, for example. Every Government should be focused on the impact that every single thing that they do will have on the climate, and on future generations as a result of the climate change it will cause. The UK Government should be leading by example by having that thread running through everything thing they do, but they refuse to. There is no point in just talking about climate change; we need to make sure that we are focusing on it in every single thing that we do. The UK Government are failing to put actions in place; they are only using words.

I am aware that I am short on time, so let me briefly mention the Supplier Development Programme in Scotland, an amazing organisation that was set up to ensure that local companies are linked with public sector procurers. It works incredibly well, so I just wanted to plug it briefly. I thank the hon. Member for Birkenhead for bringing forward the debate, and I thank all those who have made contributions.

10:15

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Ms McVey. I pay tribute to my hon. Friend the Member for Birkenhead (Mick Whitley), who not only managed to sit through Second Reading of the Procurement Bill, but clearly came out thinking he wanted more. Who can blame him? He spoke passionately about the importance of the wider social and economic considerations. He also highlighted the need for procurement to help promote British businesses and invest in places such as his constituency.

I also thank other Members, who have spoken with a lot of knowledge on this issue. On the face of it, it can seem quite dry and clunky, but it is important, as all Members have highlighted. My hon. Friend the Member for Hemsworth (Jon Trickett) mentioned that almost £300 billion is spent on procurement, yet the OECD has highlighted concerns about fraud or corruption in many areas. It is important that we look at which companies are getting contracts and ensure that enough procurement officers are reviewing them. How about we insource instead of outsource, and work with local councils to get those contracts? I am pleased that many local authorities, including mine in Lambeth, are looking at insourcing.

It is always a pleasure to see the hon. Member for Strangford (Jim Shannon) in these debates. He spoke with a lot of passion about some of the things happening in Northern Ireland. As a former London Assembly member and chair of its transport committee, I know that Wrightbus is doing fantastic work to produce buses that are going up and down London. Last year, the Mayor of London went to County Antrim to visit the Wrightbus depot and look at more buses coming on to London streets. That is why it is important to invest in local UK businesses that help the whole of the UK.

The hon. Member for Aberdeen North (Kirsty Blackman) highlighted the glaring omission that we are seeing from this Government. Climate change must be front and centre of everything that we do. Yesterday, my hon. Friend the Member for Hemsworth and I had the honour of meeting some fantastic young people who had come to see my hon. Friend the Member for Nottingham East (Nadia Whittome) about the Climate Education Bill. It is so important that we teach our young people, who are so passionate about the climate emergency, yet we are seeing an omission here.

[Hywel Williams]

The hon. Lady will recall that I mentioned the Social Partnership and Public Procurement (Wales) Bill, which is focused on achieving some socially responsible outcomes. Does she share my concern that the aims of that Bill might be in conflict with the Government’s current legislation, which is—as far as I can see—much more concerned with process?

[Florence Eshalomi]

I thank the hon. Gentleman for raising that important point. As my hon. Friend the Member for Bootle (Peter Dowd) highlighted, key issues were raised in the other place that now seem to have disappeared from the Bill. That is one of those many areas, and I will come on to it later.

We have heard that procurement makes up around a third of public spending. If it is done right, procurement can have such a transformative impact on our whole economy. My hon. Friend the Member for Birkenhead highlighted that social value should not just be an empty phrase. Social Enterprise UK found that between 2010 and 2020, the UK may have missed out on £700 billion-worth of economic, social and environmental opportunities. We are missing out on so much. That is a staggering amount of money. It is crucial that we address some of the problems in the Procurement Bill as it passes through the House.

As I mentioned on Second Reading, Labour supports the introduction of the Bill and recognises the genuine steps forward that it takes. That is why we want to work constructively with the Government to produce a Bill that is fit not just for today, but for the next Government and the Government after that. The Minister has heard my concerns about the Bill a number of times—we have sat through urgent questions and Second Reading—and we will be spending the new few weeks in Committee, which I am sure he is looking forward to, but I want to raise some of the problems that we see with it. I hope that he will think carefully before tomorrow’s deadline for tabling amendments and look at how he can make genuine improvements to the Bill. I am sure that he has had the chance to look at the amendment paper and that none of our concerns are novel to him, so I hope that he will be able to provide full and frank answers to the House on the issues that I raise.

First, I have deep concerns about the workings of the excluded, excludable and debarment systems in the Bill. My hon. Friend the Member for Hemsworth highlighted the practice of companies winning contracts and then doing down staff wages. The right hon. Member for Orkney and Shetland (Mr Carmichael) highlighted the CCTV cameras that councils are sourcing from Hikvision and the fact that we should be worried about some of the companies we are seeking contracts for. Labour is clear that we do not want to see those who act improperly, who abuse their workers or who are a threat to this country being awarded public contracts.

We therefore welcome the purpose of the powers in the Bill, but we can see loopholes in the system, which must be closed while the Bill is before the House. It is concerning that references to excludable contracts seem to give the contracting authorities discretion about whether to disregard a tender. Can the Minister please explain why excludable suppliers are not automatically disregarded in the same way as excluded suppliers?

While I understand that there may be some need for flexibility on discretion grounds, there is no mechanism in the Bill to decide where that flexibility should stand. That is extremely troubling given that grounds as serious as national security can be discretionary—that is outrageous. Can the Minister assure us that companies that are considered national threats will be excluded from contracts under the Bill? Will he ensure that contracting authorities will never be able to bypass this judgment and not disregard such suppliers during the process?

A similar problem exists with the debarment list. In his letter to Baroness Neville-Rolfe on 4 August, the Minister in the other place, Lord True, wrote that

“the debarment list is intended to focus on the most serious cases of supplier misconduct, where suppliers may pose a significant risk to contracting authorities or the public. It is not the case that every supplier which meets a ground for exclusion will be considered for inclusion on the debarment list. Rather, there will be a prioritisation policy which governs how cases are selected for investigation. It is likely that only a small number of cases will be considered each year.”

However, the Bill outlines no such qualification for ascension to the debarment list. As it is currently drafted, the only firm qualifications beyond the Minister’s wishes are mandatory and discretionary grounds for exclusion. Given the merry-go-round of Ministers we have seen over the past year, does the Minister not believe that it is right to put a mechanism in the Bill to provide clarity about the scope of the debarment list?

Will the Minister confirm that the Government’s intention for the debarment list is as Lord True laid out in his letter to Baroness Neville-Rolfe? If only the most serious cases of misconduct go on the debarment list, how can it be fair that those put on the list for discretionary reasons are still treated as excludable suppliers? If the Minister believes that a supplier poses a significant risk to the public, that supplier must be disregarded automatically from the process as an excluded supplier.

I have a further concern about the 30-day payment period down the supply chain. On Second Reading, the Paymaster General said that

“we will be paying the prime contractor within the 30-day period. People in the supply chain will be aware of the contract under which they are supplying to the prime, and we expect that 30-day payment to trickle all the way down”.—[Official Report, 9 January 2023; Vol. 725, c. 347.]

Many small and medium-sized enterprises in all our constituencies rely on prompt payment to keep afloat; they cannot rely on expectations of a trickle-down effect. The Minister may say that it will call into doubt the contract of the prime supplier, but how long will this take?

[Jon Trickett]

My hon. Friend is making a strong speech, although I wish her good luck if she is trying to persuade this ideologically driven Government to change their course. She may recall that three Prime Ministers ago—not so long ago in weeks or months, but some time ago in politics—the then Prime Minister advocated Brexit on two grounds: state aid to industry and procurement. Does my hon. Friend think the Government’s procurement policies are doing anything to level up the country socially, economically or otherwise?

[Florence Eshalomi]

I thank my hon. Friend for highlighting that. I think again of the example of Scotland, where procurement issues are being decided at the whim of Ministers. If anything, that is not levelling up; it is levelling down. We need a Procurement Bill that highlights and recognises small and medium-sized businesses, which often do fantastic work, ensure that their staff have good terms and conditions, and recognise trade unions. They should be given a fair chance at bidding for Government contracts paid for by public money, as my hon. Friend highlighted earlier.

Given how long colleagues on both sides of the House have to wait for responses from the Government, what steps will the Minister take to ensure that instances of late payment reported to the Government are dealt with promptly? In many cases, that could be the difference for an SME that stops it going under and having to hand redundancy notices to its staff. Does the Minister agree that putting strong enforcement down the supply chain in the Bill is the best way to guarantee that no supplier goes without the vital funds that it needs?

The Minister has heard many concerns this morning and I hope he will respond to all our pressing questions. Of course, I will be picking up many of these issues again in Committee.

10:27

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

It is a pleasure to serve under your chairwomanship for the first time, Ms McVey.

I congratulate the hon. Member for Birkenhead (Mick Whitley) on securing the debate. As the Opposition spokesperson, the hon. Member for Vauxhall (Florence Eshalomi), has already said, it is nice to have the opportunity to debate the issues with the hon. Gentleman again. I am looking forward to the next three weeks in Committee, discussing the Procurement Bill with colleagues from all parties, and to the Report stage that will follow. It is right that we debate these issues thoroughly. The Bill is a landmark piece of legislation that the Government believe will bring real benefits to public authorities, public services and ultimately to the taxpayer. These are things to celebrate.

The hon. Member for Birkenhead’s constituents voted, like mine, to leave the European Union in 2016, and the Bill is one of the landmark pieces of legislation that enables us to take advantage of freedoms that we simply did not have when we were in the EU. The response to the public consultation on the Bill showed the strength of feeling among public authorities and suppliers for change. I am pleased to say that we have developed a sophisticated piece of legislation that is rising up to meet the asks of us made by those who responded to the consultation.

We have about £300 billion of public procurement in this country. That represents a huge amount of taxpayers’ money—public money—that we think can be spent better for people at all levels. We see a chance to reduce paperwork, streamline processes, improve opportunities for SMEs, which I know is close to the hon. Member for Birkenhead’s heart and is close to mine because it is the backbone of the economy in my part of the world, and to introduce new ways of viewing procurement.

As Members will have heard me say on Second Reading, it is a shift from MEAT to MAT—from the most economically advantageous tender to the most advantageous tender. That gives public authorities a freer hand to make an assessment about whether procurement decisions will create jobs in their area, benefit the environment or create any other forms of social good that are not purely economically measured. We think this is a major step forward, and I hope he agrees.

I am afraid I cannot speak in detail about the ferry contract in the hon. Gentleman’s area, but the work we are doing on the Procurement Bill is intended to make it easier for procuring authorities to make decisions that are not based purely on money. It will enable them to look at local need and things such as jobs.

Shipbuilding is covered by our World Trade Organisation commitments, so we would struggle to confine shipbuilding contracts to British-only suppliers unless we left the WTO. That would, of course, deprive British companies of the opportunity to take advantage of the procurement agreements within that framework, which are worth about £1.2 trillion. I cannot comment on the exact specifics of the hon. Gentleman’s case in Merseyside, but there are limits to what we can do within the WTO.

[Mick Whitley]

I think it was three Prime Ministers ago when the Prime Minister came to Birkenhead and announced the 50-year plan for shipping. The Ministry of Defence awarded a contract to build fleet supply boats, and colleagues from Northern Ireland and Devon won it, but as soon as they did that there was a debate in the House about what kind of company Navantia was. It was registered in the UK earlier this year and its two directors come from Spain, and the majority of the work on the fleet supply boats will get done in Cadiz. That is public money; that is what we are talking about. We are talking about levelling up the left-behind towns, but that has been totally ignored.

[Alex Burghart]

If the hon. Gentleman is talking about fleet solid support ships, they are built to a British design. There is a huge amount of construction in Belfast and Appledore—the final assembly is completed in Belfast—bringing shipbuilding back to Northern Ireland. This is an enormous opportunity for levelling up and bringing jobs into exactly the sort of shipyards around the country that I am sure the hon. Gentleman wants to see benefit, so I do not quite recognise all the allegations he has made.

[Peter Dowd]

Will the Minister give way?

[Alex Burghart]

I am happy to give way to my old adversary from Bootle.

[Peter Dowd]

One of the issues that I am trying to tease out is that even when we were in the European Union—I know this, the Minister knows this, and so does everybody in this Chamber—those countries had an imaginative approach to public procurement, and we did not. Even under those rules, we had a less imaginative approach. Even under the provisions that the Government are bringing forward, they cannot move away from the anal retention and enable us to take a much more imaginative approach to procurement. What in the Bill is more imaginative and will enable us to do what we want and we were promised when we were coming out of Europe?

[Alex Burghart]

I blush to quote the hon. Gentleman back at him, but there is a lot less of the form of retention that he describes in this Bill than he would have found in the existing European rules. As he heard me say to the hon. Member for Birkenhead, the system is moving from MEAT to MAT. This is a broader understanding of what public authorities can choose to do when they procure goods and services, and that is a really good thing.

The hon. Members for Bootle (Peter Dowd) and for Birkenhead talked about buying British. This Bill will help, but we start from a strong position: between 2016 and 2019, 98% of contracts given out by public authorities in the UK went to British firms. In the Bill, we are making it easier for small and medium-sized enterprises, the majority of which are likely to be in the vicinity of public body procuring, to access contracts from public authorities. We are making it much more likely that there will be more jobs and more opportunities for growing businesses. That is very exciting and one of the most appealing things about the Bill. My noble Friend Baroness Neville-Rolfe wrote a good piece for The Times showing how we are removing barriers to engagement for SMEs in a meaningful way. She has vast experience in business and was able to shine a light on that.

Let me turn to the hon. Member for Hemsworth (Jon Trickett), who talked about insourcing and outsourcing, and the need for an ideological shift. I hope he will not mind me reminding the House that he entered the Commons in 1996 and supported one of the great outsourcing Governments—that of Tony Blair and Gordon Brown. It is so interesting to see the hon. Gentleman’s ideological shift since that time.

I gently remind the hon. Gentleman that public authorities absolutely have the freedom to insource if they think that is the best thing to do. The important thing is that they have the choice, and I hope he would not want to deprive local authorities and local councils of that choice. Maybe he would.

[Florence Eshalomi]

On that particular point, does the Minister recognise the issue highlighted by my hon. Friend the Member for Hemsworth (Jon Trickett), which is that a number of our local councils and public bodies have seen their funding cut over the past 13 years? The procurement teams that would be looking at bringing contracts back in house have shrunk, and a number of councils face difficult decisions—do they fund social workers or fund procurement officers? It is not as simple as saying councils have the freedom to insource.

[Alex Burghart]

I hesitate to remind the hon. Lady why funding for local authorities was reduced, but it had something to do with the behaviour of the Labour Government up to 2010. We all remember the letter that Labour’s Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), left for his Lib Dem successor.

The fact of the matter is that we have highly capable local authorities across the country that manage public contracts very well and which have worked with us in the construction of the Bill to ensure they have a legal framework that helps them make the decisions they want. I have no desire at all to talk them down. I have seen their capabilities up close, and I know that they are looking forward to taking advantage of the powers they will get from the Bill.

I would also very, very gently say this to the hon. Member for Hemsworth. I know that this is political knockabout, but the statements he made about PPE procurement could have been taken to insinuate that Ministers made the awarding decisions. That is absolutely not the case. Those decisions—

[Jon Trickett]

Says you.

[Alex Burghart]

The hon. Gentleman heckles me with a smile on his face, but the fact is that those decisions were made by highly capable and competent civil servants whose decisions have been upheld in court. It is wrong to suggest that they were in any way corrupt when they were trying to serve the country at a time of utter crisis in order to get, as every Member of the House wanted, as much PPE as possible when the NHS needed it most. I have listened on a number of occasions to Opposition Members speaking in such a way that suggests that Ministers handed out the contracts. That is not the case, and it would be much better for the public discourse if Opposition Members did not suggest to members of the public that that had been so.

Let me move on to the remarks made by the hon. Member for Strangford (Jim Shannon). It has been a pleasure to be able to work on the Bill with people in Northern Ireland, and the Bill is stronger as a result. We look forward to businesses of all sizes in England and Northern Ireland, and in Wales, benefiting from the new procurement legislation.

The hon. Member for Arfon (Hywel Williams) chastised the Welsh Government for allowing Westminster to legislate for them. Me and my officials have had the most productive working with the Welsh Government and these mischaracterisations imply that this is Westminster telling Wales what to do. This has been a partnership between Westminster and Cardiff and between Westminster and Belfast. It is a wonderful example of nations working together.

[Hywel Williams]

The Minister will know better than I that the Welsh Government are yet to recommend that the Senedd grants consent to the Procurement Bill due to two outstanding issues. The first is the presence of concurrent, rather than concurrent-plus powers. Concurrent- plus powers mean that both legislatures give their consent. The second is the lack of commencement powers for Welsh Ministers. Will the Minister give me an update on any progress on those two points?

[Alex Burghart]

The hon. Gentleman will get a final answer in Committee, but I can tell him that we have had nothing but productive and courteous conversations with our counterparts. I believe that we are going to end up in a mutually beneficial place, which is great news for people in Wales, England and Northern Ireland. The hon. Gentleman can join us in Committee if he wishes to hear the final read out on that. I look forward to seeing him there.

The hon. Member for Strangford is right: Northern Ireland must be included in these important opportunities. We are sad that our colleagues in Scotland have, unlike counterparts in Wales and Northern Ireland, not chosen to be part of the Procurement Bill. They are entitled to make that decision, but it is a shame. It adds a layer of complexity within the British Isles that need not be there, but c’est la vie.

The hon. Member for Aberdeen North (Kirsty Blackman) asked about trade deals and implementation. Trade deals are a reserved area. It is important that they are able to be implemented because otherwise we might find that the UK was in breach of an international agreement and that would be wrong. Yesterday, we made an amendment following discussions with the Scottish Government to narrow powers in this area and we will continue to work closely with them on implementation and, likewise, I look forward to discussing it with her in Committee; I do believe it will be her in Committee.

[Kirsty Blackman]

It will indeed.

[Alex Burghart]

Hooray.

[Kirsty Blackman]

I thank the Minister. I have not seen that amendment, so I will have a good look at it. I appreciate that he has taken some action.

[Alex Burghart]

Super. I look forward to debating that further in the weeks ahead.

The Opposition spokesperson, the hon. Member for Vauxhall, rightly highlighted that debarment is a crucial area of the Bill. In the past few days, we have tabled new amendments on debarment, which strengthen the regime. I am not going to go into all the details now because there is ample opportunity in the days ahead, but she is right to draw attention to it. On subcontractors and 30-day payments, there are implied payment terms within the Bill. Even if it is not a subcontract, the SME can demand this and raise it. Again, we could go into further details, but we have thought through the point she raised.

In conclusion, this is a great opportunity. We have come a long way from the starting point that we found ourselves in when we were in the EU. We are starting to make British procurement rules that will benefit British taxpayers, British employees, British public authorities and British suppliers. That is a good thing for all of us.

[Esther McVey (in the Chair)]

I call Mick Whitley to wind up.

10:44

[Mick Whitley]

Thank you, Ms McVey. I thank Members for their thoughtful and varied contributions. I let the Minister know that I will soon be joining colleagues to scrutinise the Procurement Bill in Committee. Today’s discussions have given me much to reflect on.

I am particularly grateful to the shadow Minister, my hon. Friend the Member for Vauxhall (Florence Eshalomi), for the passion and clarity with which she spoke today. I have already paid tribute to Labour peers and friends in the House for their hard work in fighting to amend the Bill for the better. It is welcome to hear the shadow Minister restate our party’s commitment to ensure that public money is put back into the pockets of working people and communities, such as Birkenhead, through our five-point national procurement plan.

I thank the Minister for attending and hope he recognises what has been said here today. In the short time available to us, my hon. Friends and I have attempted to highlight the real-world implications of the decisions being made in this place. I hope that the Government will seek to work constructively with colleagues from across the House in building a progressive procurement regime that helps to lay the foundations of a fairer, greener and more prosperous Britain.

Question put and agreed to.

Resolved,

That this House has considered reform of public procurement processes.

10:46

Sitting suspended.