Public Procurement (British Goods and Services) Bill
Friday 15th March 2024
(8 months, 1 week ago)
Commons ChamberRead Full debate Public Procurement (British Goods and Services) Bill 2023-24 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Sarah Champion (Rotherham) (Lab)
I beg to move, That the Bill be now read a Second time.
I am delighted to bring this important but focused Bill to the House. It would make minor amendments to both the Public Services (Social Value) Act 2012 and the Procurement Act 2023 to encourage greater uptake of British products in UK Government contracts.
The Bill aims to increase transparency and raise the importance of the origin of goods and services, animal welfare standards and environmental impact, and the standard of employment in procurement decisions. It achieves this by requiring the contracting body to publish its data, demonstrating how these areas are met in the contracts awarded. In 2014, my ten-minute rule Bill on publishing the gender pay gap for organisations employing more than 250 staff made a similar obligation. First blocked, then adopted by the Government, it has revolutionised transparency and equality within those businesses. I hope that the Government will be similarly pragmatic when it comes to this Bill and give it a safe passage.
Every year, the UK Government spend more than £300 billion on public procurement, which accounts for almost a third of all public expenditure. However, despite this huge figure, the Spend Network’s analysis found that big corporations win 90% of the contracts that are deemed suitable for small and medium-sized businesses. As a result, SMEs are missing out on around £30 billion-worth of public contracts annually. That is £30 billion that could be going to British businesses.
SMEs are the beating heart of our economy, accounting for 99% of businesses in the UK and 61% of employment, which equates to 16.7 million jobs. It is therefore shocking that they are consistently missing out on so many suitable public procurement contracts. In addition, a worrying number of contracts are awarded to foreign suppliers. Research from Tussell found that in 2020 alone the public sector spent £18 billion with overseas suppliers rather than supporting their UK counterparts.
The Public Accounts Committee’s report, “Competition in public procurement” published in December, concluded that the Government
“has not demonstrated that it has consistently used its purchasing power to support local and national policies and objectives, or to drive healthy and competitive markets, including buying from SMEs.”
It also found that the Government have
“not been fully capturing data on procurement, much less using analytics from collected data to draw insights on how competition in public procurement is operating within government and give context to purchasing decisions.”
That has to change, and my Bill can do that.
In its report “Public Sector Procurement of Food” from April 2021, the Environment, Food and Rural Affairs Committee rightly stated that public procurement
“has the potential to create significant business and growth opportunities through increased participation for small and medium-sized enterprises”—
as well as—
“improving the public sector’s access to SMEs’ creativity and innovation”.
However, crucially, it noted that SMEs have long faced difficulties in accessing public procurement opportunities.
The Minister of State, Cabinet Office (Mr Steve Baker)
The hon. Lady makes a very good case, and I think she knows that the Government have quite a lot of common ground with her policy intent. She may know that officials in the Cabinet Office are preparing for a new national procurement policy statement to set out the Government’s strategic priorities. May I offer her and her task group, as well as my hon. Friend the Member for Colchester (Will Quince), in relation to food, an opportunity to meet officials and, if necessary, the Minister? I would be very grateful if she took up that opportunity, because we would like her expertise and that of the group. As we have only recently legislated, it is difficult for the Government to support her Bill, so I hope she will take up the offer of that meeting.
Sarah Champion
The Minister, as ever, is trying to find a solution which benefits us both—that is what I am trying to do with the Bill—so I absolutely take up his offer and thank him for it. I will talk more about the working group at the end, but I have brought together a group of industry professionals. We all want to see British businesses getting a fair slice of the £300 billion pie, because we want our businesses to flourish, so I thank him for that offer. I have one more Select Committee report, this time from the Defence Committee in July 2023, which simply stated that the UK defence procurement system is
“broke—and it’s time to fix it”.
I welcome the Minister’s offer.
To tackle these long-recognised issues within the UK Government procurement system, my Bill aims to: back British businesses for public contracts; champion the UK’s world-class manufacturing and food production; increase the visibility of British food procured by the public sector; encourage investment and jobs created in towns and cities across the country; improve transparency around contracts awarded to small and medium-sized enterprises; and, just as importantly, recognise and reward good employment practices.
Let me give some context to demonstrate the need, right now, for the Bill. The UK is in a recession and has experienced years of stagnant economic growth. The number of companies going bust in 2023 hit a 30-year high. More than 25,000 UK company insolvencies were registered last year. Those figures show that one in 186 active firms went bust in 2023. That grim economic outlook is compounded by the fact that many SMEs feel shut out of the public procurement system. Taxpayers’ money is being spent with big multinationals and foreign suppliers, when as much as possible it should be spent on supporting British businesses and jobs, as other countries do with their own industries.
The Government have long argued that the EU had rules preventing them from prioritising British businesses. Many saw Brexit as an opportunity for more taxpayers’ money to be spent with British suppliers. We were told that British businesses would be first in the queue for UK Government contracts once we left the EU. The 2019 Conservative party manifesto even stated, with regard to food procurement:
“When we leave the EU, we will be able to encourage the public sector to ‘Buy British’ to support our farmers and reduce environmental costs.”
This has simply not happened. Now is high time for some of the benefits voters were promised from Brexit to come to pass. My Bill, if the Government accept it, would deliver more contracts to British businesses.
This is not a new issue. Since my election in 2012, I have been continuously highlighting how the UK Government need to do more to support British steelmakers through public procurement. The UK steel industry employs almost 40,000 people directly, with another 50,000 jobs supported through the supply chain. It also directly contributes £2.9 billion to the UK economy and adds £3.8 billion indirectly through supply chains. My constituency of Rotherham is a hub for steel production. We are incredibly proud of that heritage. Liberty Steel employs 900 people locally and supports the employment of many more workers throughout the steel chain. We make unique, speciality green steel much valued around the world, especially in aerospace. Despite this expertise and the high-quality steel that Liberty and other steelmakers produce, our steel industry still needs Government support. Let me be clear that I am not talking about handouts; I am talking about public contracts. UK Steel analysis of the 2023 steel pipeline report found that of the £603 million-worth of steel procured by government in the last financial year, 2022-23, only £365 million-worth was UK-produced. Furthermore, the British Constructional Steelwork Association analysis of steel used in the HS2 project found that only 58% of steel contracts were awarded to British suppliers, despite the British steel industry having the capacity to have carried out 100% of the work.
I welcome the recent introduction of the UK steel safeguards and the fact that UK Government Departments are now required to report past buying and future purchase pipelines of UK-made steel bought by the public purse. Those measures, particularly the reporting of where the steel is procured from in projects, are designed to encourage the uptake of UK-produced steel. The mandatory reporting model is a good template for other industries and Departments, and I welcome it. My Bill takes that mechanism and seeks to use it to achieve similar results across the economy, compelling contracting authorities to publish where they are procuring from, and to encourage the uptake of goods and services from British suppliers.
Let me give another example. I am sure hon. Members are aware that the public procurement system is failing our great British farmers. I strongly believe we must support our local food producers by ensuring that we buy, sell, make and grow more of our food, entrenching Britain’s reputation as a beacon for quality food, high standards and ethical animal treatment. The UK public sector spends about £2.4 billion a year procuring food for organisations such as schools, hospitals and the armed forces. That accounts for approximately 5.5% of UK food sector sales. Despite that level of spending, there is no accurate measure of how much food the public sector procures from British farmers. My Bill will address that.
The British public support buying British. The online supermarket Ocado reported that 87% of its customers considered it important to support British farmers, with searches for British produce on its website up by 77% year on year—
Peter Gibson (Darlington) (Con)
The hon. Lady conveniently mentions the addition of the “Buy British” button on Ocado. Will she pay tribute to my hon. Friend the Member for Bosworth (Dr Evans) for leading a fantastic campaign, bringing in that “Buy British” button on a number of supermarket websites? Will she also join my call for all the others to catch up and do the same?
Sarah Champion
The hon. Gentleman has had a premonition, as that is my next line. The hon. Member for Bosworth should indeed be commended for the “Buy British” button and we absolutely should roll it out across all websites, across all suppliers. Every supermarket and local shop should be proud to say that they stock produce that was made in Britain and made as locally as possible. That helps us on so many levels, particularly the environmental one. It also supports our workers, who are doing an amazing job in a very tough environment. I absolutely support the hon. Member for Darlington (Peter Gibson) and the hon. Member for Bosworth for the work that they have done and are doing on this.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
As my hon. Friend rightly points out, people in schools and hospitals have no choice as to what provider they go to, because they are in an institution, as we are; the choice is made by the institution on their behalf. Where consumers do not have a choice, the reporting requirement under the Bill would apply pressure to ensure that the choice made on their behalf is the right one.
Sarah Champion
I absolutely agree with my hon. Friend. Nobody who procures with taxpayers’ money wants to do a bad job or waste money; the highest possible scrutiny is imposed. My Bill asks them to publish their decisions, in the hope that if Ministers follow up that data, they can see why decisions are made and how much of the procurement is from British suppliers. On his specific example, parents would love to know the trail of the food their children are eating. A recent poll by Deltapoll backs that up. It found that 81% of 4,000 people polled said that being able to buy British food was “very” or “fairly” important, while 94% of people said that support of farmers was “very” or “fairly” important. Despite overwhelming public and cross-party support for buying British, let us be honest that our farmers are struggling. The Office for National Statistics reported that over 6,000 agricultural businesses have closed since 2017. Meanwhile, the National Farmers Union reports that business certainty and confidence within British farming is at an all-time low.
Alongside the obvious economic and social benefits of buying more British food, such as boosting the economy and creating jobs, there are also ethical reasons for wanting more British food to be procured. The Royal Society for the Prevention of Cruelty to Animals has long raised the issue of procuring authorities buying food from overseas that is produced to lower standards than in the UK, such as battery eggs and sow stall pork. Our animal welfare standards in the UK lead the world. Through my Bill focusing on buying British, we will also contribute to cruelty-free procurement becoming the norm.
My Bill will require contracting authorities to publish what proportion of food procured originates from suppliers in the UK. That will finally create an accurate measure of how much food the public sector procures from British farmers.
Peter Gibson
The hon. Lady is being incredibly generous with her time. I had the privilege of sitting on the Procurement Bill Committee recently. That was a lengthy Bill dealing with a whole panoply of procurement legislation to make our procurement system fit for the future. Will she make some remarks about why it is important for her Bill to progress today when measures in the Procurement Bill have not yet come into force, so we have not seen the results of that work?
Sarah Champion
I thank the hon. Gentleman and my hon. Friend the Member for Brighton, Kemptown (Lloyd Russell-Moyle) for their work on that important Bill. I am trying to aid the process of that roll-out because, if my Bill passes, procuring authorities will have to publish what they are procuring. That will probably be the only data available to see whether the cross-party intention, as set out in the Procurement Bill, to try to get more British businesses supported through our procurement processes, is working. If it is not working, Ministers would have the information to make the updated guidance bolder. That data would enable Ministers to give procurement money to British businesses if they wished, and if that was not breaching any laws. I see my Bill as a help; I do not see it under- mining what is happening because of measures in the Procurement Bill.
There is something going on—the hon. Member for Darlington has anticipated my next point. Importantly, the Bill does not require public procurement professionals to take any specific action beyond reporting what has been procured and how that benefits the local environment. Such an obligation cannot reasonably be seen as compromising the UK’s international obligations, which is a concern the UK Government previously had with “Buy British” policies. The measure will benefit UK food producers on the principle that what is inspected is generally delivered. I am proud that the NFU, the Countryside Alliance and the RSPCA all helped me to develop the Bill, and they support it.
It feels as if the Government, and particularly the Minister, support it. I welcome the recent announcement of an independent adviser, the hon. Member for Colchester (Will Quince), to support the ongoing work to improve public sector food procurement. The areas of the review are strikingly close to those I seek to address with the Bill, so I am incredibly grateful that the Minister has offered the time of the hon. Member for Colchester, and hopefully the time of civil servants, so that we can work together towards those common aims.
I turn to another key driver behind the Bill, which is enabling small and medium-sized enterprises to access public contracts. SMEs make up 99% of UK businesses and account for 61% of employment. Despite being the beating heart of our economy, research from the Federation of Small Businesses has found that SMEs are effectively shut out of the public procurement system. Only one in five SMEs has bid for a public sector contract in the last three years. In the construction industry, a sector heavily reliant on SMEs, only two in five SMEs have bid for a public sector contract in the last three years. Of SMEs new to public sector opportunities—those with experience of between one and nine bids—49% have failed to secure a single contract in the last three years. The lack of transparency means that they do not know why they have failed. Submitting a tendering application is a resource-heavy process. If an SME keeps getting knocked back, the stats show that it will eventually stop trying.
The National Federation of Builders, a trade association representing the interests of small and medium-sized house builders, told me that one of its members had not successfully bid for a public sector contract for over a decade, even though it is well qualified to deliver. Sadly, this situation is replicated across most sectors. Of course some SMEs are rejected for good reasons, but there is clearly a cultural issue in public contracts being awarded to large, often multinational businesses over SMEs.
Mark Tami (Alyn and Deeside) (Lab)
Smaller companies are often put off because the cost of tendering for such contracts is so high that failing to win the contract could have a really detrimental impact on the business as a whole.
Sarah Champion
My right hon. Friend is absolutely right, and that chilling effect is having a negative impact on all our SMEs. The working group debated dividing bigger contracts so that local SMEs are more inclined to go for them but, unless SMEs know why they have failed and unless they know that the door is actually open to them, why would they waste their precious resources on bidding for something that they see as utterly futile? That is what we have to change.
There is clearly a cultural issue, which is demonstrated by the fact that 90% of contracts deemed suitable for SMEs are awarded to large corporations. Data from the British Chambers of Commerce found that, in 2016, 25% of public sector procurement spending was awarded directly to SMEs. As of 2021, this figure had dropped to 21%. Only just over £1 in every £5 spent by the UK Government on public services is going straight to SMEs, which is in stark contrast to their 2022 target of spending £1 in every £3 with SMEs.
The national chair of the Federation of Small Businesses said in August 2023:
“Meeting procurement targets isn’t just a bureaucratic milestone—it’s an affirmation of trust in our small business community.”
He is right. SMEs offer so much expertise and innovation, and they must be awarded more suitable public contracts. Frustratingly, when they get a bite of the cherry, it is usually as a subcontractor, with much lower remuneration than if they had been the lead, and of course without the public credit. An example of this led me to introduce this Bill.
A Rotherham business that leads not only the UK but the world with its innovation was grateful to deliver a £1 million Government contract. However, it was actually a £10 million contract that had been delivered to a multinational that then subcontracted it down to my business, having done nothing other than the packaging and the marketing around it. Had my business known that it could apply, even if it was paid £2 million, it would have meant that the business did not have to do it at cost for what it hoped would be a way in to Government procurement. The business could have done it, made a profit and kept going, but the business is currently facing a tough time.
By amending section 1(3) of the Public Services (Social Value) Act 2012, my Bill seeks to add an obligation for contracting authorities to consider how procuring from small and medium-sized enterprises might improve their area’s wellbeing. Clause 2 will require contracting authorities to report how they have complied with this obligation. It is hoped that these changes will increase the importance of SMEs within social value tenders and will encourage the public sector to award more contracts to them.
As I mentioned, billions of pounds of public contracts are awarded to foreign suppliers every year. The most recent data shows that a substantial number of contracts are awarded to foreign suppliers both directly and indirectly —indirectly being when a foreign supplier controls the successful applicant for a contract. Of public contracts valued below £200 million, 2.3% were awarded directly to foreign suppliers, but this rose to 17.6% when indirect awards were accounted for. The story is similar for contracted values over £200 million: 2.1% were directly awarded to foreign suppliers whereas 31.5% of contracts were indirectly awarded to foreign suppliers.
An example of such a contract is the £1.6 billion Royal Navy contract awarded to a Spanish-led consortium in 2022 over an all-British one. Analysis shows that at least 40% of the work, worth £64 million, will go abroad and be carried out in Spain. To compound this issue, there have been no concrete answers as to whether there is a limit on how many jobs will be created in Spain and why there are no targets for UK steel in the contract.
Janet Daby (Lewisham East) (Lab)
I thank my hon. Friend for making such significant and poignant points, and I am sure she has given much thought to this. Why does she think the Government have allowed so many procurements to foreign suppliers over British small and medium-sized enterprises?
Sarah Champion
My hon. Friend asks an impossible question and she might want to ask it again to the Minister. In developing this Bill, I had conversations with the relevant Minister and he has been very open, and I know the Minister who is due to reply is also very open to this. I think the block is hesitancy in terms of the legislation and finding a way through, which is why my Bill is terribly modest in that it is just looking at transparency around where those contracts go, with the hope that that will do enough to influence where they actually land, which we would like to expect might be British businesses. So my answer to my hon. Friend’s question is, “Who knows?” And it is a question the British public are asking all the time, particularly when a local business goes bust as a consequence.
On the £1.6 billion contract I was talking about, the all-British bid would have generated over 6,000 good UK jobs and supported a full onshore build of the ships. This bid also promised an investment of £90 million in UK shipyards and a further £54 million in training, apprenticeships and improving the UK skills base. Had social value to the UK been prioritised, as my Bill would encourage, surely it would have won the contract. Instead a sizeable proportion of the work will go abroad at the expense of British jobs and supporting British businesses. My Bill raises the level of importance attached to the origin of goods and services in procurement decisions by increasing transparency around how public sector contracts are awarded and encouraging the uptake of British-originating products.
My Bill also seeks to highlight good employment standards within procurement. When developing the Bill, the TUC shared with me the dire state of employment standards and working practices within public procurement. To be clear, most employers treat their employees well, but it is common for outsourcing to have a detrimental effect on wages and conditions, with outsourced workers more likely to work longer hours, receive less pay and be on insecure or temporary contracts.
Lloyd Russell-Moyle
Is it not also a particular problem when procurement is given to a foreign company who will be using workers with different standards and different collective bargaining, which is totally unfair to the British businesses that have to follow British laws and British agreements with trade unions? Providing this data will give a level playing field to businesses who will know where they are being undercut.
Sarah Champion
Again, my hon. Friend is absolutely right. If companies pay people appallingly low wages, they can then undercut British businesses that want to pay people well and give them the terms and conditions so that work is fulfilling economically as well as psychologically. Yes, we are losing hand over fist in the current situation.
My Bill would therefore require contracting authorities to consider how they might act to support good employment standards and working practices. My Bill defines good employment standards and working practices as including, but not limited to, compliance with national and international obligations in the field of environment, social and labour law, and collective agreements. The Bill also requires contracting authorities to include reasonable details about how they have complied with their obligations to meet such standards in a contract award notice.
My amendments to existing legislation raise the importance of good work within public procurement, and encourage contracting authorities to award contracts to good employers by attempting to replicate regulation 56 of the Public Contracts Regulations 2015, which relates to excluding suppliers who are not compliant with international and domestic social, labour and environmental laws. It is designed to stop bad employment practices being tolerated within public procurement, such as fire and rehire or contractors refusing to implement the annual uplift of the real living wage.
Great care has been taken in drafting the Bill to avoid including measures that would threaten the UK’s international obligations with respect to trade rules and the agreement on Government procurement. It is also important to note that my Bill would place the responsibility on the contracting authorities, not on the suppliers or UK Government, to publish data on their compliance with the relevant provisions under clause 2.
I hope that my Bill will also influence the conversation on reforming the public procurement system, so I am grateful that the Minister has offered me and the working group the opportunity to meet the civil servants and perhaps the Minister to make changes, if needed, to the national procurement policy statement. Published in June 2021, the NPPS argued that the “huge power” of public procurement expenditure
“must support the delivery of public sector policy priorities, including generating economic growth, helping our communities recover from the Covid-19 pandemic, and supporting the transition to net zero carbon.”
It goes on to outline how:
“Public procurement should be leveraged to support priority national and local outcomes for the public benefit… Contracting authorities should consider the following social value outcomes”
when procuring such goods and services. My Bill seeks to cover all those, but I would be a little stronger on the “should” becoming a “must”. Aside from that, I think we are absolutely on the same page.
To conclude, my conversations with Rotherham businesses and national industry groups have made it clear that the changes I am proposing are welcome and overdue. I defy the Minister to find anyone in the UK who would not see this as common sense. Implementing the changes will increase transparency and encourage more public contracts to be awarded to British suppliers. By supporting this Bill, the House has an opportunity to demonstrate their support to British manufacturers, builders, farmers and SMEs. I thank the Labour Front Benchers for their support, and I am grateful to the members of the working group who helped me to develop it— the TUC, UK Steel, National Farmers Union, the RSPCA, the YPO, the Countryside Alliance, APSI, Bloom Procurement Services, the National Federation of Builders and Jonathan Davey—for all the help, support and guidance they have given me to date.
Peter Gibson (Darlington) (Con)
I congratulate the hon. Member for Rotherham (Sarah Champion) on her Bill, which flies the flag for British business. I am a firm believer in supporting businesses and in ensuring that we do all that we can to embrace support and to expand British business. Indeed, on the topic of buying British, as I mentioned in my intervention, my hon. Friend the Member for Bosworth (Dr Evans) has done some fantastic work in encouraging our supermarkets to add a “Buy British” button to many of their websites. He needs to be commended for that fantastic work.
The hon. Member for Rotherham has brought forward in her Bill some important points and a focus on British businesses, which is important. We must be flexible in our procurement processes, but we need more focus on ensuring that small and medium-sized enterprises have the chance to succeed and are not discriminated against. I admire her intentions, which I do not disagree with, but before I can support her Bill, we need the measures in the Procurement Act 2023 to proceed and progress, given the work that was done on it.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
It is a pleasure to follow my hon. Friend the Member for Rotherham (Sarah Champion), who has laid out a good reason why we need to develop these measures.
It was a pleasure to serve with the hon. Member for Darlington (Peter Gibson) on the Procurement Bill Committee in the last Session, where Labour tabled a number of amendments to further the cause of ensuring that we evaluate social value in contracts. Whether something is British is clearly a key social value for contracts. With British contracts, taxpayers’ money returns into local economies, there are Exchequer benefits, and we tend to have higher and better-quality standards in workers’ rights and environmental rights.
There is, in my view, a real problem with the current process. We introduce standards—be they environmental or workers’ standards—and quite rightly demand that they are high. Then, we say to companies, “Don’t worry. Get around it; ignore it all. Just offshore your production.” In fact, through those standards, we become a great champion not of increasing standards but of destroying jobs in this country.
Some Government Members—not all, but some— would say, “Well, that is an example of why we need to deregulate. That is why we should embrace our Brexit freedoms to ensure that we never get to a place where we are anti-competitive compared with the rest of the world.” The problem is that that is a race to the very bottom. First, it is a race to get below EU standards, then it is a race against standards from Turkey, and then it is a race against standards from China or countries in Africa. Our population ends up poorer and our environment more degraded.
The European Union and the US have implemented carbon border adjustment mechanisms to ensure that a tax is put on to adjust for the saving that a company would make by offshoring. The Government have rightly moved towards adopting the carbon border adjustment mechanism—although it is quite late, I am afraid—but they have not gone far enough. In America and now in Europe, there is an understanding that open procurement, in which we ignore the conditions of bidding companies, is a road to ruin. They have introduced Acts to focus on buying American or European. Despite the naysayers, that has not led to those countries being hauled up before the World Trade Organisation in relation to the agreement on Government procurement. Of course, we are a signatory to that agreement, but the fact that other signatories are able to implement a priority to buy from their own country shows that we should be less concerned about that agreement and more concerned about British jobs, British workers and British companies.
There is a small organisation in my constituency for which we tried to table an amendment to the Procurement Act. It would have meant that non-profit and small organisations could be given a leg-up in public procurement. It would have meant that if a contracting party had already developed a local relationship with such an organisation, it could bypass certain public procurement measures. I am afraid that it was rejected by the Government, but in Brighton we have an example of why it was needed.
Only a few years ago, RISE—Brighton’s specialist domestic violence service, which is one of 180 members of the network of Women’s Aid organisations and provides local expert holistic services for women, children and LGBT survivors of domestic abuse—was defunded when it lost its public procurement bid to an international consortium. It was set up 50 years ago and became a registered charity 30 years ago. It argued for and successfully got the first all-women’s refuge in Brighton. Sixteen years ago, it set up the first LGBT service for domestic abuse survivors in the country, and three years ago it lost its public procurement and had to start from scratch.
The reality is that that procurement did not take into account the social value and whether the terms and conditions negotiated through trade unions would be included. That has meant that a large number of people do not have the service they expect. Surprise, surprise, the contractor running the women’s refuge—a nice, very good housing association, but not a women-led specialist organisation in this area—was not able to offer the wraparound services, and the council had to provide additional emergency funds to RISE so that it could go into the refuges and provide the wraparound services that the women needed. The procurement process defunded a local women-led organisation and cost the council more because it had to provide additional funding to that organisation. It is a loss for women in my city and for the council, which has had to pay more money, all because there is not a proper framework for the council to evaluate the situation and ensure that, rather than just having this neoliberal public procurement—a blind process—we work with and nurture communities.
What is the end result? The next time the procurement comes around, RISE, which was a strong, healthy organisation, will be a weak, diminished organisation that will not be able to bid competitively against a national or international body. In the end, there will be fewer providers in this space, and of course anyone who did their basic GCSE or O-level economics, like I did, knows how the market works if there are monopoly providers: the price will be higher, councils will have fewer options and the taxpayer will lose out. We need to start turning that around.
Unfortunately, as a result of the loss of the bigger bid from RISE, and thanks to the cuts that we are being forced to implement in Brighton and Hove as a result of the continuing austerity and the failure to support local councils, this year it has not been able to bid for £129,000 of additional services, including £5,000 from the third sector grant and £99,000 of new burdens funding for the LGBT dispersed refuge, meaning that we will have no specialist LGBT refuge support in the city. That will put pressure on the women’s refuge, in which we have maintained good separate but equal services—that is how it should be—and that is now under threat. There is also a threat to the therapeutic wellbeing service for women and children. In these uncertain times, if we had started the process differently, we would have ended up with a flourishing local community.
In December, the Public Administration and Constitutional Affairs Committee, on which I sit, produced a report in which we found that the Government have not demonstrated that they have consistently used their purchasing power to support local and national policies, as my hon. Friend the Member for Rotherham said earlier. The big problem we found is that there is no data. Without data, we cannot provide policy, and without policy, we cannot correct the problem. We see that problem happening all around us—we see local communities losing out—but we cannot get the data that is needed.
A number of the international agreements that we have signed, such as the Australia trade deal, had revolutionary clauses around gender, for example, but if we are not monitoring some of these issues, we will not be able to put clauses in future trade deals, and we will bind ourselves in. The only reason that we could include the clauses on gender and trade was the fantastic work that my hon. Friend did to ensure that the data was collected.
The Bill is the next step towards strengthening the hand of British Trade Secretaries when they are negotiating around the world. It is about ensuring that we say, “Yes, we want free, fair and open trade, but we also want trade that levels up, not levels down.” Government Members understand the words “levelling up”, but I am not sure they have managed to deliver on the concept, so understandably, they would struggle with it in international treaties. The Bill starts to build on that process.
We need look only at the real problems we have seen with shady contracts under this Government to see that we need public procurement reform. I do not believe that the Procurement Act 2023 did that successfully enough, and this Bill is needed to fix some of those issues. I am delighted that the Government have agreed to meet my hon. Friend, and I know that when Labour is in government, we will start to fix some of the messes into which this Government have led us.
Janet Daby (Lewisham East) (Lab)
I rise to support the aim of this private Member’s Bill, which is more commonly known as the “Buy British Bill”, introduced by my hon. Friend the Member for Rotherham (Sarah Champion). We have the Bill because the Conservative Government have failed to properly reform the procurement system and to support British businesses, which means that they have failed to bring well-paid jobs to communities up and down our country.
The British Chambers of Commerce found that, in 2021, small and medium-sized enterprises received a relatively smaller amount of direct Government procurement money than they did five years previously. I therefore ask the Minister: why are SMEs being sidelined from access to public procurement under this Government, and why do they prefer to procure from foreign suppliers? That is how it seems to me.
A Labour Government would cut red tape, ensure that every small national contract includes an SME at shortlisting, and streamline the bidding process. Meanwhile, the Conservatives have failed to take opportunities to reform the procurement process to support British businesses and communities. When the Procurement Act comes into force later this year, it will do nothing to address the wasteful approach to emergency contracting rules that we saw during the pandemic. That approach saw friends and donors of the Tory party being given the first bite of the cherry, while decent, skilled local businesses were denied the same opportunities.
One of those donors is Frank Hester, who, as we know, was abusive, racist and misogynistic. Even more shockingly, he spoke about ending an MP’s life. I take that incredibly seriously. He is also the sole director of the Phoenix Partnership, an IT company that has been paid nearly half a billion pounds by central and local government and the NHS since 2016. I would like the Minister to reflect on that because the Government have to change course.
Turning specifically to the Bill and British food procurement, the Government’s food strategy from nearly two years ago stated:
“Public sector food should be healthier, more sustainable and provided by a diverse range of local suppliers. Locally produced food with reduced distance between farm and fork can provide societal benefits”.
I would like the Government to put those words into action, and I wholeheartedly support my hon. Friend’s Bill.
Ms Lyn Brown (West Ham) (Lab)
First, I thank my hon. Friend the Member for Rotherham (Sarah Champion) for bringing this Bill forward. I know that she has worked incredibly hard on it, and done an enormous amount of work consulting with a wide range of stakeholders on the need for it and its scope.
In Newham, adding value to procurement decisions is seen as a priority, but, as I am sure hon. Members will appreciate, it has been made extremely difficult with 14 years of austerity having left Newham Council reeling while massively increasing local need. The real impact of funding cuts is hard to quantify because each cut has a social and economic impact, but Newham’s general fund has been cut by about 18% and its population has increased by 16%. Of course, we cannot fix all of that through procurement, but we can address some of it through community wealth building in the long term. I want to be really honest about this: it is a really difficult thing to achieve, but that is what the council is working towards, and I believe it deserves our full support.
Like many councils, from Manchester to Darlington, Newham has gone further: it has decided to focus on the many ways we can build a community’s wealth. To me, community wealth is about creating a resilient and inclusive economy for the benefit of the local area. That means harnessing the economic and social power of locally rooted institutions, including our councils, schools, police, universities, health boards and housing associations. One way in which Newham Council is building community wealth is through increasing the proportion of its local procurement spend.
The council has also provided support to local businesses so that they can more easily reply to their tenders. A few years ago, Newham had a significantly lower proportion of resilient businesses than some other areas of inner London, with only 48% of businesses in Newham assessed as resilient in 2018, compared with 69% in inner London as a whole. For some of those businesses, being awarded longer-term local contracts helps them not only to survive, but to thrive and grow in a sustainable way. In the Royal Docks, the council has worked with partners to create London’s first living wage zone, with every single employer encouraged to pay the London living wage of £13.15 an hour.
More than 100 local employers have signed up to the council’s voluntary community wealth building pledge, which includes a commitment to pay the London living wage. The pledge also includes a wide range of steps that the council encourages employers to take to help build community wealth—for example, buying local, prioritising sustainability and supporting local residents. Those include having at least two Newham suppliers within their supply chains or committing to seek out quotes from Newham businesses when procuring new services and products. They also pledge to reduce their carbon footprints.
Businesses are encouraged to switch to a renewable energy provider or to implement a scheme to encourage their staff to cycle or get public transport to work. They are encouraged to invest in staff and young people. Businesses can create lots of opportunities for Newham’s massively talented young people through apprenticeships, and the council seeks to encourage that. Businesses who sign up to the pledge can choose to be linked to the council’s Newham work service to make it easier to hire local people. Businesses can also choose to be linked up with local voluntary projects that need their support.
All that means that businesses and employers become more invested in and embedded in our community. Equally, the emphasis on community wealth building has to involve connecting good local businesses with one another, supporting networks and harnessing the creativity of our small business leaders, because we all know that local Government officers do not have all the answers for how the local economy and society can prosper.
For most participants, the pledge is obviously voluntary, and the role of the council is to encourage and support good practice, not to impose it. There is a clear benefit for businesses, both for their reputation and in having a more secure network of partners around them. There is a clear benefit for businesses, both for their reputation and in having a more secure network of partners around them. Ultimately, we should see procurement for social value as one component in a larger strategy of shaping the local economy, so that the prosperity we create is more widely shared and better sustained over time.
When it comes to procurement, the council has a commitment to use its processes to ensure that contractors, as well as the council itself, pay the London living wage in full. That is clearly of massive importance given the continuing impacts locally of the cost of living crisis. I am sure that all Members present understand that our local areas having thriving businesses means better jobs for our communities and higher standards of living, and we all want that. Newham Council recognises the value of smaller local businesses and the value of good employment standards. Surely that is the kind of encouragement and offer of partnership we should be giving to entrepreneurs and business people across the UK.
Let me give one last example. Populo is Newham Council’s wholly owned housing company, which is building homes for rent—including a significant proportion of genuinely affordable homes—in order to tackle the housing shortage, which is impoverishing so many people in Newham. It is currently building hundreds of new homes in Newham, aiming for 7,000 by 2040. Because it is wholly owned by the council, Populo can embed higher standards in procurement, planning and design so that our wider social and economic goals are met, as well as delivering more of the homes that are so desperately needed locally. There is much more that I could say on this subject, Mr Deputy Speaker, but I want to give my Front-Bench colleague the opportunity to speak as well.
Dame Nia Griffith (Llanelli) (Lab)
I begin by congratulating my hon. Friend the Member for Rotherham (Sarah Champion) on her success in the ballot for private Members’ Bills, and on bringing forward a Bill that could benefit the small and medium-sized enterprises not only in her own area, but right across the UK. My hon. Friend has long recognised the importance and huge contribution of small and medium-sized businesses in her area and has stood up for them, as well as campaigning rigorously for the steel industry. She has put considerable effort into preparing this Bill, including setting up a working group with a whole range of organisations, including the TUC, Rolls-Royce, UK Steel, the National Farmers Union, the National Federation of Builders, the Royal Society for the Prevention of Cruelty to Animals, the Countryside Alliance, Bloom Procurement Services, YPO and the Association for Public Service Excellence.
I congratulate my hon. Friend on an excellent speech, in which she revealed some shocking facts showing how, time after time, small and medium-sized enterprises are missing out to foreign suppliers or to big multinationals that are manufacturing abroad. Whether it is naval ships or construction, a huge range of industries are missing out. I also thank my hon. Friends the Members for Brighton, Kemptown (Lloyd Russell-Moyle) and for West Ham (Ms Brown) and the hon. Member for Darlington (Peter Gibson) for their contributions today.
The UK is a party to the World Trade Organisation’s agreement on Government procurement and other international free trade agreements, which, for procurements over a certain value threshold, legally require contracting authorities not to discriminate against suppliers from other countries that are also signed up to one of those agreements. Nevertheless, procurement policy can still do plenty to support British businesses, such as using stretching social, environmental and labour clauses in contract design to ensure that British businesses are recognised for the very high standards that they meet.
As was mentioned earlier today, people may well ask why it is that my hon. Friend the Member for Rotherham is bringing forward a Bill on procurement when only last year the Government brought forward their own Procurement Bill, which will come into force this October. The fact of the matter, quite simply, is that the Government’s Procurement Act 2023 was a wasted opportunity to reform procurement. Unfortunately, despite our attempts to strengthen and improve that Bill with our amendments, when the Procurement Act comes into force in October it will allow the same wasteful approach to emergency contracting rules that we saw during the pandemic, with friends and donors of the Tory party given the first bite at the cherry, while decent, skilled local businesses are denied the same opportunity. Billions of pounds of public money will be wasted, which excellent small and medium-sized businesses such as BCB International in my constituency—
Richard Fuller (North East Bedfordshire) (Con)
On a point of order, Mr Deputy Speaker. It is being reported in the media that Conservative Members are “talking out” the next Bill, the Health and Equality Acts (Amendment) Bill. That is clearly not the case; it is Labour Members who are preventing discussion of the Bill. In what ways can I make that clear?
Mr Deputy Speaker (Sir Roger Gale)
The hon. Gentleman has been here long enough to know that that is not a point of order for the Chair. It is abundantly plain to anyone watching the debate that the hon. Member for Llanelli (Dame Nia Griffith) is on her feet, speaking from the Opposition Front Bench.