The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)
I beg to move,
That this House considers that European Union Documents No. 18966/11 and Addenda 1 and 2, relating to the Draft Directive of the European Parliament and of the Council on public procurement, and No. 18964/11 and Addenda 1 and 2, relating to a Draft Directive of the European Parliament and the Council on procurement by entities operating in the water, energy, transport and postal services sectors, do not comply with the principle of subsidiarity for the reasons set out in Chapters 2 and 3 of the Fifty-seventh Report of the European Scrutiny Committee (HC 428-lii); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.
This debate gives the House a welcome opportunity to consider the subsidiarity questions—pronouncing that word will be one of today’s challenges—identified in the draft directive on public and utilities procurement. It may assist the House if I give some general context on subsidiarity, after which I shall turn to the draft directives under consideration, focusing in particular on the subsidiarity concerns.
This is the fifth time the House has considered a motion for a reasoned opinion on subsidiarity. The first three related to financial services, and one related to justice. The Under-Secretary of State for Justice, my hon. Friend the Member for Reigate (Mr Blunt), read into the record on 7 December—at column 313—a very good definition of subsidiarity. That is not only my opinion; the hon. Member for Stoke-on-Trent South (Robert Flello), speaking for the Opposition, said precisely the same thing, so there is clearly general approbation on both sides of the House for that definition. I do not propose to trouble the House by reading out the definition again—[Interruption.] There is approbation for that from those on the Government Benches behind me. However, colleagues can, of course, read it for themselves, if they so wish.
The Government support the Lisbon treaty provisions to uphold the principle of subsidiarity and want to work with Parliament to highlight any subsidiarity concerns that the Government may share. Our explanatory memorandums on the proposals in question drew attention to those concerns, and I am very pleased that the European Scrutiny Committee—chaired by my hon. Friend the Member for Stone (Mr Cash), who is present—decided to pursue the matter with suitable dispatch. I also note that the National Assembly for Wales has written to the European Scrutiny Committee expressing concerns about subsidiarity in respect of the procurement proposals.
We have looked into whether other member states share these concerns, and I know of at least one case: the Swedish Parliament has raised similar concerns and tabled reasoned amendments on both proposals in very similar terms to those of our motion.
Kelvin Hopkins (Luton North) (Lab)
Does the Minister agree that the principle of subsidiarity is too little used and too little understood? We take it seriously, but many other European Union member states do not. Should we not take a lead on this issue more often?
Mr Harper
I agree. It is an important principle, and where it is sensible to raise it, we should do so.
Let me turn to the substance of the proposed directives. Although the motion before the House rightly refers to the draft directives as a whole, the specific issue on which the ESC has drafted the reasoned opinion is the requirement that member states must establish “national oversight bodies”. I will therefore briefly outline the proposals as a whole and the Government’s position, and then I shall turn to our specific concerns, which are shared by the Committee, about the oversight body provisions.
To recap the background, since the early 1990s there have been EU rules governing procurement by public authorities and utilities. In this context, utilities are certain bodies operating in the water, energy, postal and transport sectors, where those bodies have certain special rights or a monopoly position. The directives currently in force were adopted in 2004, and were transposed into law in the three United Kingdom jurisdictions in 2006 by means of procurement regulations. In line with the devolution settlement, the Scottish Government did that separately in Scottish law by making their own regulations; that is relevant, as I shall explain shortly. In addition, there are directives that govern the rights and remedies available to aggrieved suppliers or other interested parties if a public body or utility breaches the rules when awarding contracts. In the UK, those remedy rules have been implemented by amendments to the procurement regulations.
The directives require EU-wide advertising of many requirements and establish specific procedures to promote fair, open and transparent procurement decisions to promote open market public procurement across the EU, encouraging competition, innovation and value for money. The Government are keen to see that those rules are properly respected across the Community to ensure opportunities for UK businesses and a level playing field for all.
Perhaps at this point I should say a few words about the Government’s wider position on public procurement. My right hon. Friend the Minister for the Cabinet Office and Paymaster General announced a series of major reforms to public procurement with the aim of using the public sector’s considerable purchasing power to promote efficiency and growth. The reforms will fundamentally change the way in which the Government buy by providing an open door for current and future suppliers to discuss upcoming procurement opportunities; making it faster to do business with Government by speeding up the procurement processes to world-class standards and removing unnecessary wasteful practices; working with industry to identify and address any key capabilities needed to meet future demand; ensuring that SMEs can access the value of procurement; and reforming the EU directives that govern public procurement.
Following consultation by means of green papers, the Commission published proposals for new directives. Its declared aim is to modernise, simplify and increase flexibility in the procurement rules. The public procurement proposal covers five main areas of improvement: simplification of procedures; the strategic use of public procurement to meet new challenges, such as increased innovation and environmental protection; better access for SMEs; sound procedures to discourage corruption and favouritism; and improved governance procedures. As the European Scrutiny Committee’s reports mention, the Government support many of those elements of simplification and modernisation and I am pleased to note that the Committee also welcomes those improvements.
There are some areas where the Government will continue to press for further improvements through the negotiations, working with other member states when they have similar aims. Those improvements include a review of and increase in the financial thresholds as early as possible consistent with wider international procurement agreements and a specific time-limited exemption for mutuals, so that they can become established before being subject to competition.
Mr Dave Watts (St Helens North) (Lab)
The Minister is setting out the rules to which the Government will work to ensure that there is free and fair competition across borders, but is not the rest of Europe ignoring all those rules and, in some instances, has no intention of opening up its markets to British companies? By not taking the same position, are we not disadvantaging our businesses?
Mr Harper
There are two separate issues. The first is what other European countries do, and the European Commission should be our ally in taking action to open up those markets. The second is what we do to open up competition, and I do not think that our adopting a protectionist strategy benefits us at all. Our companies trade globally, not just in the European Union, and we need them to be competitive and to be able to win business not just in the EU but in countries with fast-growing markets.
Mr Harper
Off the top of my head, no, as I do not pretend to have an encyclopaedic knowledge of all public procurement for cars across Europe. We will not help our car industry by having people make procurement decisions to buy such cars regardless of other criteria. We need to ensure that we take into account a wider range of criteria and the hon. Gentleman will know that the Government set out our steps towards making procurement decisions, taking wider features into account. The European Commission suggests using public procurement strategically to meet challenges such as increased innovation and environmental protection to ensure that some of those extra, wider issues are built into procurement decisions.
Kelvin Hopkins
On this matter of trade, we do not so much have a problem with the rest of the world, but we have a serious trade problem with the rest of the European Union where we have a very big trade deficit. That is evidence that the other parts of the EU do not play fair on trade, particularly when it comes to currency. The Germans have persistently maintained a low parity for their currency over many decades, which has meant that their manufacturing sector has been built up at the expense of ours.
Mr William Cash (Stone) (Con)
A big issue that has cropped up in the past year is that of Bombardier. The question that the hon. Member for St Helens North (Mr Watts) just asked is apposite because this is not simply a question of whether there are fair rules on procurement in terms of competition. Because a legal framework has been created, there is a special and fundamental requirement to comply with those rules because they are part of the legal process. The problem is not merely whether proper competition is being avoided but whether the law is being breached as well.
Mr Harper
I thank my hon. Friend for making that point. On the specific issue of procuring rolling stock, he will know that when this came up in the House last year the then Transport Secretary made it clear that the bids were being evaluated by criteria laid down by the previous Government. The problem was that we had to follow the criteria that were already laid down. The then Secretary of State also said that we would look at procurement in the growth review that was under way, and that we would look at what happens in other EU countries that are constrained by the same rules and at best procurement practices to make sure that, where appropriate, we include appropriate socio-economic criteria in the procurement decisions. That has to be done right at the beginning; we cannot set out the criteria and then change the rules part way through the process to favour domestic bidders. I have looked in detail at the particular case my hon. Friend mentions and it was made clear that the decisions that people are not happy with were taken under the previous Government and that we had to implement them. The alternative would have been to suspend the procurement process completely and go right back to the drawing board.
Daniel Kawczynski (Shrewsbury and Atcham) (Con)
I, too, wanted to raise the issue of Bombardier. Does my hon. Friend agree that there is growing interest in this among British citizens and that they want the Government to be more resolved to buy British goods, particularly British agricultural products, when it comes to supplying our armed forces? How will the Bill enable us to do that?
Mr Harper
My hon. Friend makes a very good point. The Government have been doing a great deal of work on this, and my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs has been setting out some of the Government’s policies to improve that position. However, I shall not go into those in depth, because that would take us away from the focus of this reasoned opinion.
Kelvin Hopkins
The Minister is being very patient and generous in giving way. On Bombardier, is it not the case that with such complex and big contracts, it is very hard to make judgments between bids? Over time, the Siemens bid might turn out to be a lot more expensive and a lot less good than we first imagined.
Mr Harper
If the hon. Gentleman will forgive me, I have answered the point made by my hon. Friend the Member for Stone about the procurement process and I am not going to go into specifics about a particular procurement decision because I have not seen the detail and I was not involved in making that decision. The hon. Gentleman makes a good point about such procurement contracts being significant and complex and there is a need to get the specification right in the first place. There has been a considerable amount of controversy about that particular case.
Mr Spellar
First, as a previous Transport Minister may I tell the hon. Gentleman that the Germans always buy German trains and the French always buy French trains? They make it very clear how they do that. Secondly, going back to police cars, I do not know what he does on a Saturday night but if he watches any of the police series from various European countries, he will notice that if they are from any country that produces cars they always drive their own vehicles. I do not want to get into specifics, but this is about the mindset of our civil service. The French, German, Spanish and Italian civil services back their industry. What is wrong with the culture of our civil service that it is always trying to do British industry down?
Mr Cash
After 28 years in this place one gets a sense for when a Minister wants to get to the end of his speech as quickly as possible, particularly when he is being assailed on all sides. May I just ask whether a full analysis has been made by the Government through the appropriate Department—not his Department, but the Department for Business, Innovation and Skills—of whether there has been a real investigation into the way public procurement operates in this country as compared with the rest of Europe?
Mr Harper
The short and honest answer is that I do not know. I will find out and make sure that I or my right hon. Friend the Minister for the Cabinet Office writes to my hon. Friend to let him know.
I was not close to sitting down because I was about to set out the three areas in which the Government have subsidiarity concerns about the proposed oversight body—concerns that are shared by the European Scrutiny Committee. First, the oversight body was not proposed in the Commission’s consultation green paper or otherwise consulted on, so neither member states nor anyone else had an opportunity to comment on the proposal. The Commission’s impact assessment does not provide a clear or detailed justification. The European Scrutiny Committee expressed similar concerns about the inadequacy of the Commission’s impact assessment when we debated the common European sales law.
Secondly, the proposal for a single, national oversight body in each member state does not recognise or respect the different legal systems within the UK. As Members are well aware, Scotland has a separate and distinct legal system. Under the devolution arrangements, the development and application of public procurement policy and the implementation of public procurement legislation are devolved matters in both Scotland and Northern Ireland. As I have mentioned, Scotland has chosen to implement the procurement directives separately. The requirement for a single national oversight body for a member state is inconsistent with those settlements, and the Commission has not demonstrated any objective necessity for a single body in each member state.
The third substantial concern is the proposal that the oversight body should be empowered to seize the jurisdiction currently resting with the courts to determine some disputes about compliance with the procurement rules. That would be a judicial function, whereas the other functions of the body would be administrative or regulatory. If they were all combined in one body, that would intrude unjustifiably in national legal and judicial structures. That would be inconsistent with the UK’s legal traditions in which a clear distinction is made between judicial and administrative functions. The remedies rules that I mentioned earlier leave it to member states to determine the legal structures that enforce the rules. There seems to be no clear justification for departing from those now. This might affect other member states as well.
As I have said, a number of other member state Governments will have issues with the national oversight body, whether on grounds of bureaucracy, cost, incompatibility with existing arrangements or subsidiarity. The Parliament of one country has already set out similar concerns to ours in a reasoned opinion. The debate has been very helpful and the European Scrutiny Committee’s motion is very welcome. I look forward to listening to other Members and having the opportunity to support the motion and have this House take a sensible decision today.
Mr Harper
With the leave of the House, let me respond briefly to some of the concerns raised during the debate. I will try to keep my remarks as focused as I can on the motion before us, tempting though it is to range more widely over the whole gamut of European policy.
I, too, pay tribute to my hon. Friend the Member for Stone (Mr Cash) for the excellent work that he does in chairing the European Scrutiny Committee. His wider concerns about growth, trade, jobs and our success as a country were exactly the focus of the recent European Council, the details of which my right hon. Friend the Prime Minister set out so ably yesterday, when my hon. Friend was in the Chamber. From our perspective, the purpose of being in the European Union is to ensure trade, jobs and success for the United Kingdom.
I welcome the comments of the hon. Member for Barnsley East (Michael Dugher) and his general support for the motion. He referred to concerns that he had picked up about officials and “weaker Ministers” at the Treasury. I can only assume that he has reached those conclusions from his close working with the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who has great experience of the Treasury and must have encountered such things in the 10 years that he was Chancellor.
My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) entertained us, as ever, on behalf of the European Scrutiny Committee, leaving an opportunity for my hon. Friend the Member for Stone to range more widely. My hon. Friend the Member for North East Somerset made an excellent speech that took us down one or two little byways. The House will be pleased that I am going to resist the temptation to engage in any kind of theological debate about subsidiarity, or even supernatural law-making. The National Assembly for Wales, to which he referred, had two main concerns: first, about the oversight body and subsidiarity in general; and, secondly, about specific issues to do with devolution. The Government agree with those concerns, as I explained in my earlier remarks.
My only other point is about the wider procurement issues. It is worth noting that recent analysis showed that UK companies won 17% of all the public procurement contracts awarded to companies from other member states across Europe. I will leave it to hon. Members to draw their conclusions about whether that is good or could be better, but it is a fairly substantial chunk of GDP.
Finally, on the subject of how other European countries do their procurement, there are remedies for aggrieved suppliers, which countries have to implement. I urge any British company that feels that it has been hard done by to use those remedies to ensure that it gets a fair bite of the cherry.
Question put and agreed to.
Resolved,
That this House considers that European Union Documents No. 18966/11 and Addenda 1 and 2, relating to the Draft Directive of the European Parliament and of the Council on public procurement, and No. 18964/11 and Addenda 1 and 2, relating to a Draft Directive of the European Parliament and the Council on procurement by entities operating in the water, energy, transport and postal services sectors, do not comply with the principle of subsidiarity for the reasons set out in Chapters 2 and 3 of the Fifty-seventh Report of the European Scrutiny Committee (HC 428-lii); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.