Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Andrew Bingham
My hon. Friend makes a good point, and I will come to something along those lines in a moment.
As I was saying, many small and micro-businesses run tight ships—they are hyper-efficient. Consequently, they can offer products and services at much reduced prices, and every bit equal in quality. However, all the bureaucratic muddle and red tape is not only depriving small businesses of the opportunity to supply but means that public sector bodies are paying more money for the services they procure. The process is costing public sector bodies more twice over. First, someone in the public body must administer all the paperwork, with all the forms having to be read, checked and all the rest of it, so that creates a higher cost for procurement. Secondly, because the public sector bodies are ruling out—shall we say?—more competitive companies by their system, they are also paying more for the products they procure. In many respects, the public sector is paying more for goods; I hate to use the phrase, “paying through the nose”, but it is paying a premium because of its own processes.
About 18 months ago, I held a small business event in my constituency to help my local small enterprises deal with local authorities and other big public bodies, to try to break down some of the bureaucratic barriers that the public sector bodies put in their way; to be honest, sometimes they do so unwittingly. In total, 85 local companies came along to that event, and they all came with a very similar tale. They all mentioned the dreaded pre-qualification questionnaire, or PQQ, which seems to be the bane of every small business person’s life. As the hon. Member for Ogmore said, public sector bodies seem to have a system whereby they say, “This is the procurement package we use, whether the contract is worth billions, millions, thousands or tens of pounds.” It just seems to be the same process and it seems like a sledgehammer to crack a nut.
In discussing the PQQs, I will change the names, because I want to protect both the innocent and the guilty. I have one PQQ here, which is 64 pages long. It was given to me by a local small supplier. I will not say what the company does, because that would give a clue, but we will work on the theory that it supplies wallpaper, because that fits. Obviously, I do not want to disclose the company owner’s details, because it is not fair on him. He tendered for a fairly modest contract with a public sector organisation, which will also remain nameless. He sent me a PQQ that is 20 pages long and asks for information such as cash-flow forecasts. It also asks for a bank letter outlining the company’s current cash and credit position. I am sure that the bank would supply that information, but from my experience of dealing with banks I would say that it will probably charge him.
Looking at the level of detail of the contract, I see that there is an extra cost. It does not matter about all the paperwork and all the rest of it; the company owner has got a bill from his bank. The public sector body wants details of his company’s equal opportunities policy, its health and safety policy and it even asks him to
“describe your organisation’s current workforce development and training programme”.
The company is a micro-business that employs three or four people, supplying goods—as I say, we will go with wallpaper—and it has to supply all that information. I read the form with incredulity; I have even torn the page off, so that the cameras in Westminster Hall cannot pick up who sent it to the company owner. I could go on at great length, and given that we have the time I could actually read the whole of a 64-page PQQ I have, because I could get it all in before the debate finishes. In fact, I was thinking that there are people who collect different things, and we should have a name for people who collect PQQs, because I could be one of them.
The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)
I hope that my hon. Friend will excuse me for quickly intervening. I am sure that he is right to want to protect those involved, but anyone watching this debate and regretting that they cannot pick up the details on camera might like—if they know the details—to go to the Mystery Shopper page on the Cabinet Office website, which I will discuss in my response to the debate, and before the end of the debate we can “shop in” some bad practice.
Chris Evans (Islwyn) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Ogmore (Huw Irranca-Davies) on securing the debate. My only sadness is that a debate of such magnitude and gravitas does not have a much wider audience and that more Members could not be here. However, it is good to see that the Welsh are in a majority today, with four Members here, along with another Member from the Celtic fringe. We will look closely at what the Minister has to say.
Chris Evans
There is the hon. Member for Pudsey (Stuart Andrew) behind the Minister. He is a sleeper; we sent him on reconnaissance to Pudsey. Come back to Wrexham!
When we talk about the role of businesses in the economy, we are often talking about small and medium-sized enterprises. Let us not forget that half of private sector turnover is accounted for by SMEs. In Wales, the public sector spends approximately £4.3 billion per annum through procurement, which accounts for more than a third of the overall Welsh public sector budget. That includes everything from stationery, paper clips and office furniture to medical equipment. In my constituency, up in Croespenmaen, we have Abingdon Flooring, which supplies furnishings for MOD properties.
What is more, the public sector is the largest user of services and goods from the private and voluntary sectors in Wales. The scale of public sector procurement in Wales and across Britain means that it is the biggest driver of economic growth and the biggest lever the Government can use. No one, on either side of the House, can fail to recognise the importance of public sector procurement.
I remember going to a seminar with Lord Sugar, when he talked about green industry. He said that is okay having wind farms, but they need steel: where are we procuring that? My frustration about procurement is that everyone knows its importance; but, for all the companies that come to me and tell me that they are trying to procure for something, there are hoops to jump through. It gets to the point where they are frustrated and give up on the process.
I read recently that the Prime Minister’s enterprise adviser David Young said he was not convinced that the value of SMEs was being fully exploited across the public sector. It worries me that it seems from a Cabinet Office report that the target of 25% of all government contracts has been quietly dropped. Indeed, from some statements from the civil service it seems that the 25% target is not a target but an aspiration. I agree with the Government that that target could be a catalyst to achieve change in the economy; but that must be driven from Whitehall, and be more than an aspiration. It must be measurable, constant and universally accepted. Also, which businesses does it apply to? Is it for larger businesses or for small and medium-sized business? Are micro-businesses included as well? I do not believe there is anyone who does not see SMEs as job creators. The SMEs of today will be the major companies of the future.
What the debate comes down to essentially is this: we will cut the welfare bill and bring down the deficit only through people in jobs paying taxes. The only way we shall achieve that is by encouraging SMEs and other businesses to have the confidence to create jobs.
The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)
I am grateful to the hon. Member for Ogmore (Huw Irranca-Davies) for initiating this debate on such an important subject and for setting us off so passionately. As has been echoing around the Chamber this afternoon, we share a passion for the same thing: seeing excellent procurement that serves the customer—in this case, the taxpayer—and promotes growth. I am confident that every Member here supports those aims and that my remarks will outline the action merited by that.
From the outset, the Government have fully recognised the vital role that SMEs play in helping us achieve the best possible value for money—in some cases for reasons of cost and in others for reasons of innovation, a theme that has also rightly reverberated around the Chamber—when we buy goods and services for the citizen, such as school, hospital or prison meals, wallpaper or any other goods or services.
In the minutes remaining, I will take the hon. Gentleman’s invitation to shatter some myths. Let us do that together this afternoon, because he is absolutely right in laying down his support for the theme and in his desire to see increased awareness of what is available for SMEs, of the ways in which they can grab it and of the ways in which we can hold procurers to account.
I will start by addressing the goal that, by the end of this Parliament, 25% of direct and indirect Government procurement by value should go to SMEs. Although I want to move on to some content that I know will be of great help to every Member when talking to their constituents, I first need to make an overtly political point. I am sad to say that we had to take the bold step of setting a 25% aspiration because before that, under the previous Government, no effort was made to measure such things. The lecture I have just received from the Opposition Front-Bench spokesman is more than a little rich in that context. Even a member of the previous Government has had the dignity to look ahead and say what we need to do better for SMEs, and I am afraid that I do not think the Opposition Front-Bench spokesman is hitting the same heights.
After a lot of hard work in 2010, we found out that SME procurement in 2009-10 amounted to 6.5% of all procurement, or £3.1 billion—a shamefully low figure given that 95% or more of private sector businesses in the UK are microfirms, or companies with fewer than 10 employees. We recognised that something had to be done to remove the barriers facing many companies when bidding for Government contracts, and we have gone a long way towards removing those barriers. I will work through a couple of points that will help Members to express that to their constituents, which is one important thing we can do to send the message outwards.
Over the past three years, we have increased accessibility and transparency, identified and addressed poor procurement practice and provided practical assistance to help SMEs. I will start with accessibility and transparency. We have made contracts smaller and broken them up under various headings. Some of the finest examples of that can be found in information and communications technology, where historically Governments have been subject to procurement disasters. We have instead deliberately gone out to approach SMEs for Government ICT needs and have had some good successes. We have also set up Contracts Finder to increase accessibility; it is a one-stop shop to enable suppliers to find procurement and subcontracting opportunities. They can also find tender documents and contracts online, all free of charge. I urge anyone listening to or reading this debate to look at that.
People will also find online and accessible pipelines of what the Government are looking to procure under a range of topics. All those kinds of thing help would-be suppliers to know what we are looking for. As I said in my opening remarks, we believe in procurement for growth, and we believe strongly that pipelines can help in that endeavour by explaining to industry what this very large customer, the Government, are looking for over time.
In the dynamic marketplace, companies can register without cost to provide quick quotes for low-value Government contracts below £100,000. That enables them to bid and compete at minimal cost alongside larger suppliers. I recognise the points made this afternoon about the cost of bidding. We are doing something about that. On the other side of the deal, what does that give customers—Departments and the taxpayers whom they represent? It gives us cost-effective access to pre-registered Government suppliers and allows bids to be issued and responded to electronically, which again makes the procurement process quicker and more effective.
On the theme of transparency, I also note that we have established a Crown representative for SMEs, which I know will be of great interest to the hon. Member for Islwyn (Chris Evans), who wanted to know where SMEs could turn for help. There is a Crown representative in Government especially for the purpose of giving SMEs a voice at the table. That is vital, and we have done it. We have also set up an SME panel to provide a regular forum for SMEs to raise the issues that concern them most and hold our feet to the fire. I assure the hon. Gentleman that the SMEs on that panel do so. I have been there, and I have enjoyed meeting the panel very much.
Moving on to tackling poor procurement practice, we have heard a couple of good examples in this debate, particularly from my hon. Friend the Member for High Peak (Andrew Bingham), who spoke about a wallpaper supplier in his constituency. I will start with that example. It is a great shame that he and his constituents felt the need for anonymity in that example. I understand entirely, but we would all like to live in a world where they did not receive bad service and did not feel the need to hide it for fear of reprisals.
We have introduced a mystery shopper service that will be familiar to anyone who has seen such a thing in supermarkets or reputable businesses throughout the private sector. It allows poor procurement service to be identified and acted on. If a supplier encounters poor procurement practice, such as the overly bureaucratic pre-qualification questionnaire in my hon. Friend’s example, or unreasonable selection criteria, as in other examples, they can refer it anonymously to the mystery shopper service, so that we can investigate it on their behalf.
I encourage and urge all constituency Members to push that information out to SMEs or anybody bidding in their constituency for Government work. It is the only way that one by one, piece by piece, we can tackle that kind of bad practice. It allows us to identify the broader themes that we can perhaps tackle more systematically, but it also allows us to put right individual cases where something has gone wrong.
Jonathan Edwards
Based on what the Minister is saying, does she consider the move towards centralising legal aid contracts an example of bad procurement?
Miss Smith
I suspect that I do not have time to do that topic justice and that you would not wish me to go there, Mr Hollobone. However, if the hon. Gentleman thinks that it is bad practice, he or anybody else ought to enter it into the mystery shopper and see what comes out the other end. We regularly publish the outcomes of mystery shopper investigations on the gov.uk website, and I am sure that the hon. Gentleman will find it easy to use.
By 31 May this year, we had received 425 mystery shopper cases. Of those that we have closed, a great majority have had a positive outcome. Once again, I encourage all Members to ensure that their constituents are aware of it.
Huw Irranca-Davies
Briefly, and in case the Minister does not touch on these two issues, what are the UK Government doing in terms of the threshold for advertising on the web? The Welsh Government have moved to advertising any contract of more than £25,000 on the web. Also, what are the UK Government doing to reduce the insurance and turnover thresholds to break down more barriers for SMEs?
Miss Smith
On the first question, all central Government contracts of more than £10,000 must be advertised on Contracts Finder; I am sure that those who have their smartphones out will find it a helpful source of information. The second question brings me to a point that I shall make later. We need to leave some areas of professional competence for the contractors themselves. It may be under the headings that the hon. Gentleman mentioned. There are instances in which a particular contractor will need to find particular characteristics that suit their procurement.
I turn to a couple of other points that have been made. Hon. Members have asked for there to be ways of giving feedback to unsuccessful bidders. We have used the mystery shopper to provide that in some cases; I am interested in how we can encourage it as a far wider practice. I will also give an example of the move away from frameworks, another point made earlier. In some cases, it can be an instance of poor procurement practice when frameworks are used inappropriately. They can certainly be a blunt instrument. I point hon. Members to the example of the G-Cloud, a way that we are procuring for IT across Government that has done away with frameworks entirely. There are many more such examples.
PQQs, or pre-qualification questionnaires, are undoubtedly a burden to small and medium-sized businesses. To address that, we have eliminated their use in 15 of 17 Departments for all central Government procurements under the EU threshold of £100,000. The two Departments still using PQQs are doing so only for security reasons.
Miss Smith
I am terribly sorry, but I need to finish some points before I run out of time. For procurements that still require a PQQ, we have introduced a much simpler standard set of questions that reduces the burden on suppliers.
On late payment, we recognise that being paid promptly is vital to enabling SMEs to manage their cash flows. Again, we have addressed that by making Government a fair payment champion. We have a policy of paying 80% of undisputed invoices within five days and ensuring that prime contractors also pay suppliers in tier 2 within 30 days. We expect our suppliers to follow that example.
My hon. Friend the Member for High Peak briefly mentioned the fact that Government can end up paying through the nose for procurement. I make the point in passing that we are one of the best clients going. I think that the hon. Member for Islwyn said that, actually, we have some of the best credit available as a Government purchaser. We can take advantage of that and get results for the taxpayer, which is crucial because that is whom we are procuring for, as well as shaping the market. I suggest that fair payment is a way in which we can do that.
I turn to a couple of other points about assistance to SMEs. Hon. Members have spoken about the small business research initiative, under which we have provided more opportunities within Government for SMEs. To address a further point made by the hon. Member for Islwyn, we have also produced a series of “top tips” videos that help SMEs and voluntary organisations pitch for Government business. Again, he should get out his smartphone right now and find out how good those videos are.
On how the measures are giving results, I should say that direct spend with SMEs across Government has increased from the paltry 6.5% when we took office to 10% in 2011-12. We will shortly announce, two years on, the results of our efforts in that area. SMEs have also benefited from a further 6% in indirect spend through the supply chain in 2011-12, meaning that spend with SMEs across Government has increased steadily since 2010.
Looking ahead, we must keep up the pressure on Departments. The hon. Member for Newcastle upon Tyne Central (Chi Onwurah) will be delighted to know that I am personally scrutinising plans from Departments to increase their spend with SMEs and sharing them with the Prime Minister throughout. We have appointed SME champions to do so at ministerial and official levels in all Departments.
Hon. Members will also be pleased to know that we are working closely with the Department for Business, Innovation and Skills to ensure that unified advice is available to SMEs. To conclude, we are aware of the recommendations in Lord Young’s work, and I want to do more to support growth with SMEs throughout the public sector.
Mr Philip Hollobone (in the Chair)
All good things must come to an end. I thank all the hon. Members who took part in that most interesting and illuminating debate, and ask those who are not staying to leave quickly and quietly.