Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Barker) (LD)
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Procurement Bill [HL]
Wednesday 6th July 2022
(2 years, 5 months ago)
Grand CommitteeRead Full debate Procurement Act 2023 View all Procurement Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 4-II(a) Amendments for Grand Committee (Supplementary to the Second Marshalled List) - (5 Jul 2022)
The Minister of State, Cabinet Office (Lord True) (Con)
My Lords, before I begin, I would like to make a brief personal statement. Do not get too excited; it is not what you might think—
Lord True (Con)
In answer to an interesting question in the Chamber yesterday, I implied that my noble friend Lady Wheatcroft had not been present in Committee. I had not noticed that she was here and I personally apologised to her afterwards. But, as my remark lies in Hansard, I thought it appropriate to correct the record. My noble friend Lady Wheatcroft graciously said that she did not expect me to do this, but I think that it is the proper thing to do.
In moving Amendment 10, I will speak to this group of government amendments. Monday was difficult and, on behalf of the Government, I candidly acknowledged the contrition and sympathy that we felt about the number of amendments that were put down. I think that we have arrived at a better place. As noble Lords know, we arranged a briefing for noble Lords on today’s amendments and I am grateful to the officials who gave this at short notice. I hope that noble Lords who were not able to be there have had the chance to consider the supplementary information on the government amendments that was circulated. Officials will be available again tomorrow to provide a technical briefing for your Lordships on the remaining government amendments.
The government amendments in this group refer only to Schedule 2, which lists what is an “exempted contract”. The exemptions are not mutually exclusive and a contract can be an exempted contract if it falls under multiple paragraphs of this schedule. If a contract is exempted, its award and management will not be subject to any of the legislation, unless it is an international organisation procurement, where some obligations apply.
Amendment 10 to Schedule 2 would ensure consistency with similar drafting elsewhere in the Bill. For any of the exemptions in this schedule to apply, the subject of a contract must represent the main purpose and cannot reasonably be supplied under a separate contract. The amendment would add “reasonably” to this description and is consistent with drafting elsewhere in the Bill—for example, on mixed procurements, the duty to consider lots and estimating the value of a contract.
Amendment 11 clarifies the exemptions for vertical arrangements, which arise where a contracting authority enters into an arrangement with an organisation that is connected vertically with it—in other words, with an entity under its control, or what is called a “controlled person” in the legislation. A typical example might be a trading company set up by a local authority to fulfil a specific task, such as carrying out waste treatment and collection for the authority. We briefly discussed this on our first day, when I said that the Government would bring forward further facilitating amendments; I know that the Liberal Democrat Front Bench expressed an interest in that.
Amendment 12 deals with a consequential update to clause formatting following Amendment 11. These amendments to the definition of vertical arrangements have been tabled following some helpful feedback from stakeholders, including the Local Government Association, of which I believe I still may be a vice-president, in which case I should declare an interest. The feedback showed that the drafting did not properly provide for the fact that such arrangements may involve control by more than just one contracting authority. The government amendments therefore ensure that this exemption will continue to apply where there is joint control of the controlled person, as it does now.
Amendment 13 has two parts. The first part—the inclusion of new sub-paragraph (5)—is a result of the amendment to provide for joint control. It ensures that joint control may still be achieved where one person is representing multiple contracting authorities on the board—or similar body—of the controlled body. This continues the existing position in Regulation 12(6) of the Public Contracts Regulations 2015. The second part—the inclusion of new sub-paragraph (6)—stems from the updated definition of “contracting authority”, which means that the vertical arrangements exemption would unintentionally have allowed a wider category of organisations to access the exemptions than intended. This amendment ensures that the vertical and horizontal arrangements are available only to the intended public sector contracting authorities and not to public undertakings and private utilities, which have arrangements that reflect their more commercial nature.
Amendment 14 is a mirror of Amendment 13, for the same reasons. In this case, the purpose is to limit the availability of the horizontal arrangement exemptions to the intended public sector contracting authority recipients.
Amendments 15 and 16 remove the term “legal activity”, which is currently defined by reference to the Legal Services Act 2007, and replaces it with the term “legal services”. This is necessary because the definition in the 2007 Act is not appropriately applicable in a Scots law context. Leaving the term undefined allows the exemption flexibility to adapt to different legal systems within the confines of the remainder of the exemption.
I turn now to the final government amendment in this group. Amendment 17 adds a reference to legislation that explains the meanings of “contract of employment” and “worker’s contract” in Northern Ireland. This is a result of the talks with the Northern Ireland authorities. Adding the Northern Ireland reference again allows the exemption flexibility to adapt to different legal systems, provided that the remainder of the exemption is met. I beg to move.
Baroness Noakes (Con)
My Lords, I shall speak to Amendment 11A, which is an amendment to government Amendment 11. Amendment 11A is really only a place- holder to discuss some broader concepts about this Bill and about paragraph 2 of Schedule 2 in particular.
I confess that I paid little attention to the government amendments ahead of our first day in Committee. Like other noble Lords, I was completely overwhelmed by the huge groupings and the lack of explanation that arrived before they were tabled—hence, I tabled Amendment 11A only yesterday. I am certainly grateful for the explainer that was circulated yesterday. I have not yet read all 60 pages, but a reasonable summary is something like this: “We are trying to keep the new UK procurement code as close as possible to EU rules.”
This is at the heart of one of my main problems with this Bill: we have not created a UK code at all. The Bill may well have simplified or reduced the number of different sets of rules, but that has not achieved a significant simplification of the rules to any meaningful degree. Furthermore, it uses terms and concepts that are comprehensible only to procurement practitioners and in a way that is often alien to the way in which we do things in other areas. It has few principles and a whole load of pernickety rules, of which this schedule is one. In short, this is the EU way of doing things and not the UK way of doing things. I believe that we have missed an opportunity to create something that would have worked better for UK businesses and, indeed, for the UK public authorities that have to comply with it.
I turn to the specifics of Amendment 11A. The amendment would delete new sub-paragraph (2A) in Schedule 2, which is contained in my noble friend’s Amendment 11. Sub-paragraph (2A) is not new, as it rewrites sub-paragraph (2)(c) of the existing Bill. The effect of sub-paragraph (2A) denies the vertical arrangements exemption that my noble friend has just described if the body concerned has even one share held by other than a public authority. I think that this is nonsense. Holding one share or any other kind of minority holding does not change the nature of control, which is what paragraph 2 purports to base the vertical exemption on. It would restrict the exemption to bodies that are wholly owned by the public sector, in effect, and I can see no economic rationale for that.
I also want to challenge two other aspects of paragraph 2, arising out of new sub-paragraph (2B), which is a rewrite of the existing sub-paragraph (2)(b). There is one material change from the existing sub-paragraph (2)(b). It is similar to the issue that I raised in the context of Amendment 4, which we debated on our first day in Committee. The existing sub-paragraph (2)(b) refers to a person who
“exerts, or can exert, a decisive influence”.
The new version merely talks about a person who “exerts a decisive influence”. I explained on Monday that the conventional UK approach when looking at things such as control is to use a test based on the capacity to control rather than actual control. Curiously, paragraph 2 uses that concept of capacity to control because it uses the basic definition of control via the parent undertaking definition in Section 1162 of the Companies Act 2006. Under that section, control exists if a parent undertaking holds a majority of voting rights or has the right to appoint or remove a majority of the board. That is, control exists for the basic purpose of this clause if there is the ability to control, whether or not the right is used. Can my noble friend explain why the Government are using one approach to control but another for decisive influence, deliberately caused by the amendment that he has just moved?
I now turn to the concept of decisive influence itself. If someone other than a controlling authority exercises decisive influence, the vertical arrangement exemption does not apply, so it is important to find out what it means. I expected to find a definition of the term “decisive influence” in the Bill, because it is not a term that is found in general use related to companies or the control of organisations, but I cannot find a definition.
Interestingly—I say “interestingly” as I find it interesting, but I am a bit of an anorak on these things—Section 1162 of the Companies Act contains the concept of dominant influence, which is an alternative way of establishing whether a parent undertaking exists. A dominant interest is defined in Schedule 7 to that Act and requires a right to give directions to a board of directors that the board of directors has to comply with. The Companies Act does not use “decisive influence”; it uses “dominant interest”.
How then do we establish whether decisive influence exits? Do we assume that because the Bill does not use the Section 1162 definition it means something different? That might imply that it is something below the level of control, but precisely what it is getting at seems unclear. As far as I can tell, decisive influence is not a term used in English law, which comes back to my point that we are still rooting ourselves in EU law. It is found in EU competition law and, in that context, it is used as part of a rebuttable presumption of control, so that if a majority of shares are held the parent undertaking is assumed to exercise decisive influence on the subsidiary undertaking.
If it means a variant of control, we end up saying that vertical arrangements will not be exempt even if a contracting authority can control a body. If another body in fact controls that body, it does not matter if the other body can control it but does not do so; it just looks at whether it exercises control. However, the exemption is denied if a tiny fraction of the shareholding of the undertaking is held outside the public sector. There is another leg, which is if less than 80% of the activity is carried out for the contracting authority. There is a confusing set of thresholds for denying the exemption. It is even more complicated if joint control is involved, but I will not go into that. I submit that logic and common sense have somehow gone missing in paragraph 2 and that it needs a rethink.
Lord Moylan (Con)
My Lords, I rise to speak to Amendment 11 only. It carries over into our new domestic legislation what is referred to in the European Union legal context as the Teckal exemption. To that extent, it illustrates and gives force to the point made by my noble friend Lady Noakes that we are very much replicating European Union law here. The reason I rise to address it is that I wish to seek a point of clarification from my noble friend the Minister. It arises from my experience—this is an interest that I once declared but I think has now expired—of chairing Urban Design London, a body that benefited from the Teckal exemption. So I have some experience of how it works.
Urban Design London was—I mean “is”; it still exists and operates—an unincorporated association established between Transport for London, the Greater London Authority and London Councils, representing the London boroughs. Its purpose is to generate training for the benefit of local government officers, Transport for London officers and others in good practice in planning, urban design and transport design. I am very proud of it—it is a successful little body—but it was set up as an unincorporated association, meaning that it is not incorporated and not a company.
I am anxious because there are two versions of the legislation that I can look at: the one that was originally circulated and the one that has replaced it. I might say that the one that has replaced it is a great deal better than the original; it clearly shows the influence of the Local Government Association and people who understand these things. The version in the amendment is generally much better. However, I am concerned about the references to the Companies Act in sub-paragraph (2B), to be inserted by Amendment 11. The clarification I seek is that this is sufficiently broadly drawn that the controlled body that benefits from the Teckal exemption does not have to be incorporated and read in a Companies Act structure. I see my noble friend looking round; I will understand entirely if he is not able to give a firm direction to me on that point today. I simply reserve the right, depending on what he says, to bring something back on Report. I am not pressing him too far on that, but it is something that I would like to know.
I have one other point, which is that I am delighted to see that what was a provision in the originally circulated version of the Bill—whereby an appropriate authority may by regulation make provision about how to calculate the percentage of activities of the controlled body—has been dropped. The percentage of activities is relevant, because one of the qualifiers under the Teckal exemption is that 80% of your activities have to be carried out for the controlling party or parties, but “activities” is not defined. In the case of UDL, which was largely a body which employed staff who did things, we took the view as a board that the appropriate measure was staff time, but there might be bodies where “activities” should be measured by turnover, size of contracts or income and expenditure. I want my noble friend to confirm that the clause enabling an appropriate authority to make regulations on this topic has been dropped in the new amendment.
It should be, because these bodies need to be left to make their own responsible decisions about the best and appropriate means of deciding how to measure their own activities. I see no reason for the Secretary of State to be involved in making regulations about it, and if they behave perversely, they will of course be subject to potentially being sued by a contractor who had failed to achieve business that they might otherwise reasonably have thought they would have obtained.
At the risk of being a little tedious, I seek clarification from my noble friend on those two points, and if he is able to provide it not today but after the Committee, that would be more than welcome.
Lord Wigley (PC)
My Lords, I want to address the change in relation to Scottish law. Before doing that, I will pick up the point made a moment ago by the noble Baroness, Lady Noakes, with regard to the influence of European terminology. She will not be surprised to know that I have no problem with the influence of European terminology; if we are to hunt all European influences out of our legislation, it will take a very long time and leave quite a lot of uncertainty around the place. None the less, I take the point she makes with regard to the substance of the implications, and the question of a capacity to influence is a very important consideration. If a capacity to influence exists, that may have an ongoing impact without it being written in black and white. That has to be taken on board.
I want to ask the Minister about the change to get in line with Scottish law. If there is in future a change in Scottish law or a change in the ruling in the courts in Scotland, presumably that could have an implication for the way in which the Bill, when enacted, works out. Does that mean there will have to be a review every time there is a change in Scotland that might impact on this, because we are working within one market and we need to make sure there is consistency running through this? Perhaps I can park that question with the Minister, as it is a relevant one that arises from what he said.
Lord Fox (LD)
My Lords, at the beginning of the Committee the Minister had a teaser with his announcement. It is very clear that he is not going to resign, because no Minister would put himself through this process and then resign. We can be clear about his intentions.
The noble Baroness, Lady Noakes, said that she was interested in this and that perhaps some of us might not be. I am interested. Both the noble Baroness, Lady Noakes, and the noble Lord, Lord Moylan, have made important contributions to this group of amendments.
Since Monday, much industry has proceeded. We have new groups of amendments and, as the noble Baroness, Lady Noakes, pointed out, we have explanations for those amendments and what they seek to achieve. We thank the Bill team and the Government Whips’ Office for that hard work, which cannot have been easy. We also had a meeting with the Bill team this morning, which has helped us somewhat.
This is progress, although I always like to spoil praise by saying that we really should not have been starting from here in the first place. This is vital legislation that will set the scene for procurement right across our country, and the details need to be correct. We have started to hear that, in just one area, the details remain very much open to question.
Some of the amendments in this group are relatively small changes, including Amendments 10, 12, 16 and 17; others are trying to do a bit more. As we heard from the Minister, Amendment 11 rights a problem that was identified by both my noble friend Lord Wallace and the noble Lord, Lord Coaker, of groups of local authorities working in tandem.
I welcome that the Government have taken the advice of the LGA, but it seems slightly strange that it was sought or delivered after Second Reading rather than some time before it. One of the problems we sometimes have with the Government is that they forget the central role of local authorities, particularly in something like this. Local authorities should have been front and centre in the process of writing this legislation, but, far from it, it seems that they are something of an afterthought. That is where some difficulties are emerging, because, in a sense, we are trying to bend things back to fit local authorities when they should have been framed for local authorities in the first place. This amendment is welcome, with the caveat that we need clarity.
The noble Baroness, Lady Noakes, brought up the issue of clarity and the lack of definition. We heard the result of one of the legal cases that went to the European Union, the Teckal exemption, set out by the noble Lord. Most of the controversy of the European legislation has been hammered out in courts. As I said on Monday, we are spoiling for lots of legal fights in this legislation because of the loose definitions, absence of definitions and cross-definitions. I completely take the point made by the noble Baroness, Lady Noakes, that if we try to write across something using terms which do not appear in the UK lexicon of company law, we will be starting from first principles in the court in order to define them. That will not be in the interests of any government business or of local authorities. We need a clear and legally binding understanding of what all these terms mean. The Minister must use either the Dispatch Box or the legislation—preferably the latter—to clear up that ambiguity.
The second part of Amendment 13 is an example of what the Government giveth the Lords taketh away. Having cut across the public contracts regulation and removed exemptions for public undertaking and private utilities, as I understand it the Government are, with this amendment, replacing those exemptions and focusing this vertical exemption only on public utilities. As far as we are concerned, that is perfectly fine, but again, this is an example where the Bill has had to be corrected because of missing points that cut across. There are so many cross-cuts in this legislation.
Amendments 15 and 16 are another example. Here, as the Minister set out and as the noble Lord, Lord Wigley, requested, “legal activity” has meaning in Scotland and not the meaning that the Government intended for this Bill. We now have to choose something that has no meaning at all, which is “legal services”. In the words of the Government, there is a flexible definition for this. We are being asked to put a flexible definition into the centre of a Bill. I am not keen on this sort of flexibility of language, and this is another example of flexible or misunderstandable language being put into legislation. We are looking for clarity from the Minister. If it is not Pepper v Hart clarity, we need clarity written into what we have. On some of the issues mentioned by the noble Baroness, Lady Noakes, the noble Lord, Lord Wigley, and others, we need to remove that “flexibility” from our language in the Bill.
Lord Purvis of Tweed (LD)
My Lords, I shall add some questions to those posed so far on this group. Before I do, I thank the Bill team for the technical briefing this morning that I took part in remotely and for the further information that the Minister promised and which was provided and circulated with the explanatory statements. They were helpful. Of course, they do not answer all the questions, but that is the purpose of Committee.
Overall, it begs the question as to where we stand on the overall proportion of procurement that would be under covered and non-covered areas, and what is now under exempted areas. The Minister rejected my call for an updated impact assessment. At the moment, we have no information as to what level of procurement we are dealing with in these new areas. It would be helpful if the Minister could say what proportion of the procurement is now likely to be within the covered, non-covered and exempted areas.
With regard to ownership and persons, I posed a question to the technical team this morning, so I hope they have had time to provide some information to the Minister. There seems to be an assumption in the drafting that contracting authorities are either public or private bodies, but it is less clear on the other areas within the broad public sector, where there are, effectively, trust models for the delivery of services. These do not fall neatly into the category of a public or private body. Indeed, I am aware of procuring bodies that delivered services in the Scottish Borders, my former constituency area, that were hybrids between purely public authority bodies, charitable bodies, pension funds and public interest vehicles. I would be grateful if the Minister could confirm whether Amendment 11 will cover all these areas. If it does not, there will still be gaps when it comes to some of the consortia which are both traditional centralised bodies, as we discussed on Monday, and those that are other trust models.
I turn now to my second question, which I also posed to the technical team—to be fair to them, I got some form of answer. It relates to contracting authorities acting jointly when one is English and one is Scottish. What legal framework will they be operating under? The Bill team—I hope I relate this correctly; they have no right of reply, so I hope I am fair in what I say —noted that, later in the Bill, there are regulation-making powers to cover these areas. However, my concern is that, presumably, we would not be expecting regulations to be brought forward to suit individual contracting authorities acting jointly where one is Scottish and one is English. This is a slightly different point from which the Minister said on Monday he would write to me, because it relates directly to this amendment. I did not receive a letter clarifying these cross-border issues. The Minister may say that he was rather busy—
Lord True (Con)
The noble Lord has generously acknowledged, as others have, that the officials have been extremely busy. There will be a response to the noble Lord’s question, as I undertook. With respect to the officials, it is unreasonable to complain that a letter has not been received, given all the other activities going on. I repeat the undertaking. The noble Lord will receive a letter, but I must defend my officials.
Lord Purvis of Tweed (LD)
My Lords, I hope the Minister will reflect on his comments. At no stage did I criticise officials for not receiving a letter. This is a ministerial responsibility. A Minister gives an undertaking to write to a Member in Committee. A Minister brings forward and moves amendments in Committee which are pertinent to the issue I raised when the Minister said that he would write to me. I was not criticising any officials. If any criticism to be laid, it is against the Minister. I simply said that, in the absence of the letter he promised to send me, I am asking these questions for clarification. That is reasonable.
On exemptions, there has been some reference to legal services. I understand the point that has been raised about making sure that there is a distinction from Scottish legal services as appropriate, and I certainly support the Government doing that. However, my understanding is that, for some of the treaty suppliers, there are obligations under some of the treaties on the mutual recognition of professional and legal qualifications. My understanding is that the exemption for legal services under this Bill will cover those other areas where the mutual recognition of professional qualifications in carrying out certain legal services will also be excluded. I understand that a body would be unable to procure legal services that are separate from those exempted, but they are then covered in other areas of professional qualifications. This will leave certain gaps in our treaty obligations.
I reviewed the Australia agreement on the carve-out on legal services. It is broadly the same, so I understand where the Government are coming from as far as these exemptions are concerned, but it is not exactly the same. Perhaps the Minister could give some further explanation as to what is likely to be allowed under the provision of legal services by certain providers of legal services that have mutual qualification recognition, because the position on legal services is still uncertain. If the Minister could respond to those points, I would be grateful.
Lord Coaker (Lab)
My Lords, I start by thanking the noble Lord, Lord True, those who have been working with him and the officials for the briefing we received this morning and for listening to the anger, frankly, that there was on Monday about the situation. We were where we were; we are grateful to the Minister for doing what he could to degroup the amendments and sort things out as best he could. Clearly, there are still a number of issues, and many of us are still struggling to put together the various mountains of paper we have to try to make sense of it.
I congratulate the noble Baroness, Lady Noakes, on her extremely important Amendment 11A. I must say that, in my reading of Schedule 2, I had not picked that issue up, which shows part of the problem—I know that the Minister accepts this—of not having enough time. The noble Baroness’s point was on decisive influence and what that means. As the noble Lord, Lord Fox, said, the definition of particular words and phrases bedevils us at the present time. I pray in aid because, later on, I will point out one word in a couple of phrases that I think makes all the difference; I hope the Committee will bear with me and recognise that I am not being trivial—changing one word would make a significant difference to the meaning in the Bill. As well as pointing something out to us, the noble Baroness has made an extremely important point about what “decisive influence” means in paragraphs 2(2) and 2(3) of Schedule 2.
I would add to what the noble Baroness said. This is really important because is it not only
“a decisive influence on the activities of the person”;
it is also “directly or indirectly”. You then really get into the question of what on earth it means. To be frank, when you get into “decisive influence” and “indirectly”, it becomes extremely difficult. Again, I thank the noble Baroness. Like her, I look forward to listening to the answer the Minister gives with respect to that.
I agree with most of the remarks made by the noble Lords, Lord Purvis and Lord Fox, and others. I have decided not to read out my notes, because I want to try to get to the heart of this for the benefit of those who read our proceedings. If I get this wrong, the Minister will need to correct me. We need to understand where we are and what is happening.
My understanding is that the current procurement regime—not the regime envisaged by the Procurement Bill—operates under the existing Public Contracts Regulations 2015. Because we left the EU, the original Procurement Bill sought to transpose the 2015 regulations into British law. Unfortunately, in doing that, the Bill made a series of errors, and in particular around the Teckal exemption—however it is pronounced; I do not have the same mastery of languages as the noble Lord, Lord Moylan. That exemption was not actually in the original drafting. The Local Government Association and all the other bodies were horrified—from what I have seen of the statements they have made to the Government—because it meant that many of the things they were able to do under the 2015 regulations with the Teckal exemption would no longer be allowed and they would have to change their procurement processes. I apologise to the noble Lord, Lord Moylan, who gave the very good example of the transport initiative, of which he was proud, but the LGA and other bodies were worried that these sorts of arrangements would not be operational in the same way as was drafted in the original Procurement Bill.
The Committee will correct me if I am wrong, but this is the million-dollar question for me, and the reason I abandoned my notes: do the Government amendments in this group, led by Amendment 10, mean—as the noble Lord, Lord Moylan, other noble Lords, the LGA and many other organisations which have made representations to us are concerned it does—that the 2015 regulations have been transposed into the amended version of the Bill, along with the Teckal exemption to those regulations? That is what people will be looking for, because British law, as it will stand when this Bill becomes an Act, will mean that they can operate the various arrangements that they have either vertically with an entity in themselves, or horizontally with other local authorities or bodies.
If we look across the country, we see that in all the areas in which we live—including, I presume, Wales; I am not sure about Scotland, about which the noble Lord, Lord Purvis, may wish to say something—there are hundreds upon hundreds of models of procurement that have been adopted and worked on to deliver services in the way that a local authority, body or entity has decided to follow. The Minister will know this better than me, because of his experience. What they will be looking at is whether the Government’s amendments mean that their concerns have been met. That is why I decided to put down my amendment. I cannot debate law as well as many other noble Lords, but if I were someone from the outside looking at this, I would ask whether this means that I can carry on procuring in the way that I have been able to procure previously. That was my concern with the way that the Bill was originally drafted. That is the million-dollar question for the Minister.
Lord Davies of Brixton (Lab)
My Lords, I was not going to intervene in this debate, and my questions are effectively procedural. As I understand it, these amendments are to Schedule 2, although according to the Marshalled List, Schedule 2 has already been debated. We also have the report from the Delegated Powers and Regulatory Reform Committee, which made a number of trenchant criticisms of the contents of the Bill, including a provision in Schedule 2. Where and how do the Government respond to the points raised by the committee and where and how should we, as members of this Committee, raise the issues that were raised by the Delegated Powers and Regulatory Reform Committee? As my noble friend said, we have a mountain of paper here, and quite rightly we have been focused on all these government amendments, but I do not want the issues raised to pass by default. Does the Minister respond and, if so, when?
Baroness McIntosh of Pickering (Con)
I would like my noble friend to respond to a point that was raised by the noble Lord, Lord Purvis, on Monday, which is pertinent to the remarks from the noble Lord, Lord Coaker, just now. I am confused about whether paragraph 19 of Schedule 2 relates to military contracts only. I think that was the issue raised by the noble Lord, Lord Purvis, on Monday, and I do not know that we got a satisfactory answer. I am very confused about whether paragraphs 19 and 20 of Schedule 2 should be read together with paragraph 26. I think I am right that, on Monday, the noble Lord, Lord Purvis, raised whether the international agreements under paragraphs 19 and 20 relate to defence contracts only or whether they are more general.
Lord True (Con)
My Lords, I am grateful to those who have spoken. Of course, this is Committee in your Lordships’ House, the whole purpose of which is to probe, challenge, ask and seek greater definition. I make absolutely no complaint about that; indeed, I welcome it. The issue is how and when most effectively we can give the appropriate response. I and my officials will always try to do that in the best possible way and the best possible time to enable your Lordships to do your work. That is the aspiration. I have no doubt that I will fall short of that aspiration and that I will be caned for that.
I will speak to Amendment 11A, which was tabled by my noble friend Lady Noakes, in a moment. First, I have been asked questions on a number of matters, which I will try to address. I fear that the exemption list was drawn up before my time, but I am advised that it was drawn up in consultation with various stakeholders with the appropriate interests covered. Analysis of the exclusions in WTO-Government procurement agreements and responses that the Government received to the initial Green Paper were the leading informatives, as I understand from those who were involved at that stage. However, I will be happy to engage with the noble Lord outside the Committee between now and Report if there is a particular item in Schedule 2, or if he wishes to address it in an amendment on any of those exclusions. That is where we are coming from.
I will deal with a couple of other things because I want to get on to the matters that largely affect local authorities and the amendments. The noble Lord, Lord Purvis of Tweed, raised a question—this is also germane to the point made by my noble friend Lady McIntosh—about the nature of the relationship with, say, the Australia agreement, which he cited. I understand that he raised that in a briefing session this morning in relation to postal services. Indeed, that would not be a defence matter. My officials agreed to clarify this. Since it has been raised, this is the point where we are. By the way, no one should Pepper v Hart anything that I am saying at this stage because this is an exploratory Committee stage and it is important both in correspondence around Committee and in engagement that we get to the right point—I totally agree with the point that the noble Lord, Lord Fox, made about the importance of definition, which is absolutely fundamental.
This is a complicated, technical matter, which requires us to understand both the Bill and how the Australia agreement is structured. However, I am advised that we are satisfied that the Bill is not required to cover postal utility activities. To determine whether a utility is covered by the Bill, one has to look at both the entity and the activities that it is carrying out. Utilities are defined as public authorities, public undertakings and private utilities that carry out utility activities. Utility activities are defined as activities of the type set out in Schedule 4—gas and heat, as well as transport, which we discussed briefly on Monday. It is true that the Australia agreement does not define the terms “utilities” or “utility activities”. However, it works on a similar basis. The agreement covers only the utility activities covered in section C of our market access offer and only for the entities set out in section C.
In the Australia agreement, section C of our market access schedule provides that only certain transport services are utility activities and that the only entities that are covered are public utilities. Section C does not include the postal sector or private utilities. Postal services in the Australia agreement are included as services only in section E. This means that those entities only are covered by the Australia agreement in annexes A, B and C of our market access schedule, which does not include utilities in the postal sector that are covered for the postal services in section E that they procure—for example, a local authority procuring mailshot services. It does not mean that entities such as Royal Mail that operate a private postal service are covered. That is the current advice that I have on that matter; I am sure that my officials would be happy to explore it further with the noble Lord.
Lord Purvis of Tweed (LD)
I am grateful to the Minister for that and for answering at this stage a question that I have not yet asked about postal services. Our understanding is that that would be in the group with government Amendment 24 on the expansion of utilities. We will be raising some of these issues, but I take note of what the Minister said. The main thrust of my questions in this group were about the joint groups and the different types of ownership for them, but I am grateful for what the Minister has said so far.
Lord True (Con)
I am sorry, I thought that I heard the noble Lord referring to the Australia trade agreement. It was my understanding that that would be coming later. I was not sure, given that certain things are cropping up in different places. I assure the noble Lord that the matter of the Delegated Powers Committee and the Schedule 2 recommendations will be discussed in group 2, to follow. I was not sure whether we were going to get the Australia agreement later, since the noble Lord had referred to it, so I thought that I had better get the answer in.
Baroness McIntosh of Pickering (Con)
I understand that Parcelforce is a trading name of Royal Mail, but is it a commercial or a public enterprise under the definition that my noble friend has just given?
Lord True (Con)
My Lords, I have given the answer that I have been advised to give at this stage. In answer to the further supplementary question that my noble friend has asked, I will ask officials to clarify what I said. I was advised to inform the Committee that it does not mean that entities such as Royal Mail that operate a private postal service are covered. If that needs further clarification, I am sure that we can provide it.
These joint bodies are extraordinarily important. Noble Lords have spoken, particularly of local authorities, with great experience, which I hugely respect. I am second to none in believing that Governments of all colours do not generally do enough to listen to the wisdom of local government. I have said that on the Back Benches and on the Front Bench and under Labour, coalition and Conservative Governments. In answer to the noble Lord, Lord Coaker, this Government are certainly keen to ensure that local authorities will be able to operate as they did before, which was one of the reasons why this amendment was tabled, as he divined. I pay tribute to the Local Government Association for its consistent engagement. The Bill maintains the position in the current procurement regime, albeit adjusted for the purpose of UK law, by using the terminology of bodies that undertake public functions, which is drawn from the test of average functions of a public nature derived from the Human Rights Act 1998 —a complicated but well-established test, I understand.
I was asked by my noble friend Lady Noakes about decisive influence and dominant influence. I have to be very careful speaking personally as a Minister from the Dispatch Box, but our position is that we believe that the amendments we have tabled are clear and sufficient. However, on my noble friend’s question, the reference to the Companies Act 2006 is used to describe the nature of relationships between those entities that can engage in the exemption. The reference to decisive influence is broad in affecting the decision-making of the contracting authority. I will take away my noble friend’s point and consider it further, because interest was displayed by other Members in the Committee.
Lord Coaker (Lab)
I am sorry to do this, but may I pick up on the point the Minister was making to the noble Lord, Lord Moylan, about the letter he will write? The answer to the question that the noble Lord, Lord Moylan, posed is quite significant. It would be interesting for the whole Committee to know whether Regulation 12 of the Public Contracts Regulations 2015 applies in a way that would allow the noble Lord’s example organisation to continue as it is now, when the Procurement Bill becomes an Act. I apologise for intervening a bit late.
Lord True (Con)
Yes, indeed. I totally take that point. It is good practice, and I hope it will be our practice in this Committee, to circulate to all noble Lords who take part. I was not proposing to send a billet-doux to just the noble Lord, Lord Purvis of Tweed, or my noble friend Lord Moylan and not spread it round. I will address that, but I repeat that it is our expectation and hope that local authorities will be able to do as they did before. That is the fundamental point and I will pursue this in that spirit. In that light, I hope the noble Baroness will be prepared to not move her amendment.
“(1) A contract between a contracting authority and a person that is controlled by—(a) the contracting authority,(b) the contracting authority acting jointly with one or more other contracting authorities,(c) another contracting authority, where that authority also controls the contracting authority referred to in paragraph (a), or(d) another contracting authority acting jointly with one or more other contracting authorities, where the authorities acting jointly also control the contracting authority referred to in paragraph (a).(2) A contracting authority, or a contracting authority acting jointly with one or more other contracting authorities, controls a person if—(a) the contracting authority is a parent undertaking, or the contracting authorities are parent undertakings, in relation to the person,(b) no person other than the authority, or authorities, exerts a decisive influence on the activities of the person (either directly or indirectly),(c) more than 80 per cent of the activities carried out by the person are carried out for or on behalf of—(i) the contracting authority or authorities, or (ii) another person that is, or other persons that are, controlled by the authority or the authorities acting jointly, and(d) in the case of joint control—(i) each of the contracting authorities is represented on the person’s board, or equivalent decision-making body, and(ii) the person does not carry out any activities that are contrary to the interests of one or more of the contracting authorities.(2A) A person is not to be regarded as controlled by a contracting authority, or a contracting authority acting jointly with other contracting authorities, if any person that is not a public authority holds shares in the person.(2B) In sub-paragraph (2)(a)—“parent undertaking” has the meaning given in section 1162 of the Companies Act 2006, save that an “undertaking” includes any person;“parent undertakings” means two or more contracting authorities acting jointly that would, if they were a single undertaking, be a parent undertaking.”
“(5) For the purposes of sub-paragraph (2)(d)(i), one representative may represent more than one contracting authority.(6) In this paragraph, references to a contracting authority do not include references to a public undertaking or a private utility.”
“(4) In this paragraph, references to a contracting authority do not include references to a public undertaking or a private utility.”
“(2) In this paragraph, the expressions “contract of employment” and “worker’s contract”—(a) in the case of a contract awarded by a transferred Northern Ireland contracting authority or awarded as part of a procurement under a transferred Northern Ireland procurement arrangement, have the meanings given in Article 3 of the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16));(b) in any other case, have the meanings given in section 230 of the Employment Rights Act 1996.”
Lord Wallace of Saltaire
Member’s explanatory statement
This amendment is intended to allow a debate on a recommendation from the Delegated Powers and Regulatory Reform Committee in respect of Schedule 2. The Committee considers that the power under paragraph 17 “should be narrowed unless the Government can fully justify it”.
Lord Wallace of Saltaire (LD)
My Lords, the previous discussion has demonstrated the active concerns a lot of members of this Committee have that this Bill should not cramp the ability of local authorities to experiment with forms of local procurement, the encouragement of local enterprise, and so on. I had a message from a county council this morning on precisely that point. We are concerned about this. Perhaps there is enough room below the threshold, but we need to explore that a little more.
These amendments respond to the report on the Bill from the Delegated Powers and Regulatory Reform Committee. Members of that committee are here, so I shall be brief and defer to their expertise.
The Minister will be well aware that many in the Lords are deeply concerned about the Government’s determined move away from clear, detailed legislation towards skeleton Bills and executive discretion. The perhaps soon to depart Prime Minister campaigned to leave the EU on the promise of restoring parliamentary sovereignty but has worked instead to bypass Parliament wherever he can. The Minister for Brexit Opportunities and Government Efficiency, who, as far as I understand it, has some influence over this Bill, is pre-emptively arguing that the Prime Minister was elected by the people and not Parliament, and therefore does not have to go if he loses the confidence of Parliament. We all recognise that both Houses of Parliament are deficient in a number of ways and in need of reform, but, for the moment, we have the constitution that we have inherited, battered though it is, and the spread of Henry VIII powers across legislation is a breach of that constitution, as the DPRRC notes.
Amendment 18 therefore challenges the delegation of power to Ministers to make exempted contracts for the provision of public transport services. Amendment 21 similarly challenges the degree of autonomy given to Ministers in providing concession contracts for air services. Amendment 28, to the schedule on utility contracts, challenges the width of the powers granted to Ministers to make exemption determinations.
Amendment 31 is more egregious on the same theme. It would give permission for Ministers to specify by regulation which services will be subject to the light-touch regime for contracts and which will be excluded. The DPRRC’s comment on this is that the power
“should be narrowed unless the Government can fully justify it.”
I suspect that the Minister is unable to do that.
Amendment 208 also addresses the remarkably wide freedom given to Ministers with regard to light-touch contracts. Here, it goes into tertiary legislation, allowing Ministers by regulations to
“specify services of a kind specified in regulations of the authority under section 8”.
I hope that members of the Committee understand that; I am not entirely sure that I do.
Clause 86, to which I have tabled a stand part challenge, gives Ministers powers to make regulations about a range of documents on contracts and information about contracts. Clause 109 gives Ministers powers
“to amend this Act in relation to private utilities”,
requiring them to consult
“persons appearing to the authority to represent the views of private utilities, and … such other persons as the authority considers appropriate”—
but not anyone with any standing in terms of public or parliamentary accountability.
Clause 110, which is covered by Amendments 530 and 532, relates entirely to regulatory powers. Our amendments would implement the DPRRC’s recommendations to make pricing determinations for qualifying defence contracts subject to the affirmative procedure and restrict the ministerial freedom to raise financial thresholds above the rate of inflation. On all these clauses, the DPRRC argues that the breadth of ministerial discretion should be narrowed. It comments that, in a number of instances,
“the Government … have chosen this approach for no other reason than that it hasn’t yet developed the underlying policy.”
I ask the Minister to attempt to justify these overextended executive powers or, otherwise, to narrow the powers granted and recognise the importance of parliamentary scrutiny and the principle of parliamentary sovereignty. I beg to move.
Lord Berkeley (Lab)
My Lords, I put my name to Amendment 18 in the name of the noble Lord, Lord Wallace of Saltaire. I support everything he said. I am worried about the powers that the Government want to keep for themselves. I apologise to the Committee for not being here earlier; I was having a discussion with Ministers on the future railway structure, on which I believe there will be legislation this autumn. To some extent, that pre-empts what is covered by Amendment 18, which is to do with public passenger transport services. It is not just about trains; it includes buses and probably many other things as well.
Baroness Neville-Rolfe (Con)
My Lords, I support the noble Lord, Lord Wallace of Saltaire. I put my name to Amendment 18, and I am glad that the noble Lord, Lord Berkeley, did so too and that it is being debated with many other amendments about which I have a similar concern. It is right that this is a cross-party challenge to the Bill. It reflects the report of the Delegated Powers and Regulatory Reform Committee, now chaired by my noble friend Lord McLoughlin, and of course previously chaired by my noble friend Lord Blencathra. I do not think that I have ever seen such an excoriating report on the abuse of delegated powers.
This is a hugely important piece of legislation, affecting £300 billion a year of public money and its impact on those who supply it. That is nearly as much as the enormous sums spent and misspent on Covid. We now need much more information on the secondary legislation and regulations to be made under the Bill. Even if this is clarified and information is provided, my noble friend needs to bear in mind that he cannot bind a future Government or Prime Minister and their teams. Frankly, the regulatory and other delegated provisions before us are extremely dangerous and need to be reconsidered in the light of the DPRRC report and of course today’s debate and the answers that we are given. I am just sorry that we are not on the Floor of the House.
I will give a few choice quotations from the report. First, paragraph 20 says that
“in general [the relevant provisions of the Bill] leave the content of such notices, etc to be set out in Regulations”.
This includes notices about awards made without competitive tendering, the exclusion of suppliers and modifications or terminations.
Secondly, paragraph 23 says:
“We are also disappointed that the Government have provided no illustrative regulations. Illustrative regulations would have been very helpful and, without them, scrutiny of clause 86 is considerably hampered.”
This is delightful in its politeness, but it is very strong.
Thirdly, paragraph 33 says:
“The Government have failed to adequately explain”—
split infinitives would not be allowed in my day—
“why Ministers are to be given such a broad power to override the existing statutory bar on public authorities”.
This is an open-ended power to override primary legislation by order. The matters covered include: “conditions of employment” of a contractor’s workforce, “industrial disputes”, countries of origin and—this stuck in the gullet—
“political, industrial or sectarian affiliations or interests of contractors or their directors, partners or employees”.
This is utterly over the top, unless you are Mr Jeremy Corbyn, I suppose.
Finally, paragraph 53 says:
“The Government have failed to provide any justification for leaving entirely to regulations the question of which concession contracts for air services provided by air carriers are to be exempted from the Bill.”
From sitting in the Competitiveness Council of the European Union for several years, I can tell noble Lords that air services are big politically, and decisions need to be properly scrutinised by Parliament and not concluded by officials who tend—in my considerable experience—to exercise the power once matters are put into delegated legislation. There is also a vast shareholder base in aviation that should be quaking when it sees this Bill, if I have understood it correctly.
I apologise to my noble friend the Minister, with whom I have worked so well over the years, but resolving our challenge to these delegated powers is a real test of his mettle and of this Committee’s competence. They mean that the Bill is, in practice, regulatory, not deregulatory as we all hoped. I very much look forward to supporting my noble friend the Minister and others in making some very necessary changes to the Bill.
Lord Blencathra (Con)
My Lords, it is a pleasure to speak after my noble friend Lady Neville-Rolfe and after listening to the speech of the noble Lord, Lord Wallace of Saltaire. They have gone through each of the individual recommendations of the Delegated Powers Committee’s report and each of the amendments, which saves me having to quote from them as well, so I will speak in more general terms.
I did not speak on Second Reading, because a quick look at this Bill convinced me that the delegated powers report would be worth waiting for—and what a scorcher it turned out to be. Now that I am no longer committee chairman, I can speak more bluntly than I have in the past, even though I might not now get a phone call from No. 10 asking me to form a Government of national unity tonight. I fully support the concept of the Bill, but it is an appalling mess. I exonerate my noble friend the Minister, who had no part in drafting it, but how on earth can officials and the Office of the Parliamentary Counsel—the OPC—spend two years coming up with these shambles where 345 government amendments—my count on Monday—are necessary? However, what concerns me today is not the shambolic drafting but the abuses of parliamentary protocols as evidenced in the Delegated Powers Committee’s report.
Last year, the Delegated Powers Committee and the Secondary Legislation Scrutiny Committee published two reports: Democracy Denied? and Government by Diktat. We produced countless examples of legislation presented to the House with very wide regulatory powers granted without any justification for them, but with the usual excuse: “just in case they might be needed one day”. The reports cited “skeleton legislation” and clauses where the policy had not been thought through. In addition, powers were being taken to fill in, not just the details, but the general principles which should have been in the primary legislation and not in secondary legislation.
Then we have the negative procedure applied in completely unacceptable cases where the affirmative should be used, such as increasing penalties or charges, for example. Then, of course, we have the dear old Henry VIII powers attached almost automatically now to almost every Bill without any thought. No, I correct that—the thought among Bill teams and drafters is that the department can change any primary legislation it likes in future without having to go through the hassle of producing new primary legislation and getting approval for it. What a marvellous “Get out of jail free” card this is: change any legislation at the stroke of a Minister’s pen.
In this Bill, the Delegated Powers Committee has drawn attention to all these gross abuses and—let us face it—they are abuses. Just because Governments have got away with treating Parliament with contempt in the past does not mean that this should be the norm. I will quote only one paragraph from the Delegated Powers Committee’s report. Before doing so, I note that the committee is not hostile to this Government or any Government; indeed, it is now chaired by one of the longest-serving Commons Conservative Chief Whips in history, and so it is not a partisan committee. Paragraph 7 says:
“This report identifies multiple failures in the Memorandum to adequately explain and justify very broad delegations of power which enable implementation of significant policy change by delegated legislation. This would give us cause for concern at any time but is particularly disappointing as it comes so soon after the publication of our report, Democracy Denied? The urgent need to rebalance power between Parliament and the Executive, in November 2021, and of revised guidance for departments on the role and requirements of this Committee.”
The new guidance by the Delegated Powers and Regulatory Reform Committee was circulated to all departments, and, in the first week of January, I personally wrote to every Minister and every permanent secretary giving them copies of the revised guidance. This is a Cabinet Office Bill, so I want my noble friend the Minister to go back to the Cabinet Office and call in Simon Case, the Cabinet Secretary, Alex Chisholm, the Permanent Secretary, and Elizabeth Gardiner, the First Parliamentary Counsel, and ask them why they seem to have deliberately ignored every word of the guidance with which they were issued.
Worse than that, they have reneged on their promises to the committee. In the response to our report, they said that the Government agreed that the statement of principles of parliamentary democracy set out in both our reports should be included in the Cabinet Office’s Guide to Making Legislation. We reported way back last December, so they have had five months to adjust the Bill taking that into account. Why have they not done so?
The Government agreed that the routine use of just-in-case powers was not appropriate, so why include them in the Bill? They agreed that guidance should not be used to create rules that must be followed, should not be relied on for interpretation of legislation, and should describe the law accurately. They said that the Cabinet Office’s Guide to Making Legislation would be strengthened to reflect the committee's revised guidance. Will my noble friend the Minister ask why that has not happened? I am tempted to ask the non-executive board member, the noble Lord, Lord Hogan-Howe, to maybe conduct an investigation into the Cabinet Office, but I will keep that in reserve.
Of course, the Government justified skeleton legislation, Henry VIII powers and the negative procedure even when there were alternatives that would not subtract from the thrust of the legislation. Not one single item in any of the DPRRC reports would stop any Government of any persuasion driving through their programme. At worst, it would mean a Minister—usually a Lords Minister—perhaps having to do a few more 90-minute SI debates.
I conclude with something the Government did agree on. They welcomed the end-of-Session report that the Delegated Powers Committee said it would produce. The committee has now produced the first end-of-Session report, even though it covers only half or less than half of the last Session, and it makes for some very uncomfortable reading for some Bill teams and OPC drafters. It criticises the quality of delegated powers memoranda by the Ministry of Justice, and two of those by BEIS and the Home Office each. If we cannot trust the delegated powers memoranda, how can we trust the rest of the departments’ assertions?
The report highlights serious deficiencies in the Health and Care Bill, describing it as
“a clear and disturbing illustration of how much disguised legislation a Bill can contain and offends against the democratic principles of parliamentary scrutiny.”
However, by far the most egregious and insidious example was the Subsidy Control Bill, which had a delegated power which enabled the Government to disapply the Bill’s subsidy control requirements by a direction that had to be kept secret from Parliament. Added to which, the delegated powers memorandum had the effrontery, and indeed the honesty, to justify this absence of parliamentary scrutiny on the grounds of
“the potential for non-approval by Parliament”
—in other words, a risk of defeat.
Can noble Lords believe that? Noble Lords who were on the committee can believe it, because they had it removed eventually. Officials drafted provisions to enact a law in secret and not tell Parliament in case Parliament voted against it. We do not have that in this Bill, but I am quoting some general examples to show how appalling some of the general delegations of power have been.
Of course, Ministers have ultimate responsibility, but we all know that Ministers were not responsible for the 345 government amendments in this Bill. Nor are they the ones who have devised and insisted on inserting all these parliamentary abuses into legislation. I suspect that my noble friend the Minister was as shocked as the rest of us when he was handed this Bill and saw the extent of the completely inappropriate delegation of powers.
I want him to go back to the Cabinet Office and tell officials and parliamentary drafters that if they do not want their names on the list of bad boys and girls when the DPRRC publishes the full report at the end of this Session, they had better bring in the changes on Report, as suggested by the Delegated Powers Committee. They should amend the Bill not only to keep their noses clean but because it is the right, democratic thing to do.
Lord Hope of Craighead (CB)
My Lords, I support the amendment in the name of the noble Lord, Lord Wallace of Saltaire, but I have a question for the Minister. As an example of the grouping of paragraphs and sections to which objection is taken, I point out that paragraph 17 of Schedule 2 refers to
“services of a kind specified in regulations made by an appropriate authority.”
The phrase “appropriate authority” occurs in all the paragraphs and measures that are under attack and is defined in Clause 111(1) as meaning
“a Minister of the Crown … the Welsh Ministers, or ... a Northern Ireland department”.
There is no mention of any of the Scottish Ministers.
Baroness Hayman of Ullock (Lab)
My Lords, I thank the noble Lord, Lord Wallace of Saltaire, for tabling these amendments in the first place, and I thank those Members who put their names to them. It is important that we have had the opportunity to debate the report produced by the Delegated Powers and Regulatory Reform Committee, a report that the noble Lord, Lord Blencathra, described as a scorcher. I think we all agree that there is a lot in here of great concern, and it is very important that we have spent this time going through it. I also thank members of the committee for the work they did in going into such detail on this very complex Bill, to draw our attention to their serious concerns and the problems that we need to look at and resolve.
I will not go into a great amount of detail. Other noble Lords have talked about the detail of the report so there is no point in my repeating that. I will just draw the Committee’s attention to a few things. My noble friend Lord Berkeley started the debate by expressing his concerns about the broad range of powers—the Henry VIII powers, as they are described—and other noble Lords have talked about their concerns about them. The noble Baroness, Lady Neville-Rolfe, felt that some of them were potentially dangerous. If noble Lords’ concerns are that strong, it is really important that we look at how to address them. She drew attention to a number of particularly damning paragraphs. There was also talk about the fact that a large number of clauses should be subject to the affirmative procedure rather than the negative one, and of course we absolutely support that.
I draw the Grand Committee’s attention to paragraph 60 of the report, which was the one that struck me in the context of the way that a lot of Bills, legislation and policy development have been happening recently. If noble Lords will bear with me, I will read it out. Talking about Clause 109, it says:
“This is, in effect, a skeleton clause as the real operation of the exemption process is to be left to regulations. We are very concerned that the Government appears to have chosen this approach for no other reason than that it hasn’t yet developed the underlying policy.”
That gives me great concern because it seems almost to be becoming the norm, and it is not the right way to go about making regulations and legislation. The DPRRC then talks about its Democracy Denied? report, which the noble Lord, Lord Blencathra, mentioned, and says that
“we drew attention to the issue of the inclusion of powers in bills which were, in effect, ‘a tool to cover imperfect policy development’. We said this was unacceptable and that we looked to the Government to undertake the systemic reforms necessary to prevent its happening. It is disappointing to find evidence in this Bill that this issue has not been addressed.”
That was the only further concern that I wanted to draw the Committee’s attention to today. A number of us have worked on a lot of Bills now, and there is a worrying lean towards this lack of policy development before Bills are drawn together and published. That is often why the Bills then come into so many difficulties. It would be better if all this was sorted out much earlier, so that we all knew where we were and could understand and better support the Government in producing good legislation. Some very interesting questions have been asked, including a very specific one from the noble and learned Lord, Lord Hope of Craighead, and I look forward to the Minister’s response.
Lord True (Con)
My Lords, I thank all those who have spoken. I take seriously the gravity of the remarks made. I assure my noble friend Lord Blencathra, whose chairmanship of the committee was distinguished—he can speak even more freely now that he is no longer in that role—that while I did not catch the names of all the individuals that he asked me to refer his remarks to, I will make sure that that is done as he requested.
On the question raised by the noble and learned Lord, Lord Hope of Craighead, it is a matter of regret —we discussed this on the first day—but the Scottish Government have declined to be part of this legislation. They do not wish to be. They wish to pursue their own course and obviously that is why they are omitted from the definition of an appropriate authority under the legislation. It would be odd if they were an appropriate authority to alter legislation which they declined to take part in. That is the explanation.
Lord Hope of Craighead (CB)
Of course, it is possible that the Administration in Scotland will change. This Bill will become an Act which will perhaps last longer than the present regime in Scotland. Assuming one has an Administration who are favourable to participating in this system, the question then is why they should not be included, or at least mentioned, in the definition of appropriate authority. It is quite a serious issue, because appropriate authorities is referred to in many places in the Bill, as the noble Lord knows. If, as I think the noble Lord is indicating, this is simply a sort of penalty for not participating in the legislation, it seems unfortunate that that should be set in an Act which will last for, I imagine, many years into the future. Is it not worth rethinking this? Might it not be better to mention the Scottish Ministers and leave it to the future to see whether they actually exercise the power that has been given?
Lord True (Con)
My Lords, I hear what the noble and learned Lord says. Those remarks might also be addressed to the First Minister in Scotland. I expressed regret—I think it is shared across the Committee—that the Scottish Government have not wished to take part in the constructive way in which the Welsh Administration have. We have had good co-operation with the Welsh Administration, and that has had an impact on the Bill. Clearly, if the policy changes, then a Bill can be amended, but I am about to reply to a series of complaints about the Government taking all sorts of potential regulatory powers to change this, that or the other, and that would be quite a substantial secondary power to take. It is regrettable, but that is the position.
Lord Purvis of Tweed (LD)
Further to the point from the noble and learned Lord, I am less convinced at the response that this is discretionary as to the choice of Scottish Ministers. I understood that these provisions were for public passenger transport services that do not cross the border into Scotland. Therefore, these are for the provision of public transport services that begin and end in England.
If that is the case, they are within the scope of this legislation. If they are public passenger transport services which begin and end within Scotland, they would be under Scottish legislation. Therefore, this would not apply and the appropriate authority would not be Scottish Ministers. Would it not be better if the Bill simply stated where the public passenger transport services are? The area of concern for me is cross-border public passenger transport services, for which, under the 2016 legislation, there was further ministerial devolution to allow some form of regulations to be passed on cross-border public transport services. I declare an interest because I use them every week.
Lord True (Con)
I hear what the noble Lord says. I come to this House and I am asked to respect the position of the devolved Administrations. The position of the devolved Administration in Scotland is that they do not wish to be part of this legislation, so I am caught. If at a later stage, or even at this stage, the noble Lord wishes to put forward an amendment to change “appropriate authority” to include the Scottish Government, no doubt we can debate that matter, but the position now is the one I set out and I have given the explanation that is the policy decision of the Scottish Administration.
Lord Purvis of Tweed (LD)
We are making law so, for the record of the Committee, is the Minister saying that public passenger transport services under paragraph 17 of Schedule 2, for the exempted contracts, are public passenger transport services that begin and end in England? Is that correct?
Lord True (Con)
My Lords, the noble Lord is right to raise the issue of cross-border services. We will come to that later in the Bill. I am not excluding discussion of cross-border. It is an overall policy position that I am stating. We will come to the cross-border issue later in the legislation. I do not want the noble Lord to think that we are having a kind of Sicilian motorway approach, where the Mafia money ran out. I fully understand where he is coming from on that. I was really replying on the broader point.
Time runs on and I must get on to the specific and very important points made not only by the Delegated Powers Committee but by noble Lords who have tabled amendments. I will try to persuade the Committee that the amendments are unnecessary and that the strictures of the Delegated Powers Committee were strong. I heard the word “a scorcher”, but perhaps I do not necessarily need that. I heard the remarks from all sides on that. We will carefully consider them, notwithstanding what I say now. Obviously, it believes it is a reasonable position, but we will consider those remarks.
Amendment 18 would remove paragraph 17 of Schedule 2, which has been alluded to. The effect of this would be to remove an exemption for certain public passenger transport services that exists in our current procurement legislation. The exemption exists and it is necessary as procurement for such services is governed by a separate regime operated by the Department for Transport. It is important that the Bill does not impinge on that separate regime and that the exemptions under the Bill fully align to ensure that public passenger transport services are regulated by the correct regime. There is no intention to exempt public passenger transport services beyond those currently exempt and governed by the Department for Transport regime.
Amendment 21, tabled by the noble Lord, Lord Wallace of Saltaire, seeks to remove a provision that exempts concession contracts for air services provided by a qualifying air carrier. Removing this would bring those contracts within the scope of the Bill, which would be a fundamental change to the existing position.
Air services are separate markets driven and operated by the private commercial sector. The public sector does not generally procure or intervene in these services. Given the distinctive features of the air transport market, and the state’s historical limited intervention in it, it would not be appropriate to bring air transport within the scope of the mainstream procurement rules. However, I assure noble Lords that the power is limited to specifying the meaning of a “qualifying air carrier”, which is, in essence, someone licensed under the existing regime for air carriers. This power is not wide-ranging and is needed only to ensure that the definition refers to the correct regime. Therefore, I ask noble Lords not to press Amendments 18 and 21.
Lord Fox (LD)
I appreciate the comment the Minister has just made. This is a straight question: under what circumstances would these thresholds be changing, other than the GPA change? This would either be with or without inflation—inflation has nothing to do with it; the GPA has so far determined what these thresholds are. I am a little confused about what power the Government were seeking in the first place with this.
Lord True (Con)
I believe that there may be potential, for example, for an evolution in the nature of the regime. However, I will come back to the noble Lord with further examples, if that is helpful. We can add that to the list of matters to take up.
Finally, the noble Baroness, Lady Hayman of Ullock, quite understandably expressed concerns about Clause 109. This is specifically related to private utilities; it provides a power for an appropriate authority to reduce the regulation of private utilities under the Bill to reduce regulation. As the Bill provides at Clauses 81 and 89, contracting authorities owe a duty to treaty state suppliers to comply with a substantial part of the Bill. The power can be exercised to make amendments only where those amendments do not put the UK in breach of its obligations to those suppliers, and this will inherently limit the scope of the amendments we are able to make. For example, private utilities will still be required to publish tender notices and contract award notices.
Private utilities are covered by the Bill where they have been granted a special or exclusive right to carry out a utility activity, where that right substantially limits other entities that have no such rights carrying out those activities. The clause requires the appropriate authority to consult persons representing the views of private utilities and other appropriate persons prior to making regulations. The Government, quite rightly, would have to seek the approval of Parliament under the affirmative procedure for any deregulation measures.
While those are the explanations, I have tried to give the Committee a detailed explanation on each of the amendments of the Government’s position and view. I return to the fundamental point I set out at the outset: we are giving, as I have indicated as we have been going along, proper consideration to the recommendations of the Delegated Powers and Regulatory Reform Committee. We intend to return to this on Report, in cognisance and consideration of what noble Lords on all sides have said.
Baroness Neville-Rolfe (Con)
I want to express a concern. Although the Minister’s argument seems to be that the powers are already rather limited and that there are natural limitations—for example, the GPA—I am not convinced that we actually need to put all this into delegated legislation. In some places, we could decide things and make it clear in the Bill. Then, if there is future evolution of the market or the development of technical regimes, as my noble friend suggests, we should come back to the House and look again at legislation in those areas.
Obviously, I come from a business background, and, as I said, the thought that officials can effectively make major changes that will affect the market in which you are operating is actually quite worrying. We had an example of this on Monday. The example we received from the noble Baroness, Lady Hayman of Ullock, about
“a tool to cover imperfect policy development”
was a quote from the report in relation to private utilities. Therefore, I did not repeat it, but it is a good example of where there might be a changing market, which might then generate quite substantial uncertainty in the procurement field and be a big problem for our companies.
I took four egregious examples out of a respected cross-party report to try to be constructive, but my noble friend has unfortunately tried to explain why the Bill is as it is, rather than to respond to these individual examples. I really need his response to these examples because I need to know how much to press on things such as notices and concessions when we get to those parts of the Bill. If it is clear that the delegated powers cannot be misused, it makes it a lot easier to agree to other parts of the Bill. I apologise to the Committee for speaking at length, but I feel very strongly about this.
Lord True (Con)
My Lords, it is Committee and my noble friend and all other noble Lords are entitled to intervene as much as they wish. She makes an important point, and I was just on that paragraph in my speech—it is slightly small compared to the rest of the speech—and was trying to set out the Government’s rationale for why the balance is probably right.
Lord Berkeley (Lab)
I take the noble Lord back to his response on Amendment 18 in relation to public passenger transport services. He argued, probably rightly, that they are the responsibility of the Department for Transport and should therefore be exempt here. Paragraph 17 of Schedule 2 defines a “contract”, and paragraphs 33, 34 and 35 at the end of the schedule cover “Concession contracts”, which are all exempt. I assume—perhaps the Minister could confirm this—that the exemptions for “air services” and “a qualifying air carrier” come under the definition of “concession”, because the Bill says this, although it does not define what a concession is.
I am concerned that there are examples in this country of a third category: a franchise. I am not sure where that comes into this; I know of one air service that is a PSO and probably a franchise, and, certainly, some bus and train contracts are franchises. If the Minister does not have the answer to that today—it is a little detailed—perhaps he could write to us, because it is quite important. If the Bill is going to exempt all these things, the whole lot needs to be exempted and handed to the Department for Transport. It is no good having concessions exempted and franchises not. I look forward to the Minister’s comments.
Lord True (Con)
My Lords, I will have to take counsel and advice on that, and I will certainly come back. As I said, the fundamental position is to try to keep things as they are, exempting passenger transport services that are currently exempt and covered by the Department for Transport. Concession contracts are dealt with slightly differently under the regime—we will discuss that later—but I will come back to the Committee to clarify the points that the noble Lord asked about.
Lord Wallace of Saltaire (LD)
I thank the noble Lord for his explanations; if some of them had been available earlier, it might have been easier to accept some of the Government’s arguments. I find Clause 109 the most difficult: it gives the Minister the power to amend primary legislation without any reference to Parliament. But I note that he said that this will be looked at and perhaps discussed with others between Committee and Report, and I thank him for that constructive approach.
In turn, I am sure that he noted the strong views around the Committee about this particular Bill and the broader issues with skeleton Bills. We will return to this in a number of other areas in the Bill where we want to see spelled out things that we are at the moment expected to take for granted that the Minister will later say something about, provide a strategic policy statement on or whatever. That is simply not enough, so this will be a continuing issue.
In passing, as we keep stubbing our toes against the GPA, I am quite surprised that Jacob Rees-Mogg has not demanded that Britain withdraws from the GPA, because if we are to take back control we had better take it back properly of some of these international obligations, which clearly limit and constrain what we can do in a range of quite often important issues, but perhaps that is an over-partisan remark in Committee on a Bill. We will have to return to this, but I thank the Minister for the constructive way in which he has responded. I beg leave to withdraw the amendment.
Baroness Scott of Bybrook
Baroness Scott of Bybrook (Con)
My Lords, I start by clarifying what utilities are covered in the Bill. Utilities are defined in it as public bodies, public undertakings or certain private undertakings that carry out utility activities. Public undertakings differ from public bodies in that they do not have functions of a public nature; their activities are more economic and commercial in nature. While it is no longer one, before the Government sold their shares in 2015 Eurostar International Ltd was a public undertaking.
The Bill covers private utilities only where they have been granted a special or exclusive right to carry out a utility activity. These are rights that have been granted by a statutory, regulatory or administrative provision and that substantially limit other entities from carrying out those activities. Rights are not special or exclusive when granted by following a competitive procedure or where the opportunity was adequately publicised and the rights were granted on the basis of an objective, non-discriminatory criterion.
Private utilities which enjoy “special or exclusive rights” are effectively in a monopoly position and therefore they could, however unlikely it is, engage in preferential treatment that, for example, favours their own affiliates or strategic partners and discriminates against other suppliers bidding for the contracts. The Bill applies to utilities only where they are carrying out the utility activities set out in Schedule 4: specifically, gas and heat, electricity, water, transport services, ports and airports, the extraction of oil and gas, and the exploration for or extraction of coal or other solid fuels.
The two government amendments in this group are minor and technical in nature. Amendment 20 to Schedule 2 is consequential on government Amendment 231, which amends Clause 35(6) to ensure a single definition of utility is applied to the whole Bill. In Schedule 2, paragraph 28(2) is therefore no longer required. The definition at Clause 35(6) is exactly the same as that contained in the deleted sub-paragraph (2).
Amendment 24 amends Clause 5(1) to define a utilities contract as a contract
“wholly or mainly for the purpose of a utility activity”.
The addition of “wholly or” is to reflect the reality that a utility contract can include solely or predominantly utility activities. This amendment to the terminology ensures consistency with the approach to mixed procurement used elsewhere in the Bill; for example, with Clause 8(1) on light touch contracts, where the same principle applies. I beg to move.
Lord Purvis of Tweed (LD)
I am grateful for the Minister’s explanations. Her colleague the noble Lord, Lord True, previewed some clarification regarding the Post Office, so perhaps she was forewarned. I have two questions for clarification, further to what she said.
The more specific question relates to freeports, which I raised in the technical discussion this morning. I would be grateful if the Minister could respond now, but if not I would be happy if she does so in writing. There are a number of areas of government policy—I am not debating the rights and wrongs of this—which have activities linked to the provision of utility services but which are not directly, wholly or mainly a utility service. I am concerned, for example, about whether the more commercial activity of freeports, which are government policy and have the benefit of being linked with a utility but do not provide utility services, may well be exempted. That would not bring about the level of transparency in the thresholds that I believe there should be. I am still scratching my head about the status of freeports.
The element raised earlier by the noble Lord, Lord True, on postal services is concerning. I am particularly interested in the status of Post Office Ltd. The noble Baroness, Lady McIntosh of Pickering, raised Parcelforce. I understand that Royal Mail and Parcelforce have a relationship with Post Office Ltd, and they provide different services. I understand that the Post Office is not considered a Schedule 4 utility, but clarification on whether it is covered under the public undertaking elements would be helpful. I ask because postal business of the Post Office is included under the procurement chapter, referred to by the noble Lord, Lord True, and annexe 16A of the UK-Australia agreement, as are postal services, which relate to letters, parcels, counter services and other such services. The classification under the WTO which the annexe uses links with the pick-up, transport and delivery services of letters, newspapers and journals, whether for domestic or foreign markets. I am not entirely clear about the status of that when it comes to Royal Mail services. They are covered within the procurement chapter of the Australia agreement, but I am not sure of their status in this Bill.
This speaks to the wider point that we are now in the realm of having to look at each of the 24 agreements in the schedule. Any authority or likely bidder for any of these works will have to study all these FTAs and all the procurement chapters, in addition to the EU-UK TCA, this legal framework, and the Scottish and Welsh ones. At the very least, we are now replacing one system with 25—or more likely with 27. That means it is not a more efficient way of covering it.
Finally—I asked earlier, because it is not clear in the impact assessment, and Ministers might write to me on this—now that the Government are clarifying their position in the Bill on those that are covered, not covered and the exemptions, I would like to see an update on the information about the likely number of contracts and the values in all these categories. I would be grateful for that information and for clarification on the Post Office.
Lord Wigley (PC)
My Lords, I want to raise one narrow aspect; that of Dŵr Cymru, Welsh Water. The position of Welsh Water is somewhat different from that of the other water providers within England and Wales; I think the situation in Scotland is different again. Dŵr Cymru is a not-for-profit company, and the assumption and understanding is that nothing in the Bill undermines the capability of the Welsh Government to award the contract within the service area of Dŵr Cymru to a not-for-profit company of this sort. Quite clearly, that has a different impact than if that market was open for competition on a profit-making basis.
The performance of Dŵr Cymru is generally in most areas regarded as having been very satisfactory. There are ongoing arguments about quality of river water, et cetera, and noble Lords will be aware of those, but with regard to the provision of water, there is no wish—certainly at present, and I cannot foresee one in the near future—for there to be anything that disturbs that apple cart. I hope that the noble Baroness will be able to give an assurance on the record in this Committee that nothing in the Bill can, in any circumstances, undermine the ability of the Welsh Government to award the franchise for providing water in Wales to a not-for-profit company such as Dŵr Cymru.
Lord Fox (LD)
My Lords, very briefly, I thank the Minister for her clear statement. The subject of utilities has come up both on Monday and today, and we are beginning to get some clarity around how the whole utility story fits together, but anything more she can give us on that would be helpful. This is probably not helpful, but it seems to me to be an analysis of the issue. The majority of the trade deals to date are essentially rollover trade deals, and to paraphrase the noble Baroness, Lady Noakes, this legislation is essentially rollover legislation. However, trade deals such as the Australia deal are not rollover trade deals. We are in danger of trying to pour new wine into old skins here.
The issue that my noble friend highlighted here is an example where the new-style trade deal is not easily catered for in the old-style legislation, which is essentially rollover legislation. I am not sure what the solution to that is, other than “more work needed”, but I think—and this is a dispassionate and hopefully helpful observation —we are looking at a new trading position. The Government talk about that all the time, but we are essentially looking at legislation that was dealing with an existing set of trade deals which are, by their nature, different from the new ones. This is what is being thrown up, and we will start to see problems thrown up increasingly.
Lord Berkeley (Lab)
To go back to Amendment 20, the noble Baroness gave some useful explanation of the definition of a utility. I want to go on briefly to the example that the noble Lord, Lord Purvis, mentioned, which is freeports. That presumably comes under paragraph 5 of Schedule 4, on page 86. It is not clear to me whether any of the activities of a freeport are exempt or not. In other words, the freeport gets a load of money from the Government, but does it have to comply with the procurement regulations and everything else in the Bill? Does it have to be transparent about how it complies, whether it has sent out for three quotes or whatever, and whether the contracts have been awarded fairly? That is one example, and I expect there are many others in other sectors. It would be interesting to know because when we get to Schedule 2, there are so many different definitions in there that it is quite difficult to understand which applies to what. I am sure that, at some stage, the Ministers will try to give us some examples of all these different issues on page 81.
Baroness Hayman of Ullock (Lab)
My Lords, I must say, I find the utilities section of this quite confusing in some areas. The more clarification we can get from the Minister, the better. It is not just this bit; it is the fact that it is cross-referenced a lot right across the Bill and is impacted by so many other pieces of legislation, including internationally.
We talked with officials about the Australia trade agreement this morning; the noble Lord, Lord Purvis, raised this. I am still slightly confused as to how that all links together. Rather sadly, after the discussion, I went and found the relevant parts and read them. The Bill talks about universal service obligations, postal monopolies, exclusive suppliers and specified collection, transport and delivery services. I know that the Minister is not able to come back to us on this now but I would appreciate some kind of written explanation of how this all works together and what the implications are of having that kind of reference to postal services in a trade agreement. What impact does that have on future procurement legislation? Will the Procurement Bill have an impact on future trade agreements in this area? Personally, I find this quite confusing; it would be extremely helpful to have it laid out in a crystal-clear fashion so that we do not end up with this kind of confusion and the debates we are having.
I will not repeat all the things that noble Lords said when they talked about having more clarification on Schedule 2. I will just briefly come back to cross-referencing throughout the Bill. In the previous debate, we talked about the committee report, which again mentions Schedule 4, the utility activities exposed to competition, the provisions of the WTO agreement—the GPA—and so on. For me, a lot of this is about having a clear understanding of which utilities lie in this group and which lie in that group; which utilities will have to follow certain rules; which will be exempt; and how they will be exempt. I would appreciate proper clarification on all those areas because this is a lot to take in; a lot of it needs to be right as well.
I appreciate that I have asked the Minister to do quite a complicated task but, in Committee and certainly ahead of Report, that sort of information and clarification would be extremely helpful.
Baroness Scott of Bybrook (Con)
I thank noble Lords. We have listened—I thought that we explained the Australian postal services to the noble Lord, Lord Purvis, in our debate on a previous group—but obviously further questions still need to be addressed. As the noble Baroness, Lady Hayman, clearly said, the issues of utilities’ groupings and the rules that apply to each group are not yet clear enough. I know that will take extra time for everybody but I suggest that we pull together another meeting purely on utilities and their interaction, particularly with the trade agreements that are in place now and future trade agreements that could be in place.
At the same time, I remember freeports coming up in the first Committee debate. I do not have any further information but we will get that information and discuss it. If required, we will send a letter afterwards confirming everything we have discussed so that noble Lords have that in their packs.
I have good news for the noble Lord, Lord Wigley. I can assure him that this Bill will not change anything from the current regime with regard to Welsh water. I will not try to say it in Welsh because I am not very good at it. I hope that this assures him that everything is fine in Wales.
I think that the noble Lord, Lord Berkeley, brought up freeports on the first day of Committee. We will invite him to have a discussion on that.
These were minor and technical amendments that seem to have grown into something much bigger but they serve to clarify the Bill and ensure consistency on the provision of utilities contracts. I therefore hope that noble Lords will support them.
Baroness Noakes
Member’s explanatory statement
This amendment probes what “good reasons” are acceptable for the purposes of not aggregating contracts.
Baroness Noakes (Con)
My Lords, Amendment 22 is in a group of rather different amendments, most of which have more meat in them than my amendment. It is a probing amendment to paragraph 4 of Schedule 3, which contains a provision to ensure that contracts are not fragmented in order to escape the value limits that govern some of the procurement rules. The basic rule in paragraph 4 is that the contracting authority has to add up the value of all the contracts if they could reasonably have been supplied under one contract.
However, paragraph 4(2) allows the contracting authority not to do this if it has “good reasons”. Amendment 22 proposes to remove this in order to find out exactly what the Government intend to allow contracting authorities to do and to probe why they have not been more specific in the Bill. At first sight, paragraph 4(2) is a massive let-out clause, enabling authorities to avoid aggregating contracts. I look forward to my noble friend the Minister’s explanation. I beg to move.
Lord Wallace of Saltaire (LD)
My Lords, I rise to speak to Amendment 81, which we on these Benches regard as particularly important. It would put in the Bill one of the most important decisions to take before embarking on the procurement of public goods and services: make or buy? That is the subject of an entire chapter in the Government’s own Sourcing Playbook. This key decision process is missing from the Bill. We seek to put it in as an essential part of the pre-procurement process. The choice of delivery models should be based on careful and impartial consideration of the different forms of delivery available for each type of work, supply or service.
Conservatives in Government have sometimes acted as though outsourcing to for-profit companies—often large outsourcing companies that have been labelled “strategic suppliers”—is the only model worth considering. Unless the Minister wishes to argue that The Sourcing Playbook and other recent publications on procurement guidelines are no longer operable, it seems entirely appropriate to put in the Bill that the choice between in-house and outsource should first be considered. Later, we will move other amendments on the delivery model choices between for-profit and not-for-profit provision.
We have carefully followed the Government’s own language in these publications in drafting the amendment. The Minister may argue that we should leave the Bill a skeleton as far as possible to allow Ministers as much flexibility as possible; we have heard him press the case for flexibility already. We argue the case for clarity, accountability and future-proofing. The principles of the procurement process must be in the Bill, not left for later in the policy statements issued by changing Ministers as they pass through the relevant office.
Lord Hunt of Kings Heath (Lab)
My Lords, as this is my first intervention, I remind the Committee of my presidency of the Health Care Supply Association. I have Amendments 82, 92 and 141 in this group, none of which have much to do with each other, but that is part of the mysteries and delights of grouping.
Amendment 82 is particularly concerned with the challenges facing charities seeking to obtain contracts from public authorities. I am very grateful to NCVO and Lloyds Bank for their briefing on this matter. While all types and sizes of charities experience challenges relating to the commissioning and procurement of public service contracts, smaller organisations often face considerable barriers. Yet a large proportion of the voluntary sector is actually fundamental to the delivery of public services. There are many examples, but we know, for instance, that the voluntary sector is the leading provider of services—according to research commissioned by DCMS—in relation to homelessness, and there are many other services where we are absolutely reliant on the voluntary sector.
However, there is a real problem in the huge amount of work that needs to be done to assemble information and make bids. Advance notice of tender opportunities is important for charities. We know that many of them have far fewer resources than private companies to support bid-writing, so they need time to plan. They also want to take time to work with service users or other charities to develop an offer, and that cannot be rushed. When commissioning services for people, especially those experiencing a range of intersecting challenges, a market does not often exist, so preliminary market engagement is critical for understanding what people need and how those needs could be met.
All my amendment seeks to do is create a presumption that contracting authorities should have ample notice through a planned procurement notice, unless there is a very good reason not to do so. This would allow the necessary time, particularly for smaller charities, to prepare bids.
My Amendment 92 is about the need for rigour and accountability in procurement. It starts from the requirement set by Her Majesty’s Treasury to ensure that the investment of public money, especially large sums, is done objectively and in a way that those who have to authorise the investment can rely on. It also deals with the principle of transparency and would ensure that business cases are routinely published.
My understanding is that it is already required under Green Book guidance from Her Majesty’s Treasury, particularly for major projects managed in the government portfolio, that at least a summary of the business case has to be published within four months of contract award. The Green Book, which has been regularly updated by the Treasury as circumstances require, describes in great detail the rigorous process that needs to be followed. The principle is that if you do not abide by this, you will not get approval for the expenditure of resources. Much in the Green Book is based on the need for a proper business case and I believe it was also envisaged that the business case would be published.
The problem is that regulation and good practice are too often ignored in the public sector. I think athere is less appetite for proper enforcement of that guidance. All campaigners can do to raise concerns about a particular tender process is go for judicial review, which, as we all know, can be very expensive.
My particular interest is the NHS. When I was a Health Minister, which seems a very long time ago, there were very strict rules about spending and investment by trusts. If public money was sought for a major procurement or programme then a strong authorisation path led from region to department, and often to the Treasury itself. Some of that remains, but what is missing is that the former strategic health authorities ensured that the required processes were followed properly and intervened when they were not. They also ensured that the public were consulted, but much of that has foolishly been thrown away. That means that it has become much harder for the public to hold decision-makers to account.
It is very noticeable that, last month, the Public Accounts Committee published a report on the Department of Health’s 2020-21 annual report. It commented that the department
“has regularly failed to follow public spending rules and across the Departmental Group there is a track record of failing to comply with the requirements of Managing Public Money. The Department is required to obtain approval from the Treasury before committing to expenditure where such authority is needed. The Treasury has confirmed that £1.3 billion of the Department’s spending in 2020–21 did not have HM Treasury consent and was therefore ‘irregular’. The Treasury has stated that ‘in the vast majority of cases’ this was because either the Department and/or the NHS had spent funds without approval or in express breach of conditions.”
If the noble Baroness, Lady Noakes, was still in the position she held on financial management in the Department of Health, that would not be happening.
My amendment would ensure that there is a proper business case and that it should be publicly available before crucial decisions are taken. If the Minister says that it is already required, the fact is that parts of the public sector are not listening. I hope that this debate will be helpful in ensuring that the Treasury and government departments look at this very closely in the future.
My third amendment follows a briefing from the RNIB and concerns the fact that, in replacing the existing legislation, the Bill overwrites requirements that are of particular significance to 14 million disabled people in the UK because they ensure that publicly procured goods and services are accessible to everyone. It is pretty unclear at the moment how the current Bill will replace that regulatory framework, and my Amendment 141 seeks to re-establish a requirement that contracting authorities have due regard to accessibility criteria for disabled people.
In June last year several organisations, including the RNIB, wrote to the Cabinet Office seeking assurances that accessibility for disabled people would be maintained in public procurement legislation. Responding, the then Minister, the noble Lord, Lord Agnew—who has certainly shown how you should resign, in style and with full transparency and visibility to your Lordships’ House, although I do not think he quite managed the grace of the noble Lord, Lord True, in his very perceptive remarks yesterday—said that the Government are committed to ensuring that accessibility for disabled people is maintained as part of public procurement legislation, and that the new regime will ensure that specifications take into account accessibility criteria and design for all users. Despite that, the only reference we can find to accessibility is in Clause 87(2), which states that any electronic communications utilised as part of the public procurement exercise must be
“accessible to people with disabilities.”
This is partly probing—finding out the government response to it. If the Minister argues that the public sector equality duty under the Equality Act is sufficient, we will argue that it is not sufficient because we have seen contracting authorities failing to consider their obligations and procuring inaccessible products. This amendment is only a start, but I hope the Minister will be sympathetic to the issue.
Lord Lansley (Con)
My Lords, before I speak to my Amendments 84 and 88, I will just say that, while I do not think it is a registrable interest or a conflict of interests, my experience in these things is largely derived from my work, over a number of years now, advising LOW Associates SRL in Brussels, which has a number of contracts with the European Commission and other European agencies. We have participated in procurements on a number of occasions each year in the European context. That gives one quite a lot of experience of the system we are moving from and some of the ways it can be improved. I put that on the record.
My noble friend and other noble Lords may recall that at Second Reading the most important point I made—it is one I will return to on a number of occasions, including when we talk about the procurement objectives and the national procurement policy statement —is that procurement by the public sector is a very large element of economic activity. The way in which it is conducted can have a significant and beneficial impact on productivity in the economy if the issues of innovation are properly incorporated into the consideration of how procurement is undertaken and who the suppliers to public authorities are.
In a sense, the noble Baroness, Lady Worthington, is trying to do the same kinds of things in Amendments 85 and 87. We are maybe trying to approach it in slightly different ways. The same will be true in relation to the procurement objectives.
I hope that in responding to this debate my noble friend can at least give us a sense that we can work together to try to ensure that the promotion of innovation is one of the central aspects of how contracting authorities go about their process of delivering best value, and that the broader externalities of procurement, through promoting innovation in the economy, are realised. They are significant.
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
My Lords, I understand that the noble Baroness, Lady Brinton—who is contributing remotely to the debates this afternoon—was expecting to speak on this group, but unfortunately, that message did not reach the clerks or the chair. I believe that the noble Baroness is ready to speak now, so with the permission of the Committee, I invite her to speak.
Baroness Brinton (LD) [V]
My Lords, I declare my interests as a vice-president of the LGA and as a disabled person. I am speaking to Amendment 141, which would ensure that contracting authorities must follow accessibility principles as defined under the UN Convention on the Rights of Persons with Disabilities, or UNCRPD.
The Public Contract Regulations 2015 set out the rules for technical specifications in Regulation 42, saying that it must include “accessibility for disabled persons” as core to characteristics including quality, environmental and climate change performance levels, whole-life design, performance and safety—indeed, many of the things that this Bill is covering.
So, in theory, Amendment 141 should not be necessary. However, Regulation 42(9), on the technical specifications, says that:
“Where mandatory accessibility requirements are adopted by a legal act of the EU, technical specifications shall, as far as accessibility criteria for disabled persons or design for all users are concerned, be defined by reference thereto.”
There are three other sets of regulations—the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011—which all also confirm the conformity with the EU procurement directive. I spoke at Second Reading about that directive.
The very helpful briefing from the RNIB sets out the technical concerns about how we need to ensure that accessibility rules are embedded in legislation following Brexit. This amendment is needed because we must have clear rules for accessibility criteria for people with disabilities and the principles of universal design, as defined under the UN CRPD.
This Government repeatedly say that they were proud to get Brexit done. They also say, proudly on their website, that they want
“disabled people to fulfil their potential and play a full role in society.”
In 2017, however, the UN published its Concluding Observations on the Initial Report of the United Kingdom of Great Britain and Northern Ireland, which was less than complimentary about the UK Government’s progress in abiding by the CRPD. In paragraphs 6(a), 6(d) and 6(e), the UN refers to:
“The insufficient incorporation and uneven implementation of the Convention across all policy areas and levels within all regions, devolved governments and territories under its jurisdiction and/or control … The existing laws, regulations and practices that discriminate against persons with disabilities … The lack of information on policies, programmes and measures that will be put in place by the State party to protect persons with disabilities from being negatively affected when article 50 of the Treaty on European Union is triggered.”
It goes on to say in paragraph 7(c) that the UK should
“Adopt legally binding instruments to implement the concept of disability, in line with article 1 of the Convention, and ensure that new and existing legislation incorporates the human rights model of disability across all policy areas and all levels and regions of all devolved governments and jurisdictions and/or territories under its control”.
There are 78 paragraphs in this UN report setting out what we must still do to comply with the UN CRPD; the Government are due to report back by 8 July 2023. In other parliamentary debates, Questions, Statements and legislation, Parliament is being told time and again by this Government that they want to meet those requirements because complying with the UN CRPD is an absolute priority.
I give two extremely brief illustrations of the failings, which are obvious to me as a disabled person but may not be to others. They would be resolved with a clear and legally binding requirement for accessibility criteria. The first is a bus driver on a publicly funded route, contracted by a council, who refuses to accept a wheelchair user because that driver still has the power to ignore the law and does not want to ask people to move out of the wheelchair space. The second is that a large number of DWP offices and those of their subcontractors —which are used for the assessment of individuals for their access to benefits, whether specifically disability benefits, universal credit or any other benefit—often have steps or stairs and no lift. There continue to be regular reports in the press of disabled people being marked as “no shows” at interviews when they could not access the building, which then results in them being penalised and not receiving the benefits. That is shameful. It also presumes that there would be no staff with disabilities who need to access the buildings, which is just unacceptable.
That is why we need Amendment 141. I look forward to the Minister’s explanation of how this Bill will meet the UN CRPD in relation to all matters on public procurement.
Lord Aberdare (CB)
My Lords, I have added my name to Amendment 82, in the name of the noble Lord, Lord Hunt of Kings Heath. As at Second Reading, my contributions in Committee will mainly reflect the interests of small businesses, including in the construction sector, and other smaller providers such as charities and social enterprises; of course, one of the Bill’s aims is to increase access to public contracts for such smaller organisations. I am grateful for the briefings that I have received from the engineering services alliance Actuate UK, from the NCVO and from the Lloyds Bank Foundation.
I will try not to repeat the arguments so strongly made by the noble Lord, Lord Hunt, but small businesses and charities often struggle to compete effectively in competitive tendering processes. They do not have teams with specific bid-writing expertise, so it is often chief executives or managers within the businesses who have to prepare proposals on top of their existing full-time and front-line roles. The process of completing pre-qualification questionnaires and invitations to tender is often onerous and complex, requiring considerable time and resources. Tenders are often launched with little or no warning and with tight timescales. Greater lead-in times and awareness of when tenders will be published would better help small businesses and charities to prepare and subsequently compete for relevant contracts.
The existing wording in Clause 14(1) allows for better practice, confirming that contracting authorities are able to publish a planned procurement notice. But your Lordships will know that being able to do something within legislation does not mean that it actually happens. Amendment 82 seeks to beef up the wording by replacing “may publish” with “must consider publishing” to place a greater onus on contracting authorities to publish a planned procurement notice. I feel that even this requirement is rather a low bar, as well as being extremely difficult to monitor or enforce. My preference might be simply to replace “may publish” with “must publish”.
The amendment also states that a planned procurement notice must be considered whenever “no significant barriers exist” and
“no detriment to service recipients would occur”.
Again, I might have preferred a more positive criterion spelling out that such a notice specifically should be published when this would enable a diversity of suppliers, including of course small businesses and charities, to participate in the contract. I hope the Minister will be able to tell us how the Government plan to ensure that small businesses and charities will receive proper notice of tenders that might be suitable for them, preferably through a requirement for planned procurement notices to be published in most circumstances.
This is just one aspect of ensuring that smaller contractors are involved early enough in the process, not just to be aware of and prepared for tenders for which they might be able and suitable to bid, but also when appropriate to bring their own skills and innovation abilities to influence the shape of the overall bid. Early contractor involvement is something I may come back to later. I welcome the amendments from the noble Lord, Lord Lansley, which also seem to point in this direction. Meanwhile, I am happy to support the noble Lord, Lord Hunt, in his Amendment 82.
Baroness Worthington (CB)
My Lords, I declare my interest as co-chair of Peers for the Planet and will speak to Amendments 85 and 87 in my name in this group. I also apologise as this is the first time I have spoken on this Bill, having not been present at Second Reading, but I read the debate with great interest.
I have tabled amendments to this Bill with three goals in mind: first, to try to embed a consideration of the climate change crisis facing us and the environmental goals we must meet into primary legislation. It is important that this appears on the face of the Bill rather than in a yet to be approved policy statement to show the long-term leadership and clarity around tackling these issues, given that public procurement is such a huge lever on both these issues. Secondly, I am seeking to put climate and nature-positive procurement processes in from the very outset of preliminary market engagement and embed it throughout the award criteria setting process to appointment. Thirdly, I want to bring greater transparency to the process and visibility so that all can see how this important lever is being deployed.
The Climate Change Committee highlighted in its recent progress report to Parliament the importance of ensuring that all procurement decisions by all government departments are aligned with our net-zero goals. My amendments seek to address this recommendation. I look forward to hearing the Minister’s thoughts and ask if he would agree to meet myself and other supportive Peers to discuss whether these amendments might be supported.
Amendments 85 and 87 relate to Part 3 of the Bill, under Clause 15, “Preliminary market engagement”. They aim to bring in an ambition to the new procurement regime to positively reward and incentivise those suppliers who are innovating and providing climate-positive and nature-positive sustainable products and services. I am very grateful for the interventions of the noble Lord, Lord Lansley, who I think is seeking to achieve a similar goal: to open this market to new entrants and providers. We cannot stay with the status quo; we must see a transition of our economy towards a more sustainable future. This offers government at every level a very important lever. I hope that it would bring economic benefits for business and wider society if we were to do this.
I am very grateful for the cross-party support of the noble Baronesses, Lady Verma, Lady Boycott and Lady Parminter, on these two amendments.
Baroness Verma (Con)
My Lords, in supporting Amendments 85 and 87, I declare my interests as someone with small and medium-sized businesses in adult social care; as the chair of a renewable energy company; and as someone with 44 years of experience in the SME sector—taking away the 10 and a half years of my Front-Bench life, which excluded me from my businesses.
I start by supporting the amendments tabled by my noble friend Lord Lansley. They very much touch on what the SME sector faces constantly: the challenge of being able to enter into procurement. Today, I had a delegation of small and medium-sized manufacturers come to me from Leicester because they are fed up to the back teeth with constantly being outed from the process of some public sector contracts, with which we could reinvigorate our manufacturing sector. Covid taught us a lot about outsourcing. What we want to do is build back our insourcing. It hits all the challenges that we want to get to net zero on.
Listening to their struggles, I know, having come from the textiles industry at the early age of 19, that this country is remarkably good at producing goods if people are given the opportunities. This Bill will be one of those routes in to being able to demonstrate how much this country can focus on supporting industry, making the procurement system a lot easier. I know that, when we have to do this in adult social care, it is a nightmare to get through the processes because we as an independent business are competing with large organisations that are based overseas and have tens of thousands of pounds to put behind writing bid tenders.
I champion small and medium-sized businesses—particularly from the Midlands because that is my place and I will always champion it—but we are constantly missing out on the great talent that we have here. Reducing our carbon footprint because we can produce things here is a no-brainer for me.
I will go back to my script, which I have worked a little bit on. In its guidance on sustainable procurement, the World Bank recognises the role that procurement can play in driving sustainability goals and highlights the value-for-money benefits of sustainable procurement, stating:
“Sustainable procurement is strategic procurement practice at its optimum.”
Taking sustainable procurement considerations into account from the outset of the procurement process is critical. These amendments will help to deliver on that vision and meet the Committee on Climate Change’s recommendation in its progress report to Parliament last week that procurement decisions by all government departments be aligned with the net-zero goals.
In ensuring that contracting authorities design a procurement system that proactively seeks out suppliers who are doing the right thing and providing goods and services that help to deliver a resilient society and tackle climate change and biodiversity loss, I hope that my noble friend the Minister will look at these changes and try to incorporate them in the Bill. If we have an opportunity, we should take it now because it will save the planet and will save our own sectors in this country as well.
Baroness Boycott (CB)
My Lords, I am happy to support Amendments 85 and 87 in the name of the noble Baroness, Lady Worthington. As we have heard, procurement is an incredibly powerful tool and, if we do not use it in the right way, we will never get to our net-zero targets.
I thoroughly support the aim to shift the ambition of any new procurement regime to positively reward and incentivise suppliers who are innovating and providing climate-positive, sustainable products. As well as helping to achieve our climate and environmental goals, it will bring economic benefits. I would go further and say that we should not award any contracts to people who do not fulfil these categories from now on.
I note that the Government’s response to the consultation on the procurement Green Paper commented that many respondents had
“provided details of aspects that they would like contracting authorities to take greater account of, for example more focus on social and environmental impact.”
This amendment would help to ensure that contracting authorities always take this goal forward. The net-zero strategy, which many of us have referred to, clearly establishes the strategic importance of net zero at the project design stage. This amendment would make it much easier to draw this golden thread right through the procurement process to the end product.
With that in mind, I conclude that this amendment to incorporate the climate, environment and wider public benefits of procurement at preliminary market engagement when the authority’s procurement exercise is at the design stage is fully in line with policy. It needs only to be reflected in the Bill in the permissive way in which it is expressed in this amendment. I very much hope that the Minister will welcome it.
Before I sit down, I support Amendment 82 from the noble Lord, Lord Hunt of Kings Heath. As someone who has chaired many charities and tried to work with local authorities about picking up contracts that have lapsed, such as meals on wheels, I can say that you really need to know in advance what money might be available. No one should take the charities sector for granted in this respect.
Lord Wigley (PC)
My Lords, I am delighted to follow the noble Baroness. This group of amendments brings together three different but equally important threads that are material to this Bill, each of which deserves a place in these debates on the Bill in its own right.
First, there are the environmental points, which were mentioned a moment ago by the noble Baroness, Lady Worthington, and noble Lords subsequently added to them. They are fundamental. If it is government policy to aim at challenging targets to save our environment, that must be written into every aspect of public policy. It must be written into this aspect of public policy and others. We should not leave any opportunity going begging. This is an opportunity to have that in a Bill and to make sure that it is clearly understood by all those involved in the various diverse aspects of the procurement system.
Equally important is the question of how we regenerate the economy. Central to that must be the role of SMEs. They are a vital cog in the economy. They are the acorns from which the future will grow. They can also be very compatible with the environmental arguments to which we have referred. The points made by the noble Lord, Lord Lansley, the noble Baroness, Lady Verma, and my noble friend Lord Aberdare are important. I know that we will return to them on subsequent amendments, but we must not lose sight of them because these elements are vital to regenerating the economy in a sustainable way.
The third aspect, which I want to concentrate on for a moment, is disability. That agenda has been close to my heart for the past 40 or 50 years. The speech made by the noble Baroness, Lady Brinton, brought it home to us. As long ago as 1981, I had brought to my attention the social definition of disability: that a handicap is a relationship between a disabled person and his or her environment, be that the social environment, the physical environment or the psychological environment, and that we may or may not be able to do anything about the basic disability but we can almost always do something about the environment, be that the physical environment, the social environment or the psychological environment. Therefore, the extent to which a disability leads to a handicap rests with us in society in controlling those three elements. Clearly, that responsibility must run into all aspects of economic life and is therefore relevant to the Procurement Bill before us.
I very much hope that the amendments we have heard about—in particular, Amendment 141 in the name of the noble Lord, Lord Hunt, but others as well—are passed to ensure that this matter is written into the Bill and that we have no misunderstanding. These three elements—the environmental element, the small business and economic regeneration element and the disability element—are central to the procurement system.
Baroness Parminter (LD)
My Lords, it is a great privilege to follow the noble Lord, Lord Wigley. I echo all the comments he made. I want to make a brief remark in support of Amendments 85 and 87 in the name of the noble Baroness, Lady Worthington, which I and my colleagues have co-signed, and in support of the point made so powerfully by the noble Lord, Lord Wigley, about ensuring that there a commitment in the Bill to deliver the net-zero and environmental goals through a commitment to ensuring that “public goods” includes sustainability goals. That is fundamental.
I will add only one point that has not been covered by colleagues. It is that this is not happening at the moment. The National Audit Office and the Environmental Audit Committee in the House of Commons have looked into public procurement by government departments and found there to be a woeful lack of connection with consideration of net zero and our environmental goals, and that is when government departments already have a statement from the Cabinet Office that is meant to guide them towards it. It is not happening, but that is completely separate from the far wider issue of where it is absolutely not happening, which is in public services procurement, where there is no guidance. If we do not have a national public policy statement on that, it will not happen, so it is absolutely fundamental that we get this in the Bill.
Lord Berkeley (Lab)
My Lords, I support all the amendments in this group, but particularly those tabled by my noble friend Lord Hunt of Kings Heath. In his introduction, he emphasised the importance of rigour, accountability and transparency. I would add advance notice. The Minister who responds may say that it is all in the Treasury Green Book. It probably is, but anybody who has looked at small projects—localism, levelling up, town centres—will know that you have to comply with the Treasury rules, but it is hard to find them, especially for people who do not understand them too easily. My noble friend has put in this amendment and all the other things that go with it. It is really important in a Procurement Bill that people know what to expect and how to do it.
It also needs to be not confidential. I have a couple of examples. The first is an excellent example of the need for a business case. Some noble Lords may know that Cornwall Council was supporting a new stadium for football, rugby and everything else in Truro, which everybody seems to want, and there is private sector involvement. Last week, Cornwall Council decided that it was not going to do this and withdrew from it, saying that there was no proper business case. That was brave, when everybody wants it, but there was no business case. At least it understood what was going on, but that is not the case for an awful lot of other people—I have mentioned the ferry to Scilly before, but will not mention that again—and the other side of it is things such as HS2, where the budget goes up through the roof.
My final question to my noble friend—I know he will do it for Report—and a few other people, concerns how you enforce these things when something goes wrong. That is the biggest problem that we have not solved yet. I look forward to the Minister’s reply.
Lord Wallace of Saltaire (LD)
My Lords, I hope the Minister is impressed by the cross-party consensus on a number of things on this issue. At the moment, this is very much a skeleton Bill. The demands to put more in the Bill come from all parts and relate to a number of different clauses. I hope that he will be able to respond outside Committee, between Committee and Report, to consider whether the Government might be able to come back to satisfy some of these requests with appropriate language. As we have already stressed, the language is already there in a number of government publications; it is just not in the Bill. I look forward to his response.
Lord Coaker (Lab)
My Lords, here we go. This is an important part of the Bill dealing with process, and some things have been incredibly difficult to understand. Now we get to things that we can feel. We are talking about purchasing, buying and procurement. We are saying that if we are going to do that, we have a real opportunity as a Parliament—and the Government have a real opportunity, to be fair, but it is going to be driven by some of the amendments here—to use procurement to produce the country and society that we want. Many Governments and local authorities have failed to use the power of that purchasing to drive social change. That is what these amendments are about. I think it is sometimes important to set the context for the various amendments here. I suspect that to an extent there will be a bit of a clash on that because, to be honest, some of us take a position that the free market should be interfered with more than it is. Others take the view that the free market will sort these things out because it will. That is a view, and I think there will be a clash.
Some of these amendments should be in the Bill. The Government will say what they are seeking to achieve. The amendments in this group on the pre-procurement phase are to legislate to enforce it and to make it a reality rather than an aspiration—something that we think would be a good thing to happen. I wanted to say that. I shall wax lyrical at different times to set the context of amendments because otherwise they get lost. Many of the points that have been made on amendments are very important. If I were the Government, I would make more of them. To be frank, the Government may need a bit of advice at the moment. I would not be the person to give it to them, but if I were doing that I would make more of it as a Government, saying that this is what the Government are seeking to achieve, and they will be driven by people in this Committee, and no doubt elsewhere, to go further.
I have a couple of things specifically on the amendments. The noble Baroness, Lady Noakes, will be pleased because this is about a word—I warned them. In Clause 14, which is about the pre-procurement phase, the word “may” is used on a number of occasions. We are discussing what should be in planned procurement notices, which is Clause 14, what should be in preliminary market engagement, which is Clause 15, and what should be in preliminary market engagement notices, which is Clause 16. Those clauses do not insist that the notices are published but say that they “may” be published. Why not have “will” or “must”? The word “must” is used in other clauses in this part, so somewhere along the line, whoever drafted the Bill said, “We will have ‘must’, but in these clauses, we will have ‘may.’” I am always told that this does not make any difference and that the intention is to do that, but why leave it to chance when many of the amendments in this group, ably spoken to by different members of the Committee, are dependent upon a planned procurement notice being published, a preliminary market engagement taking place or a preliminary market engagement notice being published? The amendment could be passed, but it would not make any difference because it only “may” be done, not “must” be done. I hope that is as conflated and convoluted as I get and that the Committee takes the point. I think it would be helpful to the Committee to understand why the word “may” is used in certain clauses and not “must”.
All sorts of really good amendments in this group have been presented to us. I want to make a couple of points about them. My noble friend Lord Hunt, the noble Lord, Lord Aberdare, and the noble Baroness, Lady Boycott, made a point about the role of charities and small businesses, as did the noble Lord, Lord Lansley. Everybody agrees that we have to do more to help small businesses, that we cannot let the big players dominate, that we have to get new entrants and to support them, and asks why we cannot grow business in this area and do more about young people trying to start something. Here is the opportunity. Here is the chance to use procurement to drive the sort of change and make the social difference that we want it to make. The noble Lord, Lord Lansley, is absolutely right that we should use procurement to do it. Other noble Lords who have spoken have made the same point, so it goes all the way through.
The noble Lord, Lord Wallace, is absolutely right about the delivery model for outsourcing that he talked about. One of the disgraces of the last 20 or 30 years is the way in which some things have been forced to be outsourced. I am not an ideological puritan about this; I understand that sometimes it might be the right thing to do—I have got in trouble with my own party for saying that. It is the compulsion to do it that is the problem; where it defies common sense, that is the problem. In those circumstances, the noble Lord, Lord Wallace, and those who support him are quite right to address that.
I was also particularly pleased with the noble Lord’s proposed new subsection (1)(c) in Amendment 81, which I thought he might have emphasised. It talks about outsourcing being able to be brought back in where it is not delivering what it said it was going to deliver. That has been the plague of many things: when something is outsourced and it seems that it is impossible to do anything about it. That is what the amendment seeks to do—another noble Lord in the debate made the point about what you do in those circumstances.
I will just say quickly that I support what the noble Baronesses, Lady Worthington, Lady Verma, Lady Boycott and Lady Parminter, and other noble Lords said on climate change and environmental protection. We need to wake up to this. People say that people are not interested in politics, but they are interested in climate change and environmental degradation, and they cannot understand why something is not being done—why billions of pounds are not used to drive change. This is a real opportunity to do that, and I hope that the Government will take it. No doubt the Government will say that they have all sorts of policies around climate change—Acts, regulations and other things—and that of course they support tackling it. Who does not support trying to do something about climate change and environmental degradation? Everyone supports it. But sometimes the actual will is not there to deliver it through practical policy which will make a real difference. That is the point of the amendment before us.
Lastly, on my noble friend Lord Hunt’s point about disability, I cannot remember the figure from the RNIB briefing—I had a quick look but I cannot remember what it was—but millions of people were potentially impacted.
Lord Coaker (Lab)
Some 14 million people were potentially impacted according to the briefing that we had on the limitations on access ability and all those sorts of things. That should be a wake-up call to us as well, and again, it is something that we can use. I thank my noble friend Lord Hunt and those who have supported him for bringing that forward.
I will finish there. This is a wake-up call to this Committee. This debate should be in the Chamber. This is a massive debate about billions of pounds which can be used to generate social change and to change the direction of the country in a way that there is probably a consensus about in many ways. Sometimes in Committee we forget how important it is. We are legislating in a way that will have an impact on the lives of millions of people in this country—and people across Europe and so on, without going into it too much. The impact is enormous, and that is what we are doing in this Room, and why we are bothering to stay here on a Thursday night without finishing.
Lord Coaker (Lab)
Is it, my Lords? I am that excited and I have been speaking that long—is it still Wednesday?
Lord True (Con)
My Lords, if that is an offer to come back tomorrow and carry on, I do not know how popular that will be.
There are many things that I like about the noble Lord opposite. First, he is very likeable and fun to be with. Secondly, he has a long connection with the great city of Nottingham, which he will know is something that I share. Thirdly, there is what Mr Baldwin would call his awful frankness. However, there is something of a philosophical divide that will come through in this discussion. I will reply in detail to the amendments, but what we have heard from the noble Lord is that the Labour Government that he envisages would want to use the powers under this Bill to constrain individual private companies that sought to provide public services to conform to the will of whatever the Labour Party’s wishes in power might be.
Lord Wallace of Saltaire (LD)
Flexibility, I think I understand, means a skeleton Bill. I think we all understand that. It will either be in the strategic policy statement, which we will come to, or it needs to be in the Bill. I think that around the Committee, everyone will feel that more ought to be in the Bill than is there now, so that we all know where we are going. If we are not allowed to have a draft of the strategic policy statement before the Bill finishes its passage, that is really not adequate.
Lord True (Con)
My Lords, I think the noble Lord makes a slightly different point. It is a point of concern, and we discussed it on the earlier group. I understand that how much is in secondary legislation and so on is a concern to noble Lords. When I talk about flexibility, I am talking about a structure that is simple and clear, and does not say, “Before you apply to procurement, you have to do a, b, c, d, e, f, g, h…”. We could probably use up the whole alphabet with the aspirations that we will hear in this Committee before anyone can get past the starting gate that we are discussing now. One needs to bear in mind the need for that sort of flexibility. That is the relative simplicity I am thinking about. However, time is late and I need to respond, not to the debate launched by the noble Lord opposite, but to the amendments.
My noble friend Lady Noakes came forward with a very thoughtful amendment, as always. There has been an outstanding debate, and I will want to study it in Hansard and reflect on everybody’s contributions. My noble friend had a very specific point in relation to estimation of cost and how services should be aggregated. Her probing amendment seeks to establish where the Government are coming from.
The proposed methodology in the Bill for estimating the value of contracts, which allows some flexibility, is very similar to the long-standing valuation rules in existing regulations and will therefore be helpful to procurers. Paragraph 4 of Schedule 3 contains an “anti-avoidance” provision that is designed to ensure that contracting authorities do not artificially subdivide procurements in order to evade the rules. This mirrors an analogous concept in the long-standing regulatory scheme but we think that it is presented in a simpler and more user-friendly way. It involves a general rule that contracting authorities should, where possible, seek to aggregate for the purposes of valuation but, as my noble friend said, it also permits exceptions where there are good reasons. Without the “good reasons” exception, the provision becomes something of a blunt instrument.
My noble friend asked for some examples so I will give one: an authority buying its printers from a particular supplier does not necessarily mean that it should buy all its toner, paper and servicing from the same supplier if it believes that it can get a better deal elsewhere. We believe that contracting authorities need to continue to have discretion not to aggregate where they have good reasons not to do so. I will look carefully at my noble friend’s point about the overall estimation of costs but we do not believe that it would be desirable to set out in legislation what constitutes a good reason because this will depend on the circumstances of each case. I request that this amendment be withdrawn.
Amendment 81, tabled by the noble Lord, Lord Wallace, seeks to add elements from the Government’s Sourcing Playbook as a new clause before Clause 14 to require contracting authorities to conduct a “delivery model assessment” when introducing “significant change” in their business model, helping to inform strategic decisions on insourcing and outsourcing. I agree with the noble Lord that rigorous assessment of contracting authorities’ plans is essential for good delivery. However, again, we have continuously sought throughout the development of the Bill to ensure that it remains flexible and does not unnecessarily stipulate blanket requirements, which tie contracting authorities down to a single process that adds unnecessary burdens or will not necessarily work in all cases. For example, “make or buy” decisions, which the noble Lord asked about, need to be considered carefully—indeed, our commercial guidance in playbooks includes comprehensive guidance on this—but, in our submission, it is not necessary for this to be mandated in legislation. Furthermore, large outsourcing contracts will obviously be scrutinised by departmental, Cabinet Office and Treasury controls to ensure value for money and successful delivery.
So we believe that these things should not be mandated by legislation and that this is already achieved through the development and implementation of the sourcing playbooks, which the noble Lord kindly drew our attention to and actually complimented very much with his desire to put them into primary legislation. I am grateful for his endorsement of those principles.
I turn to Amendment 82, tabled by the noble Lords, Lord Hunt of Kings Heath and Lord Aberdare. Some of the underlying arguments on this clause obviously touched on extremely important issues. The amendment proposes to amend Clause 14 to create a presumption that contracting authorities should publish a “planned procurement notice” unless there is good reason not to. Again, I agree that it is vital that the market—particularly certain aspects of it to which the noble Lord and others referred—is given sufficiently early warning of what contracting authorities intend to buy so that suppliers can gear up to deliver. This is particularly important for SMEs and charities, which were referred to by the noble Lord and others.
The Bill makes additional provision to this effect in Part 8. Contracting authorities with an annual procurement spend of more than £100 million will already be required to publish a “pipeline notice”, which will contain information about upcoming procurement with an estimated value of more than £2 million that the contracting authority plans to undertake in the reporting period. This will allow suppliers to see higher-value upcoming procurements and make a decision on whether they wish to bid.
However, contracting authorities should be left to determine where planned procurement notices are useful for lower-value contracts, owing to the potential burden. I will come back to charities. Contracting authorities are incentivised to make use of these notices through a reduction in the tendering period in circumstances in which they are properly issued. They will not necessarily be useful in all circumstances; as such, the Government are currently not of the view that it would be helpful to mandate their use, but I will reflect on what the noble Lord said.
Amendment 84, tabled and interestingly spoken to by my noble friend Lord Lansley, seeks to add to the purposes of “preliminary market engagement” in Clause 15(1). This includes,
“ascertaining how the tender notice may be expressed in terms of outcomes and”
KPIs
“for the purpose of minimising … processes”.
Focusing on the outcomes of the contract, as opposed to being too prescriptive on how these are achieved, is indeed a sensible reason for conducting preliminary engagement—I agree with my noble friend on that. Contracting authorities are encouraged to consider KPIs in their preliminary market engagement. For example, Clause 15(1)(c) includes
“preparing the tender notice and associated tender documents”.
I will look at the Bill against what my noble friend has said, but, as I have said, in some respects the Bill already provides for this and encourages the purpose that he has asked for in terms of Clause 15(1)(c) giving the purpose of preparing the tender notice and documents.
Amendments 85 and 87, tabled by the noble Baroness, Lady Worthington, and others, are important. They provide that, when undertaking “preliminary market engagement”, contracting authorities may engage with suppliers in relation to designing a procurement process that will maximise certain public goods and encourage innovation. I very much hear what noble Lords across the Committee have said about innovation, and I will certainly take that thought away. I think there would be a lot of understanding and support in government for that aspiration; innovative new entrant suppliers should be actively sought out.
We wish to promote and encourage contracting authorities to conduct preliminary market engagement. However, this engagement needs to be appropriate and related to the subsequent procurement. Imposing such an obligation on contracting authorities could have the counterproductive effect of disincentivising preliminary market engagement which, I am sure we all agree, would not be desirable.
Baroness Worthington (CB)
Just to clarify, Amendment 85 would not make a mandatory requirement; it simply places it under the “may” condition of Clause 15. Therefore, it does not materially change Clause 15 but just explicitly states that we are seeking this process to draw out innovation.
Lord True (Con)
I take the noble Baroness’s point and understand what she is saying. This takes me back to the opening remarks. We have doubts about the appropriateness of including wider policy objectives, such as those suggested in the noble Baroness’s amendment, in this piece of primary legislation. Each procurement is different, and what is appropriate, for example, for a large-scale infrastructure project, may not be appropriate for a smaller, price-driven transactional arrangement. The strategic priorities that a Government require contracting authorities to have regard to when carrying out their procurement functions are, therefore, better detailed in the national procurement policy statement—which we will debate later in Committee—than in primary legislation.
Amendment 88, tabled by my noble friend Lord Lansley, seeks to require contracting authorities to take into
“account … the size or experience of”
suppliers when determining whether the supplier’s involvement in preliminary market engagement has placed them at an unfair advantage and, therefore, whether they should be excluded from any subsequent procurement. Like other noble Lords who have spoken, my noble friend put forward a thought-provoking point. As I said earlier, I agree with the importance of building capacity among SMEs. We have seen an increase in spending on SMEs in recent years. Figures published last month show that government spending with small businesses rose to a record £19.3 billion in 2020-21—the highest since records began. We hope that the new procurement regime will make it simpler, quicker and cheaper for suppliers, including SMEs, charities and social enterprises, to bid for public sector contracts, and with lower barriers to entry to the market.
Lord Hunt of Kings Heath (Lab)
I am grateful to the noble Lord for considering my amendment. Does he accept part of my premise, which is that some public authorities are really not doing the right thing at the moment, despite Treasury rules and guidelines? In fact, the qualification the PAC made to the DH report is some evidence of that in relation to the NHS.
Lord True (Con)
My Lords, I could not possibly be tempted, particularly at 8.04 pm when the Committee needs to finish shortly and I already have a very long response to a large number of amendments. The Bill does have pipeline notices, which I have discussed: I will engage with the noble Lord on that before Report and I welcome that.
Amendment 141 is about a hugely important issue to which so many noble Lords spoke. The noble Baroness seeks to amend Clause 24 to require contracting authorities to take account of accessibility and design for all principles when drawing up their terms of procurement, except in duly justified circumstances. This is an issue of fundamental importance. It is of concern for disabled people, and I know that your Lordships hold concerns about accessibility very close to their hearts; it comes up in every piece of legislation.
As part of our broader goal of a simpler regulatory framework and increased flexibility to design efficient, commercial and market-focused competitions, the Bill does not dictate how terms of procurement including technical specifications are to be drawn up, which is the issue around Clause 24. It simply contains what is prohibited by international agreements and applies to all “terms of a procurement” as defined in Clause 24(5). We believe that this approach is better than the existing approach, as buyers are forced to truly analyse and develop the content of their specifications to address the needs of all those the public contract should support.
The UK has legal obligations, which we readily own and which will dictate how terms of procurement are drawn up, with accessibility covered by Section 149 of the Equality Act 2010, as mentioned by the noble Lord opposite. We consider that helps deliver the intended outcomes of both the current duties in this area contained in Regulation 42 of the Public Contracts Regulations 2015 and of this amendment.
I have heard the very strong speeches made by noble Lords on all sides, and I have seen the submissions from the RNIB and others. It is very important that we should have constructive discussion to test whether the Bill delivers the accessibility that your Lordships hope for. The Government remain absolutely committed to ensuring that public procurement drives better outcomes for disabled people. In our contention, there is no dilution of the commitment to accessibility under the Bill. The Government are clear that accessibility criteria should always be taken into account in every procurement, and the existing legislation ensures that that is the case.
However, we will engage further on this and on the other themes and points put forward by so many noble Lords in this wide-ranging debate. In those circumstances, I respectfully request that the amendments are withdrawn and not pressed.
Baroness Noakes (Con)
My Lords, the only amendment that is going to be withdrawn is my rather small amendment in this group, Amendment 22. My noble friend said that we needed flexibility, and that good reasons were there to allow flexibility. I completely buy the need for flexibility in the procurement rules, but I still wonder whether good reasons without some other constraint around them are sufficient. I was pondering whether the good reasons need to be attached to value for money, or something similar. That may be covered by the interaction with Clause 11, which sets up procurement objectives, but I am probably too tired to work that out in my own mind at the moment. I will consider it further, and my noble friend the Minister, who also said he would consider it further, might like to reflect outside this Committee on how that works out. For this evening, I am sure that everyone will be mightily relieved if I beg leave to withdraw my amendment.