Wednesday 6th July 2022
(1 year, 9 months ago)
Grand CommitteeProcurement Act 2023 View all Procurement Act 2023 Debates Read Hansard Text 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 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.
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.”
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.
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.