Draft Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026
(1 day, 13 hours ago)
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The Parliamentary Secretary, Cabinet Office (Chris Ward)
I beg to move,
That the Committee has considered the draft Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026.
This order has a simple but important purpose: to put power and opportunity, and to keep resources, in the hands of local communities and businesses. It will ensure that local authorities, parish councils and fire, waste and national park authorities in England can reserve contracts that are cumulatively worth around £1 billion a year to suppliers based in the UK or in their local community. It will boost small and medium-sized enterprises and voluntary groups by ensuring that they have a better chance of benefiting from local procurement, and it will cut red tape and simplify contracting regimes. It is also proof that this Government are using every lever at our disposal to ensure that public procurement drives growth and opportunity in every part of the country.
The order disapplies section 17(5)(e) of the Local Government Act 1988 in specific and carefully defined areas, to enable local authorities in England to reserve public procurement competitions for below-threshold contracts to suppliers based in either the UK or their local area. Below-threshold contracts are contracts that are valued below the financial thresholds set out in the Procurement Act 2023: approximately £207,000 for goods and services, and £5.2 million for works. Those may be considered lower-value contracts, but they matter enormously to local businesses and support local jobs. Last year, they accounted for over £1 billion of spend and for almost two thirds of the contracts awarded by sub-central authorities.
Currently, local authorities are prevented from awarding below-threshold procurements on the basis of supplier location, meaning that a local authority—for example, in the great city of Brighton and Hove—is unable to reserve procurements for local companies, even if doing so would boost local jobs, tap into local expertise and still deliver comparable value for taxpayers’ money. This Government believe that that should change, and that central and local government should not be agnostic about where public contracts are awarded, where jobs are created and where resources are concentrated.
It is important to note that the powers in the order are optional. Local authorities can decide whether the powers will benefit their communities and deliver better procurement opportunities, but we believe that they should have the freedom to use them if they wish, and we know from feedback that many are keen to do so. The order also seeks to boost transparency in local procurement. When authorities use these powers, they will have to advertise the opportunity and state clearly in their advertisement which area the competition is reserved to. Suppliers will therefore know up front whether they are eligible, and the public will be able to see how and if local authorities are using the powers.
On geographical scope, the order applies only to England, but the devolved Governments are aware of it, and we have been working with them and keeping them abreast of developments. Whether they wish to implement a similar policy is of course a matter for them, but we are happy to support them on that.
I have two further points to make. First, the order gives flexibility to local authorities to define the local area that will apply to a reserved procurement. It could be reserved to their own specific area—for example, Brighton and Hove council—or extended to include neighbouring counties or neighbouring London boroughs. That additional flexibility reflects feedback from local authorities, building on the consultation that the previous Government carried out. We think it better reflects the reality of how local government operates, and how local authorities can support jobs and services in their areas.
Secondly, the order can only be applied on a geographical basis, and not on political grounds. Section 17 of the Local Government Act, to which the order applies, was enacted to prevent politically motivated boycotts of foreign countries through procurement, and those safeguards are fully maintained. The order simply disapplies section 17(5)(e)—the geographical location provision—in two specific circumstances: for UK-wide reservation or for local area reservation, and only in relation to local thresholds. All other section 17 provisions, regarding political affiliations and so forth, remain in full force. This builds on the work that the previous Government had done in this space.
Before bringing the legislation forward, we listened and worked carefully with local authorities, which have been overwhelmingly supportive; indeed, many have been asking for this power for years. There is also strong support from the Federation of Small Businesses, which has described it as
“exactly the kind of practical reform we called for”.
Statutory guidance has been published to support the implementation, which we have worked on in consultation with the Local Government Association, and the previous Government consulted on similar proposals in 2023. We are standing on the shoulders of the Procurement Act, so I hope there will be a degree of cross-party consensus.
In conclusion, this order reflects the calls of local authorities, small businesses and communities. Building on the work of the 2023 Act, it will provide the tools for local authorities to keep around £1 billion in their local communities, with the prospect of much more to come. It also underlines the Government’s commitment to ensure that procurement is a lever for jobs, growth and opportunity across the country.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
It is a pleasure to serve with you in the Chair this afternoon, Mr Dowd. The Opposition are supportive of the direction of travel outlined in the order, and we do not propose to divide the Committee. I have a couple of questions that I would like to put to the Minister, but as he has clearly outlined, the provisions build on the principles outlined in the Localism Act 2011 and the Public Services (Social Value) Act 2012 to enable local authority procurement to be used more flexibly to support local economies.
It would be helpful if the Minister could set out the consideration the Government have given to previous debates and legislation on the issue of boycotts, divestment and sanctions. He touched on that in his introduction, but it might be helpful for the record if we have real clarity about how the proposed statutory instrument ensures that the principles, which were agreed cross-party, continue to be enshrined in the procurement rules that local authorities have to follow.
Could the Minister set out in a little more detail how the Government’s English Devolution and Community Empowerment Bill, which is making its way through Parliament, envisages widespread reorganisation? The regulations will either be updated or are sufficiently flexible to enable the new combined authorities, and multiples of those combined authorities, to work together. There are already good examples, such as in London, where trading standards are delivered under a central contract operated by the royal borough of Kensington and Chelsea for all 33 London local authorities. We have the Kent commercial framework, which is an existing and established commercial procurement process that multiple different local authorities use. I want to ensure that there is nothing in the order that would frustrate existing and effective commercial arrangements that also support local economies.
Can the Minister set out whether the Government are giving any consideration, following the greater flexibility that we have around procurement following EU exit, to implementing the EU model of service concessions in the procurement of local authorities, which always gave a much greater degree of flexibility around procurement in respect of statutory functions? That is a provision that, historically, has never been open to local authorities in the United Kingdom. It is used as a means of achieving many of the same ends that the order seeks to work towards, but without anything like the level of bureaucracy that is inherent in some multi-stage competitive tendering processes.
Finally, the Minister outlined, and I totally agree with him, the importance of this order for local authorities in implementing measures that support local economies and key industries in their area. Can he set out for the Committee what, if any, follow-up there is going to be? We know that in the past one of the challenges for the Government was that, although greater flexibility was introduced, the take-up or use of that flexibility was extremely limited in practice. What measures will there be to assess the impact that this order has, to ensure that it is operating in the way intended or, if not, to prompt a reconsideration or re-examination of the opportunities to take this kind of approach on a greater and more productive scale in the future?
Chris Ward
I thank the hon. Gentleman for his comments and the spirit in which they were intended. I think that there is good agreement on this issue, and I will discuss each of his four points. First, on boycotts and divestment, as I said, the safeguards are essential and fully maintained by this order. We have worked in close liaison and built on the work that the previous Government did to ensure that is the case. The order disapplies only the geographic location provision in very narrow areas. Broader protections remain in place—there is no change to that.
As the hon. Gentleman says, the Procurement Act prevents contracting authorities from discriminating against suppliers that are entitled to the benefits of international agreements. That of course includes Israel and any World Trade Organisation signatory. Boycotts would be unlawful under that Act and remain completely unlawful. Councils could not do that under the order, as these are very narrow and specific measures. However, the hon. Gentleman’s point is well made, and it is one that I have looked at closely as we have gone through this legislation. I support the point he made.
Secondly, on local government reorganisation, when the English Devolution and Community Empowerment Bill goes through and reorganisation happens, the geographic areas will need to be updated in this legislation. If it is okay with the hon. Gentleman, I will ask my colleagues in the Ministry of Housing, Communities and Local Government to write to him and follow up on the specific point about how that will go through. It has been taken into account as we progress.
On EU procurement models, for my sins, the hon. Gentleman is going to hear a lot more from me about EU models and how we go about our new relationship with the EU, because I will be taking the relevant Bill through Committee soon. The changes that will be made by that Bill and how we will deliver them are not affected by this order at the moment. He will hear a lot more about how we will change some of that as the proposed EU Bill goes through. I will follow up with him on that.
The hon. Gentleman’s final point was about how we will follow up with local government to ensure that it takes up these powers and uses them. As I say, this is an optional power; there is no compulsion for local government to use it. However, given the level of consultation that has been done under successive Governments, I am optimistic that such use will happen. We are working with the Local Government Association to try to raise awareness and drive through implementation. My Department, along with MHCLG, will also write to local authorities to inform them of the powers and of how they can apply them, and to offer them support to do so. We are offering support without compulsion, but we will continue to monitor the situation and try to drive their use.
I hope that responds to the points raised. This is about giving a power that local authorities have been requesting for a long time. I think that it will make a big difference to businesses across the country. I want to thank everyone who has worked on this under successive Governments, including those from MHCLG, the Cabinet Office and the LGA, for their support. I hope that all hon. Members will join me in supporting it.
Question put and agreed to.