Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026
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Baroness Taylor of Stevenage
That the Grand Committee do consider the Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026.
Relevant document: 46th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, this order delivers on the Government’s commitment to build a stronger economy in all parts of the country. It gives local authorities in England the tools they need to support local and UK-based businesses and to strengthen local communities through the power of public procurement.
The order enables local government authorities to reserve public procurement competitions for below-threshold contracts to suppliers based within the UK or their local area. Below-threshold contracts are those valued below the financial thresholds set out in Schedule 1 to the Procurement Act 2023 and which are subject to a much more limited set of rules than contracts valued above the thresholds. Those thresholds are set to align with the UK’s international obligations on public procurement.
These may be lower-value contracts, but they matter enormously. Between February and November 2025 alone, they accounted for over £1 billion of spend and represented almost two-thirds of the contracts awarded by subcentral authorities—I think that is Civil Service-speak for local authorities. Currently, local authorities are prevented from considering supply location when carrying out procurements by Section 17(5)(e) of the Local Government Act 1988. That provision was enacted to prevent politically motivated boycotts of foreign countries through procurement—an essential safeguard that this order fully maintains. The order permits this restriction to be set aside only when authorities reserve competitions for below-threshold contracts to either UK-based businesses or to businesses based in a defined local area. Authorities cannot target specific countries, and political boycotts remain unlawful.
Before bringing forward this legislation, we listened carefully to local authorities. The previous Government consulted on a similar proposal in 2023, which received strong support in principle. However, authorities were clear that the proposed approach then—limiting reservations to a single county or a single London borough—was too restrictive. It was unworkable for combined authorities spanning multiple areas, for councils procuring jointly across boundaries and for parish councils.
This Government have taken a different approach. The order provides the greater flexibility that authorities asked for by allowing them to set the local area as their own area or the entire county or borough within which they are located, or to extend it to include any bordering counties or London boroughs. This matches the reality of how local government operates. Economic geographies do not stop at administrative boundaries.
Authorities can also combine this geographic flexibility with existing powers to reserve contracts to small and medium-sized enterprises and voluntary, community and social enterprises. This means that an authority could reserve a contract to local SMEs or to UK-based social enterprises, maximising flexibility to support their communities in the way that makes the most sense.
Transparency remains paramount. When authorities use these powers and advertise the opportunity, they must clearly state in their procurement advertisement what area the competition is reserved to.
The order also amends the Procurement Regulations 2024 to require that authorities state the relevant area in any below-threshold tender notice that is published. Suppliers will know up front whether they are eligible, and the public can see how their local authority is using its powers.
Statutory guidance has been published to support implementation and was prepared in consultation with the Local Government Association. The broader policy of enabling authorities to reserve competitions for below-threshold contracts had cross-party support during the passage of the Procurement Act. Labour welcomed it in opposition and local government has asked for it consistently. The order empowers local authorities in England to support local economies, strengthen UK businesses, and create opportunities for SMEs and social enterprises, all while maintaining essential safeguards against political boycotts. I beg to move.
Lord Kirkhope of Harrogate (Con)
My Lords, I will intervene briefly. First, I declare a long-gone interest: I was a county councillor many years ago. I always believed, as did my local authority, that, whatever one did in terms of procurement, the overall aim and need was to obtain best value for money in any contracts of any size, so I have slightly mixed views about this order. On the one hand, as the Minister said, it is very important that we support our native suppliers and contractors as far as is possible when it comes to work, particularly below the threshold. I would like the Minister to clarify that low threshold when she responds.
However, it seems that there are one or two questions here. First, this order would give a local authority the ability to determine a defined local area. Is that within the particular boundaries of the local authority? I see that there is provision here for that to include bordering authorities. Bearing in mind the nature of unitary local government nowadays, that would be an enormously large area. Does this mean either that you can choose to have a very small defined area, such as a particular town or village that contains certain traders who may be able to be part of the procurement, or, more generally, that it would be a wide area? Does the advertisement that will be placed, which is required, have to give reasons why a defined area has been chosen?
My only worry there, in looking back at the history of local government, is that a selection procedure that aims at a defined area within a local authority surely could—I am not saying that it would, but it could—be used politically in certain circumstances: for example, in a political operation where a number of procurements were made available in certain parts of a local authority area that happened to have a particular political complexion. There does not appear to be much of a safeguard against that here, so I would like some reassurance from the Minister on this point.
I mentioned the advertisement. I would like to know a little more from the Minister about the nature of that advertisement, as well as the reasoning that there has to be in it for doing what the local authority has chosen to do. The Minister is right when she talks about boycotts regarding countries; that is a very difficult area indeed. Again, we must be very careful that there is no indication here of a boycott, in the hands of politicians, against a particular country—or, indeed, to come back to the low-threshold procurements, of a boycott against particular individuals, firms or people who are being ruled against, either because they have different political views or because they have some other discriminatory situation with which they might not comply.
I am sorry to raise these few doubts in my mind. Although I see the intention here as very positive, I want to be absolutely sure that, in its delivery, it will not only maintain support for local contractors and local services but continue on the basis with which I started: providing council tax payers with the best value for money.
Baroness Taylor of Stevenage (Lab)
My Lords, I am grateful to all noble Lords who have spoken in this debate seeking—quite rightly—some clarification.
I will refer first to the below-threshold limits, because I think that that would put this in a context that might be helpful. The below threshold for local authorities is £207,720 for goods and services and £5.193 million for works; that is the threshold that applies here. I should add that central government has had similar powers to these since December 2020, so we are doing something for local government that central government has had for some time.
The noble Lord, Lord Kirkhope, spoke about best value in procurement. I agree entirely with what the noble Lord, Lord Shipley, said: it is my belief that best value should definitely include the social value of local procurement, which is why the Government were keen to take this step as soon as we could. It brings jobs locally and helps local businesses. That can be very much added into the best value equation for local people.
On the definition of local authorities, there is a flexible definition of what a local authority is. To refer to the questions that have been asked, it is for the local authority to determine what that local area will be. The order has been drafted to take account of changes that will be made by the English Devolution and Community Empowerment Bill regarding local government reorganisation and authorities’ geographic areas of responsibility. Strategic authorities are already covered by the order, and combined authorities and county combined authorities are already listed as best value authorities under Section 1 of the Local Government Act 1999. This order applies to all best value authorities.
Importantly, for strategic authorities, a designation applies to particular combined authorities and combined county authorities; the underlying corporate entities remain the county authority or the county combined authority. When they receive a strategic authority designation, they continue to be best value authorities and, therefore, to be covered by this order—so no amendment to the order will be needed. It is intended that this measure is future-proofed, which will include new local authorities formed as part of the reorganisation process.
On the advertisement issue raised by the noble Lord, Lord Kirkhope, I understand his point about this having the potential to be a political matter, but these are economic decisions taken in terms of the contract. It is hard to see a situation where a local authority would take a decision about where it was going to have its boundary in relation to politics, because that will change; you might very well cause yourself a future problem if you were to do that. These decisions should be taken as economic and financial decisions for the council concerned. Of course, the advertisement must state the area to which the contract applies, so it has to go out in public with that.
I hope that I have covered the question from the noble Lord, Lord Shipley, about definition in my response to the question from the noble Lord, Lord Kirkhope. Local authorities will be able to determine in a flexible way what their local area is; they can set it as their own area, or the entire county or borough in which they are located, or they can extend it to bordering English counties or other areas local to them as they see fit, or to London boroughs. If you are in the south of my county, you will have London boroughs on your southern border, so you may wish to extend it to them as well.
Lord Shipley (LD)
I would like to be clear about this, because I have not understood what the Minister said. The order does not say that a metropolitan district council, as a single authority, can join another authority to theirs. In other words, if a metropolitan district council, such as Calderdale, as a single authority wishes to procure a contract, can it invite bids from a neighbouring council which is not a London borough or a county? That is what the Minister just said that they can do, and I think it is not specified in the order. I think we need to be very clear about this, because it is not just about strategic authorities; in my case, the strategic authority is 120 miles long, and that is not a local area.
Baroness Taylor of Stevenage (Lab)
Councils can procure either singly in an area that they have determined or jointly with an area that is next to them. I am not sure that I can be any clearer in setting the proposal and I am not sure where the confusion is arising.
Lord Shipley (LD)
The confusion lies in Article 3(5)(a)(ii). The point is that it refers to one relevant authority— not more than one—that seeks to procure a contract. The sub-paragraph says that
“where there is one relevant authority which intends to enter into a relevant contract”,
it can do so only in
“the area of that authority”,
which means its own area, or
“any of the areas of the counties or London boroughs that border that area”.
There is no mention at that point of a neighbouring metropolitan council.
If it would help the Minister, I would be very happy to have a response in writing, as long as it is posted in the Library. I am in favour of this happening, so do not want to hold things up, but would like to be clear about whether the councils—I live in Tyne and Wear—can work together in procurement. Can one relevant authority procure, but advertise the contract in a neighbouring authority, even if that neighbouring authority is not a part of the procurement process? You can do it in London and when you are next to a county but, at the moment, according to this order, you cannot do it in an urban metropolitan area.
Baroness Taylor of Stevenage (Lab)
I will take away the issue that the noble Lord has raised, review it and write to him on it, but it looks clear to me that the order says
“where there are two or more relevant authorities which intend to enter into a relevant contract … the areas of those authorities, or … the areas specified in (i) and any of the areas of the counties or London boroughs that border those areas”.
I think that it is clear, but I will take it back, review it and come back to the noble Lord.
Baroness Taylor of Stevenage (Lab)
I do not think that the noble Lord, Lord Fuller, has spoken in the debate.
Lord Kirkhope of Harrogate (Con)
I want to say a quick word. I think one of the problems, as far as I can see, is the word “counties”. Changes in local government and so on mean that I, for instance, reside in North Yorkshire, which is a county, but next to it is West Yorkshire. That may cause a problem in terms of interpretation. I am sorry; I do not want to complicate the Minister’s position, but it would be very helpful if she could write to us about this point, because defining it as just counties and London boroughs does not help with the other structures in local government.
Baroness Taylor of Stevenage (Lab)
We are discussing a matter of semantics here, but the confusion might have occurred because, under the Local Government Act 1972, “county” includes metropolitan authorities. That might be the issue, but it is only fair that I set that out more clearly in writing to all the noble Lords who have taken part in the debate.
The noble Lord, Lord Jamieson, referred to frameworks —and, yes, councils can still jointly procure under this process. He spoke about VCSEs. We will, of course, keep all matters under review in that way. I hope that this is a real opportunity for VCSEs; over many years of procuring contracts, I have often heard them say that not enough consideration is given to the possibility of VCSE delivery, so I hope that this will expand the opportunities for VCSEs.
The noble Lord spoke about the restriction that meant that this was not implemented before. Again, we did not go out to consultation because the consultation had already been done. I do not know why the previous Government took the decision to change tack and not implement it, but the response to the consultation was very clear that the previous proposals would be too restrictive, which is why we made these changes and brought them in, in the way that we have.
I just want to say that I said the term “subcentral”, but it is not a term that I would ever use myself. I will make sure that it does not appear in any of my future appearances before the Committee.
Lord Jamieson (Con)
I want just to clarify the point that I tried to make about consortiums. I want to make sure how the consortium will function where maybe people are looking, shall we say, to give some local focus. If you end up in a consortium, which might be Bedfordshire, Hertfordshire and Kent, will you be able then to say, “We’ll only accept bids from people from Hertfordshire, Bedfordshire and Kent” because they are not coterminous, not neighbouring? I am not expecting an answer now, but perhaps the Minister could kindly give it some thought and just say whether, if one enters into a consortium, the footprint can effectively be the consortium?
Baroness Taylor of Stevenage (Lab)
I think the answer is yes but I will come back to the noble Lord in writing. The threshold might step in there because, as I have set out, there are limits on the threshold for this process.
Lord Shipley (LD)
My Lords, I want just to clarify one small point. The noble Lord, Lord Jamieson, raised the issue of council areas that border each other but, where there is a river between them, there is a question of whether the border is the middle of the river. I just want to say that because, when I read this, I realised that there are lots of rivers where councils work across the river together and they ought to be in a position where they can procure jointly.
Baroness Taylor of Stevenage (Lab)
I think administrative boundaries take account of rivers generally, so I hope that there being a river in between you would not get in the way of you procuring jointly with your neighbouring area. At some point in the past the Boundary Commission would have taken account of that river and said which area it lies in; as we know, rivers tend to go in and out of different counties.
Lord Kirkhope of Harrogate (Con)
As regards changes in local government, the River Tyne, for instance—which I know extremely well, being a Geordie—was always the border between Northumberland and County Durham. Of course, the Tyne and Wear authority encompassed the whole thing. But at the same time, a number of rivers have management operations in which the board is made up of different components of a number of interested local authorities, which are not necessarily local authorities that are, as it were, on one side or the other of that river. I do not know whether that confuses this even further—I suspect that it does.
Baroness Taylor of Stevenage (Lab)
There is enough flexibility in this order for local authorities to determine these matters, to put their heads together and decide how they want to operate in procurement terms. That is what is intended in the order; I hope that is what happens. No doubt it will get tested at some point, but I hope that it works as we intend it to.
As we all know, local government has been asking for a very long time to have this flexibility to issue and award contracts locally. I hope that this order will give local authorities that flexibility. We all want to support local and UK businesses through the procurement that we do for people in our own areas.
I thank colleagues across government who have developed the policy, particularly at the Cabinet Office and in the Ministry of Housing, Communities and Local Government, and I thank the Local Government Association for its support. I have had support from both the Cabinet Office and MHCLG today. I hope that noble Lords will join me in supporting this order and I commend it to the Committee.