Local Government Procurement

Debate between Andrew Gwynne and Rory Stewart

Wednesday 16th January 2013 Westminster Hall

[Andrew Gwynne]

My hon. Friend reiterates the point that joint working and joint procurement models can bring huge savings to the public purse and immense benefits for the local economy, whether in Scotland, Greater Manchester, Derbyshire, Cumbria, or Northern Ireland.

[Rory Stewart (Penrith and The Border) (Con)]

I congratulate the hon. Gentleman on securing this debate. He kindly mentioned Cumbria, where the central challenge in local procurement is how to support small local charities against big national providers. The procurement rules seem to make it difficult for small local Cumbrian charities, and even Carers UK and Mencap, to retain contracts that they have performed well for 20 years. They are being swept aside by huge national giants. Does the hon. Gentleman have any lessons from Greater Manchester on how to deal with procurement for local charities?

[Andrew Gwynne]

The hon. Gentleman makes an important point. In his constituency and mine, excellent work is being done by not-for-profit organisations and charities to provide key public services. Given a level playing field, they can compete and often provide better services than the big players, but one problem with local government contracts has been that the big players can sweep up those contracts. Perhaps the Minister will respond to that point and ensure that local councils can prioritise local charities and organisations to provide those services. There is often an added benefit in keeping them within an organisation that operates in the locality, because it keeps skills and some spending local.

During the first year of the Tameside Works First initiative, a total of £12 million of capital funding was invested in the local economy. In the second year, more than £13 million was invested in local companies via the Building Schools for the Future programme alone; that was delivered through its investment partner, Carillion. In line with most of local government across the country, particularly in metropolitan areas, since the 2010 spending review, the council’s capital programme has been vastly reduced. Continued austerity measures and Government proposals to localise business rates make it even more important that local companies receive the support they need to survive and grow, if we are to increase personal and economic resilience in places such as Tameside.

Let me put that into context. A total of £151.9 million was spent by Tameside council with external contractors in 2011-12, of which £35.3 million, or 23%, was spent with Tameside-based companies, and a further £27.6 million was spent via Carillion, which also uses local companies in its supply chain as part of the Tameside Works First initiative. As a result, the council’s spend on Tameside contractors has increased hugely, by almost 50% over the past three years, from £20.1 million in 2009-10, when the Tameside Works First initiative started. In addition to sums spent with external contractors, £9.5 million was spent in the local economy via Tameside council’s own direct services. All those combined are considerable amounts of money to keep in the local economy to support local businesses and jobs.

According to 2011-12 billing data, in that year alone Tameside council processed transactions with 12,000 external contractors, of which 5,593—almost half—were based in Tameside. Some £35.3 million was spent with those companies across 55,713 individual transactions, equating to an average transaction value of £634; the largest individual transaction value was just over £1 million. A total of 3,100 local suppliers received payments of up to £60,000, which requires either three quotes of up to £20,000, or three tenders between £20,000 and £60,000 before the contracts can be let. Many of those were smaller contracts, directly let to local companies. I think, for example, of the new park railings at Granada park in Denton: not only does the park look very smart, but that fairly small contract was a lifeline for the Denton blacksmiths, Anvil Masters, a few years back, because it helped the company to keep its head above water. We must not lose sight of the importance of those small contracts. We would do well to look at the very good work being done by the Tameside metropolitan borough council to see how a local council can actively support its community through very tough economic times.

In the short time left, I will focus on Stockport metropolitan borough council, which is the other council that I represent in my Denton and Reddish constituency, with Reddish North and Reddish South wards being in Stockport, of course. Sadly, the council has not been quite as proactive as Tameside in supporting the local economy. Stockport introduced an initiative called Stockport Boost. The frustrating thing for me is that the initiative seems gimmicky in nature, giving the appearance of helping local businesses and the local economy while actually doing very little. It speaks volumes that Stockport council won the local authority PR team of the year award in 2011 for the Stockport Boost campaign, which

“looked at ways to tackle the recession, providing businesses and residents with advice and support on how to cope during the year ahead.”

That is very laudable, and advice and support are fine, but on inspection it appears that Stockport council does not have a specific policy for prioritising local provision. In a recent response to a Labour party survey, the council said simply that it seeks to

“strive to look beyond the price of each tender at what the collective benefit to our economy and the environment would be.”

Warm words, but perhaps the council could learn a few lessons from the Tameside part of my constituency.

Of course, given the way in which the Stockport Liberal Democrats run the council, it is hardly a surprise that the council won the local authority PR team of the year, with little else to credit it with. It still has not identified £5.3 million of additional cuts that need to be included in the budget that will be set in the first week of March. Overall, from 2010-11 to 2015-16, the estimate is that nearly £80 million of budget reductions will need to be found in Stockport, but the council’s approach is entirely about keeping its head in the sand when it comes to local finance.

Clearly, taking £80 million out of a local economy will be hugely damaging, and I am almost certain that it will be my constituents in the Reddish area who will feel the swing of the axe the hardest, because the Liberal Democrat council has past form in choosing to focus many of its cuts on those areas of Stockport in which it has absolutely no political representation. It is worrying to me that by not supporting local communities, there is an inherent unfairness and a higher impact on more socially deprived areas such as Reddish and other communities, particularly in the north of Stockport.