Trade Bill

Baroness Neville-Rolfe Excerpts

Committee: 1st sitting (Hansarad): House of Lords
Monday 21st January 2019 Lords Chamber

I genuinely appreciate noble Lords’ concerns but hope that this House has found the Government’s response to each of the amendments reassuring. Clause 1 is about ensuring continuity, and ensuring that UK businesses enjoy the same opportunities in future as they do now. That is something that I believe the whole House supports, and I ask the noble Lord to withdraw the amendment.

[Baroness Neville-Rolfe (Con)]

My noble friend helpfully explained how the implementation of the Agreement on Government Procurement would work and referred us to a website with useful detail. She said that where there was accession by another party, there would not be anything major. The whole idea of the provision was continuity, so you would be implementing things that had already happened. I have a simple question—I apologise that I am not expert in this area. The Government say that they are negotiating with a whole list of countries, including Albania and Australia, for example. If they were suddenly to accede to the GPA, which sounds quite positive—because it would mean more trade between countries in public services and in other sorts of procurement—would that then simply be added in, or would it be done in some other legislation? That is not quite continuity. It is very sensible to use an existing system, but I am keen to understand whether we are agreeing to that today or whether it would be done somewhere else. I apologise if my noble friend has already clarified that.

[Baroness Fairhead]

I thank my noble friend for the question. My understanding is that it puts us in the same position as we are today. When parties want to withdraw from or join the GPA, a process is gone through with the EU in which they demonstrate their intention and present their schedules to the WTO. Each member then decides whether they are prepared to accept that new addition or withdrawal. That is the process that we would go through. If that should happen, the Bill gives a power to implement under SIs. Parliament would be able to decide whether new members could join or leave.

--- Later in debate ---

[Lord Risby (Con)]

My Lords, as one of the Prime Minister’s trade envoys and as a long-standing deputy chairman of the Small Business Bureau, I support the amendment put forward by my noble friend Lord Lansley. I salute my noble friend Lord Livingston’s efforts, who helped to transform our external commercial activities.

Highlighting the importance of the small business sector is key to what the department is now doing. That is a huge cultural change because, although our small and medium-sized businesses sector is vibrant, it has not been brought into the loop of trade promotion. Huge effort is being undertaken there. I mention that because, earlier in the debate, there was an implication of inaction in the department. I have seen for myself how utterly untrue that is. For example, you can see on the website how small and medium-sized businesses are being offered communication skills and efforts are being made to encourage them; a sophisticated system is being put into effect.

My noble friend talked about strategy. Simply, there has been something of an oversight as far as the sector is concerned, particularly in terms of trade promotion. What is happening now is definitely a considerable change. The amendment highlights the importance of the sector for the future of this country and its future dynamic economic activity, which I hope will happen post Brexit, and offers a framework for participation in procurement. I hope that the Minister will give some sort of encouragement or indication of whether this is at the forefront of her thinking and that of the department when she replies to the debate because I believe that an important message was relayed by my noble friend in his remarks.

[Baroness Neville-Rolfe]

My Lords, I am a huge supporter of the small business sector and its growth. Indeed, some of the issues raised in Amendment 4, moved by the noble Lord, Lord Stevenson, are also important. However, like other noble Lords, I am not sure that they should be written into the Bill. I want to take this opportunity to ask the Minister a question, which she may prefer to answer in writing. Essentially, I want to pick up on the points about the importance of small businesses made by my noble friend Lord Livingston —who, as has been said, did so much as Trade Minister—and my noble friend Lord Risby.

My noble friend Lord Lansley is right that some countries try to discriminate in the procurement process in various ways. He rightly quoted the US Small Business Act. What can we do about that in policy terms? In particular, can we improve the process facing SMEs trying to win contracts either internationally or here in the UK? From my own experience, including a period serving on the Efficiency Board in the Cabinet Office, bidding rules are complex and vastly expensive—as a result, it is said, of European Union laws and requirements. Is work in hand to simplify our rules as we leave the EU to help SMEs win a bigger share of procurement, as I think we would all like?

[Lord Davies of Stamford]

My Lords, I have been listening to the debate with great interest, but I am worried that the House may be making a technical mistake that could have wider implications. With the best intentions in mind, many noble Lords have spoken in favour of the suggestion to place quotas on companies to do with the beneficiaries of public procurement for the portion of the contract supplied by small businesses. It has been said that the small business share in defence procurement is much lower than it ought to be. The House should be very careful about that. It is probably not possible to increase that greatly; I speak as a former Defence Procurement Minister, as the House will know. If we send our young men and women into battle, we must give them the very best equipment money can buy. There can be no compromise on that. In my view, we cannot under any circumstances accept something second-best when the best is available.

Defence equipment generally involves a great deal of research and development; the products are often high-tech, modern and unique, designed to our specifications and not for anybody else, so there are not the economies of scale that are generated with substantial sales. That is a problem because most of the big defence contractors have an overwhelmingly large share in this country’s defence business. When I was the Defence Procurement Minister, the five big defence procurement suppliers included BAE Systems, Thales, Lockheed Martin—which is American, of course—and Boeing. They are large companies, some of which are supplied with components and parts by small businesses, to a considerable degree. However, some of them are not and, in practice, it is impossible to force them to do that.

We must buy the best, which is often very expensive. We cannot place such conditions on its procurement. Let me give an example. Of course, we spent billions of pounds buying the F-35, which is a wonderful aircraft. We buy it from Lockheed Martin; it is built and assembled in Fort Worth in northern Texas, close to Dallas. I have been there many times. The British share in its procurement project is considerable: about 15% is produced by BAE Systems, but that is not a very large company. One would have to look at the extent to which BAE Systems procures from small businesses. In the United States, to some extent—but, again, to a limited degree—Lockheed Martin buys goods, equipment, services or software from small companies, but they are American small companies, so they do not help us to reach that particular kind of quota.

In some cases, like the Boeing contract for the Chinook helicopter—I once placed an order for 24 of them, so that was a very substantial contract—again the suppliers are largely American. It is not possible to insert British suppliers into the chain because they do not produce what is required for that particular aircraft. It was designed in America according to specifications set down by the American Department of Defense. I do not want to go into too much detail on this; rather, I want to give the Committee an indication that it might be worth thinking carefully about these matters before defence procurement is automatically considered as being part of the desirable targets for increasing the share of the market for small businesses. I fear that almost certainly the only sensible solution would be to leave defence out of this altogether. I started off by mentioning the fact that life and death issues are involved, and we should not be imposing any additional constraints on our defence procurement.