Procurement Bill [HL]

Lord Hendy Excerpts

Committee stage
Wednesday 13th July 2022 Grand Committee

[Lord Knight of Weymouth (Lab)]

My Lords, I should start by apologising for not being able to be present for Second Reading, but I hope that we can have an interesting niche debate about the importance of good work and good work in respect of government procurement. There are five amendments in my name in this group, and I am delighted that I was joined by my noble friends Lord Hendy and Lady Hayman and the noble Baroness, Lady Bennett. I am grateful to them for their support. Also in this group are some important amendments from my noble friend Lord Hendy.

There are two aspects of regulation as I see it. One is about putting some minimum standards in place, which is what my noble friend’s important amendments are about, and the other is about commissioning better practice and better performance, and that is where my amendments sit.

I should also remind your Lordships that I am the co-chair of the All-Party Parliamentary Group on the Future of Work, along with David Davis in the other place. We have been working with the Institute for the Future of Work on this good work agenda and have found from the evidence around good work that the more you can increase the quantity of good work in the economy and society, the better the prospects are for people and the communities in which they live. We therefore remind the Minister and the Committee of the importance of this agenda in terms of levelling up, in particular, but also building security, prosperity and self-respect—there is a virtuous circle in play.

We are also trying to tackle particular problems that the Institute for the Future of Work, for example, uncovered in its report The Amazonian Era. It looks at the supply chain in the logistics sector that starts with the Amazon warehouses and the problems of algorithmic management where people are being managed by machines and are suffering in terms of their mental health, self-respect, security and prosperity as a result. The Committee may be interested to know that President Biden in the United States is currently instigating a whole swathe of work around supply chains for procurement in order to look at this very topic.

In one of the amendments, we define what good work is, but it is important to remember how good work aligns social, economic and health interests. Taking health, for example, the institute’s good work monitor shows a really strong correlation between health outcomes and higher-quality work, especially regarding chronic obstructive pulmonary disease, heart disease, some cancers, liver disease, drug use and self-harm. All those can be improved by people being able to work in a better environment. This was underscored by the Deaton review for the Institute for Fiscal Studies in May 2019.

There is also a correlation between the pay and benefits that workers receive and the productivity they then generate—hence this is also good for employers. The Resolution Foundation today has published a report showing that UK households are, on average, £8,800 worse off than their equivalents in France and Germany, in large part because of low productivity. This is a British disease that we need to tackle. I suggest that tackling, and incentivising through procurement, a better quality of work is at the heart of what we might want to do. I can also tell the Committee that this is not at the expense of unemployment. There is a very useful correlation showing that good work creates good and higher levels of employment.

I will not run through the principles of good work, as they are set out in one of my amendments. However, in terms of the requirement that we want to put on those entering the process to secure government procurement, there are plenty of indicators to help them demonstrate the quality of the work that they are offering and engaged in. The amendments would essentially ensure that the impacts on access to work and the conditions and quality of work are evaluated at a prequalification stage in procurement. They would thereby deliver strong public benefits. I listened carefully to what the Minister, the noble Lord, Lord True, said in response to the last group of amendments around public benefit. The essential argument was, I think, that it applies differently to different projects, and he therefore wants to keep it loose and flexible.

I say to him that I worry, first, about the possibility of companies that are successful in procurement off-setting one social or public benefit against another. I really do not want to see anyone off-setting the quality of the work against some other social good or public benefit. Secondly, my understanding of how good, successful capitalism works is that business and employers demonstrate four types of value: value to the shareholder; value to the customer, in this case the public purse; value to society, namely public benefit; and employee benefit and value. That is the value mix we are looking to incentivise and get right. In this context and this group of amendments, we are arguing—there is really good evidence to support this—that you can deliver really strong employee benefit and in doing so deliver extremely successful social and public benefit along the way. I seek to get this written into the Bill through these amendments. I beg to move.

[Lord Hendy (Lab)]

My Lords, I will speak to Amendments 186, 292, 297, 315, 319 and 519. I express my gratitude to the noble Baroness, Lady Bennett, and my noble friends Lord Hain and Lord Monks for adding their names. Of course, I support the amendments moved by my noble friend Lord Knight, for the reasons he advanced.

All the amendments in this group are designed to utilise the tremendous power of public procurement to improve the lot of Britain’s 32 million-strong workforce. As the Minister reminded us at Second Reading, £300 billion of public contracts is involved, some 13% of GDP. Public contracts involve tens of thousands of employers and hundreds of thousands, if not millions, of workers in their execution.

At Second Reading, I tried to make the case for the Bill to restore the fair wages resolution of the House of Commons, which subsisted to protect terms and conditions from 1891 through to 1983. The response of the Minister, the noble Lord, Lord True, was:

“To impose your political objectives on a nation, you have to win an election and form a Government.”—[Official Report, 25/5/22; col. 925.]


He made that point earlier this afternoon in different words. It was a powerful point, but we do not think it is sufficiently powerful to answer the amendments proposed.

There are two reasons for this, one ethical and the other legal. I will deal with the ethical issue first. As we know, Clause 11(1) of the Bill includes “maximising public benefit” as one of four objectives to which the contracting bodies must have regard in letting public contracts. Clearly, one way of maximising benefit is to improve or maintain the condition of the working lives of both the workers engaged on public contracts and the many more millions whose employers will be influenced by the terms and conditions set on public contracts.

The other side of that coin is the public benefit in preventing bad employers undercutting good ones in the obtaining of public contracts. Bad employers such as P&O Ferries, which deployed employment practices which the Prime Minister and other Ministers condemned as abominable, should not on any basis be the beneficiaries of public contracts, as I am sure the Minister will agree. Schedules 6 and 7 of the Bill already specify various mandatory and discretionary grounds for excluding potential bidders from public contracts, among which are various forms of abuse of workers. So the principle is established, but the exclusions do not go far enough.

Amendments 186 and 319—one is mandatory and the other discretionary, if your Lordships do not like the idea of mandatory exclusion on this basis—would provide for the possible exclusion of bidders on the basis that the bidder has been found by an employment tribunal or court to have significantly breached the rights of an employee or worker, or that it has admitted that it significantly breached those rights, or that it has made a payment to an employee or worker in respect of a significant breach of their rights. That would catch the P&O Ferries-type employer. Of course, it is necessary to include, as the previous legislation did, a mechanism for self-cleansing so that bidders that are genuinely remorseful and have changed their practice can be included.

--- Later in debate ---

The noble Lord, Lord Hendy, also mentioned the TCA.

[Lord Hendy (Lab)]

Why would breaches of ILO conventions not apply to bidders in this country if they apply to bidders from outside this country?

[Baroness Scott of Bybrook (Con)]

As that is a legal question, I shall get a legal answer for the noble Lord, and I will certainly write. I thought I had answered him, but I will make sure that that is clearly written legally.

On the TCA, with respect to Articles 387 and 399 of the EU-UK Trade and Cooperation Agreement, procurement law does not grant rights to workers and, as such, the exclusion grounds are not inconsistent with the UK’s obligations under those articles. The rights protected by these provisions are provided elsewhere in national laws, none of which are affected by the Bill. The exclusion grounds are not intended as a means of enforcing labour rights; rather, exclusion is a mechanism to ensure that contracting authorities do not award contracts to suppliers that pose a risk.

I am confident this will enable contracting authorities effectively to protect the rights of workers delivering public contracts, especially when combined with other changes we are making to strengthen the exclusions regime, such as the inclusion of serious labour misconduct in the absence of a conviction as a discretionary ground for exclusion; requiring assessment of whether the exclusion grounds apply to subsidiaries of the supplier; and extending the current time limit for discretionary exclusion grounds from three years to five years.

Amendments 292 and 297, tabled by the noble Lords, Lord Hendy, Lord Hain, Lord Monks and Lord Woodley, remove the requirement for contracting authorities to consider the risk of the circumstances giving rise to an exclusion ground recurring in applying the exclusions regime. Exclusion is not a punishment for past misconduct; that is for the courts to decide. Exclusion is a risk-based measure and, as such, suppliers should be encouraged to clean up their act and given the right to make the case that they have addressed the risk of the misconduct or other issues occurring again. This might be through better training, stronger compliance controls or dismissing the staff involved in any misconduct. It is for contracting authorities to decide whether the evidence they have seen is sufficient to reassure themselves that the issues in question are unlikely to occur again.

Amendment 519, tabled by the noble Lord, Lord Hendy, proposes to use Clause 104 of the Bill to omit Section 17(5)(a) and (b) from the Local Government Act 1988. It would remove the prohibition on relevant authorities, as detailed in Section 17(5)(a) and (b) of the 1988 Act, to consider in relation to public supply or works contracts the terms and conditions of a contractor’s workers and the employment status of their subcontractors.

The Bill provides for a range of labour violations to be considered as part of the grounds for exclusion, which must be considered for every supplier wishing to participate in each procurement within the scope of the Bill. These matters will be subject to further debate, possibly later today, when the Committee considers the exclusions and debarment regime in the Bill. I am sure my noble friend Lord True will have more to say on that.

The purpose of Clause 104 in the Bill is, first, to ensure that authorities to which Section 17 of the Local Government Act 1988 applies are not prevented by that section from complying with their duties under this Bill; and, secondly, to enable a Minister of the Crown or the Welsh Ministers to make regulations to disapply, when required, a duty under Section 17. The clause ensures that authorities covered by the 1988 Act can take advantage of domestic procurement policies that may be implemented during the life of the Bill.

Clause 104(1), which amends Section 17(11) of the Local Government Act 1988, directly achieves this. However, it amends Section 17 only to the extent necessary to ensure that the relevant authorities are not prevented by virtue of the section from complying with the Bill. It would not be appropriate to use the Bill as a vehicle to make further amendments to the 1988 Act, as proposed by the noble Lord, Lord Hendy.

Amendment 535, tabled by the noble Lords, Lord Knight and Lord Hendy, and the noble Baronesses, Lady Hayman and Lady Bennett, creates the concept of “good work”, relied upon by the other amendments in this group. In the light of my responses on substantive amendments, there is little I can usefully add on this amendment. I therefore respectfully ask that noble Lords do not pursue these amendments.