Deregulation Bill
Lord Young of Norwood Green Excerpts(10 years ago)
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Lord Young of Norwood Green (Lab)
My Lords, we do not oppose those amendments, which, as the Minister rightly said, are technical and relate to the decision to transfer the duties.
However, I can resist anything except temptation, as someone once said. I cannot resist responding to the point made about having created approaching 2 million apprenticeships. I welcome the Government’s commitment to apprenticeships but I keep making the plea for that figure to be disaggregated. The Minister knows as well as I do that anywhere between 50% and 75% of those apprenticeships are over-25s and really ought to be described as re-skilled adults or adult apprenticeships. It is not that we reject the need to ensure that re-skilling takes place but a number of people have raised doubts about whether they really should qualify as apprenticeships.
Real progress has been made on apprenticeships but I wish we would refrain from quoting that figure as though it were the answer to all the problems. We still have a long way to go in increasing apprenticeships, and I shall quote the usual statistic: only one in five employers and a third of FTSE 100 companies have apprentices. Other than those comments, we are content to support the amendment.
Lord Young of Norwood Green
I welcome that clarification and apologise to the Committee for any confusion caused.
My Lords, Amendment 69A seeks to amend Schedule 14 to ensure that teachers at further education establishments have specified qualifications. It seems that there is a dichotomy in government policies: on the one hand, they stress the importance of vocational careers and apprenticeships—we heard the Minister pointing out the difficulties in some areas, such as construction—and the need to enhance public perception of young people, parents and teachers, yet the schedule seeks to remove the requirement for teachers at further education institutions to have a specified qualification.
The Opposition are not alone in their concern. The City & Guilds institute, in written evidence to a consultation on the proposed revocation of further education teachers’ qualifications, said:
“City & Guilds wishes to see further exploration of the impact of removing the statutory requirements for Further Education (FE) sector teachers to have specific teaching qualifications at the same time as other changes resulting from the establishment of the Education and Teaching Foundation. The Sector faces uncertainties about the expectations for staff qualifications … The Coalition Government’s Skills for Sustainable Growth made clear that a strong FE system should play a key role in social mobility. Qualitative evidence suggests that the 2007 Regulations had a big impact in relation to the FE sector. There has been a year-on-year increase in the proportion of staff with a teaching qualification at Level 5 or above and an increase in the overall proportion of teaching staff in FE colleges holding a recognised teaching qualification (at whatever level) since the introduction of the Regulations (an increase from 74% of staff in 2005-06 to 77% in 2009-10). The majority of teaching staff in FE colleges are either qualified or on the way to becoming qualified according to the most recent data (from late 2010, but including earlier returns for 25% of providers). The Deregulation Bill now puts responsibility on the FE sector to consolidate and improve this momentum, so the sector will need to define and establish clear direction on how it will sustain and enhance its professionalism … City & Guilds is keen to ensure that the quality of FE teaching is maintained. ‘The quality of an education system cannot exceed the quality of its teachers. If we are committed to high quality vocational education, we must have teachers with the experience and skills to deliver it.’ It is vital for FE providers to strike the right balance in relation to teaching skills and industry/subject expertise within their workforce”.
Those closing points about striking the right balance between having specific qualifications and “industry/subject expertise” lie at the heart of this. I applaud the Government’s commitment to vocational training, but we question whether the schedule’s act of removing the need for teaching requirements is a step too far.
I go further and refer to the proposals of Labour’s independent Skills Taskforce, led by Professor Chris Husbands, director of the Institute of Education, and comprised of leading business and education experts. The work of the task force informs Labour’s shadow business and educations teams. It feeds into Labour’s work and business policy commission, and its education and children policy commission.
Under the proposals put forward by the independent Skills Taskforce, colleges will apply to become institutes of technical education, specialising in technical subjects suited to their local labour markets and focusing on offering high-quality technical education to young people. Gaining a licence should be contingent on three core criteria: demonstrable specialist vocational training and expertise; strong employer and labour market links; and high-quality English and maths provision. I would add IT to that. Having a licence would allow these institutes to access funding streams to deliver the technical baccalaureate and off-the-job apprenticeship training. They will consult on the process for licensing colleges.
One option recommended by the Skills Taskforce is to give the UK Commission for Employment and Skills responsibility for determining the full criteria and method for awarding the licences. The report goes on to recommend that, under Labour, college lecturers would be required to obtain a teaching qualification to ensure that standards are high. This is in contrast to the policy of the previous Minister, Michael Gove, of allowing unqualified lecturers, and it is consistent with Labour’s position of insisting on qualified teachers in schools.
All further education lecturers will have to become qualified to minimum standards, determined by the Education and Training Foundation. FE lecturers will need to have at least level 2 English and maths, which is surely not an unreasonable requirement. As part of a new agenda for the professional development of FE lecturers, they will also be required to spend time in industry to top up their skills and expertise. Again, I think that strikes the right balance—requiring a qualification plus the need to know what is going on in their particular industry.
Despite calls from industry, the Government have refused to back these steps. We believe that these bold new policies will build on Labour’s agenda for those young people who choose not to go to university. It may not be an either/or decision; they may well go on to qualify for a degree later as a result of their technical education. These announcements follow a commitment made by Labour to dramatically increase the number of level 3 youth apprentices over the next five years. We will ask all firms that want a major government contract to provide high-quality apprenticeships for the next generation, in contrast to this Government’s attitude of allowing public contracts to have no requirement for apprenticeships.
In closing, I ask the Minister whether there will be any guidance or criteria for FE colleges to consider when appointing teachers in the FE sector and encouraging their career and personal development. Surely all of us in this Committee know that we face a real challenge in meeting shortages of those skills that are vital to the development of industry and the growth of the economy. Quality further education which inspires students, parents, teachers and industry surely lies at the heart of the solution. I look forward to the Minister’s response. I beg to move.
Baroness Perry of Southwark (Con)
My Lords, I hesitate to contradict anything said by the noble Lord, Lord Young, because I know that his heart is absolutely in the same place as mine so far as vocational education is concerned. I also hesitate very much to go against anything said by the City & Guilds of London Institute, having been its vice-president for many years and then the chair of its quality and standards committee. However, on this occasion I think that the amendment has got it wrong, and the way the Bill is currently drafted is right.
Let me explain why I think that. I started my own career teaching in further education, so I have worked alongside many people who taught courses in mechanical vehicle repairs and so on who were not qualified teachers and had no teaching qualification. However, they had a passionate commitment to the education and training of the young people for whom they were responsible. Very recently, I visited a further education college and went to see the construction course. I talked to a young man who I think was about 16 or 17. He told me quite openly that he had been truanting from school for many years and was not at all interested in it, but then he saw this course and decided that he would have a go. He absolutely loved it, and he was learning and upping his skills in maths and English and so on.
I then talked to the tutor on the course, who did not have a teaching qualification. He told me that he himself had been very much like the young man who was now his student. He had played truant from school; he had “messed about”, as he put it. Finally, he had got himself an apprenticeship in the building trade, had worked his way up and become a foreman and had decided that he would go to night school and do some A-levels and so on. He had then sought and obtained a job as a teacher. He was not a qualified teacher but he was a highly self-educated and aspirational young man, and deeply aspirational for the young students he was teaching.
We would deny to principals of further education colleges the freedom to offer jobs to people like that, who have all the right experience in terms of their knowledge of the industry and a deep commitment to bringing other young people along the path they have themselves followed. The 2002 Act says that it would prohibit the provision of education by a person who does not have that specified qualification. To insist that they have a teaching qualification, as well as all the other qualifications of experience and vocational qualifications, would make for a very sad day for further education. I beg the noble Lord to think again. I pass to him.
Lord Young of Norwood Green
I ought to clarify that, as I thought I had made clear in my contribution, this is obviously a probing amendment in a way. We sought to oppose the removal of that particular paragraph, which specifies, as the noble Baroness, Lady Perry, rightly says, a particular teaching qualification. If the noble Baroness reflects on my contribution, however, she will note that we talked about a qualification—something like level 2 in English and maths.
I concur with the noble Baroness’s point. I, too, have been to FE colleges. The one that stuck in my mind was teaching painting and decorating. They said that it used to be a hopeless course until they got the current teacher in, who had run his own successful business in painting and decorating for 20 years. What he did not know about sticking a piece of paper on a wall—I say that ironically—was not worth knowing. He was an inspirational teacher, with much the same effect as that referred to by the noble Baroness.
This is in the nature of a probing amendment. My final point was to ask whether there would be any guidance and criteria. I hesitated to interrupt the noble Baroness, but I hope that that has been helpful.
Baroness Donaghy (Lab)
My Lords, some noble Lords know that I spent 33 years at the University of London Institute of Education, so teacher training is in my blood. I support my noble friend on this amendment. I do not think there is any intention that we should not recognise some flexibility in the system for those who do not have a traditional academic background. I am sure that that is not what my noble friend meant.
Years ago, I was secretary to a committee of all 36 principals of teacher training colleges in the south-east of England; this was so long ago that some of them wore hats to the committee. Perhaps the noble Baroness, Lady Perry, also knows about a particular set of principals who were a formidable group of, mainly, women. Garnett College in the Roehampton area—the noble Baroness is nodding—trained mature entrants. It was a one-year course, mainly for technical education. To this day, I do not know why that college was closed; that was a disgrace. It gave a chance to people who did not have a traditional background. They may have come from what were in those days called the colonies. There was a great tranche of administrators and officials coming from a lot of former African colonies looking for work in their 40s and 50s. There were also ex-service personnel and others who found work as teachers and managed to get an equivalence recognition of their background and experience before they entered the course.
Even for the main Senate House, there used to be a mature entrance system for 600 people a year, who would just have to pass a basic, opening gateway course, as I think they are called now—they were not called gateway courses in those days. It admitted 600 people a year for a shortened teacher training course. Again, it was people who had experience but no traditional academic background. So it cannot be beyond the wit of man or Governments to recreate that kind of system to allow for non-traditional entrants into the system. I firmly believe that we should not go backwards on requiring teacher training of some kind. In the health service, I often chair consultant appointment panels. One of the requirements for the successful applicant is that they should have gone on some teacher training and/or some leadership skills training. We insist on such standards for our consultants so that they can teach the next generation. It would be the height of irony if we should give a hint that we do not expect certain standards from our teachers.
I hope that the Government will rethink on this, if only to get some new thinking about how we train teachers in the non-traditional subjects and the more technical subjects, and how this will fit in with the university technical colleges developed by the noble Lord, Lord Baker of Dorking. This is an extremely important pathway into those colleges and we should give some active thought to it. If we do not have the teachers trained to make those pupils fit for those technical colleges, we will be failing them at a very early age. With those words—I am delighted to see that the noble Baroness, Lady Thornton, is now here— I will sit down.
Lord Wallace of Saltaire
The thought had not crossed the minds of any of us on this side of the Room that we might possibly be waiting for the noble Baroness, Lady Thornton; we, too, are very glad to see her here.
I do not think we are very far apart on this matter. I think we are all strongly in favour of good-quality teaching. We all recognise that in many of these practical areas people with practical experience also have a lot to offer, but that, as part of their development and encouraging them to become good teachers, it is quite useful these days to give them some teacher training—in spite of the fact that many of them may not want any.
May I declare a slightly embarrassed interest? I taught for 15 years in three successive universities without a single half-hour of training on how to be a teacher—which was the way one behaved in those days. What is more, I gained a prize at one stage for the quality of my teaching. I was rather relieved when, having spent 12 years in a think tank, I came back to universities and found that, although the University of Oxford did not think about training me to teach, the London School of Economics did. Since IT had become an important element in teaching, there were things that we really needed to know about how one handled a different student generation. No qualification was required, but there were some very good short courses on how to use teaching aids.
Thinking about my own university experience, I recall that the most popular course in my department at the London School of Economics was taught not by somebody who had come via the traditional route through universities or research and so on but by a former ambassador. He taught a course in economic diplomacy. The weight of his practical experience, as well his ability to organise an argument, made a huge difference for students, most of whom would not themselves become university teachers but many of whom were indeed hoping to become diplomats or businessmen and thus picked up that practical experience.
In introducing his amendment, the noble Lord, Lord Young of Norwood Green, citing the City & Guilds institute, said that the majority of FE teachers are either qualified or on their way to being qualified. That is fine; we do not disagree too much—that is where we are and we merely wish to push things a little more in that direction. The noble Lord also said that what we need is both experience and skills.
We recognise that people in these practical disciplines will come from a range of different backgrounds. They will not all have to have extensive professional qualifications but it may be desirable for them to pick up the sort of skills I have been talking about now that we have all these different ways of using teaching aids. The purpose of this amendment is very much to allow colleges to make their own decisions and not to impose too many strong controls from the top. We intend to free colleges from central government control and place responsibility on them to address their various needs.
The Education and Training Foundation has a core responsibility for ensuring the development of a well qualified, effective and up-to-date professional workforce. It is responsible for the standards of FE leaders and teachers and has now taken on responsibility for the membership of the Institute for Learning. The foundation will be looking at what more it can do to help increase the professionalism of teachers in this field. It has recently issued guidance and new professional standards for these teachers.
I hope that suggests that we are not far apart on this. It is really a question of how far we should impose detailed regulations from the top. We are encouraging colleges to work with the Education and Training Foundation to make sure that people who often come from a practical background, as the noble Lord said, are given the chance to acquire the professional skills that they need alongside the inspirational qualities which they may have gained from their practical experience. This is about deregulation, not deprofessionalisation. We have removed the requirement to have a qualification, which as the noble Lord points out, does not apply to a number of people teaching in FE colleges at the moment. However, the expectation is that the large majority of teachers will be qualified. We do not see regulation from the top as the best way to achieve this. Teachers need to play a part in developing their own professionalism, with the Education and Training Foundation providing common standards which will underpin that. On that basis, I hope that I have reassured the noble Lord and that he will feel able to withdraw this probing amendment.
Lord Young of Norwood Green
The Minister’s contribution was worth while. I will read Hansard and look at what the Institute of Education is saying because that is important. I think the only difference between us here concerns what we would regard as minimum standards in maths and English. On the basis of what we have heard, we will reconsider the issue. I beg leave to withdraw the amendment.
Government Procurement Policy
Lord Young of Norwood Green Excerpts(13 years ago)
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Lord Young of Norwood Green
My Lords, I, too, thank my noble friend Lord Sugar for creating this opportunity to debate a subject of vital importance, especially in today’s economic circumstances, against a background of government policies that are not delivering the growth that we need but delivering, unfortunately, the highest level of unemployment for 17 years. I congratulate my noble friend on his customary and characteristically robust analysis, and I look forward to the ministerial response to some of the points that he raised. I am not sure that centralised purchasing is the total answer, but there are certainly savings to be made—we saw that in the recent Green analysis. I am certain that my noble friend is right to call for a more holistic analysis that goes beyond the lowest price. He made a valid point also about the restrictions that still exist in relation to SMEs.
To pay our way in the future, we need to build an economy that works; we need private sector growth, more people starting businesses and growing businesses succeeding in business. But we need that to work with public investment and procurement. To set this new direction, government cannot just stand at the sidelines. Government must use every tool purposefully and consistently to shape and support this business environment, from competition policy to taxation, and from regulation to procurement. That means developing institutions for collaboration and support, making sure that the right finance is in place, as well as the research base, the skills base and the other elements that support innovation and growth. It means investing in infrastructure, offering certainty in the policy environment and giving businesses the confidence to invest. It is active government, shaping markets, growing key sectors of the economy and supporting the growth of more companies which build value over time, invest long term, innovate, offer good jobs, pay fair wages, and train.
Governments cannot tell individual companies what strategy to pursue—we know that that will not work—but nor should they be indifferent to the choices that they make. There are many businesses already pursuing these strategies—it can make good business sense—but the policy environment does not always mean that this is the case. The challenge for policy-makers is how to create the framework so that that which is good business—socially valuable, sustainable—is also that which is most profitable, good business always being good business. This brings me back to procurement: getting it right so it can shape that environment and enabling procurement to play a critical role in the economy that we need for the future.
In government, we took steps to improve the way in which services are procured. In 2006, for example, we launched the Supply2.gov portal to make it easier for SMEs to access government contracts. In 2008, we commissioned a report on using public sector procurement to encourage SME growth. In the Pre-Budget Report, we committed to advertise government contracts worth more than £20,000 via a single, free online portal; to introduce measures to reduce bureaucracy and make opportunities more transparent for small businesses; to standardise the qualification criteria and encourage innovation by specifying outcomes rather than prescribing solutions; and to help SMEs get a fair deal when they were subcontractors.
Just before we left office, we set in the 2010 Budget central departmental targets to increase the proportion of central government procurement spend that goes to SMEs by 15 per cent throughout the supply chain. I know that this Government have a deep-rooted aversion to targets, but as we have heard a number of noble Lords say in this debate, it is all very well saying that one is going to encourage SMEs, but the track record to date shows that there is a lot more progress to be made.
This Government have sought to build on that legacy: they want 25 per cent of government contracts to be delivered by SMEs and to eliminate pre-qualification questionnaires for all central government procurements under £100,000. They have sought to introduce a one-stop shop that displays every central government tender opportunity and they want to iron out wasteful practices and unnecessary complexity in procurement processes. These measures are welcome but there have been contradictory signals too. The Government’s own adviser, Sir Philip Green, suggesting ways that government procurement would squeeze out SMEs and delay payments is an example. In recent months we have seen the case of Bombardier, which brought into focus the failure of the Government to recognise the significance of this procurement to our future competitive success, the consequences of which have placed the future of the train manufacturing industry in the UK in jeopardy. We believe it is essential that there is a UK-based train-building industry capable of designing, building and, of course, winning orders for those trains. We are urging the Government to outline the strategy for ensuring that this can happen, including for the new Crossrail rolling stock. We want to see UK rail manufacturing in a position to win these orders, not put at a disadvantage following the Thameslink decision.
This draws me to the fundamental question we need to consider—how we ensure that procurement is an engine for growth and how we improve the processes but, critically, the ambition that procurement can unlock. The Government are unfortunately missing this opportunity in our view. With £240 billion to spend, the Government are by far and away the UK’s biggest single consumer. Procurement can and should be a driver of growth, driving innovation, opening up markets, creating new markets and opening up to new businesses and new ways of doing things. That means putting procurement centre stage. We know that that has not always happened across government, local government and in the public sector. We must ask how we can demand more of procurement. How can this buyer power be leveraged to support the kind of economy we want to see? How can we make every single pound of spending create the most value to our economy and society? I suggest that it can be done in the following ways. We should build broader objectives into public procurement contracts, as we did with the Olympics. Construction contracts included clauses requiring the training of apprentices, creating 350 new apprenticeship places. For the life of me I cannot understand why the Government will not act in this area. There is no legal prohibition against doing that. When we have more than a million unemployed young people, it seems to me that every apprenticeship place that we can create is vital. Haringey is doing this; through its procurement process it has opened up business to SMEs and created new employment opportunities for many long-term unemployed people, while saving £8 million over five years. EU law is often put up as an obstacle to so-called “social clauses”, not least because they can limit competition. However, they do not have to, as the noble Lord, Lord Sugar, and other noble Lords have said. This is an area where we need to explore the full potential and test the boundaries rigorously and robustly. Other countries manage to do it and we have heard references to French and Dutch examples.
We need to create markets for innovative products and services. My noble friend Lord Haskel referred to the importance of innovation in design. When in government, Labour created the Small Business Research Initiative, using procurement to create markets for innovative companies which often lack financial backing during exploratory development phases. However, it remains very small; it is worth between £10 million and £15 million a year. By contrast, the US SBIR programme, on which it is modelled, has now been running for almost 30 years and is worth $2.5 billion a year. Properly scaled, we should probably have a programme worth something like £240 million in the UK.
I have already talked about Bombardier so I will not develop that further. However, I was grateful to my noble friend Lord Davies for giving a more balanced assessment of where we are going on Labour’s defence industrial strategy. I know from my experience of being a member of the Armed Forces’ Pay Review Body for four years that our record in ensuring that the forces had the best possible equipment was well appreciated. Labour's defence industrial strategy, which gave certainty to the UK industry, is being replaced by a commitment to buy off the shelf. There are arguments about whether this really is cheaper given the costs of adaptation. My noble friend Lord Davies demonstrated the importance of having a very strategic analysis in the area of defence.
This has been a very wide-ranging, important and constructive debate. I cannot possibly hope to deal with all the points that were raised. My noble friend Lord Puttnam said that there were ways of driving costs down and value up and mentioned the Promethean experience and the interesting incorporation of Phil Smith of Cisco on to the Technology Strategy Board. I share his optimism on that front. My noble friend Lord Kestenbaum made the important point about the need for government investment in vital areas such as global positioning satellites or the development of the internet protocol. Without those seed-corn investments it is doubtful whether important progress would have been made in those areas.
Lord Young of Norwood Green
I see that time has caught up with me; the noble Baroness does not have to remind me of that. I look forward to the Minister’s response.
Lord Wallace of Saltaire
My Lords, this debate has ranged widely. I thank the noble Lord, Lord Sugar, for drawing the House’s attention to such an important issue. Procurement is central to the Government’s programme for reform and efficiency in public services and, as the Autumn Statement will make clear, to the growth agenda. I thank all noble Lords who have spoken in the debate and will do my best to address many of the points that have been raised.
In October 2010, in a debate on Sir Philip Green’s report, the noble Lord, Lord Sugar, argued that,
“it is time to centralise buying and to bring in some kind of head honcho from the private sector who knows what they are doing and pay them the right amount of money, which they would be paid in a large organisation”.—[Official Report, 14/10/10; col. 593.]
Our head honcho—the government chief procurement officer, as we prefer to call him—is John Collington. John is a highly respected procurement professional who joined the Civil Service five years ago after having spent 25 years in the private sector in a number of senior commercial and supply chain roles, operating on a global basis. He is well paid. He is not paid on the scale of the CEO of one of our major banks, but then the Government are not entirely happy with the scale on which our major banks are paying their current CEOs.
Since then the Government have embarked on a new procurement strategy to reform the way in which they buy those goods and services which they need to fulfil their responsibilities. The strategy focuses on having a centralised approach to the purchasing of common goods and services, appointing Crown representatives—of which there are now nine—to work with the Government’s largest suppliers, removing the red tape that stops SMEs competing for government contracts, improving our procurement technology and, above all, investing in our staff to improve our procurement capability. The noble Lord, Lord Kestenbaum, called for a procurement revolution. This is under way.
The scale of government procurement should be set out. Central government procures some £62 billion of supplies a year. The wider public sector, including local government, procures some £168 billion and the total public sector procurement, including that of arm’s-length bodies, is some £230 billion. Some of that is accounted for by commodities and some by services. Then there are the major long-term contracts for infrastructure construction, manufactured systems and trains, armoured vehicles and aircraft carriers. These do not, of course, require entirely the same approach. There are unavoidable tensions between central control and local diversity and—as the noble Lord, Lord Anderson, pointed out—between the squeeze on costs and the political requirement to achieve regional balance where that is possible. I should say that the Olympic Delivery Authority has done extremely well in delivering on time and within cost. I regret that the regional balance has not been as good as it should be but on other criteria it has been a remarkable success.
Much of the criticism in this debate has been about the practice of the previous Government regarding, for example, the ETS and the other enormous IT contracts, and the vast expenditure on consultants. The Government are setting out to be a lean Government in procurement. If I may say so, it is a lean Government in every single aspect through and through. As noble Lords will know, the Government Car Service has been considerably pruned. Ministers are now walking twice as much. I have not yet assessed how much weight they have lost but we are a leaner Government, I think, than our predecessor was in that respect.
Eighteen months ago the Government promised to drive out inefficiency and unjustifiable costs from all parts of central government, including procurement. As part of that drive, in just 10 months we have saved £3 billion from reduced discretionary spend and smarter procurement that has allowed departments to protect essential front-line services and jobs. This has included more than £870 million saved by cutting departmental spend on consultants; nearly £500 million saved by reducing spend on temporary agency staff; some £400 million saved by taking stronger control of our marketing spend; some £360 million saved by centralising spend on common goods and services; and £800 million saved from renegotiating deals with some of the largest suppliers to government. Last March, for example, we announced that nine different commodities would be jointly purchased by October: energy, office supplies, professional services, travel, fleet, telecoms, IT commodities, print, and advertising in the media. I am very happy, as a Yorkshire resident, to say that the domestic travel component was awarded to a small enterprise based in Bradford—so it is not merely a matter of large suppliers. A month later John Collington announced that, over the next four years, this new procurement model is estimated to cut 25 per cent from the £13 billion spend on common goods and services in central government.
This is a very good start, but we also need to do away with the unnecessary bureaucracy that adds wasteful time and costs to the procurement process. Following a lean review of the procurement process, we are adopting a new approach to sourcing that focuses on those practices that add value to the way that government procures goods and services.
Another major step forward has been the transformation of the Buying Solutions trading fund into the Government Procurement Service. This organisation is now established as the delivery arm of the centralised procurement strategy, delivering expert sourcing and category management for common goods and services. It is focused on delivering savings to the taxpayer and increasing the proportion of spend that is centralised. For major projects we have established the Major Projects Authority, which, with the pre-existing Major Projects Review Board, takes particular account of defence procurement, major infrastructure procurement and IT.
The noble Lord, Lord Davies of Stamford, made a characteristically robust speech. I look forward now to his speeches in the way that I used to look forward to those of the noble Lord, Lord Gilbert, who would always robustly tell us how well defence procurement had taken place while he was a Minister and how appallingly it had deteriorated since he left. The only problem, I say to the noble Lord, Lord Davies of Stamford, is that he left the MoD 10 years after the noble Lord, Lord Gilbert. Perhaps he should consult the noble Lord, Lord Gilbert, on how they could better reconcile their narrative next time round.
Over the past six months the Government Procurement Service has already made significant progress. It has developed centralised strategies for energy, office solutions, professional services covering consultancy, contingent labour, legal services, and so on. It has driven much-improved data and significantly increased the transparency of operations and performance through a procurement executive board. It has moved central government customers on to the first centrally let commercial arrangement—the government office supplies contract. The Government Procurement Service has established a process for using surplus income to fund Government Procurement Service and government procurement improvements, with four key investments made to date. The procurement service has managed procurements, extensions and renegotiations of contracts worth approximately £3.6 billion in annual value.
We are conscious that Britain does not compare well with Germany, France and the Netherlands in the relationship with suppliers. Perhaps I may quote the speech made by my colleague Francis Maude on Monday. He said that,
“the British public sector has taken a speed dating approach”
compared with those countries’ mutually beneficial long-term relationships. We are aware of that and looking at it, and we very much hope to improve the relationship. I say to the noble Lords, Lord Broers and Lord Hunt of Chesterton, that we are also well aware of the role that this long-term relationship can play in encouraging innovation and, in particular, new innovative companies.
The noble Lord, Lord Sugar, made a number of remarks about not sending contracts to foreign companies that pay little tax in this country. I say to him that it is not only foreign companies that, in some cases, do not pay very much tax in this country; some of our major domestic media companies do not either. One has to remember that Siemens employs a large number of people in manufacturing plants in this country, and therefore the question of what is and what is not a British company has become a little more complicated. We are also well aware of the French, German, Dutch and other examples. What the noble Lord, Lord Puttnam, called the procurement game is, therefore, something that we intend to learn.
Moreover, we are working not just with the biggest companies. In February this year, the Prime Minister outlined measures to open up the way that government does business in order to ensure that small and medium companies, charities and voluntary organisations are in the best possible position to bid for contracts. Since February we have delivered the following building blocks aimed at supporting SMEs. We have eliminated the use of pre-qualification questionnaires in 15 departments for procurements below the EU threshold of approximately £100,000. Evidence suggested that the length of those pre-qualification questionnaires was one of the biggest inhibitions to small companies in applying for government contracts. The two departments still using pre-qualification questionnaires are doing so only for security reasons. We are also now publishing all central government tenders and contracts through the Contracts Finder website. More than 2,000 tenders have been published, of which 50 per cent were flagged as suitable for SMEs, and more than 30 per cent of contracts listed were flagged as awarded to SMEs. We are also piloting a new e-sourcing solution, the Dynamic Marketplace. Nine departments have signed up and more than 500 suppliers have registered, providing themselves with free and easy access to opportunities below the EU threshold. We have even introduced a “mystery shopper” scheme to allow suppliers to report bad procurement practice by government purchasers. More than 100 cases so far have been received and dealt with under the scheme.
I say to the noble Lord, Lord Sugar, that there is no 25 per cent rule regarding the turnover of SMEs in bidding for public procurement contracts. Consideration is given purely to the financial viability of SMEs bidding for contracts, and we are aware of the need to encourage SMEs in all ways. In July 2011 we published the first SME progress report and departmental action plans outlining how departments are supporting SMEs. We ran an Innovation Launch Pad, which received 351 proposals from SMEs. Two of the best companies have since won new business with government, and we hope that others will do so as well. To help with suppliers’ cash flow—a point raised by the noble Lord, Lord O’Neill—the Government aim to pay 80 percent of undisputed invoices within five days. That is not on the same model as supermarkets. In all new contracts we require main contractors to pay their subcontractors —which are more often SMEs—promptly.
We have also taken steps to raise the competency and professionalism of public sector procurement staff. We are building a training programme that will increase the skills of the Government’s key procurement professionals in line with the use of lean techniques. This will become a prerequisite for procurers who lead on major procurements for government. We have also implemented a two-way commercial interchange pilot programme with industry to bring private sector expertise into government and interchange with our procurers who will benefit from experience of private sector best practices.
I therefore respectfully suggest that in the 13 months since the debate on the Green report, this Government have done far more to transform public procurement than the previous Administration managed to do in 13 years. However, we are not resting on our laurels. We recognise that there is still more to be done, and we have a clear programme to do it.
I turn to the question of EU rules, which clearly need to be substantially reformed. We welcome the European Commission’s intent to publish proposals to simplify the procurement directives by early 2012, and in our response to the Commission’s Green Paper on the modernisation of EU public procurement policy we have called for significant simplification to free up public procurement markets and enable a light-touch, modern regulatory framework. We have been in active dialogue with the Commission on these proposals. This is a once-in-a-decade opportunity to simplify the procedures, cut red tape, embed transparency, and increase cross-border competition to the benefit of citizens, business and public authorities across the European Union. As a priority, we must ensure that these reforms catalyse and drive growth.
Alongside this work, in July the Government stated that we would consider whether the UK was best applying the EU procurement rules and managing our procurements in order to meet our strategic needs, cost effectively, in the long term. We will be publishing more details as part of the growth review on 29 November.
Three days ago, at the Cabinet Office conference on 21 November, my honourable friend the Minister for the Cabinet Office unveiled a radical package of measures that will change how our Government buy from the private sector in a way that supports business and promotes growth. The Government will provide an open door for current and future suppliers to discuss forthcoming procurement opportunities, cutting the time taken in the procurement process. We will work with industry to identify and address any key capabilities needed to meet future demand. We have published a pipeline of £50 billion of potential business opportunities across government, giving an unprecedented view into the Government’s expected future requirements and helping business to build the confidence to invest long term in plant, machinery and people.
We aim to make it 40 per cent faster to do business with government—another issue which matters enormously to smaller companies. All but the most complex procurement processes will be completed within 120 working days from January, compared with the average of 200 days now. By engaging earlier and more openly with business and the wider supply chain, government will be able to reduce the time taken during the procurement process and provide the greater certainty and visibility of this forward pipeline to unlock investment. We will require all civil servants responsible for running major procurements to be trained in the Government’s new approach.
The noble Lord, Lord St John, talked about the advantages of payment by results and procuring for outcomes. As he will know, a number of experiments on this are going on in different sectors. It is something that we are well aware of. We intend to experiment with it further and we hope to benefit from it more in the future. As Francis Maude said on Monday, we will follow the example of our EU neighbours and, indeed, of best practice in the private sector by making it easier for our suppliers to do business with us.
The Government Procurement Service, now based within the Efficiency and Reform Group in the Cabinet Office, will continue to implement the category strategies and deliver centralised contracts in the core category areas. Only last week, we awarded the central government travel management services contract—that is, the domestic and international contract—which is projected to save the Government some £20 million, equating to a saving of approximately 30 per cent against the existing arrangement. I shall not mention which airline I flew with the last time I went on government business, but that is part of the saving.
The Government are committed to continuing the work that we have started, to promoting growth, to increasing savings and reducing bureaucracy, to making public procurement a slick and efficient process, and to making government a reasonable and straightforward customer for businesses to work with.
Lord Young of Norwood Green
The one question that the noble Lord has not addressed on which I should welcome some comment is why in public procurement contracts we do not stipulate, as the previous Government did, that it is a perfectly reasonable quid pro quo to indicate how many apprentices there are and what training they will be undertaking. I thought it disgraceful when I discovered a very large government contract with a company that did not have a single apprentice on its books. I would welcome the Minister’s response to that.
Lord Wallace of Saltaire
As the noble Lord will know, the number of apprentices has increased considerably in the past year, and this is something to which we are paying a great deal of attention. However, on his specific question, I shall investigate and write to him.