Local Government: Ethical Procurement

Alan Duncan Excerpts

Tuesday 15th March 2016 Westminster Hall

[The Parliamentary Secretary, Cabinet Office (John Penrose)]

It is always good to have your sure hand guiding our proceedings, Mr Streeter. I start by joining the chorus of congratulations to the hon. Member for Birmingham, Northfield (Richard Burden) on securing this debate. He is right that this is an important issue. He is also right to say what it is about and what it is not about, and to acknowledge that there are sincerely held views on both sides of the broader issue. He is right to put that point up front and pay it due respect. I echo those points.

As the hon. Gentleman has asked some distinct questions, and other questions have embroidered around them, I will try to address those questions as I go through my speech. I am sure he will pick me up if I do not. I will try to make sure that he has a minute or so at the end to sum up.

[Sir Alan Duncan (Rutland and Melton) (Con)]

Will the Minister give way?

[John Penrose]

Briefly, but I will then have to make progress.

[Sir Alan Duncan]

At the beginning of his comments, will the Minister clarify an important point of fact, which is the kernel of this issue? Will the Government’s proposed procurement rules permit a local authority to adopt a policy against investment in, or purchase from, Israeli settlements in the Palestinian west bank?

[John Penrose]

The answer is that it depends; I am sorry to be a little indistinct. I will come on to the details. I hope to give my right hon. Friend a proper answer, rather than just a straightforward yes or no, because there are situations where councils will be able to and situations where they will not.

The overarching principles behind public procurement are twofold. First, public sector procurers are required to seek the very best value for money for the taxpayer. Secondly, public procurement must be delivered through fair and open competition. Public sector procurers have to follow detailed procedural rules laid down in the Public Contracts Regulations 2015, which implement the Government’s domestic procurement policy and wider EU and international rules, including the EU procurement directives and the WTO Government procurement agreement; a number of right hon. and hon. Members have referred to the GPA in this debate.

Under those obligations, our contracting authorities are required to treat all suppliers equally, regardless of their geographic origin. The regulations have recently been updated and modernised, but the basic principles are long-standing and have been in place for many decades. Any breach of the rules puts public authorities and the Government themselves at risk of breaching all sorts of laws. Serious remedies are available to aggrieved suppliers through the courts for breaches of those rules, including damages, fines and what lawyers call “ineffectiveness”, which basically means contract cancellation.

A number of colleagues have mentioned that ethical procurement has a much wider meaning than we have focused on here. We could talk about it in relation to arms firms, defence industry investment or investment in the tobacco industry. However, we have focused, perhaps understandably, on a specific example. The point is that “ethical procurement” is not a defined term—it means different things. There are many examples of how procurers take ethical considerations into account. For example, the rules allow authorities to exclude suppliers that have breached certain international social, environmental or labour laws. In addition, we already ensure that prime contractors behave ethically towards their subcontractors—for example, by requiring 30-day payment terms. That applies through supply chains, as the hon. Member for Foyle (Mark Durkan) said.

The Public Services (Social Value) Act 2012, which came into effect in 2013, placed a requirement on commissioners to consider the economic, environmental and social benefits of their approaches to procurement before the process starts.

[Sir Alan Duncan]

In that case, is there anything in the Minister’s list that includes the illegal origin of the products to be bought?

[John Penrose]

The point is that although we are clear that the settlements themselves are absolutely illegal—I am happy to clarify the Government’s foreign policy—that does not necessarily mean that activities undertaken by firms that happen to be based there are themselves automatically illegal. A separate, case-by-case decision must be made about whether each potential supplier satisfies the rules. I will give more detail about that as I go, if I can.

We have flexibilities in our procurement rules. Some things are explicitly ruled out—