Local Government Procurement

Debate between Andrew Gwynne and Iain McKenzie

Wednesday 16th January 2013 Westminster Hall

[Andrew Gwynne]

I absolutely do see benefit in that type of clustering arrangement. We in Greater Manchester had the first statutory combined authority, covering all 10 metropolitan boroughs that make up the county of Greater Manchester. They are now working together on a statutory footing, including on some procurement issues, and providing huge savings for those local authorities. That sort of best practice could be rolled out across the United Kingdom.

[Mr Iain McKenzie (Inverclyde) (Lab)]

I congratulate my hon. Friend on securing this important debate. Is he aware that, for some time, Scotland has had joint procurement under the Scotland Excel initiative, which is delivering sizeable savings for councils throughout Scotland and allowing local businesses to piggy-back on contracts?

[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.

[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.

[Mr McKenzie]

I thank my hon. Friend for giving way once more. Does he agree that it is essential to encourage local businesses to register with their councils’ procurement departments at the earliest possible opportunity, so that up-and-coming contracts can be flagged up to them, prior to other tenders being submitted?

[Andrew Gwynne]

I agree absolutely.

Returning to the national picture, I would like to ask the Minister a number of questions, particularly on the wider issues that we have discussed today. The Public Services (Social Value) Act 2012 was intended to support local areas, but the Government do not seem to be supporting it as much as we would expect them to. What steps is the Minister taking to ensure that councils are aware of that legislation and that they know how it could benefit them and their local economies?

European legislation has proven to be an issue, with many councils citing it as an obstacle preventing them from undertaking their preferred procurement policies. The Minister for the Cabinet Office and Paymaster General has repeatedly spoken of that problem since the Government came into office, but has not done much about it. What steps are being taken to ensure that EU procurement law does not prevent local authorities from procuring in the best way for their area and their local objectives?

Some of the most innovative councils, such as Birmingham and Newcastle, have written social clauses into the majority of contracts to ensure that suppliers contribute towards meeting objectives such as reducing youth unemployment, taking on apprentices, or providing jobs for the long-term unemployed. Sadly, however, the Government are not taking enough action to support that approach. In his document, “50 ways to save”, the Secretary of State for Communities and Local Government suggests that councils do more to bring down the price of goods and services, combine back-office procurement functions and cut down on procurement fraud. I know that those ideas have largely gone down like a damp squib in local government. Nowhere does it mention the savings that can be made by taking a strategic approach to procurement that supports the local economy and local jobs, thus necessitating less spending in the future.

I commend to the Minister the good work of Labour-controlled Tameside council, which is using its sadly diminishing spending power to support local businesses, local jobs and the local economy in these tough times. I urge him to give serious consideration to the points I have made. Local government, even in these cash-strapped times, has a key role to play in economic support. I also urge him to take action on the wider obstacles to local government pursuing a more directed procurement policy. I look forward to his response.