Procurement Bill [Lords]

Danny Kruger Excerpts

Report stage
Tuesday 13th June 2023 Commons Chamber

According to research from the British Chambers of Commerce—the Minister knows that I have cited these figures before—in 2016, 25% of public sector procurement spending was awarded directly to SMEs. By 2021, that had dropped to 21%. Neither of those figures suggests a healthy procurement environment for SMEs, but it is shocking that SMEs have faced more difficulty in getting a fair share of public contracts in the past five years, despite the strong rhetoric from the Government. One important barrier for SMEs is the constant delay they face in getting access to the money they are owed within an appropriate timeframe. For SMEs that see a significant amount of money coming in via a single contract or a small pool of contracts, such delays can be devastating to the balance sheet. They can lead to missed payments, job losses and even closures of our valuable SMEs.

[Danny Kruger (Devizes) (Con)]

I applaud what the hon. Member is saying about SMEs. She is absolutely right that it is important that we support the small business sector. However, she has tabled amendments that would favour the insourcing of public services. She seems to think that we should require the public sector to deliver public contracts, rather than SMEs. Which is it?

[Florence Eshalomi]

The hon. Member is absolutely right: those SMEs will work with local councils in a local area, and they know the local area. In some cases the contracts that are outsourced are not value for money. This is about ensuring that, in public contracts, public money is spent in the right way. If we are to lower the risks faced by SMEs seeking to enter the supply chain, it is vital that the measures in the Bill have an impact.

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[Dame Meg Hillier]

I agree with the hon. Gentleman. Of course, if evaluation is built in from the beginning, the company that has been contracted to do the work would be required to collect data. They will say that that involves more cost but, over time, it would wash out. We need a better standard of data collection on all sorts of issues.

Take the example of a contractor that was asked to run a prison. The Government provided data on the prison’s maintenance, but the data was not right as it did not count the number of windows and toilets, and so on, that needed to be fixed, so the company had to come in and count them. In that case, the company had not banked on prisoners breaking more windows than the average in other buildings. There is lots of data, and we keep pushing for it to be collected, and that data could be built into evaluations.

The hon. Gentleman is bang on about making sure we do not send good money after bad. If something is not working, we need the evidence and the political courage, sometimes, to end the contract. We need to make sure that the people delivering a contract are clear that they are delivering the contract’s aims. Evaluation should have the impact of tightening procurement, tightening the management of contracts by the civil service and sharpening up those who bid for contracts to do a better job and to be proud of that job, in the knowledge that doing a good job may well mean that the contract is extended, but not if they do not do a good job. We should also reward good behaviour. I am keen to hear what the Minister has to say about that.

My right hon. Friend the Member for Barking (Dame Margaret Hodge) tabled amendments that would ensure that organisations involved in nefarious activities are excluded from public procurement. It is extraordinary that companies that are making money in nefarious ways can bolster their activity and give themselves credibility through public procurement. Others have talked a lot about the issues around China, so I will not go into that much more. My right hon. Friend has a strong reputation in this area, and her amendments speak for themselves.

We do not want to miss this opportunity. I recognise that not everything in procurement is about legislation. It would give me some comfort, as Chair of the Public Accounts Committee, if the Minister showed that that is being thought about a bit more deeply across Whitehall.

[Danny Kruger]

This has been a very interesting debate, veering from grand geopolitics to the sourcing of public services and paperclips. All of this is, in a sense, the responsibility of an independent country, so the debate is one benefit of Brexit, for which I am sure we are all very grateful.

I am pleased with the Bill and the Government amendments. I think of it as the patriotic Procurement Bill, which is exactly what we need. I particularly welcome the explicit commitment to national security that has been added to the Bill, and I pay tribute to my hon. Friends the Members for Rutland and Melton (Alicia Kearns) and for East Worthing and Shoreham (Tim Loughton), and my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), for their work and their contributions today. I am particularly grateful to my hon. Friend the Member for Isle of Wight (Bob Seely) for his tremendous speech about the dangers we face from a more hostile China.

In the Government amendments, and in Government policy in general, we see a necessary new realism in UK policy. Security is the new watchword of our times, and to me it means much more than defence against hostile states. We face all sorts of other threats to our security, including, as my hon. Friend the Member for Isle of Wight mentioned, our extreme dependence on supply chains around the world, not only but particularly those in hostile states.

Conservative Members tend to regard “protecting” and “subsidising” domestic industry as dirty words and unorthodox policies. Nevertheless, we see around the world a growing tide of tariff barriers and domestic subsidies. Our great friends in the United States have committed to spending $500 billion on domestic manufacturers, particularly to wean themselves off Chinese imports. I welcome the Prime Minister’s commitments this week to a new US-UK economic collaboration arrangement to secure our common interests and to ensure that we have safe supply chains. We will need to rely more on our allies in future.

As we move from a just-in-time procurement model, we need to recognise, particularly on this side of the House, the role of Government in ensuring economic security. The fact is that £300 billion a year makes the Government the biggest player in the UK economy. As we have heard today, and I pay tribute to the speeches made by Opposition Members, the Government are often not very good at procurement and spending public money for public goods. We could go into the sources and origins of that, but we should recognise that since the late 1990s, and under the Blair and Brown Governments in particular, the model of new public management has created a new doctrine of how Government money should be spent on private sector providers. The principle of introducing internal markets—the purchaser-provider split—was an attempt to ensure greater efficiency, greater value for money and greater responsiveness to the users of public services, and it engendered all sorts of difficulties, too. The hon. Members for Poplar and Limehouse (Apsana Begum) and for Oldham East and Saddleworth (Debbie Abrahams) listed some of them, and I recognise them from my previous work. Providers have to jump through really bureaucratic processes.

There is a concentration of big suppliers. My right hon. Friend the Member for Chingford and Woodford Green has done a lot of good work, although he did not speak about it today, on the importance of SME procurement. Large charities in particular can game the system, in the way that large companies can, to secure Government contracts. The Government often do not buy the best; they buy the service that gives commissioners the least risk. Those suppliers often run rings around Government. In the way services are designed and delivered, we see cost deferrals, with payment pushed back beyond the budget cycle; cost shunting, with different parts of the public sector having to carry the cost for a bad contract; the creaming of the high-value, low-cost clients or services; and the parking of high-cost, low-value services. So the providers, whether they are charitable or commercial, game the system. We see that all time, so all this needs improvement and this Bill takes important steps towards ensuring that.

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[Sir Iain Duncan Smith]

I am fascinated by the speech my hon. Friend is making, because he is right in one sense about this. We did a report at the Centre for Social Justice about four or five years ago where we looked at productivity. So often we make international comparisons, but the whole figure for productivity contains that which a country wants to put into it. For example, France does not put health or education into its productivity measures. Health and education have shocking productivity outcomes in terms of cost, which means that France is able to declare itself as having a higher level of productivity. London and the south-east have the highest productivity in Europe, but the real story is that the rest of the UK does not meet the average for the whole of the Europe, which tells us what our problem really is.

[Danny Kruger]

My right hon. Friend makes important points, and I recognise the difficulty of comparing our productivity figures with those of other countries. The comparison I am making is with our own recent history, but he is absolutely right in what he says. Indeed, the point about what is measured matters enormously. In our debates, we often make the mistake of thinking that the only things that matter are those that can be easily quantified. That is a great challenge we face, particularly in the social sector.

The Government are rightly committed to improving the efficiency and productivity of the public services—I absolutely support them on that—but we face another great challenge that does not get enough of a mention: the need to reduce demand on the system as a whole. We are spending so much not just because we are inefficient, but because the demand on the system is so high. I do not need to run through all the details of the enormous budgets we spend on social breakdowns and the consequences of social problems that we should have averted, in criminal justice, in the health budget, in what is called “social protection”. Some £150 billion is categorised under “social protection” in the public finances—not pensions, but paying for people who have tough lives. We should be seeking to reduce the cost of those budgets, because each one of those costs represents, in a sense, people in trouble. Both for financial and social reasons, we should be trying to reduce that expenditure.

How do we do that? We need social reform. I am not going to bore the House with long thoughts on that, but we need public sector reform, as has been mentioned a bit today, and that includes procurement reform. I acknowledge what Labour is suggesting in some of its amendments and in some of the speeches we have heard: an objection to the whole model of outsourcing. I recognise the objections to some of the failures of public service management—new public management—over the past generation, and some of the challenges of outsourcing and of competition in the public sector or for public services. However, I do not think insourcing everything is the answer. Reverting to a pre-1990 model of everything being delivered by the central state, as one of the amendments and Unison are championing, is not the right model. We need a better model of outsourcing that relies much more on civil society and, in particular, on the local, community-based services in which the UK is so rich and which do such a great job. We need to be able to measure their value properly and commission their services effectively. That is what this Bill aims to do.

I declare an interest, in that I set up and ran for many years projects working in prisons and with youth services. I have personal acquaintance with the challenge of EU procurement, not only social fund commissioning, but central and local government contracts. None of this is easy and I am familiar with all of that. I am familiar with the frustrations of getting on the frameworks; expressing interest; bidding through tenders; and being treated as bid candy on a long contract. I am also familiar with going through a pointless competition process where there is only one obvious provider—the one that helped to design the service—which still has to jump through loads of competitive hoops only for some other random provider to come in and swipe the contract; I speak bitterly from experience. The challenges that small social enterprises face are significant.

The difference between procurement and commissioning is not often acknowledged. We often have procurement departments doing work that is too complicated for them on their own. We need to have proper commissioning where people who are paying for a service work collaboratively with providers, stakeholders, service users and other parts of the system. Everybody needs to bring their assets, resources, skills and experience to co-design the service that is needed locally. The Bill brings us much closer to that model. I greatly welcome the measures that have been included, especially around the simplification of tendering. The single portal is an important development and it is good for transparency as well. The Tell Us Once registration is essential, as is the help that will be given to SMEs and social enterprises, including the active reduction in the barriers to tendering, lower reporting requirements and so on.

Most of all there is the shift from the most economically advantageous regime to the most advantageous regime. That small excision of the word “economically” is an important recognition of the point that my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) was just making about the need to go beyond a purely commercial estimation of the value of social projects. I would go further. In 2020, I wrote a report for the Government who were trying to maximise and sustain the enormous contributions that communities were making during the first lockdown. I suggested that we recognise and declare that the whole of Government commissioning—the whole of public service spending—is to deliver social value for the public. Essentially, that is what we all believe and it should be stated much more explicitly in my view. I just bring the House’s attention back to the Conservative Government’s Social Value Act 2012, which gets those principles right.

I recognise that we need to take enormous steps forward. I honour what the Government have been doing around national security. I also honour the steps that have been taken to ensure greater opportunities for SMEs and social enterprises, and I commend the Bill to the House.

[Caroline Lucas (Brighton, Pavilion) (Green)]

I wish to associate myself with the remarks made by hon. and right hon. Members across the House about the dangers of sourcing from high-risk countries and parts of countries and those implicated in serious human rights abuses. The appalling persecution of the Uyghurs in Xinjiang is a very powerful case in point that has been echoed by many Members around the House, and I agree very strongly with that.

I rise to speak to amendment 60 and new clause 17. I welcome the provisions in the Bill that aim to help small and medium-sized enterprises to access public contracts. SMEs are often best placed to meet the needs of the communities in which they operate, providing numerous social and economic benefits. Those benefits, often referred to as a social value, cannot simply be reduced to a tick-box exercise. Nor can we allow social value to amount only to crumbs of compensation from corporate giants, while they extract wealth from our communities. Wider economic, social and environmental priorities need to be built in from the start of every procurement process.

The UK spends about £300 billion a year on public procurement. We could question whether that is a good thing. That has already been hinted at—whether some of these services at least would be better off delivered in-house by public bodies themselves rather than via contracts. However, this is probably not the place to go into that debate. I want to focus on the need to use that procurement spend as a force for good—to keep wealth in local economies, to ensure that public money goes to responsible companies and not those that exploit people and nature, and to help us meet our climate goals and to preserve a liveable future for all of us. I want to see values, not just value, at the heart of the public procurement process in public life.

That brings me to amendment 60 on the national procurement policy statement, which sets out the strategic objectives that the Government want public procurement to achieve. The amendment would require the Government to assess and report on the impact of the national procurement policy statement on meeting environmental and climate targets and to set out any steps that they intend to take to meet them.

Thanks to the efforts of climate campaigners across the country, we are now seeing the net zero goal and the need for climate action acknowledged in strategies and policy statements across the public sector. But these acknowledgements remain meaningless unless we assess the real world impact of those statements. Are our plans to reduce emissions actually being implemented and are they working? The amendment would signal to contracting authorities and businesses that the Government are serious about aligning procurement with climate and environmental goals. It would also enable Government to see where policy might need to be strengthened if it is not having the intended impact.

New clause 17 would require public contracts that include the supply of food to be aligned with nutritional guidelines and to specify options suitable for a plant-based diet. We know that animal agriculture is one of the largest contributors to global heating and biodiversity loss, representing around 15% of all greenhouse gas emissions according to the United Nations Food and Agriculture Organisation. More and more people are choosing to move to more plant-based eating and almost one quarter of people in Britain now follow a mainly or entirely meat-free diet.

The 2022 progress report to Parliament by the Climate Change Committee urges the Government not to ignore the role of diet and notes:

“Government can influence diet shifts, through mandating plant-based options in public settings”.

My amendment would require public contracts for the supply of food to be in line with the Eatwell Guide, which drew inspiration from the nutritional guidance of what was then Public Health England, developed in conjunction with the devolved nations. Analysis by the Carbon Trust found that, thanks to lower consumption of meat, dairy and sugary foods, the environmental footprint of the Eatwell diet is around one third lower than the current national diet.

In settings such as hospitals and schools, where good nutrition can make all the difference, our public sector should lead the way by offering nutritious and sustainable food. That is too often overridden by a narrow notion of value for money, resulting in vulnerable people being given food that does not meet nutritional guidelines. As we all remember, during the pandemic the Government were forced to U-turn on school meal vouchers after widespread outrage at the poor quality and quantity of food being distributed to families. That was not just one isolated failure; it was symptomatic of a political culture that thinks we can package up children’s nutrition, health or any public service and hand it over to whichever corporate giant says it will do it most cheaply. That is the culture that has to change.

Last year the all-party parliamentary group on the green new deal, which I co-chair, produced a report setting out how local community-based solutions are key to climate action. As part of that inquiry we heard from the Sustainable Food Places network, as well as from community farms and kitchens. A key recommendation that came up again and again was to use the procurement system to support more local food and plant-based diets.

The Government’s own food strategy proposes a target of at least 50% of food spend to be on food produced locally or to high environmental standards, a move I certainly applaud. However, nine months on from the Department for Environment, Food and Rural Affairs consultation, we are still awaiting the Government’s response.

Pioneering local authorities and public bodies are leading the way, and my constituency has had some notable successes. In 2020, Brighton received the first-ever Sustainable Food Places gold award. It has brought in improved standards for procurement as part of a wider campaign to get more people eating more vegetables and its school food supplier meets the Food for Life gold standard for championing healthy, local, climate-friendly food.

A more joined-up approach to food, climate and nature and a real commitment to supporting local businesses and community organisations would have huge benefits for our health and our local economies. In addition to the provisions in this new clause, I would therefore hope to see much more support for public bodies that want to put social value at the heart of procurement, to help them to find out how best to get sustainable food from local producers into public sector canteens.