Draft Public Contracts (Amendment) Regulations 2022

Florence Eshalomi Excerpts

Monday 12th December 2022 General Committees

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Pritchard. I thank the Minister for his opening remarks.

As the Minister outlined, this statutory instrument has been introduced to correct an inconsistency arising from the UK’s exit from the EU and our joining of the World Trade Organisation’s agreement on Government procurement as an independent entity from 1 January 2021. As a consequence of that change in relationship, new thresholds were agreed for the public contracts that are subject to a full range of procurement regulations in the UK. These new thresholds include a change to how we calculate public contracts to be inclusive of VAT, effectively reducing the real-terms value where public contracts are subject to regulation.

The Public Procurement Regulations 2021 brought into force new thresholds for fully regulated public contracts. They also introduced a new VAT calculation method, which is relevant to the Public Contracts Regulations 2015. However, an inconsistency in the SI meant the threshold for compliance with certain requirements—for instance, inclusion on the Contracts Finder—were not adjusted, despite being made significantly lower in real terms by the inclusion of VAT. Given the reference to the new VAT regime in the explanatory memorandum, it appears the Government did not intend to bring these thresholds down in the Public Procurement Regulations 2021. This begs the question: why has it taken the Government nearly a year between the introduction of the new regulatory scheme on 1 January 2021 and their attempt to fix this inconsistency? Surely, the extra regulatory burden should have been made clear to Ministers swiftly after this change and a solution could have been presented earlier.

We do not oppose the simple addition of 20% to the threshold, as laid out in the procurement policy note on these changes of December 2021, as the suggested method of calculating the extra VAT. But it is noteworthy that the thresholds for full regulation only increased by just under 13%. Will the Minister inform the Committee as to the rationale for the different levels of increase between these two thresholds? I understand the desire to reduce Government burdens by increasing these thresholds, so we do not intend to oppose this SI today. But it is important for the Government to consider that some of the increased scrutiny will have been especially welcomed by small and medium-sized businesses, who will find these smaller contracts more desirable. For example, the publication of more opportunities on Contracts Finder provides a good chance for businesses to find and bid for smaller bits of work. The requirement for authorities to pay suppliers within 30 days is also welcomed to give businesses the certainty they need to pay day-to-day bills on time. I look forward to discussing the wider issues around procurement during the Commons stages of the Procurement Bill, so I will end my remarks for today and await the Minister's response.