Fairness and Inequality

Debate between Iain McKenzie and Jonathan Edwards

Tuesday 11th February 2014 Commons Chamber

[Jonathan Edwards]

The point that is often forgotten is that despite the fact that London is one of the richest parts of the European Union and that communities such as mine in Carmarthenshire are at the bottom of the European wealth league, public expenditure per head is higher in London than it is in Wales—that is until very recent figures, which showed that Welsh spending had caught up. It is an incredible situation. I could not make this up.

The way in which monetary policy is formulated is also in severe need of reform. The week before last, I tabled an early-day motion calling for the Bank of England, or the Sterling Central Bank as it should be renamed, to be reformed better to take into account the economies of the UK when formulating monetary policy. The Governor should appear for scrutiny before the relevant Committees of the devolved legislatures, and meet with the devolved Governments, just as he has to with the Chancellor and the relevant Select Committees in Westminster.

In addition, the four external members of the Monetary Policy Committee should be nominated by the four nations, rather than hand-picked by the Chancellor of the day from the self-serving banking elite. [Interruption.] I am grateful to my friends from Northern Ireland who supported that early-day motion. There is an interesting story in the Western Mail about the need for the Welsh Government and the Northern Ireland Assembly to collaborate in the event of Scottish independence, be it a yes or a no vote, to ensure that we are not bombarded by Westminster. I hope that it might be a small step on the road to greater collaboration. Instead, what we have is a drive towards regional pay in the public sector, introduced by the previous UK Government and now developed by the coalition, which ghettoises low-wage economies outside London.

Labour has gone a step further, with a pledge to cap benefits on a geographical basis if it forms the next Government. That means that the unemployed and disabled in Wales will receive fewer payments than those who happen to live in London. Wales will have lost more than £1 billion during 2013-14 due to cuts in benefits. Those include payments that people in work receive to top-up low wages. That money would have been spent directly in the Welsh economy, but is now lost.

Rather than hitting the sick and unemployed with a stick and labelling them “scroungers”, why do we not embrace the active labour market programme employed so successfully in Sweden? It is an interventionist policy, in which the Swedish Government spend twice the amount per capita that is spent in the UK, creating tailored action plans. The programme has productivity and mental health benefits, so it ends up costing the taxpayer far less, as individuals are moved from social security into employment, and it eases considerable pressure on heath services.

It is increasingly clear that the Treasury has been re-infected with the British disease of basing growth on inflating house prices backed up with taxpayers’ cash—the Help to Buy policy. Far from rebalancing the economy, the Treasury is reintroducing boom and bust. Instead of delivering an equitable share of infrastructure investment across the UK, the Exchequer lavishes London with its grand design projects, be it the Olympics, Crossrail 1 and 2 or High Speed 2. UK Trade & Investment does not deliberately channel foreign direct investment into the poorest parts of the state, unlike its German counterpart, Germany Trade & Invest, which has a statutory duty to do so. Is it not sobering that despite the cold war and a physical wall between the east and west of its country, Germany today is far more balanced in geographical wealth than the UK?

Other places have shown the way. Germany is a federal republic, and the constitution requires fiscal equalisation among the Länder. That is a timeless requirement on all parts of government, and policies are required no matter the era. After reunification, when poorer East Germany joined developed West Germany, a massive effort meant a variety of measures were implemented, including financial transfers to poorer regions and industrial development policies.

The same could be done from Westminster, but it has not been. The alternative is the approach favoured by the London parties, whereby investment is concentrated in London and the south-east, and wealth inequalities continue to rise. It is clear that it is time for a change. Where are the voices in support of such a change? Who will turn back the tide of growing inequality? We know that we cannot rely on the Tories in London, so unashamed are they in their love of banking and the financial elite. Where is Labour? Why is it not standing up against inequality? Its amendment seeks to wreck our motion, absolving it of its role in creating rising inequality over the past decade, but it is bereft of policies.

Last week, some of Labour’s Wales-based Members defended the UK as a redistributive Union. They are deluding themselves, both about their record in government, as inequality rose during that period, and about the current situation. A closer examination of their voting record would suggest that their rhetoric is unsupported by action. I cite their abstention on the Welfare Reform Bill, which introduced the cruel and dreaded bedroom tax; their abstention on a cut in the top rate of income tax; and their refusal to support any measure to help to promote measures to provide the Welsh Government with the economic powers that they need to move the Welsh economy forward.

[Mr Iain McKenzie (Inverclyde) (Lab)]

The hon. Gentleman mentioned the bedroom tax, and I invite him to congratulate Scottish Labour which, in the Scottish Parliament, pushed the Scottish Government to end the bedroom tax in Scotland. Will he further assist me in calling on the Scottish Government to reimburse those good citizens who have already paid the bedroom tax?

[Jonathan Edwards]

The hon. Gentleman seems to forget that his party is not in power in Scotland any more—it is the Scottish National party Government who introduced that policy. Rather than grandstanding, he would be better advised to congratulate the SNP on its progressive track record in government.

Who could forget the hon. Member for Leeds West (Rachel Reeves), the shadow Work and Pensions Secretary, promising to be “tougher than the Tories” on benefits? Only today, the Leader of the Opposition has praised none other than Baroness Thatcher, that well known proponent of fairness and equality, in a bid to reform public services. By that, he can only mean more privatisation. Perhaps the greatest let down, and without a doubt Labour’s greatest folly, reflecting its abandonment of the fight against inequality, is its commitment to Tory austerity cuts post-2015. It is now blocking fiscal devolution to Wales, which would enable us to develop our own economy. It has also failed to commit to fair funding for Wales, even though it admits underfunding by more than £300 million a year as a result of the Barnett formula.

The national parties of Wales and Scotland fight for a partnership of equals between the nations of these isles. However, it is about far more than that. It is about what we do once we achieve that aim. The main reason is to honour the political traditions of our countries, which I have set out today and which have been undermined by centuries of Westminster rule.

SMEs (Public Sector Procurement)

Debate between Iain McKenzie and Jonathan Edwards

Tuesday 11th June 2013 Westminster Hall

[Mr Iain McKenzie (Inverclyde) (Lab)]

It is indeed a pleasure, Mr Hollobone, to serve under your chairmanship today.

I start by congratulating my hon. Friend the Member for Ogmore (Huw Irranca-Davies) on securing this very important debate. He spoke on this subject with passion, enthusiasm and knowledge. I could not agree more with what he said, to the point that I fear I may just repeat his speech with a Scottish accent. Without doubt, the importance of small and medium-sized enterprises across the UK cannot be overstated. SMEs are the backbone of the British economy and we need to ensure that both central Government and local government do everything they can to help them through the procurement tendering process to secure contracts.

SMEs employ more than 14 million people and have a combined turnover of £1,500 billion, which accounts for some 47% of private sector employment and about 34% of turnover. Importantly for a local economy, 83p of every £1 spent with a local business will go back into that local economy.

Those are just some of the statistics about SMEs. They are vital to the economic well-being of Britain and vital to employment opportunities. They are the driving force of our economy and they deserve their fair share of public sector procurement. Small businesses are struggling to survive in these challenging economic times, so it is essential that they have every opportunity to win Government contracts or to become part of the supply chain to local and national Government.

Public procurement spend is significant even in these challenging times. Public sector bodies, including central Government, the armed forces and the NHS, spend around £220 billion a year on goods and services—everything from stationery and office furniture to medical equipment and catering services. Despite that, however, public procurement is an underused tool when it comes to keeping trade local. Nearly three quarters of SMEs rarely or never bid for government work, and more than three quarters of SMEs believe that there are barriers to awareness of government opportunities. Many say that lengthy and complex pre-qualification questionnaires disadvantage smaller businesses. The playing field has been stacked against SMEs trying to win public sector contracts. To many SMEs, public procurement seems to have been deliberately designed so that they do not succeed.

More than half of SMEs feel that the process of tendering for Government contracts requires more time and resources than their business can allow for. Some 50% of SMEs find it significantly more difficult to deliver to Government agencies than to the private sector, mainly because of the additional formalities required by public sector clients. SMEs say over and over again that the bureaucracy needs to be simplified to help them bid for public sector contracts and especially low-value contracts.

The majority of SMEs are relatively unaware of where to look for opportunities, and they believe it is too time-consuming to try to find out about them. In addition, they do not bid, because they feel they are unable to compete with larger suppliers. One in five SMEs believes it is unsuccessful in a bid because it is unable to offer better value for money than other suppliers.

One member of the Federation of Small Businesses said:

“Local authorities are the bureaucratic mind at work, busily inventing disproportionately complicated procedures.”

Does that not sound familiar?

Could the Minister look at the following points—she will be glad to hear that the list is not overly lengthy—to improve SMEs’ prospects of securing Government contracts? First, could access to public contracts and pre-qualification questionnaires not be simplified? Secondly, could there not be education seminars on how to tender for contracts, especially through e-procurement? Thirdly, there could be much better access to information about public sector procurement opportunities for SMEs. More needs to be done to improve channels of information, so that small businesses know what contracts are up for tender.

Government buyers need to develop business associations with local SMEs and to set up standard contracts of terms and conditions before inviting companies to tender for released contracts. That will, of course, entail a separation of duties, in that those who source would not be those who evaluate tenders and place contracts. There also needs to be a focus on building an integrated supply chain, in which there are no weak links, and on applying green procurement to keep that supply chain as short and as local as possible.

Where possible, e-procurement should be used to enable SMEs quickly and economically to bid for contracts. The Government also need to target and improve contract monitoring for performance if business associations are to continue and to be justified. In addition, the Government must prove best value by having multiple bids that are evaluated against clear contract weighting.

What of the spend of local authorities? The procurement spend of many councils is significant, averaging £185 million for each local authority. Nationally, that is billions of pounds per year. On the basis of the rather limited figures available, however, less than 50% of that spend goes to SMEs. A significant proportion of councils do not record the size or location of the businesses they spend with, and that should be rectified.

Cost savings are overwhelmingly the biggest driver of procurement policy, outweighing other factors, such as the quality of goods and services, and economic development. That is understandable, given the constraints on local government, but it is, none the less, regrettable, because cost should not always be the most significant factor in awarding a contract, and savings can also be made through quality.

If you will allow me, Mr Hollobone, I will describe what has been taking shape in Scotland over the past couple of years. There has been a total redesigning of the procurement process, which has embraced private, cutting-edge procurement practices to bring about the maximum savings. I hope that will banish the days of off-the-shelf, catalogue procurement.

Some years ago, Scotland Excel was developed, bringing together the combined spend of the 32 local authorities in Scotland. More to the point, it updated and standardised procurement practices, which was necessary if local government was to deal with these challenging times and bring about the savings required in their spend. Many SMEs have been successful in gaining contracts through this collaborative buying consortium. Many other areas of the UK employ buying consortiums; they have had many successes, and they have many good practices they could and should share across the country.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I apologise to the hon. Member for Ogmore (Huw Irranca-Davies) for being rather late for the debate. The hon. Member for Inverclyde (Mr McKenzie) is making an important point. About 75% of procurement in Scotland is sourced in Scotland, but only about 50% of procurement in Wales is sourced in Wales. What are the major lessons Wales could learn from Scotland?

[Mr McKenzie]

They are working jointly, and the McClelland report has been shared by both Administrations. As I said, it shone a light on procurement practices in local and national Government and updated them, bringing in many good, cutting-edge practices. It is recognised that if we devolve procurement to a local level, the supply chain can be improved and can be kept as short as possible. I should also mention the green procurement card, which is used across Europe to justify a local spend.

Can SMEs do anything to improve their situation? Yes, they can. They can prepare before bidding for contracts. They should know their strengths and highlight them in any bid. They can become aware of appropriate opportunities and select the right ones. They can engage with their clients, discussing their requirements if they are unsure about them.

SMEs can also use their clients’ chosen method to deal with those clients. If that is online, they should learn how to load to the bid portal and about what limitations the portal has in terms of the size of the tender document and the time it takes to load. SMEs should not miss a bid by running over the deadline because their data was slow to upload.

SMEs should also fully meet their clients’ needs and know what matters most in their hierarchy of weighting. Finally, they should combine expertise with innovation, and explain themselves clearly if any new practices or processes are involved on their side of the supply chain.

We should always remember that awarding to local SMEs has many rewards: it builds local businesses, with many becoming subcontractors to the initial contract winner; it creates local employment opportunities and secures employment locally; and moneys spent locally tend to circulate locally, supporting other businesses and jobs. To conclude, SMEs are important, and they will always be important to our economy.