John Spellar
Main Page: John Spellar (Labour - Warley)Department Debates - View all John Spellar's debates with the Cabinet Office
(1 month, 2 weeks ago)
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Alex Burghart
My right hon. Friend asks a pertinent question—one that was at the forefront of Ministers’ minds when the legislation was drafted and as it made its way through both Houses. A number of provisions in primary legislation are there specifically to increase the chances that small and medium-sized enterprises, which are more likely to be British, get a bigger share of the £300 billion-worth of public procurement. Those provisions include everything from the online procurement system that we are building—which will increase transparency and allow greater notification of pipelines, helping small and medium-sized enterprises to prepare for those procurements—to reduced red tape, which will take the burden off those SMEs and reduce their barriers to entry. We are hopeful that a lot of local businesses in his constituency and in mine will benefit from this landmark piece of post-Brexit legislation.
The contents I was describing would typically include the contact details for the contracting authority, the contract’s subject matter, key timings for the procurement process, and various other basic information about a particular procurement that interested suppliers would need to know. The provisions also cover the practical measures that authorities must follow when publishing those notices, such as publishing on a central digital platform and handling situations in the event that the platform is unavailable.
Beyond transparency, the instrument includes various other necessary provisions to supplement the Act that will be relevant in certain situations. We provide various lists in the schedules so that procurers are able to identify whether certain obligations apply in a particular case, including a list of light-touch services that qualify for simplified rules, and a list of central Government authorities and works that are subject to different thresholds. The regulations disapply the Procurement Act in relation to healthcare services procurements within the scope of the NHS provider selection regime, which has set out the regulatory framework for healthcare services procurement since its introduction in January this year.
The regulations also set out how devolved Scottish contracting authorities are to be regulated by the Act if they choose to use a commercial tool established under the Act or procure jointly with a buyer regulated by the Act. The provisions of the regulations apply to reserved procurement in England, Wales, Northern Ireland and Scotland, and to transferred procurement in Northern Ireland. The Welsh Government have laid similar secondary legislation that will apply in respect of devolved procurement in Wales, and if the devolved body carrying out that procurement mainly operates in Wales, elsewhere.
The Government have consulted carefully with stakeholders throughout all stages of the reform process, and we published our response to the formal public consultation on these regulations on 22 March. That consultation was a great success, evoking a good response from the various representative sectors, and confirmed that the proposed regulations generally worked as intended. Many stakeholders urged that certain matters be clarified and explained in guidance and training, which is a key part of our implementation programme that is being rolled out across the UK. The Government response demonstrates that we have listened to feedback, and confirms a number of areas in which the consultation led to technical and drafting improvements.
Once the instrument has been made, contracting authorities and suppliers will need time in order to fully adapt their systems and processes before go-live. As such, the Government have provided six months’ advance notice of go-live of the new regime before these regulations come into force, which will happen on 28 October this year.
Alex Burghart
I would be delighted to give way to the right hon. Gentleman.
John Spellar
I thank the Minister for giving way—at least it will enable him to draw breath—but could I ask a straightforward question? To what extent is this instrument going to enable British industry and British services to compete on a level playing field, in which we prioritise our domestic producers like every other country in the world does?
Alex Burghart
The right hon. Gentleman knows what is coming, because he asked me this question a number of times during the passage of the Act. We are doing two main things: the first is that we are greatly simplifying our procurement processes, which—as he heard me say a moment ago to my right hon. Friend the Member for Wokingham (Sir John Redwood)—will particularly work to the advantage of small and medium-sized enterprises. However, the right hon. Gentleman must be cognisant of the fact that we have a number of international trade agreements with countries all over the world, in which we have agreed to compete with them on a level playing field. The only way in which we could deliberately give advantageous opportunities to British companies vis-à-vis those arrangements would be to break those trade deals. I am sure that is not what the right hon. Gentleman is proposing.
John Spellar
We have a lot of time and a thin House. I presume that the United States is also a signatory to the same trade treaties, yet it has the “buy American” legislation, which is very strong and very effectively enforced. In the area of shipping, for example, it also has the Jones Act, which says that anything being shipped between ports in the United States has to be carried by American vessels. The United States is working under the same treaty, so why is it able to do that, while we, for some reason—perhaps deep Treasury dogma, or long-standing civil service prejudice against industry—cannot?
Alex Burghart
If the right hon. Gentleman looks at the details of the trade deals that we have with other countries, he will see that by and large, those trade deals have been created in order to further commerce and trade between two countries, and agree that there will be areas in which there will be a level playing field between our country and that other country—that is often the basis of a trade deal. The United States is the world’s leading economy and has been for over a century, and can sometimes strike deals or come to arrangements that other countries that are not the world’s largest economy cannot. I am afraid he will have to go and do his own research on American trade deals, but I can explain to him why we have the procurement system we do and why, because of the steps we have taken in this legislation, we will be creating additional opportunities for small and medium-sized enterprises in his constituency as well as in mine. That is much for the better, and it is a much better situation than we found ourselves in while we were still in the EU, with a very cumbersome, slow-moving and long-unreformed system of procurement to which we had been shackled for about 40 years.
For the avoidance of doubt, Members will want to be aware that this statutory instrument has been corrected to remove drafting references and a couple of typographical errors that were mistakenly added during the publishing process. I hope that colleagues will join me in supporting these regulations and will approve this SI today.
Sir John Redwood (Wokingham) (Con)
It is difficult to come up with a good system that has the right balance, because the taxpayer’s interest is very much in favour of economies of scale and availability, while the small business struggles to meet the possible volumes of a successful bid for a contract and to satisfy all the criteria that the large company finds easy to manage. I am grateful for the fact that the Minister and the Government generally have been thinking rather more about how small business and the self-employed can make a bigger contribution and how contracts can be broken down into more manageable sizes, both in primary legislation and now in the detail.
John Spellar
The right hon. Gentleman is absolutely right on that, but very often the primes get the contract and subcontract to the SMEs and put on a huge on-cost and profit margin. Those SMEs are therefore never able to grow properly, and they are stifled, because Whitehall prefers to deal with very large conglomerates.
Sir John Redwood
There will be that bias. Sometimes it is right, and it is always understandable, but Ministers and, above all, the senior officials implementing this new policy will have to bear that in mind. They will have to try to correct for the ease of going for a large company solution, where all the boxes will be filled impeccably and all the right things will be ticked, although that can lead to a contract disaster, because getting the electronic responses right is not the same as delivering the right good at the right price in all the right ways.
I have another worry. We are in an era of exciting and rapid change. Technology is changing even more quickly than over much of our lifetimes so far, as the Prime Minister was mentioning in his remarks this morning. None of us can be sure what opportunities artificial intelligence will produce in wider digitalisation, but we know that digitalisation will make an increasing contribution to, and have an impact on, service provision. So much of government is about the provision of personal services and administrative services, and so much of that can benefit from the intelligent application of these exciting new technologies, but they need careful handling.
The big problem in public procurement is when the innovators are moving so quickly that the invitation to bid is about things that are out of date; they are what the system has been used to handling and the state feels comfortable with. The state can define the old products and old services perfectly well, because it has experience of them, whereas maybe what is needed in certain cases is the innovative product or service. I remember innovating in industry in the past. Often, we had to be willing to license a competitor of our own breakthrough, to give people comfort that there would be some competitive check on costs and availability. Such things are complicated to model and to build in to big procurement systems, such as the state. It means that the state tends to lag and the private sector makes much more rapid advances, because people take more risk and are prepared to change what they wish to procure when they see something better. In the case of the state things have to go through many committees and many memos, and it is probably easier not to bother or to wait a few years until something has happened.
I do not have any easy answers. I understand that the Government and the Minister have the best of intentions, and they have come up with rules that they think are more flexible, but the proof of this pudding will be in the eating. I just emphasise that we need a system that is flexible enough to understand that sometimes it does not know what it wants, or does not know what is available, or that something that is available might be better than the thing people thought they wanted.
My final observation is that we have lost a lot of the self-employed in recent years for one reason or another, but the issues over tax status are part of the problem, with the toughening of the rules over IR35. I worry that a lot of self-employed people will struggle to get any work from the Government, because it is much easier for those procuring just to say, “It’s too much hassle; we would be to blame if this person were taking liberties with the tax system, and although they say they are compliant and self-employed, we aren’t so sure.” Of course, someone can become genuinely self-employed only if they win enough independent contracts. If a big part of procurement is not allowing them to win state contracts, it is much more difficult for them to become genuinely self-employed.
Dave Doogan (Angus) (SNP)
The SNP does not oppose the draft Procurement Regulations 2024. Their context is a deeply unwelcome Brexit reality from Scotland’s point of view, but they are largely uncontentious and little more than one would expect under the framework established by the Procurement Act 2023. However, that framework is unsatisfactory to some extent, not for what it gives effect to but for what it does not safeguard against. The Act fails to mandate sufficient tax transparency for large multinationals bidding for public contracts—a profoundly basic requirement for those seeking to profit from public expenditure to be transparent about their own tax position and, therefore, it is a significant failure in the framework. The Act also fails to appropriately protect workers’ rights—never more important for workers in the UK, who face a growing threat to their employment rights, having been stripped of EU protections. It does not properly uphold the priority of social benefit from such contract awards.
Vitally, the Act fails to close the loopholes that allowed for the appalling Tory VIP lane for the procurement of personal protective equipment during the pandemic. If there is no institutional learning from that glaring and seismic misappropriation of public funds, it prompts the question of whether the omission is by dint of incompetence or by design, given the repeated denials of this Tory Government with respect to that particular crisis.
John Spellar
Some underlying reasons for the PPE failures were the lack of industrial capacity, the complete inability to communicate with industrial capacity, and the endless reliance on middle men who rushed off to China. Firms in this country could have done the job but had no way of getting access, as back-door routes were used, which dominated a lot of the newspapers.
Dave Doogan
The right hon. Member made a number of important points, not least that we allow the atrophy of our industrial base at our peril, particularly in times of crisis. It unduly compliments the Government to suggest that there was only an inability to communicate with ordinary firms in the United Kingdom—I am afraid that the circumstances around the Tory VIP lane were far more sinister than that. With that, I will make some progress.
A third of public expenditure—some £300 billion annually—is spent on public procurement, so it is essential that its regulation is not simply minimalist administrative housekeeping, but an ambitious plan to improve public procurement continuously. In the absence of any such ambition in these regulations, we can clearly see the sloping shoulders of a dying Administration content to pass on their responsibility for forging a public procurement system that benefits taxpayers, local suppliers, industry and service users alike to the next UK Government—God help us.
The SNP and Scotland more generally must, under the current constitutional settlement, concede to be bound by the regulations, for the time being at least. In so doing, however, we note that the Tory Government promised in 2019 to get Brexit done, yet they are still fumbling around with fundamental and basic legislation five years later, trying to implement what was their pipe dream, but is a bona fide nightmare for ordinary people across these islands. Still further regulation will be required to give full effect to the Procurement Act 2023, but it seems unlikely that it will be the same Government standing there to advance it.
John Spellar (Warley) (Lab)
I would like to make a couple of observations before I get on to the main thrust of my argument.
First, I regard the regulations as a great missed opportunity. It is not that the actual regulations themselves are not acceptable—they are probably an improvement—but they do not deal with a whole number of core failures in public procurement in this country. We have just discussed the covid era. I had a firm in my constituency that produced safety apparel for the catering industry. It knew exactly how to produce gowns; it had skilled cutters and machinery. There was no way of getting through the bureaucracy, which of course had been subcontracted to Deloitte, which also got a massive cut out of it. There was a real failure to engage with industry and, as the hon. Member for Angus (Dave Doogan) pointed out, a failure to maintain the industrial base—although I would gently point out to my friend that procurement from the Scottish Administration has not always distinguished itself over recent years either.
The right hon. Member for Wokingham (Sir John Redwood) rightly pointed out that very often Government procurement policy deliberately moves against SMEs because it aggregates contracts, for example, for repairs and maintenance in defence. Instead of being done by local firms, they are aggregated into one large contract, which only the big national facilities companies are able to do. Of course, they subcontract out the work and we know—we have just had a considerable number of reports about defence accommodation—how woeful their record is on delivery. That is a further problem that, I regret, is not addressed in the document, or in the Minister’s rapidly delivered speech.
That is the point: there are no penalties for failure. Recently, the Defence Committee received a letter from the Defence Secretary saying he cannot, under Government procurement rules, take into account past performance in assessing a contract. Mr Deputy Speaker, if you give work to a builder, he bodges the job, he comes back and tenders with the lowest price and you are governed by Government procurement, you have to take that, even though you know the history is that he cannot do the job. We see that very much in IT contracts, where firms fail time and time and time again. It is a shame that the right hon. Member for Rayleigh and Wickford (Mr Francois) is not present because I am sure he could talk at length about a company that is, rightly, his bête noire in that regard.
There is a fundamental failure of philosophy at the heart of Government and the regulations do not address it. That is also why I think this is a missed opportunity. They are based on a philosophy and theory that do not relate to the real world. I intervened on the Minister to talk about trade deals and he went on about the United States being able to strike particular deals. The core of international trading relations—and a lot of it that deals with public procurement is mentioned in the document—is World Trade Organisation agreements. I accept that there has been a deep fundamental failing within the WTO, which was to admit China to the organisation and then not to insist that it followed its rules, until basically it became too big to fail and too big to take on. I accept that there was that failure. But every other major industrial country looks after its own, often very effectively.
We heard all this during the debates about the European Union. I used to have to say, both to Eurosceptics and to Euro-enthusiasts who were ascribing either our problems or our salvation to Brussels, that the problems were not fundamentally in Brussels—they were in Whitehall. I remember once saying to a senior civil servant—a good one, by the way—during an argument about an issue related to this that, if the British civil service had fought the corner of Britain as hard as its French, German, Italian and other counterparts fought theirs, the British public would have been much more content with the EU. The British undermined it because they would not be good Europeans: they would not behave like the rest of Europe.
Let us consider the issue of police vehicles, which I raise regularly in the House. If we go to Berlin, Paris or Rome, we see that all their police vehicles—apart from the Carabinieri Land Rovers—are made in their own countries. If there is free competition and a superior product is available at a better price, surely one country should dominate? Not a bit of it.
Another argument that we have regularly concerns the fleet solid support ships. The Government insist on putting the contract out to international competition, and the bulk of the ships will be built in northern Spain. When France and Italy decided to procure similar vessels, it was made very clear that they had better be built in yards in France and Italy.
Sarah Champion
My right hon. Friend is making a very good speech and I fully agree with what he is saying. One of the ways in which Europe manages to support its own industry is by applying weighting to social value, ascribing the highest value to the very act of providing jobs for local people. That is something that we could be doing.
John Spellar
It is true that the social weighting applied here is insufficient, but European countries also send a clear subliminal message to competitors, putting up, as it were, a sign saying “Just don’t bother.” When Germany did procure a design for naval vessels from Holland, the prerequisite was that they had to be built in German yards.
Sir John Redwood
Is there not also a strong national security argument for procuring all defence items in Britain and creating a more competitive market at home to have honesty on prices?
John Spellar
That is exactly right. One of the arguments for buying steel from, mainly, Sweden—and possibly from France—was “We do not produce steel of that quality here”, but if we do not provide the orders for that quality of steel, our plants will gradually stop producing it, and we will also lose the skills. That has been a constant row. The same has applied to trains. When I was a Transport Minister, Alstom came along, having taken over the Washwood Heath factory, and said, “Our problem is that when we go to corporate headquarters, we will be told that if we want to sell trains in France we must produce them in France, and if we want to sell trains in Germany we must produce them in Germany. Britain will buy from anyone; where do you think the investment goes?” That has been a regular theme.
During the period of Labour government—and I fear that it is probably still the same with this Government —we heard Ministers say, “We have to abide by these rules because otherwise we cannot expect other people to do so.” I say, “Join the real world, the world in which people do fight their corner, the world where people battle for their corner!” The real, deep irony is that the failure to protect our industry is also a failure to protect our industrial communities, and to protect not just the livelihoods but the life of those communities. We talk about left-behind towns, which are very much at the heart of this issue, but it has also happened to quite an extent in America. It drives a populist feeling that people decry, but which they have been instrumental in bringing about.
If the argument that we have to follow some theoretical rules, rather than be part of the practical world, was wrong previously, which it certainly was, it is even less sustainable now. What the Ukraine conflict has shown is the need for industrial capacity. When I say “industrial capacity”, I do not just mean a plant; I also mean trained personnel. I do not just mean scientists, high technicians and skilled trades—semi-skilled production workers with the ability to make the machines work and to turn materiel out are also a core part of this.
We have seen that drain and drift away, so when we are faced with an existential crisis and Ukraine is on the frontline for freedom against an aggressive and assertive Russia, it becomes incredibly difficult—regardless of whether we will the money out of the Treasury, which I accept is important—to get production ramped up because of the lack of skills throughout the economy. I accept that some of the equipment in the second world war was less technically advanced, but the allies were quickly able— America was astonishingly quick—to move civil capacity into war production. Although we often focus on the “whizz bang” stuff—the hi-tech stuff—a lot of it is about good machining, which requires those abilities and that capacity.
When I argue for maintaining capacity in the UK, it does not mean that we should not co-operate with other countries, but we should do so on the basis of ensuring that our interests get dealt with as well, which will be mutually beneficial in the long run. If we are able to play our part, we will have that greater industrial capacity, but we cannot be the universal donor. We also have to have a degree of reciprocation and investment coming into the UK.
As I said, I accept that the changes introduced by the regulations are an improvement, but they have still not broken the psychological grip inside the civil service, which is not interested in industry and does not rate it, even in the face of the Ukraine crisis and the world dividing up into trade blocs. I am asking not for Britain to be an outlier, but for Britain to become part of the international community, behave like a normal country and have prosperity spread out much more across the country. I think it is called levelling up—we even have a Department that is supposed to be dealing with that.
Mr Toby Perkins (Chesterfield) (Lab)
I pay tribute to my right hon. Friend, who has been a doughty campaigner on this issue in all the time I have been in Parliament. I agree that we are not looking for British exceptionalism; we are looking for Britain to catch up with the kinds of practices that we know are commonplace in many other countries that are part of the European Union. We need to make sure that supporting UK manufacturing is part of the policy aims of our procurement strategy.
John Spellar
I absolutely agree. Hopefully then, we will achieve what Mr Churchill argued for in the early part of the last century. When he was Chancellor of the Exchequer, he wanted to see industry more content and capital less proud. By “industry”, he meant both firms and the workforce. We would have much more content and stability in this country if the Government were prepared to use the enormous power that they have. We often talk about the Government as a legislator and an administrator, but the Government as customer is enormously important. That can drive progress and change, but it can also drive equity. I ask the Minister to reflect on that and, in the short time left for this Administration, to start a change of thinking in Whitehall to make it easier for us to play a proactive role rather than a merely reactive one. The prize is enormous, both for our prosperity and for our content.
Alex Burghart
Gosh—the Leader of the House? One day, Mr Deputy Speaker.
It has been a pleasure to listen to hon. Members and to hear the widespread support for the regulations. There is widespread recognition that they are a great improvement on the regime that we have swept away. They form part of one of the landmark pieces of legislation since our departure from the European Union.
We heard support from across the House for a procurement system that greatly supports small and medium-sized enterprises. As I said in my opening remarks, that was at the forefront of Ministers’ thinking as the Procurement Bill was devised. It was very much in the minds of the businesses and the contracting authorities that we spoke to as the legislation was put together. The right hon. Member for Warley (John Spellar) gave an excellent speech and referred to Churchill’s wonderful phrase that industry should be “more content”. From the extensive consultations we have undertaken to prepare the legislation, we know these regulations will make “industry more content”, and that this is very much what businesses have been asking for and looking forward to.
There are a number of things that will help small and medium-sized enterprises, not least transparency and our new online system. The hon. Member for Llanelli (Dame Nia Griffith) said, quite rightly, that the system must be easy to use. One of my first jobs as an adviser to Government was in child protection. I remember the disastrous integrated children’s system that was in place under the last Labour Government, which took hours upon hours out of social workers’ time. It was dreadful because it took them away from working with children and meant they had to follow a very bureaucratic process.
We must be committed to ensuring that people are able to enter data and use the system without taking away from the most important part of their job. The Procurement Act, the regulations and the supporting documentation also support social value. The national procurement policy statement, which we have published, is keen to make sure that we do not remain obsessed with the most economically advantageous tender, but instead move to the most advantageous tender. That is a broader understanding of what is useful to contracting authorities and to society, and enables the consideration of issues such as local jobs and local skills.
The right hon. Member for Warley mentioned skills, and he was quite right to do so. When I was Minister for Apprenticeships and Skills, I was very keen to make sure that we were building up high-quality, internationally competitive apprenticeships, which played to the skills that were going to be needed in the areas in which they were provided.
The right hon. Gentleman also spoke about levelling up. I saw one of the most powerful examples of levelling up when I was a Minister in the Department for Education. The Government created a freeport on Teesside, which was part of our job. The excellent Mayor of Teesside, Lord Houchen, who I am pleased to say has been wonderfully returned by his constituents, worked with business to build a hydrogen plant in the freeport. The deal that was struck was that the hydrogen plant would support local colleges in providing the high-quality apprenticeships that would get young people—and not so young people—the jobs in that community. That is levelling up: all parts of Government—both from Whitehall to a local level—working with providers of local skills and industry to make sure that people can be a part of the success story of their own communities. I am very proud that it is this Government who have helped to deliver changes such as this.
Alex Burghart
I am always delighted to give way to the right hon. Gentleman.
John Spellar
I thank the Minister for his positive remarks.
Cannot Government, as customer, prescribe ratios of apprenticeships within the contracts, particularly construction contracts, and stipulate, as was done at the Olympic Park, that if a company moves off site for whatever reason, including when a contract moves into a different phase, and a new company comes in, there is an obligation to transfer the apprentices across? That would be building a sustainable base for the future.
Alex Burghart
I am sure the right hon. Gentleman knows that that is often the case. We do have requirements for apprenticeships to be part of major Government projects. He quite rightly spoke about Government as an intelligent customer—intelligent not just in terms of getting the best price, but of getting the best overall value. I say to him again that the idea of having a system of most advantageous tender, not just most economically advantageous tender, was always at the heart of these regulations.
The right hon. Gentleman should look at the excellent work being done by the Crown Commercial Service. By bundling together purchases made by different parts of Government, we can make sure that we get best value—I mean value in the broadest sense. In the Cabinet Office—perhaps one of the less glamorous areas of Government—in which I am proud to serve, that work is under way, already saving British taxpayers billions of pounds and making sure that we have a better and more holistic view of what Government spend can do.
Work such as that, alongside legislation such as this, means that we are building a system in which not just industry is content, but Government and the taxpayer are too, as well as the small and medium-sized enterprises and the communities in which they sit. I recommend this motion to the House.
Question put and agreed to.
Resolved,
That the draft Procurement Regulations 2024, which were laid before this House on 25 March, be approved.