Local Authorities (Procurement)

Debate between John Stevenson and David Simpson

Tuesday 24th April 2012 Westminster Hall

[John Stevenson]

Yes, I do accept that. It probably happens at the national level as well. National Government should look at the issue and encourage local government to follow what could be their example if they watered down some of the policies coming out of Europe.

Clearly and rightly, an authority that wants to make a substantial purchase of goods or services must follow strict procedures, but there can and should be flexibility, particularly for smaller purchases of goods and services by local authorities. I accept that there must be clear procedures in place for smaller procurement contracts, that there must be openness and transparency, and that there must be no opportunity for inappropriate contracts. However, there are opportunities for local authorities through their procurement policies to help to support and to develop their local economy by procuring from local businesses and thereby benefiting the wider local community.

[David Simpson (Upper Bann) (DUP)]

On procurement, surely we will cut off our nose to spite our face in many cases. The whole idea is to drive the economy locally for local companies, but many of those companies miss out because of the very point that the hon. Gentleman has raised about European legislation.

[John Stevenson]

I take the hon. Gentleman’s point. Local economies and local businesses are the way to drive our economy. They are a key player, and we underestimate their importance. We must take into account the European dimension, and if that frustrates local businesses, we must try to do something about it.

I have taken the opportunity to look at Government advice on procurement policy, and the key point is that procurement must be value for money, normally through competition. I accept that that is generally the correct approach, and will often be the one that authorities will follow, but how we interpret the definition of “value for money” is a much wider issue. My hon. Friend the Member for Warwick and Leamington (Chris White) successfully navigated through Parliament the Public Services (Social Value) Act 2012. It requires local authorities, when they enter into procurement contracts, to give greater consideration to economic, social and/or environmental well-being during the pre-procurement stage. That is hugely welcome, and it is extremely important that councils are made fully aware of the Act’s provisions, and the potential benefits for their areas.

I firmly believe that it is incumbent on councils to take into consideration the impact that their procurement can have on their local economy, and the success or otherwise of local businesses, especially small ones. Local government procurement can be beneficial in giving local businesses the ability to grow and expand. That creates jobs, skills and investment in areas throughout the country, particularly those that are badly in need of investment. However, a negative effect can be created as easily, and can go beyond having a direct impact on a local business. It can spread into the wider community, lowering employment, and preventing money from being recycled through the local economy, leading to less money being invested in businesses in that area. It is clear how local government procurement has the ability to create a much less vibrant and successful local economy very quickly.

I want to be parochial for a moment. In 2010, the university of Cumbria produced a paper entitled “The Impact of Local Authority Procurement on Local Economies, The Case of Cumbria”. It found that increasing pressures on local authorities to be efficient and effective in their use of public resources may contradict the need to support local communities, particularly during a period of economic downturn. The findings suggested that many small and medium-sized enterprises throughout Cumbria relied on local authority contracts for business stability. Those interviewed throughout the county confirmed that when a more formal approach to public procurement is taken, coupled with a more defined definition of “value for money”, SMEs become more vulnerable.

To its credit, Cumbria county council's procurement strategy aims to increase the proportion of suppliers based in the county from 60% in 2010 to 65% in 2012. Collectively, the Cumbrian authorities have an annual procurement spend in excess of £300 million, more than half of which is spent locally. That sort of money can have a profound effect on any local economy, so I want to ensure that local authorities have the appropriate power and tools to ensure that they can promote and support local business through their individual procurement policies. I therefore ask the Minister to consider three key issues.

First, does he believe that the power of general competence for local authorities, which was granted by the Government in recent legislation, gives them sufficient additional powers to introduce or pursue a procurement policy that can examine the wider effects of their current policy beyond best practice? Secondly, to what extent does the Minister feel that the Public Services (Social Value) Act 2012, which was promoted by my hon. Friend the Member for Warwick and Leamington, is on the radar of local authorities; and how widely is it being used across the country? Finally, what measures does the Minister intend to pursue to help with the issue and to ensure that local authorities have policies that truly benefit their own locality?

I want Carlisle to have a vibrant, local economy, creating jobs and prosperity for local people.