Public Procurement Processes

Jon Trickett Excerpts

Wednesday 25th January 2023 Westminster Hall

[Jon Trickett (Hemsworth) (Lab)]

I am pleased to speak under your chairpersonship, Ms McVey.

I congratulate my hon. Friend the Member for Birkenhead (Mick Whitley), who has made a great contribution to the debate. I agree with him that the procurement of services and goods during the pandemic was a disgrace. It is hard to avoid the word “racketeering” when we consider what happened. There was a time when suppliers would meet on the golf course—perhaps at the 19th hole, as they used to say—to rig the prices for providing services to local councils, and there was debate about whether that took place in freemasons’ lodges and elsewhere; now, it seems that they just pick up the phone to a Tory Minister or MP and it gives them access to the VIP lane.

One pound in every £3 of public spending goes on procurement, and possibly more. It is around £300 billion, which is an astonishing amount of money. The OECD, the European Commission and the United Nations have all said that procurement carries the biggest risk of corruption or fraud in modern states. Of the £12 billion that was spent on PPE, £4 billion was spent on contracts that failed to meet the NHS standards—a third was spent on supplies that were not fit for purpose. Some £10.5 billion-worth of contracts was awarded without any fair or open competition in a seven-month period at the height of the pandemic. We understand that there was a national crisis and huge pressure on the NHS, but notwithstanding that, something went badly wrong; everybody must agree with that.

[Peter Dowd]

It is interesting that a Government publication said:

“Value to the taxpayer should lie at the heart of our procurement decisions.”

Does my hon. Friend believe that there was value for the taxpayer in that particular process?

[Jon Trickett]

My hon. Friend is absolutely right to ask that question. No convincing answer has been provided as to whether value for money was achieved. In fact, it is as plain as the nose on your face that there was no value for money, and I will come to that in a second.

In recent decades, there has been a presumption in favour of outsourcing. That was never the case before. Britain used to be proud of its public service and of the high standards of ethics in the civil service and in politics. It is hard to share that pride these days. The presumption in favour of outsourcing contracts and obtaining services from the private sector has gone through the leadership of all the political parties, and it is time it stopped.

There are seven separate reasons why one should be cautious about that presumption. I hasten to say, though, that there will always be a case for some procurement from the private sector—for instance, police motorbikes will not be nationalised in the immediate future, so one can see that there is a case there—but the presumption should end. Let me briefly refer to the seven issues that it is important to consider.

First, the Government Procurement Service is not as professional as it needs to be. It is possible to get a university degree these days in good procurement practice. That is a necessity to ensure value for money for every penny spent, but the service is under-resourced and not as professional as it needs to be. That is not to criticise the civil servants who do a difficult job in difficult circumstances, but they are in danger of being flooded by the provision of contracts.

I worked in the private sector, as a plumber in the building industry. We were monitored by the main developers to make sure that we provided value for money. Quite often, I confess, we would see whether we could get extras built in on top of the money in the original contract. It was for the quantity surveyors who worked for the developers and builders to make sure that we did not get away with anything. Can we honestly say that every single line in every contract is monitored in the same way as in the private sector? I do not think we can. The reason is because staff are under-resourced, and we are under-resourced because we are outsourcing as an ideological decision rather than anything else.

Here is my second point. More often than not, there is no public comparator. When I was the leader of Leeds City Council, I would ensure that if something was going out to the private sector, there would be a public sector bid made by the council, which would not have a slice on top for profitability. I would then see whether the private sector could compete with the public sector bid. That is one thing that might be done, but there are no public sector comparators under the present neoliberal economic settlement, which we regard with despair, to be honest. Therefore, there is no guarantee that a cartel or group of racketeers is not fixing prices between them to rip off the taxpayer. We cannot be clear about whether that is happening, although without a proper procurement service, I am sure that it is.

My third point is this. No evidence has been produced anywhere in the world that outsourcing is cheaper than insourcing. It has been looked at by the Public Accounts Committee and various bodies throughout the world. What is striking is that larger global companies are now insourcing. They were outsourcing, buying in accountancy and legal services and so on. That is stopping. Why are they insourcing? Because it is cheaper and more effective, and delivers better value for money. Yet here we are with a Government that seem hellbent on outsourcing, for ideological reasons rather than to protect the public purse.

My fourth point is that the private sector puts in prices, but the first thing it does when it wins the contract is to drive down the pay and conditions of the staff employed. Wherever one looks, that is the case. I have experience of that in my constituency. We had a service for cleaning a school a few years ago. The first thing the company did was to cut wages and try to get rid of some of the staff. The staff went on strike, which went on a long time, and the school was filthy. That contract was frankly a disgrace. We all know that that happens everywhere. We see wages falling as a share of GDP. What is the process behind that happening? There are a number of processes, but one is outsourcing, driving down wages in order to increase profits.

My fifth point is this. A service provided in the public sector is motivated by the single ethos of public service. It tries to provide a service to the public without a mind to delivering profits and dividends to shareholders. There are two contesting ethoses—if that is the correct plural—in play. One is serving and enhancing shareholder value as a private sector provider; the other is public service. Well, I know what I want for the staff who treat me, my family or my constituents. I want people who are motivated by one thing only: providing the highest possible quality service. That is what motivated people. The three women I just talked about, who were cleaners and went on strike, were treated in a really shabby way. Their greatest concern was the kids left in the school. The toilets were not being cleaned. They would talk to me regularly about their guilty consciences at being unable to provide the service. They were interested in only one thing: providing a service to those children.

[Kirsty Blackman]

On the point about wages, does the hon. Member share my concern that, although we have control of public sector wages, the Conservatives are not keen on negotiating fair pay settlements? That means that public sector wages are actually being reduced and done down, compared with where they should be.

[Jon Trickett]

I totally agree with the hon. Member. We are seeing a fragmentation of the labour market and the driving down of people’s incomes—particularly of manual workers and others—and I resent it, on behalf of those people. It is not right for the country; after all, if wages are in long-term decline, the economy itself will be in long-term decline as well.

My sixth and penultimate point is about pay and pay ratios. What happens in the public sector—although we would have to say, if we were living in a purely ethical economic environment, that certain public servants are probably paid more than they ought to be—is that pay ratios accelerate the minute a service is outsourced, to the point where we see people earning massive multiples of what the lowest paid in the same service receive. That is not congenial to providing a public-oriented service, which is what we would want to see. Pay ratios in the public sector are accountable through Parliament to the public in a way that they are not once they have been privatised. Indeed, once a service has been privatised—outsourced—it is no longer subject to all the constraints that the public sector has to operate under. Indeed, one further point to make is that if I want to understand why a public sector service in my constituency or the country is deteriorating, I can submit a freedom of information request or ask questions in Parliament. The minute that service has been privatised, we cannot do that, so it is not accountable.

My final point is about the impact on the local and national economy. If we do not control procurement in a proper way, we are unable to direct it to local providers of services in a way that we would expect to be able to do with taxpayers’ money. That has an impact, too, on the local economy.

For all those reasons, this is an important debate, and I am glad that it was raised by my hon. Friend the Member for Birkenhead. It is beyond the legislation that is before us. We need an ideological shift; we need a presumption in favour of the public sector, not the private sector, and I hope that I have contributed in a small way to making an argument for that.

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[Kirsty Blackman]

I absolutely agree. It is a further power grab, just like the United Kingdom Internal Market Act 2020. We have an agreed settlement that was put to a referendum in the first place. We have the Scotland Act 1998, which gives the Scottish Parliament its powers. This is within those powers. It is our responsibility—a responsibility that our parliamentarians in Scotland were elected to carry out—and that the UK Government are trying to take that back means that people in Scotland are not getting what they voted for. They voted for politicians in order to direct this, but their politicians are unable to do so because the UK Parliament is trying to take back control.

Turning to the issues that have been raised today, I will touch first on the EU principles that have been written into the Procurement Bill, which concern transparency, equal treatment, non-discrimination and proportionality. We agree that we should remain as closely aligned with the EU as possible in this regard, and that keeping those principles is absolutely the right thing to do.

[Jon Trickett]

I wonder whether the hon. Lady agrees with those learned commentators who said that EU rules actually preclude the use of procurement to achieve social objectives, and that that was an argument for Brexit rather than for remaining in the European Union.

[Kirsty Blackman]

I think a number of other states have done procurement in a more flexible way even though they are in the European Union. It is not necessarily the case that the way the UK did procurement prior to Brexit is the only way to do procurement within the EU, as a number of states manage to do it very differently. We all have to work within the global procurement agreement. That is part of the World Trade Organisation, which sets rules that, similarly, the EU procurement rules abide by. I am not aware that anybody has suggested that we should step outside that global procurement framework; whether or not they support Brexit, people are still keen to remain part of that.

On transparency and the comments by the hon. Member for Hemsworth (Jon Trickett) about the kind of ideological shift that is required, I agree that this is ideology. We can do procurement in a number of different ways—we can focus on external companies in the private sector, or we can reframe that and focus on the public sector. We can think about the best way to do it. On the basis that they are trying their very best to defund it, I have concerns about the current UK Government’s willingness to use the public sector, which seems completely ideologically opposed to what they would be keen to achieve. However, I agree that we should go further in that direction, on the basis that we can better implement and embed fair working practices because we have much more control over the terms and conditions of people who are directly employed by local authorities or other public sector bodies and we can be more sure they are employed in a fair way.

The right hon. Member for Orkney and Shetland (Mr Carmichael) mentioned Hikvision, which is involved in the Chinese Government’s detention camps and what is happening with the Uyghur Muslims through its facial recognition technology. Some 61% of UK public authorities use Hikvision cameras. That is not a small number. In Scotland, we have committed to getting rid of Hikvision cameras and ending our work with Hikvision, and the US has blacklisted it. The UK Government still have not chosen to do that, so I would very much welcome a commitment from the Minister that they will look at Hikvision specifically and consider what actions they can take to ensure that they are not supporting a company that is committing human rights abuses. It seems to me that the Procurement Bill fails to take into account some of those abuses, despite pushes by the Lords to make that happen.

Again, climate change issues are not embedded in the Procurement Bill. It does not take into account the climate change targets in Scotland, for example. Every Government should be focused on the impact that every single thing that they do will have on the climate, and on future generations as a result of the climate change it will cause. The UK Government should be leading by example by having that thread running through everything thing they do, but they refuse to. There is no point in just talking about climate change; we need to make sure that we are focusing on it in every single thing that we do. The UK Government are failing to put actions in place; they are only using words.

I am aware that I am short on time, so let me briefly mention the Supplier Development Programme in Scotland, an amazing organisation that was set up to ensure that local companies are linked with public sector procurers. It works incredibly well, so I just wanted to plug it briefly. I thank the hon. Member for Birkenhead for bringing forward the debate, and I thank all those who have made contributions.

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[Florence Eshalomi]

I thank the hon. Gentleman for raising that important point. As my hon. Friend the Member for Bootle (Peter Dowd) highlighted, key issues were raised in the other place that now seem to have disappeared from the Bill. That is one of those many areas, and I will come on to it later.

We have heard that procurement makes up around a third of public spending. If it is done right, procurement can have such a transformative impact on our whole economy. My hon. Friend the Member for Birkenhead highlighted that social value should not just be an empty phrase. Social Enterprise UK found that between 2010 and 2020, the UK may have missed out on £700 billion-worth of economic, social and environmental opportunities. We are missing out on so much. That is a staggering amount of money. It is crucial that we address some of the problems in the Procurement Bill as it passes through the House.

As I mentioned on Second Reading, Labour supports the introduction of the Bill and recognises the genuine steps forward that it takes. That is why we want to work constructively with the Government to produce a Bill that is fit not just for today, but for the next Government and the Government after that. The Minister has heard my concerns about the Bill a number of times—we have sat through urgent questions and Second Reading—and we will be spending the new few weeks in Committee, which I am sure he is looking forward to, but I want to raise some of the problems that we see with it. I hope that he will think carefully before tomorrow’s deadline for tabling amendments and look at how he can make genuine improvements to the Bill. I am sure that he has had the chance to look at the amendment paper and that none of our concerns are novel to him, so I hope that he will be able to provide full and frank answers to the House on the issues that I raise.

First, I have deep concerns about the workings of the excluded, excludable and debarment systems in the Bill. My hon. Friend the Member for Hemsworth highlighted the practice of companies winning contracts and then doing down staff wages. The right hon. Member for Orkney and Shetland (Mr Carmichael) highlighted the CCTV cameras that councils are sourcing from Hikvision and the fact that we should be worried about some of the companies we are seeking contracts for. Labour is clear that we do not want to see those who act improperly, who abuse their workers or who are a threat to this country being awarded public contracts.

We therefore welcome the purpose of the powers in the Bill, but we can see loopholes in the system, which must be closed while the Bill is before the House. It is concerning that references to excludable contracts seem to give the contracting authorities discretion about whether to disregard a tender. Can the Minister please explain why excludable suppliers are not automatically disregarded in the same way as excluded suppliers?

While I understand that there may be some need for flexibility on discretion grounds, there is no mechanism in the Bill to decide where that flexibility should stand. That is extremely troubling given that grounds as serious as national security can be discretionary—that is outrageous. Can the Minister assure us that companies that are considered national threats will be excluded from contracts under the Bill? Will he ensure that contracting authorities will never be able to bypass this judgment and not disregard such suppliers during the process?

A similar problem exists with the debarment list. In his letter to Baroness Neville-Rolfe on 4 August, the Minister in the other place, Lord True, wrote that

“the debarment list is intended to focus on the most serious cases of supplier misconduct, where suppliers may pose a significant risk to contracting authorities or the public. It is not the case that every supplier which meets a ground for exclusion will be considered for inclusion on the debarment list. Rather, there will be a prioritisation policy which governs how cases are selected for investigation. It is likely that only a small number of cases will be considered each year.”

However, the Bill outlines no such qualification for ascension to the debarment list. As it is currently drafted, the only firm qualifications beyond the Minister’s wishes are mandatory and discretionary grounds for exclusion. Given the merry-go-round of Ministers we have seen over the past year, does the Minister not believe that it is right to put a mechanism in the Bill to provide clarity about the scope of the debarment list?

Will the Minister confirm that the Government’s intention for the debarment list is as Lord True laid out in his letter to Baroness Neville-Rolfe? If only the most serious cases of misconduct go on the debarment list, how can it be fair that those put on the list for discretionary reasons are still treated as excludable suppliers? If the Minister believes that a supplier poses a significant risk to the public, that supplier must be disregarded automatically from the process as an excluded supplier.

I have a further concern about the 30-day payment period down the supply chain. On Second Reading, the Paymaster General said that

“we will be paying the prime contractor within the 30-day period. People in the supply chain will be aware of the contract under which they are supplying to the prime, and we expect that 30-day payment to trickle all the way down”.—[Official Report, 9 January 2023; Vol. 725, c. 347.]

Many small and medium-sized enterprises in all our constituencies rely on prompt payment to keep afloat; they cannot rely on expectations of a trickle-down effect. The Minister may say that it will call into doubt the contract of the prime supplier, but how long will this take?

[Jon Trickett]

My hon. Friend is making a strong speech, although I wish her good luck if she is trying to persuade this ideologically driven Government to change their course. She may recall that three Prime Ministers ago—not so long ago in weeks or months, but some time ago in politics—the then Prime Minister advocated Brexit on two grounds: state aid to industry and procurement. Does my hon. Friend think the Government’s procurement policies are doing anything to level up the country socially, economically or otherwise?

[Florence Eshalomi]

I thank my hon. Friend for highlighting that. I think again of the example of Scotland, where procurement issues are being decided at the whim of Ministers. If anything, that is not levelling up; it is levelling down. We need a Procurement Bill that highlights and recognises small and medium-sized businesses, which often do fantastic work, ensure that their staff have good terms and conditions, and recognise trade unions. They should be given a fair chance at bidding for Government contracts paid for by public money, as my hon. Friend highlighted earlier.

Given how long colleagues on both sides of the House have to wait for responses from the Government, what steps will the Minister take to ensure that instances of late payment reported to the Government are dealt with promptly? In many cases, that could be the difference for an SME that stops it going under and having to hand redundancy notices to its staff. Does the Minister agree that putting strong enforcement down the supply chain in the Bill is the best way to guarantee that no supplier goes without the vital funds that it needs?

The Minister has heard many concerns this morning and I hope he will respond to all our pressing questions. Of course, I will be picking up many of these issues again in Committee.

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[Alex Burghart]

I hesitate to remind the hon. Lady why funding for local authorities was reduced, but it had something to do with the behaviour of the Labour Government up to 2010. We all remember the letter that Labour’s Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), left for his Lib Dem successor.

The fact of the matter is that we have highly capable local authorities across the country that manage public contracts very well and which have worked with us in the construction of the Bill to ensure they have a legal framework that helps them make the decisions they want. I have no desire at all to talk them down. I have seen their capabilities up close, and I know that they are looking forward to taking advantage of the powers they will get from the Bill.

I would also very, very gently say this to the hon. Member for Hemsworth. I know that this is political knockabout, but the statements he made about PPE procurement could have been taken to insinuate that Ministers made the awarding decisions. That is absolutely not the case. Those decisions—

[Jon Trickett]

Says you.

[Alex Burghart]

The hon. Gentleman heckles me with a smile on his face, but the fact is that those decisions were made by highly capable and competent civil servants whose decisions have been upheld in court. It is wrong to suggest that they were in any way corrupt when they were trying to serve the country at a time of utter crisis in order to get, as every Member of the House wanted, as much PPE as possible when the NHS needed it most. I have listened on a number of occasions to Opposition Members speaking in such a way that suggests that Ministers handed out the contracts. That is not the case, and it would be much better for the public discourse if Opposition Members did not suggest to members of the public that that had been so.

Let me move on to the remarks made by the hon. Member for Strangford (Jim Shannon). It has been a pleasure to be able to work on the Bill with people in Northern Ireland, and the Bill is stronger as a result. We look forward to businesses of all sizes in England and Northern Ireland, and in Wales, benefiting from the new procurement legislation.

The hon. Member for Arfon (Hywel Williams) chastised the Welsh Government for allowing Westminster to legislate for them. Me and my officials have had the most productive working with the Welsh Government and these mischaracterisations imply that this is Westminster telling Wales what to do. This has been a partnership between Westminster and Cardiff and between Westminster and Belfast. It is a wonderful example of nations working together.