Local Government Procurement

Jonathan Reynolds Excerpts

Wednesday 16th January 2013 Westminster Hall

[Andrew Gwynne (Denton and Reddish) (Lab)]

As ever, it is a pleasure to see you in the Chair, Mr Robertson. I am grateful to have been granted this debate.

Local government procurement is becoming increasingly important, particularly in places such as my constituency, and I will refer to some of the work that is being done to support local businesses in my constituency during these harsh economic times, especially with the help of Tameside metropolitan borough council in its Tameside Works First initiative. It is also important nationally because almost £62 billion a year is spent through local government procurement, and that amount looks set to increase rapidly as spending cuts force councils to outsource even more services. Clearly, the way in which that money is spent can have a huge impact on the local economy, jobs and training, so we must ensure that we get it right. We must also ensure that, as well as working to obtain best value for money, councils do not overlook important benefits that could be secured through better procurement, particularly added benefits to the local economy.

A study by the Federation of Small Businesses shows that of every £1 spent in the local economy, 83p goes back into that economy. Social Enterprise UK asks:

“If £1 is spent on delivery of services, can that same £1 be used to also produce a wider benefit to the community?”

That is an interesting point, because investing in our local communities must almost certainly have a wider social benefit and positive effect on the same local area.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

As ever, it is a pleasure to share with my hon. Friend the responsibility of representing Tameside in Parliament. He is always pressing its case. We know from experience in Tameside what a difference local councils can make. Does he agree that the Government’s attitude to local government funding and to local councils borders on contempt? The way we are going, we will soon lose any lever we have in managing our local economies through local authorities and helping to improve our constituents’ lives.

[Andrew Gwynne]

My hon. Friend makes an important point, because the impact of the local government settlement on a council such as Tameside has been nothing short of devastating. Projections show that coming years will be very difficult for Tameside and other boroughs if things do not improve substantially. That will involve not just the council’s own budget, but the wider local economy. The amount of money being taken out of areas like Tameside will have a devastating impact on the communities we represent.

I want to highlight some of the good work being done in my constituency. The importance of local procurement to support small and medium-sized enterprises is well known. Research in 2005 by the New Economics Foundation with Northumberland county council suggested that for every £1 of direct spending in the local economy, the total value, including indirect spend, equates to £1.76. At the start of the economic downturn, Tameside metropolitan borough council, one of two councils covering my constituency, introduced the Tameside Works First initiative to give more support to local companies and to help to boost the local economy. It was spearheaded by Councillor Keiran Quinn, then the cabinet member for economic development and now the executive leader of the council, precisely to provide support to local companies. Under that programme, specific capital projects and programmes were designated to be supplied locally when possible. At the same time, partner organisations were encouraged to sign up to a local procurement charter, committing themselves also to support a local supply chain.

--- Later in debate ---

[Brandon Lewis]

My hon. Friend tempts me into allowing central Government to dictate to a local authority what it should be doing—we get criticised for that—but I will say to him that authorities have the general power of competence. They can look around at some of the very good work that I have just touched on, at Waveney, Hertfordshire and Tameside, and see how to simplify the process. That will ensure that a local charity does not have the problem that such charities have had in the past, when I was in local government, of having to say, “We can’t bid for this. We haven’t got the staffing levels, because it takes days to understand these forms, fill them in and negotiate.” The forms for these contracts should be simple and straightforward. Any of us should be able to read and understand them and take part in the process. Local authorities still have some way to go with that. That leads me on to my next point.

[Jonathan Reynolds]

I am listening to the Minister’s speech, and he seems genuinely to be an enthusiast for the role that local authorities can play in shaping their local economies. Is he in any way concerned that the financial situation that local government faces, which is a fact—this is not the time to debate whether it is right or wrong—is limiting their ability to do that and is to the detriment of getting this country back towards growth and jobs for everyone, which is what we all want?

[Brandon Lewis]

No, I do not agree with that. The hon. Gentleman mentioned cuts earlier. The Labour party has announced £52 billion of cuts in the Department for Community and Local Government budget and has not itemised any of them. We have to be realistic about that. Actually, the situation should drive local authorities to want to do better with procurement, to free up money to use on services rather than procurement.

Councils can now do many things to improve procurement, and many authorities need to go much further. They can consider abolishing requirements to complete a pre-qualification questionnaire for contracts below the EU threshold. They can publish all their tenders and contracts online, build up a supplier network and engage with suppliers in the way some already do. They can stop gold-plating on equalities. Equality impact assessments are not and never have been a legal requirement. Officers can use their judgment to pay due regard to equality without resorting to time-consuming, bureaucratic, tick-box exercises. Breaking up contracts into smaller bite-sized chunks or using subcontracting can open up procurement.

Local authorities have a key role in supporting their local economies through procurement. Councils can take steps to use their spending power to support economic growth, but procurement processes need not be complex. All councils can simplify them, as I have outlined, and make future contract opportunities easier for small businesses. Making those changes will also save councils money by reducing unnecessary red tape and bolstering business rate returns. There is an in-built incentive for local authorities to do that now. Some councils have grasped that and made great strides to help local businesses to bid effectively for contracts, but the majority have a long way yet to go. They owe it to local taxpayers to rise to that challenge.