Public Procurement Processes

Kirsty Blackman Excerpts

Wednesday 25th January 2023 Westminster Hall

[Mick Whitley]

Public procurement is for all, not just the Government or privateers. This is all about social value.

The fact that a vital local employer in Birkenhead, a deprived constituency, was at the mercy of a Dutch company is a very good reason why the public procurement process needs to be reformed. Social value is not an empty phrase. Cammell Laird is the largest employer in my constituency. Birkenhead has an above-average number of benefit claimants, who struggle to survive, so work flowing into Cammell Laird is vital to turn despair and poverty into hope and prosperity, yet the opportunity to create such work was hindered by the legal restrictions surrounding the existing procurement process. That problem is not addressed by the Procurement Bill, because it excludes social value—a key measure of the overall value of any contract.

Value for money has come to mean the cheapest bid, not the best bid. As a result, Cammell Laird and the workers in my constituency suffered a blow. The bulk of the work of the ferries contracts goes through a Dutch company, which I have been told will be keeping its costs low and its profits high by outsourcing work on Mersey Ferries to Romania. That is a glaring example of how public money has not served the public good. I am pleased for the workers of Belfast and Devon that Harland & Wolff and BMT were included in a winning Team Resolute bid, but there is no guarantee of the amount of work they will get as a result of the contract.

[Kirsty Blackman (Aberdeen North) (SNP)]

On that point, is the hon. Gentleman concerned about the climate change impact—the carbon impact—of getting stuff and people from further away, the social issues that that causes, and the effect on the people who live locally?

[Mick Whitley]

The hon. Lady makes a good point, which I will cover a bit later.

Team Resolute is led by a Spanish ship company called Navantia, which is guaranteed to get at least 40% of the work, worth about £640 million. Ministers have confirmed that there is no limit on the jobs it can create in Spain. As for Navantia being part of a UK consortium, it is true that the bid includes Navantia UK, but here’s the rub: Navantia UK was created only in May last year as a subsidiary of the Spanish firm. It has no trading history, and its two directors live in Spain.

At the very heart of the problem lies the fact that a social value calculation is not included in the public procurement process. My call on the Government is simple: make it a compulsory component—make its inclusion in the consideration of all bids compulsory.

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[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 (Aberdeen North) (SNP)]

Thank you for chairing this meeting so admirably this morning, Ms McVey. I congratulate the hon. Member for Birkenhead (Mick Whitley) on securing the debate. I also thank all those who have spoken for having such easy-to-pronounce constituency names. I very much appreciate that none of them is a mouthful; that has worked out very well for me this morning.

I want to talk about a number of things that we are concerned about in the Procurement Bill, and that we are concerned about more generally in how public procurement works. Public procurement is devolved in Scotland; we are able to set our own procurement rules and legislation. None the less, the Bill impacts Scotland. Also, while we are part of this place and while we are part of this United Kingdom, for however short a period of time that may be, we very much want to improve the situation and ensure the utmost levels of fairness and transparency in the public procurement regime, whether or not we continue to be involved in it.

[Hywel Williams]

Of course, Scotland can chart its own course on this matter. Does the hon. Lady share my surprise that the Welsh Government have consented to the UK Government’s legislating on their behalf?

[Kirsty Blackman]

I absolutely do. It is disappointing, especially given some of the excellent things that are happening in Wales, particularly around the work of the Future Generations Commissioner and how that is embedded in what the Welsh Government do. To hand that over to Westminster seems a real dereliction of duty, and I am concerned that that is the direction that has been chosen.

The biggest concern that we have about the Procurement Bill is its significant impact on Scotland in relation to devolution and the implementation of trade deals, including the Australia and New Zealand trade deals. We agree that trade deals are reserved. Obviously, we want to be independent, and we will be signing our own trade deals then, but while they are reserved, we agree that that is what the devolution settlement looks like. However, the implementation of trade deals in Scotland touches on devolved areas. We should be able to implement the procurement rules that come out of trade deals ourselves. The Procurement Bill will allow UK Ministers to implement, through secondary legislation, procurement practices in Scotland, as well as in the rest of the UK. That should be the responsibility of the Scottish Parliament and Scottish Ministers, and the UK Government should put that in the Bill rather than reserving that additional power.

[Peter Dowd]

Does the hon. Lady agree that the Bill is taking back control to Westminster, not to the places that actually need it?

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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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[Alex Burghart]

The hon. Gentleman will get a final answer in Committee, but I can tell him that we have had nothing but productive and courteous conversations with our counterparts. I believe that we are going to end up in a mutually beneficial place, which is great news for people in Wales, England and Northern Ireland. The hon. Gentleman can join us in Committee if he wishes to hear the final read out on that. I look forward to seeing him there.

The hon. Member for Strangford is right: Northern Ireland must be included in these important opportunities. We are sad that our colleagues in Scotland have, unlike counterparts in Wales and Northern Ireland, not chosen to be part of the Procurement Bill. They are entitled to make that decision, but it is a shame. It adds a layer of complexity within the British Isles that need not be there, but c’est la vie.

The hon. Member for Aberdeen North (Kirsty Blackman) asked about trade deals and implementation. Trade deals are a reserved area. It is important that they are able to be implemented because otherwise we might find that the UK was in breach of an international agreement and that would be wrong. Yesterday, we made an amendment following discussions with the Scottish Government to narrow powers in this area and we will continue to work closely with them on implementation and, likewise, I look forward to discussing it with her in Committee; I do believe it will be her in Committee.

[Kirsty Blackman]

It will indeed.

[Alex Burghart]

Hooray.

[Kirsty Blackman]

I thank the Minister. I have not seen that amendment, so I will have a good look at it. I appreciate that he has taken some action.

[Alex Burghart]

Super. I look forward to debating that further in the weeks ahead.

The Opposition spokesperson, the hon. Member for Vauxhall, rightly highlighted that debarment is a crucial area of the Bill. In the past few days, we have tabled new amendments on debarment, which strengthen the regime. I am not going to go into all the details now because there is ample opportunity in the days ahead, but she is right to draw attention to it. On subcontractors and 30-day payments, there are implied payment terms within the Bill. Even if it is not a subcontract, the SME can demand this and raise it. Again, we could go into further details, but we have thought through the point she raised.

In conclusion, this is a great opportunity. We have come a long way from the starting point that we found ourselves in when we were in the EU. We are starting to make British procurement rules that will benefit British taxpayers, British employees, British public authorities and British suppliers. That is a good thing for all of us.