Energy Bill [Lords]

Debate between Lisa Nandy and Sammy Wilson

Monday 18th January 2016 Commons Chamber

[Lisa Nandy]

One of the most important things we can do to help boost jobs and skills in the North sea is to have a long-term plan. I will say more about that as I make progress.

[Sammy Wilson]

Does the shadow Minister agree that to a certain extent she is speaking with forked tongue? On the one hand she is saying that we have to decarbonise the economy, but on the other she is saying we have to increase the output of a carbon fuel—oil. Which is it? Does she want to decarbonise the economy or does she want people to buy oil?

[Lisa Nandy]

Perhaps I can help the hon. Gentleman with that, as it is one of the things that he obviously struggles to understand. As we move towards a clean economy—there is widespread agreement in all parts of the House that that is a journey we must take—we need to think, too, about where we get our energy from in the short to medium term. There is no question about this—it is a fact that we will need to rely on oil and gas in the short to medium term. Because of that, the question that we face on all sides of the House is whether we import that oil and gas or generate our own.

Our view is that this transition must be made with due care and attention to the jobs, skills and investment we need in this country. It must also be made with due care for our environment, our health and our safety. That is a difficult thing to achieve. I very much welcome the fact that we are having this debate, but it seems to me that pitting the interests of the industry we currently have in the North sea against our interests in transitioning to a clean economy will not get us very far at all.

Government Contracts (SMEs)

Debate between Lisa Nandy and Sammy Wilson

Wednesday 28th January 2015 Westminster Hall

[Lisa Nandy (Wigan) (Lab)]

I thank the hon. Member for South Antrim (Dr McCrea) for initiating the debate. He was absolutely right to point out just what a force small and medium-sized business are across the country. There are 5 million of them, and they are what keeps our economy moving. He cited examples from his constituency, and I am sure that all hon. Members will have their own examples in mind. Taken together, SMEs are the single biggest employer in my constituency, and that situation is replicated in many towns, cities and rural areas throughout the country.

There is much more that we could do to support SMEs, which are one of the country’s greatest assets, and to unlock their talent, energy and commitment to their communities. I was interested to hear what the hon. Gentleman said about job creation in Northern Ireland over the past few years. It is fascinating to hear what small businesses manage to do despite all the problems and challenges that they face. Think what more they could do if we put in place more support and took away some of the barriers that they encounter.

We must acknowledge the extent to which SMEs have felt the squeeze in recent years, and the problems surrounding Government contracts, which are the focus of today’s debate, must be seen in that context. An economic policy that imposed huge front-loaded cuts on public services has undoubtedly had an impact on SMEs, because in many areas of the country—this picture is familiar to people in Wigan—that policy has created a toxic mix of unemployment, low wages and insecure jobs, which has stopped people spending money in small shops and businesses, thus costing those businesses trade and, in many cases, jobs. In a few instances, the situation has cost people their entire business, which was why I listened with interest to what the hon. Member for East Antrim (Sammy Wilson) said about the balance that must be struck between conditions on contracts and the need for simplicity. He is absolutely right to raise that point because there is a common picture throughout the country of contracts that contain unnecessary complexity that could be removed, with some concerted effort.

When we talk to SMEs, we often find that they are keen to use Government contracts as a force for social good, as my hon. Friend the Member for Inverclyde (Mr McKenzie) described when he spoke about apprenticeships and jobs, but they can need Government support to achieve that. The future jobs fund was a good example of a partnership involving public sector bodies at first, and later smaller employers that could not necessarily afford wage subsidies, but wanted to create opportunities. The programme had a significant effect on young people.

In my area, as is the case in many parts of the country, making the living wage a condition of contracts has been hugely helpful for many SMEs, partly because that means that they do not have to engage in a race to the bottom to undercut prices, because if the requirement to pay the living wage is clearly set out in a contract, such companies can compete without driving down the conditions of their work force. SMEs also benefit from that approach because if more people in towns such as mine are paid the living wage, it is more likely that they will have surplus income to spend in local shops and businesses, meaning that the cycle continues.

It is right to recognise that the picture has been very difficult for many SMEs across the country. The huge front-loaded cuts to many local authorities, health services and other public sector bodies have meant that SMEs have lost contracts. Many small businesses that could borrow money easily from banks on a short-term, sustainable basis a few years ago are now struggling due to the loss of trade and contracts. Taken together, all those things have been problematic for this group of businesses.

Despite the cuts, and although central Government are not handing out large contracts or spending huge amounts on public services, and are unlikely to ramp up that spending any time soon, there is far more that they could do by using the range of tools at their disposal. That was why the hon. Member for South Antrim was right to focus on Government contracts and procurement, which are among central Government’s biggest tools for good. Central Government spend £40 billion a year on goods and services, about 10% of which goes directly to SMEs. Over time—I am not making a party political point because this has happened over a considerable period—a trend has developed for putting in place centralised contractual arrangements that, for various reasons, have tended to shut smaller organisations out of the process altogether. As a result, businesses that are closest to their communities, and that deliver services and do the good that hon. Members have talked about, have become subcontractors in a supply chain, if they are able to compete at all. My hon. Friend the Member for Inverclyde said that he might need to get out more, and while I could not possibly comment on that, perhaps the same is true for the Government, because there is a regional and local picture to consider, too.

[Sammy Wilson]

Does the hon. Lady accept that, at a time of fiscal constraint, there is a need to get value for money from contracts? That sometimes means that contracts need to be centralised, but one way around that might be to encourage consortiums of small businesses to apply for larger contracts, because such contracts do not necessarily have to exclude small businesses. I sometimes wonder whether we have explored all options of how we ensure that we can have large contracts while still involving smaller firms in delivery.

[Lisa Nandy]

The hon. Gentleman is absolutely right. I was just about to address the difficulty that small and medium-sized companies face when bidding for public sector contracts. The hon. Member for South Antrim talked about the lengthy, expensive and unnecessarily complicated process, and the lack of support, so I will not rehearse those points to the Minister, although I am interested in his response to them.

One way in which we can ensure that small and medium-sized businesses are not shut out of the procurement process is by moving that process much closer to communities through the devolution agenda, with more commissioning at a regional level. In the past few years, local enterprise partnerships have been established in the place of the regional development agencies, which were very successful. In some areas, local enterprise partnerships still have to bed in, and we can do much more at the local, regional and national levels to make them work for local communities. I see this being played out at the local level, too, but when resources are scarce in local, national or regional government, there is a perceived tension between getting value for money and giving contracts to local providers or those that can offer over and above in relation to the social good. In reality, small and medium-sized companies are much more effective at delivering such contracts because they are rooted in their community, because they see the social impact of what they do and because they can have regard to a range of factors beyond just day-to-day profit making.

There is a good example of that, from which I hope the Government have learned. During the commissioning process for the Work programme, some smaller providers, including a number from the voluntary sector, pulled out because they felt that they could not make an impact through their contracts. We can see a good example of the problem of contracts being dominated by bigger companies, with smaller organisations acting as sub-primes, because St Mungo’s, the homelessness charity, pulled out because not one person was referred to it through the Work programme during the period of its contract. It is inconceivable to think that, had St Mungo’s been given the contract directly, it would have been unable to find people who were desperate to get into work and could have benefited from the intervention it could offer.

The hon. Gentleman was right to say that such dominance by a small number of larger companies is not effective at any level—it is not good for the public or for SMEs. This is not just about SMEs getting what they deserve; it is about ensuring that we are delivering the best value for money in our communities and across the country.

In the time I have remaining, I will address the length of time it takes for payment to reach SMEs for the services that they provide. We hear the complaint that bigger companies are contracted and small companies have to act as sub-primes. The Government could do much more to act in instances when they have made a payment to a prime provider but that has not yet reached the smaller company at the bottom of the chain.

[Sammy Wilson]

A possible solution when there is a substantial number of subcontractors is the greater use of project bank accounts. Rather than money being paid to the main contractor, it goes into a project bank account to be drawn out as invoices come in. In Northern Ireland, a main contractor can be excluded from applying for public sector contracts for a specified period of time if there are complaints that it is clearly not abiding by the terms of a contract.

[Lisa Nandy]

I would welcome the Minister’s response to the hon. Gentleman’s intervention.

Although the Government’s record on prompt payment is better than that of the private sector, the National Audit Office found a few weeks ago that the figures are skewed by the Government making prompter payments to a few large suppliers. Astonishingly, it is virtually impossible to assess the record of the Cabinet Office and many other Departments because paper invoices are not dated when they arrive, which is a method commonly used by smaller organisations. Despite the Government’s rhetoric, the situation betrays a casual attitude to something that can be make or break for many small businesses. It would be helpful to know what the Minister has done in the past few weeks to address the situation. Were the Government to pay invoices within five calendar days rather than 30, the reduced interest cost to businesses could be worth up to £88 million, according to the NAO, and the reduced cost to the taxpayer could be up to £55 million. The NAO report called for strategic leadership from the Government and I hope the Minister agrees that it is important that the Cabinet Office leads on this by ensuring that its own suppliers are paid on time.

In conclusion, the Government could draw on the success of other countries. Labour would set up a small business administration that could work to mainstream and hardwire such activity in government. That would require a huge cultural change, but there are small things that the Government could do more quickly, such as taking action on late payments, to signal their intent to unlock one of this country’s biggest assets.