Trade (Australia and New Zealand) Bill (Fourth sitting)

Lloyd Russell-Moyle Excerpts

Committee stage
Tuesday 18th October 2022 Public Bill Committees

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Thank you, Mr Twigg, for the opportunity to resume my speech in this debate that was opened by the hon. Member for Airdrie and Shotts. I will speak in particular to amendments 5, 7, 20 and 22.

It is a particular joy that you are chairing the afternoon sitting, Mr Twigg, because you will know, having been both a Minister and a shadow Minister, just how much the odds are stacked against a shadow Minister in a Bill Committee, with 1,000-plus civil servants backing up the Minister versus just one researcher and, fortunately, some very high-quality Labour colleagues. The odds are very uneven.

When this morning’s sitting ended, I had begun some preliminary remarks on the case for amendment 5. I was about to highlight some of the issues around the differences between the New Zealand free trade agreement procurement chapter and the Australia FTA procurement chapter. I suspect that businesses will need some help to navigate those differences, so consultation with interested businesses across the UK would seem sensible.

It is tempting to think that the differences are so marginal that they can be ignored and that any flaws in the procurement chapters can be swept away by the upcoming procurement Bill or our accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. As the Minister briefly alluded to, with the CPTPP not yet on the statute book and with plenty of issues to be addressed before it gets there—if it does—we have to get the trade deal procurement chapters and their implementation right, as they will, without question, affect the legal landscape in which businesses bid for contracts here in the UK and in which British businesses bid for contracts in Australia and New Zealand.

Not only are there subtle and important differences between the New Zealand and Australia deal procurement chapters, but they are not the only such chapters that we have signed up to since our departure from the European Union; of course, we have the procurement chapter in the deal that the previous Prime Minister negotiated with the European Union. Again, there are subtle but none the less significant differences between the EU procurement chapter and the Australia and New Zealand chapters. It would seem an obvious and sensible thing for Ministers to embrace some help to navigate those differences, and amendment 5 would help them to do that.

Where do the differences lie? It is important to remember that the Government procurement agreement is the foundation text for procurement negotiations. The procurement chapter in the EU deal—the first we signed—keeps the GPA text and builds upwards from it. I hope to come to the evidence of the procurement expert Professor Sanchez-Graells in a little bit. He argues that the text of the procurement chapter in the Australia deal not only replicates but, crucially, modifies the text of the GPA. That creates a GPA-minus agreement and risks all sorts of complications and legal problems when bidding for contracts, both here in the UK for Australian and New Zealand businesses, and in Australia and New Zealand for British businesses.

Another reason that we should perhaps consult firms is that, as I understand it from the evidence that Professor Sanchez-Graells gave us, a UK firm could be barred from all remedies—the interim relief remedy, judicial review, as well as full redress, compensation—if they felt they were being unfairly treated in an Australian Government tender process, on public interest grounds. In a similar process in Australia, a French firm could be barred from interim relief but not from a redress claim. So the French firm could potentially secure compensation if it was treated unfairly if the contract was moved forward on public interest grounds, but the British firm could not. Apparently, that is because the UK firm’s rights are considered under the UK-Australia FTA, while the French firm’s rights would be governed by France’s membership of the Government procurement agreement.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

Is not this another worrying sign that the trade deals and the Bill often sell British businesses short? British businesses are being deprived of rights that they currently have. I am sure my hon. Friend will confirm that, if we pass the Bill without amendment, it will mean that British businesses have less access and security in the Australian and New Zealand markets than they currently do under the GPA rules that extend to everyone already.

[Gareth Thomas]

That is certainly my understanding of the evidence that Professor Sanchez-Graells gave this Committee, the Select Committee on International Trade in this place, and the International Agreements Committee in the other place.

Let me spell out for the Committee where the problem lies. As I understand it, the Government procurement agreement allows countries to bar access to some but not all remedies, on public interest grounds, for companies that are unhappy with Government procurement decisions, but, crucially, it does not allow a ban on remedies involving compensation. That is the difference with the Australia FTA procurement chapter, which does allow a ban on remedies involving compensation.

Potentially, the firms of other GPA countries will have more comfort and ability to risk tendering for big Australian Government contracts, because they will know that they have some access to remedies if things go wrong in the procurement process and they want to try to get compensation. As my hon. Friend the Member for Brighton, Kemptown rightly says, it takes some skill to negotiate a worse position for British businesses in terms of access to remedies than the situation we have now. That is probably not the biggest mistake that the now Prime Minister has made in her time in office, but it feels like a significant issue, and I look forward to the Minister addressing it.

Government procurement matters enormously. We have touched a little on some of the reasons for that. It helps if Government procurement is done well. One of the reasons why amendment 5 is necessary is to ensure that we do not make the current set-up for Government procurement in the UK worse but, instead, enhance it. Done well, Government procurement can help to build supply chain resilience. We saw the significance of that during the covid lockdowns, when our dependence on China became ever clearer and the need to re-onshore some of our supply chains became a topic for discussion by business and, I suspect, in Whitehall.

We are all too familiar with the horror stories about some of the dodgy personal protective equipment that was procured. We understand the context in which some of those decisions were made, but it is striking that Transparency International, with which I worked when I was a development Minister trying to tackle corruption in developing countries, felt the need to investigate the Government procurement market for PPE. It identified some 73 contracts, worth 20% of all the contracts, that it said raised one or more red flags for possible corruption. That suggests there is work to be done to improve the quality of Government procurement. The National Audit Office also highlighted concerns, where the Government admitted that they were not getting full value for money on PPE.

We also know that good conditions for Government procurement can create more choice and more scope for innovation, and can achieve better value for money. One thinks about the digital procurement expertise that we need, and the potential for artificial intelligence to help revolutionise public services. We need to make sure that the framework under which Government procurement contracts are being offered works well, and that this new injection of uncertainty—but also, potentially, enhanced opportunities for other firms to come into the Government procurement market—does not destabilise the UK procurement market but improves things. A bit of consultation might help in that regard.

I touched on some issues around levelling up, which, to my surprise, prompted murmurs of disagreement from Government Members. I understood from their chuntering that they think everything is rosy with Government procurement outside London and the south-east. However, some figures I have seen from the House of Commons Library suggest that at the moment, there is a clear bias in the Government procurement market towards businesses operating in London and the south-east. The last thing we would want is for the procurement chapters of the Australia and New Zealand trade agreements to exacerbate the difficulties for businesses, not only in London and the south-east but in the west midlands, the north-west, the north-east or the east of England, that are trying to get into the Government procurement market.

House of Commons Library data demonstrates that of the 445 most lucrative contracts awarded by central Government in 2019, 202 went to companies in London or the south-east. That does not suggest that Ministers are using Government procurement to level up. We know they are not doing much else on levelling up, so one would hope that they would take the opportunity to consult more, as our amendment 5 would require them to, in order to ensure that the Government procurement market is not being made worse for businesses outside London and the south-east that want to get involved. It might be an opportunity to look at reforms and think about how businesses outside London and the south-east can be encouraged to do so.

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[Gareth Thomas]

Nevertheless, it seems a reasonable question to pose. A bit of better consultation might allow us to think about how we encourage more British businesses to secure Government contracts. The Minister rightly said that there is a good argument for extending the contracts covered by this legislation—he was thinking of contracts of unknown value and length—on the grounds that it would encourage more competition and better value for money, but we need to ensure that that does not put off good British businesses, particularly small and medium-sized ones in the local area, from getting contracts. I am yet to hear any convincing story from this Minister or, indeed, Business Ministers or Cabinet Office Ministers about what they are doing in that space to shift things forward.

Let me come to some of the specific concerns that Professor Sanchez-Graells raised, which are the most troubling of the many issues raised in the evidence sessions last Wednesday. It is worth highlighting Professor Sanchez-Graells’s experience. He is a professor of economic law at the University of Bristol Law School and co-director of the Centre for Global Law and Innovation. He has done a lot of research on economic law, particularly competition law and procurement, and his research concentrates on the way the public sector interacts with the market and how it organises the delivery of public services, especially healthcare. He is a significant witness. He was clearly taken seriously by the International Trade Committee and by the International Agreements Committee in the House of Lords.

Professor Sanchez-Graells argued that there are a series of problems with the way in which the procurement chapter has been written that, in effect, create the GPA-minus problem, which could have a chilling impact on the appetite of British businesses to bid in Australia and New Zealand, unless Ministers can rectify those problems and provide comprehensive reassurance that Professor Sanchez-Graells may not have considered the whole picture. He has been explicit in saying that he wants the procurement chapters of both the New Zealand and Australia deals renegotiated and only then put into law, so it is important that we hear the Minister’s reaction to those concerns.

I had thought that the biggest problems with the Bill were the huge giveaway to Australian farmers, the lack of protection for British agricultural goods, the lack of progress on geographical indications and the shocking levels of scrutiny, but Professor Sanchez-Graells appears to suggest that there are serious issues with procurement and whether the procurement chapters present the huge opportunity that Ministers have been keen to big up. He says that the legal uncertainties in the chapter that the Bill would write into law ensure that the rules clash with the World Trade Organisation’s rules on procurement, and we would then risk breaching international law, be it the GPA or the two trade deals.

We know that Ministers have a record of not being bothered about breaking international law—one thinks of the Northern Ireland protocol or other aspects of the trade agreement with Europe—but if Britain’s reputation for international lawbreaking gathers ground, that could have a chilling effect on our ability to negotiate other trade agreements and implications for the confidence of the markets, which is particularly worrying.

The GPA is the baseline for opening up access to procurement contracts. I commend Ministers for the objective of creating a GPA-plus regime, and the Australia deal secures some more substantive obligations that point in the direction of such a regime, such as the electronic publication of contracts by authorities, the inclusion of a clause on environmental, social and labour considerations and a clause on SME access to procurement opportunities, the expansion of economic coverage through the inclusion of concession and build-operate-transfer contracts, and so on. However, it also deviates in ways that alter or reduce substantive obligations, so we have the creation of a GPA-minus regime instead.

The scope for legal uncertainty risks having a chilling effect in terms of British businesses wanting to bid for Australian and New Zealand contracts, and vice versa. Amendment 5 makes it clear that consultation is key, and amendment 22 would give us the chance to understand fully the impact of these GPA-minus changes. Both would be helpful additions to the legislation and would allow us to address some of the concerns.

The concerns Professor Sanchez-Graells expressed in evidence to the Select Committee were very technical and challenged members of the Committee—they certainly challenged me when I read back over them to fully understand their scope. To bring them to life at our witness session last week, I asked him to give some examples of where his concerns might have played out. One example I asked him to think about was a British construction business bidding for a contract to help build the Melbourne airport link, which the Australian authorities are tendering. He said:

“Let us imagine that an innovative British company that wants to sell low emissions rolling stock for that metro link in Melbourne airport goes and tenders in Australia. It is excluded for any number of reasons and it wants to challenge the decision. It could also be barred from access to remedies in Australia, which means that the UK tenderer has lost its time and probably made a loss on the project.”––[Official Report, Trade (Australia and New Zealand) Public Bill Committee, 12 October 2022; c. 42, Q52.]

That business could lose its access to remedies if the Australian courts embraced the decision of the contracting authority on public interest grounds—that the contract could not be delayed and the compensation not offered, because it was so important that the Melbourne airport link got built on time.

If the UK tenderer had spent substantial amounts to get that contract and then could not get any compensation for all that money, that would create a big disincentive for anyone from the UK thinking of trying to tender for future projects in Australia. It is important that the Minister and the Department for International Trade explain what steps they will take to prevent that risk from coming to fruition.

[Lloyd Russell-Moyle]

Is there not also a danger that an international company could choose which of its subsidiaries a bid should come from? Rather than choosing the British company and channelling the money through it, it might consider that the protection offered would be marginally better should the bid come from the French or German company. The multinational company will choose to channel its bids through their other subsidiary companies outside the UK, which could deprive UK taxpayers of money and British workers of the contract, when the British company has done some of the necessary paperwork and processing. There does not need to be a material change; there only needs to be a theoretical risk that that could happen.

[Gareth Thomas]

Unfortunately, that is absolutely right, as Professor Sanchez-Graells argued. That is a real risk. There are potentially chilling impacts on British authorities that want to issue contracts, should New Zealand companies, and particularly Australian companies, bid.

On the possible GPA-minus provisions, a broader issue is relevant to the argument for amendments 5 and 22. Is the GPA being undermined? The GPA-minus provisions are not just an issue for the UK-Australia FTA, but are likely to be an issue under the CPTPP. Given how difficult it was to negotiate the GPA and how long it can take to secure improvements, enhancements and modernisation, one has to ask whether Ministers have given up a little on that multilateral process. Have they decided that it is so important to get individual procurement chapters agreed under trade deals with potential allies that we will give up on the process of modernising the GPA? Surely it needs to be a living document, because it dates quickly; the current version was negotiated more than 10 years ago and is already out of date on digital procurement and sustainability. The more GPA-minus provisions there are in trade agreements negotiated around the world, the more difficult it will be for the World Trade Organisation to negotiate an enhanced, modernised GPA. It would be good to hear what plans the Minister and the new Secretary of State have to prevent the UK-Australia chapter, with its GPA-minus provisions, from stopping any effort to modernise the GPA. One hopes that Britain would seek to lead that process at the WTO.

The second major concern of Professor Sanchez-Graells is why we are putting the two procurement chapters into law if we plan to accede to the CPTPP? It has its own procurement chapters, and both Australia and New Zealand are members of it. Those chapters are very similar to the Australia and New Zealand FTA chapters, so there is similar scope for uncertainty. We have been led to believe by the current Prime Minister and the previous Secretary of State for International Trade—presumably the present Secretary of State will tell us something similar—that CPTPP remains the top trade priority for Ministers. Professor Sanchez-Graells is concerned about the Government’s rush to get two procurement chapters on to the statute book when there is scope for future uncertainty. I am not sure what I think about that particular argument, but I would be interested to hear what the Minister has to say.

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[Lloyd Russell-Moyle]

We heard from the Minister this morning that potential accession to the CPTPP will not replace this agreement but be additional to it. Therefore, British businesses will have to cope with three different systems. We have also heard from the Minister that the Procurement Bill will not entirely replace the chapters and agreement before us, so there will be four potential regimes that people have to navigate. Is that not creating more bureaucracy for businesses rather than less?

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I want to correct the record in one important regard. I am sure that the hon. Member for Harrow West did not mean to mislead the Committee or the House, which is a serious matter, but he was a bit ambiguous with the truth. He said that five years is 48 months. He is right, but he is not telling the full truth, is he? It is 60 months. The hon. Member for Brighton, Kemptown, voluntarily prayed in aid the great Arthur Ponsonby. I am not entirely sure that the good people of Brighton—particularly Momentum—would support him in praising that individual. If he googles him, he will see that Arthur Ponsonby resigned when the fascists in Italy invaded Abyssinia, and then resigned again later from the Labour party. As I say, it has been an interesting debate. A large number of points were made, and I will try to cover all of them.

[Lloyd Russell-Moyle]

rose—

[Sir James Duddridge]

If I am given some leniency near the end, there might be an opportunity to intervene then, if there is a particular element that I have not picked up on, because there are about 25 issues that I need to cover.

Broadly speaking—officials will not like me saying this—I agree with a lot of what has been said. I agree about the importance of consultation, and of reviewing and evaluating what we have done. There is a lot of that in the Bill, and a lot of it has been done by the Government already. I will go through what we have done, but just because we have consulted, that does not mean we do what someone wants. It is a balancing act. I suspect the hon. Member for Harrow West would do things differently from me if he was in the hot seat, but I am sure he would have consulted as widely as the Department and officials did on behalf of His Majesty’s Government. I am disappointed to hear that he will press two of these measure to a vote. He has thrown down the gauntlet, and I have picked it up, so hopefully I can persuade him not to vote on them, because we are covering a lot of the issues raised.

Communication with the devolved Administrations is integral to not only the way the Department conducts its negotiations but ensuring that legislation operates effectively in each and every nation of the United Kingdom. I am more than happy to reiterate the commitment of the then Secretary of State for International Development that the UK Government would not normally legislate without the consent of the devolved Administrations. The hon. Member for Airdrie and Shotts may well say, “Why not put that in the Bill?” That is a valid point, but it is not one about procurement; it is about the fundamental nature of devolution. Treaty making is done at the UK level on procurement, as it would be in an international treaty on, for example, nuclear non-proliferation.

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[Sir James Duddridge]

He clearly does, but that is not for this Bill. On scrutiny, Members drew comparison with the EU and the US. I gently point out that those are very different democratic bodies. The EU is a body of 27 nation states, remotely located; and the US has a presidential system, and an Executive that is more detached from the legislature, whereas we are much more integrated here.

On consultation, there was a wider discussion that related to all types of scrutiny but included procurement, so with your permission, Mr Twigg, I will go through how we have looked at scrutiny through the lens of procurement.

[Lloyd Russell-Moyle]

The Minister is quite right to mention that those two systems are different. Norway operates a dualist system for international treaty agreements in the same way that we do. It operates a prime ministerial system with a constitutional monarchy in the same way that we do. Their Parliament has the ability to scrutinise the heads of terms of international agreements, and its committees can agree the additional measures that are coming through, and can be consulted on them. So, yes, he is right in relation to the two big examples that I gave, but there are many other international examples, and I do not want to bore the Committee by going through more of them. Will he not at least acknowledge that we are on the worse end of the scale when it comes to the consultation of Parliaments, devolved areas and civil society, not on the better end?

[Sir James Duddridge]

No, I do not. I do not want to go through a comparative analysis of every country around the world, but we are not. There is a lot in legislation that we have to do; there is a lot that is not in legislation that we do on a repeated basis. For example, on issues of the scrutiny of the New Zealand and Australia trade deals, particularly in relation to procurement, prior to our talks, we published all of our objectives. We published the economic scoping document and a Government response to the call for input. During the negotiations, we published six public reports of what happened, so Parliament and the public could input and lobby. We published extensive information at the agreement stage and at the in-principle stage. We also engaged in Parliamentary activity. All together, there were over 12 sessions with either the International Trade Committee or the Lords International Agreements Committee.

[Lloyd Russell-Moyle]

Will the hon. Gentleman give way?

[Sir James Duddridge]

I will just finish the point and then I will certainly give way to the hon. Gentleman. I was rather hoping that he was going to be at a Select Committee, but it is a pleasure to see him here—[Interruption.] I will finish my point and then I will give way. I apologise, Mr Twigg, for being slightly disorderly. We made nine ministerial statements and there were eight formal MP briefings; Ministers also made themselves available more informally to Members on both sides of the House.

[Lloyd Russell-Moyle]

I could not resist this Public Bill Committee and so I am missing the opportunity to grill the Secretary of State for International Trade. Hopefully I would not just be grilling her, but having fruitful discussions, such as those that we will now have. I look forward to doing that on future occasions.

The Minister listed a number of documents that the Government have published, but he has confused publishing information with having detailed, constructive and structured dialogues—with sitting down and engaging with people.

I have already publicly put blame on the previous Secretary of State, the right hon. Member for Berwick-upon-Tweed (Anne-Marie Trevelyan), and I will not repeat myself. However, for one reason or another, more than five times, she was unable to meet the International Trade Committee, and she was unable to meet it before it published its report on the Australia and New Zealand free trade agreements. That led to an urgent question in the Chamber and a Westminster Hall debate. Will the Minister not at least accept that there is more that the Department could do to engage co-operatively with the International Trade Committee and others, to stop the contention that we have had?

[Sir James Duddridge]

During long interventions, sometimes Ministers jokingly ask to intervene, but I had been sitting down for so long that I genuinely thought I was listening to a speech.

Relations with the International Trade Committee have not been as good as the Government, the Committee or the House want. That is going to change. We will make ourselves fully available. I know the Secretary of State has already started having those meetings with the Committee. Her diary obviously shifts quite quickly, so I cannot say where she will be, when. I know there is a whole series of activities planned. I am looking at the Public Gallery; there are civil servants looking into how we can link better with members of the Committee. I will play my part as Minister of State at the Department, and will always make myself available to the Committee, if at all possible. It will be my top priority, over and above speaking to the House or taking part in other Committee processes.

The hon. Gentleman said, “You just publish reports. That’s not enough.” If that is all we did, it would not be enough, but it is not all we have done. There are inter-ministerial groups on these issues, which are attended by Ministers from the devolved Administrations, particularly those with responsibility for trade. The forum that we are discussing was established to consider all trade policy, and its effective implementation, and will be able to review and evaluate that policy’s impact.

The hon. Member for Harrow West seems incapable of using the word “effect” or “impact” without prefacing it with the word “chilling”, as if these were haunting issues. We want to evaluate policies, to look at the impact assessment, and to improve all the time. As has been said, the agreements are evolving. They get built on and improved. The forum has met eight times since its inception in 2020. It provides for open discussion about negotiation, and allows Ministers from devolved Administrations to contribute their views directly, both formally and, in the sidings, informally.

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[Sir James Duddridge]

The unions are involved in the trade advisory groups. There is, I think, one issue with an offer that has been made to one union to join, but it is holding out because it wants another union also to be involved and is therefore not participating.

On returning to the Department after the previous sitting, one of my officials expressed surprise at the evidence given because it contradicted something she had been at—she had been present at one of those meetings. While I am happy to look again and the current Secretary of State has made it clear that she wants all consultees to be included in the process, we are the decision makers in our process, and I would not want to contract out UK Government decision making to any organisation.

I am not going to answer the question on the United States. I am responsible for many things, but not the system in the US.

[Lloyd Russell-Moyle]

The Minister has said that the trade unions are members of trade advisory groups, but I have looked up the membership of those groups, searching for the word “union”, and there are only four union members, and they are all farmers union representatives. I understand that farmers unions are important, but they are different from trade unions and the TUC, so either the list on the website is not up to date or there is some confusion here. It would be useful if we got some clarity.

[Sir James Duddridge]

Absolutely. On unions—I mean unions in the broadest sense; I am not trying to pull a fast one by referring to four regional national farmers unions—my understanding is that six unions, as the hon. Gentleman would understand the term “union”, as opposed to the Conservative and Unionist party, for argument’s sake, are genuinely involved in the trade advisory groups. That is what we would want.

That is on the record. If I am wrong and if I have misread my brief, I will correct the record later and write to the hon. Gentleman with the details of the unions, and perhaps with more information around the issue of the union being invited to something and there being some type of deal, if it is in the public interest to put that out. I want to encourage the unions to come and be part of the process, and I want us to make decisions.

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[Sir James Duddridge]

Thank, you Mr Twigg.

The Government are committed to transparency. We have put forward a suite of enhanced transparency and scrutiny arrangements that go well beyond our statutory obligations.

[Lloyd Russell-Moyle]

Will the Minister give way on that point?

[Sir James Duddridge]

So early? Yes, I am more than happy to.

[Lloyd Russell-Moyle]

I am pleased to hear about the Government’s commitment to transparency, but at 3 o’clock, the Secretary of State cancelled her meeting with the Chair of the International Trade Committee. He turned up to the Department, where an official said, “The Secretary of State is going to be in the House for votes so cannot meet you now. We will have to postpone to another week.” Is that the reset that we were promised and the kind of openness and transparency that we should expect?

[Sir James Duddridge]

I have made the point that we want to establish a good relationship with the International Trade Committee, and the Secretary of State giving evidence to it is clearly part of that. The hon. Gentleman will know that Ministers sometimes need to deal with matters urgently. I do not know what other matters are going on, but I am sure that the Secretary of State has apologised profusely and looks forward—as I do—to attending that Committee. I am more than happy to update the hon. Gentleman in a bit more detail, informally—perhaps even later today if I have time to go back to the Department.