Procurement Bill [HL]

Lord Alton of Liverpool Excerpts

Committee stage
Monday 18th July 2022 Grand Committee

[Lord Berkeley (Lab)]

My Lords, I shall speak to Amendment 449A tabled in my name and that of the noble Lord, Lord Clement-Jones. I support the two amendments to which my noble friend Lord Hunt of Kings Heath has just spoken. Amendment 449A covers much the same ground as his Amendment 449, but it probably goes a bit further in arguing for the need for transparency. It relates to public service contractors and where information about them should be available under FoI.

The Bill’s disclosure provisions are very limited in comparison with what would be available under FoI. Authorities responsible for contracts worth over £200 million would be required to set and publish key performance indicators, but they do not give the same information, there is a delay of probably up to one year in them and they do not help members of the public and others who might be interested in getting the information.

The amendment sets out that the FoI Act should be extended to cover information held by public sector contractors about these contracts. At present, it allows access to such information only if it is held on behalf of the commissioning authority, which normally applies only where the contract specifically entitles the authority to obtain particular information from the contractor. Where it does not, the information held by the contractor is outside the scope of FoI provisions.

There are many examples of this. Some of those cited by my noble friend probably also apply here but I shall mention one or two others. The first is a report on potential fire safety defects at Hereford County Hospital, constructed and managed under a PFI scheme by Mercia Healthcare Ltd under an agreement with the NHS trust. The report was commissioned by Mercia Healthcare from the now-defunct contractor Carillion, which was still operating at the time. The request to the trust for information about this was refused on the grounds that the report was not held by or on behalf of the trust. There are many such examples. I could explain at length some of the contracts that HS2 has got into; I shall not, but the same comments apply. There is a complete lack of transparency about information on that.

The extension to cover information held by contractors about contracts with public authorities has been supported by the Information Commissioner, the Public Accounts Committee, the Public Administration and Constitutional Affairs Committee, the Justice Committee, the Committee on Standards in Public Life, the Independent Commission on Freedom of Information, set up by the Government to review the FoI Act in 2015, and the Institute for Government. There are many other examples from around the world where transparency is thought necessary and desirable. I believe the UK FoI provisions should be extended to allow access to such information via a request to the public authority responsible for the contract.

While I am on my feet and while we are talking about transparency, I should like to ask the Minister about a Written Statement giving guidance to Ministers participating in government commercial activity. It comes from the Minister for Brexit Opportunities and Government Efficiency and says that the Bill we are discussing

“creates a simpler and more flexible commercial system that better meets our country’s needs while remaining compliant with our international obligations. Ministers have the opportunity to participate fully in this system with certain safeguards to protect them from the risk of legal challenge.”—[Official Report, Commons, 15/7/22; col. 17WS.]

I could add that it does not protect the taxpayer and does not seem to protect anybody from the Minister making lots of money out of NHS contracts, as we have heard. It is odd that this Statement has come out in the middle of our deliberations on this Bill. Could the Minister explain when we can see the guidance—I have asked the Library and it does not have it yet—and how it fits in with the Bill we are discussing?

[Lord Alton of Liverpool (CB)]

My Lords, I support Amendment 449 in the name of the noble Lord, Lord Hunt of Kings Heath, and Amendment 449A from the noble Lords, Lord Berkeley and Lord Clement-Jones, which deal with transparency. The Minister will not be surprised that I will use this opportunity to raise the blocking of information about the purchase of Hikvision cameras, which are used all over the United Kingdom; he was good enough to meet me twice to discuss this and I am very grateful to him for the time he gave. The noble Lord, Lord Clement-Jones, raised this in a Motion to Regret debate in February. I raised it at Second Reading, quoting the Biometrics and Surveillance Camera Commissioner, Professor Fraser Sampson, who said he was

“encouraged to see reports … that the Secretary of State for Health and Social Care has now prohibited any further procurement of Hikvision surveillance technology by his department”.

I asked the Minister at the time whether he would be willing to share his own department’s response to that letter to the Cabinet Secretary from Professor Sampson, and to explain why, if it was the right thing to do in the case of the Department of Health—and I believe it was the right thing to do—to give information to Members of Parliament in parliamentary Questions, which it was, because the Minister answered Questions from me specifically on this on 25 and 26 May, it was not possible on security grounds to give the same answers it was possible to give in connection with the Department of Health.

Even more relevant, in conjunction with these amendments, is the fact that only last week the information requested in a freedom of information request about Hikvision in connection with HS2—which I will come back to—was denied. That raises quite a lot of serious problems, I think, in the minds of any member of the public, let alone parliamentarians anxious to discover the truth about why particular things are being ordered, how much they cost, whether they pose security risks and what the dangers are to the United Kingdom.

I think we have a serious problem in our procurement supply chain when it comes to the problem of Chinese technology companies—blacklisted, I might add, by a Five Eyes ally, the United States, as a threat to national security and yet allowed in the United Kingdom —who are known for their complicity in human rights violations taking place in Xinjiang against Uighurs, and I declare a non-pecuniary interest as vice-chair of the All-Party Parliamentary Group on Uighurs. When I met the noble Lord to discuss the legislation before us, he noted that there are over 1 million Hikvision and Dahua Technology cameras in the United Kingdom —I repeat, over 1 million. The noble Lord outlined that the Government do indeed have concerns regarding the security of these cameras and their links to the concentration camps in Xinjiang.

Now as many will be aware, a number of civil society organisations, including Free Tibet and Big Brother Watch—through freedom of information requests —have found that a number of government departments, local authorities, NHS trusts, schools, police forces, job centres and prisons use cameras manufactured by Dahua Technology and by Hikvision. What is not clear is the extent of the issue across the public procurement supply chain, and that is why these amendments are so important.

I have asked the Cabinet Office how many departments have cameras manufactured by Dahua Technology and Hikvision and, as I have explained, Ministers—with the exception of the Department of Health—have refused to reply. I welcome the decision made by the former Secretary of State at the Department of Health to commit to removing Hikvision cameras from his department, but when will we have a timetable for other departments to follow suit? How can we justify doing one thing on national security grounds in one department and not elsewhere?

I have asked Ministers how many of these cameras are at UK ports, airports and train stations and, again, I have been rebuffed on the grounds that the Government will not speculate on the security provisions on our transport network. When you apply through freedom of information requests for that information, it is declined. So, sadly, the debate around the use of Hikvision and Dahua in our public procurement supply chain is shrouded in secrecy. I hope Ministers unwilling to be transparent about the issues that we have faced hitherto will see that they are wrong to have been so and will remedy that.

Nowhere is this issue more evident than when I was recently approached by a concerned party who had reported to me that Hikvision may have received a contract from HS2 to install its cameras along the entire length of this new high-speed rail network. Following this information, I submitted a freedom of information request to HS2 asking for information on whether Hikvision has any contracts with HS2, and I was informed that HS2 does not centrally hold information regarding contracts with its suppliers. This is clearly an unacceptable state of affairs. Phase 1 of HS2 is to cost taxpayers—and the noble Lord, Lord Berkeley, I am sure will correct me if I am underestimating this—some £44.6 billion, and that includes substantial procurement contracts. It is well within the public interest to ensure that taxpayers’ money is not going to Chinese technology companies that have been accused of complicity in gross human rights violations and the use of forced labour—slave labour.

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[Lord True (Con)]

My Lords, I apologise for not rising sooner; I never know how many spokesmen are going to rise from the various Benches. This has been another interesting and informative debate. It has also been extremely wide-ranging, as has become our custom in this Committee. I will try to answer as many points as possible, but there are things coming from various areas that we will look at carefully. This is your Lordships’ Committee and therefore it is perfectly reasonable for points to be made. My aspiration is to answer, but I may not be able to answer them all.

Before I get on to the main amendments, I will address various things I was asked about. The noble Baroness, Lady Boycott, asked about the Palantir contract. I am advised that this is a DHSC NHS contract. I am not informed in my department of the details she asked for, but I will ask my officials to follow up and respond to her later.

The noble Lord, Lord Berkeley, asked about a Written Ministerial Statement made last week. The timing of the publication of the participation in government commercial activity guidelines for Ministers referred to in that Statement is not connected to this Bill. The guidance sets out how Ministers can be appropriately involved in commercial activity, including procurements, under the current procurement rules.

I was anticipating in a later group—indeed, there are some relevant amendments—a debate about Hikvision. I am grateful for what the noble Lord, Lord Alton, said, as well as for the opportunity to speak to him about this matter, which, as he said, has some security considerations. So far as the actuality of what might or could happen is concerned—that is a potential rather than a loaded spin on it—it is ultimately up to contracting authorities to apply the grounds for exclusion under this Bill on a contract-by-contract basis. The national security ground is discretionary, meaning that authorities can take into account a range of factors, including the nature of the contract being tendered. However, the debarment regime will allow for the central consideration of suppliers on the grounds of national security. As the noble Lord knows, the Government’s security group is working with the National Technical Authority and the Government Commercial Function on the government security aspects of this issue.

I appreciate the noble Lord’s impatience, given the sensitivities of the issue. Policy options are being worked out for how to mitigate the security risks posed by this type of equipment; they range from primary legislation to ban certain companies from the government supply chain to issuing more advice and guidance for contracting authorities. The Cabinet Office has also published guidance setting out the steps that all government departments must take to identify and mitigate modern slavery and labour abuse risks throughout the commercial lifecycle, focusing on the areas of highest risk. We may well return to this issue in debate on a later group, but I can assure the noble Lord that the matters he raised are ones that the Government are not minimising but currently considering.

[Lord Alton of Liverpool (CB)]

I am grateful to the Minister. Without pre-empting our debate later in the Committee’s proceedings, is he in a position now to respond to the letter to the Cabinet Secretary from Professor Sampson, which I referred to in my remarks earlier? If not, could that correspondence be made available to your Lordships between now and Report?

Also, has the Minister had a chance to look at the Foreign Affairs Select Committee’s report, which called for a total prohibition of Hikvision, and the decision not just of the United States Administration but of the European Parliament to ban Hikvision from their public procurement policies? Given the national security implications, as he said—earlier, I referred specifically to the suggestion that HS2 might procure and use Hikvision cameras on the whole of its new network—does the noble Lord not agree that this is something on which we should shine more light rather more urgently?

[Lord True (Con)]

Perish the thought that I might comment on the shelf life of HS2, but I do take what the noble Lord says very seriously. The fact is that some of the factors he mentions are taken into consideration. This issue is live. I accept his chiding. I will look carefully at his words and at what he has asked to be published or not published, but I hope that we may get a resolution of this matter, because I understand the demand, the request and the desire for a clear and public solution to the points put forward by the noble Lord. We will see what we can do, if not before the next group then certainly before we come back to this issue on Report.

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Amendment 448, proposed by the noble Lords, Lord Wallace and Lord Fox, was the amendment on which Hikvision was mentioned. I am advised that in relation to the specific letter to the Cabinet Secretary, we cannot publish it at this stage but, repeating what I have said, we cannot comment on security arrangements on the government estate. As I said, these are matters under consideration.

[Lord Alton of Liverpool (CB)]

My Lords, before the noble Lord continues, I hope he will go back to the original statement to reflect further on whether this information could be published. This was an open letter from Professor Sampson that was published—it appeared in the national newspapers that the letter had been sent to the Cabinet Secretary—and I would have thought that most of the issues raised in that letter are things to which Members of your Lordships’ House should certainly be privy.

[Lord True (Con)]

My Lords, I have given further information. The noble Lord referred to a whole range of factors which he asked to be considered and asked me to respond to the Foreign Affairs Select Committee report and so on. I said I would reflect on all he has said and come back, but I gather there has been some reflection on this aspect of his menu. We will no doubt maintain this dialogue.

The amendments we were talking about—Amendments 448, 449 and 449A—all relate to freedom of information and seek to bring external suppliers into the scope of the Act. In practice, the Government do not believe that the amendment would add much and could impose burdens on businesses that would make public contracts unattractive. The public authority will already hold all the details of the tendering process and the resulting contracts, and that information can already be requested under the FoI Act. The desire has been expressed in some quarters to reform the FoI Act, but we are looking at the proposals before us.

Furthermore, information held by a supplier or subcontractor on behalf of a contracting authority is already within scope of the Act. The amendments also introduce unhelpful limitations on the ability of contracting authorities to withhold commercially confidential information. This is a point of debate, but the FoI Act sets out the duties on public bodies when they receive requests for information under the Act. Restating the operation of that legislation is not necessary in this Bill. The Bill sets out in detail what information is required to be published and the triggers for publication, as well as requiring contracting authorities to explain why they are withholding any data.

Amendment 449A also seeks to extend the enforcement powers of the Information Commissioner to suppliers and subcontractors and open them up to criminal prosecution. The Information Commissioner already has enforcement powers in relation to public authorities and therefore in relation to the information held by others on their behalf. We believe that transparency is a sanction for authorities that fail to fulfil their obligations to publish as the failure will be obvious to the public. Failure to publish information required by the Act could be subject to judicial review, and there is also potential for a civil claim for breach of statutory duty pursuant to Clause 89 if the supplier can demonstrate that it suffered loss or damage arising from a breach of a publication obligation. Additionally, an appropriate authority has a power under Clauses 96 to 98 to investigate a contracting authority’s compliance with the Act, make recommendations and, if appropriate, provide statutory guidance to share lessons learned as a result of the investigation. Recommendations issued under Clause 97 come with a duty on the contracting authority to have regard to those recommendations when considering how to comply with the Act, and failure to do so would also leave the contracting authority open to judicial review.

Where a contracting authority is required to publish something that includes sensitive commercial information, it may withhold or redact that information only if there is an “overriding public interest” in doing so. Where the commercial confidentiality exemption is used to withhold or redact information, this must be publicly recorded. As such, there will be full transparency about what has been withheld and why, and interested parties can always challenge such decisions by requesting the withheld information under FoI law. This process is subject to the oversight of the Information Commissioner. Interested parties can also complain to the procurement review unit, which we discussed the other day.

Amendments 450 and 451 are from the noble Lords, Lord Wallace and Lord Fox. They are absent, and I send them best wishes for their respective aliments. Expertus dico: I have just had an aliment as noble Lords saw in the last Session, and I very much feel for all noble Lords. These amendments would make it harder for contracting authorities to withhold information in instances where there is sensitive commercial content. The overall result could be the inappropriate disclosure of sensitive information or fear of such disclosure, both of which are likely to have a chilling effect on suppliers bidding if they cannot be confident that their commercial secrets will be respected by contracting authorities. This could lead to a reduction in choice, quality and value.

Amendment 452, tabled by the noble Baronesses, Lady Worthington and Lady Boycott, and Amendment 455, tabled by the noble Baroness, Lady Hayman of Ullock—which I think is intended to address the central digital platform, not the data on the supplier registration system—propose to introduce various requirements about the accessibility of published information and how it is licensed. The Government have already committed to a publicly available digital platform which will allow citizens to understand authorities’ procurement decisions. This data will be freely available. It will remain subject to data protection law and redaction under the exemptions set out in Clause 85.

However, not all information should be published on the central digital platform. For example, some associated tender documents produced under Clause 20 in certain procurement exercises may need to be circulated to only a limited group of suppliers, for instance, where that information is sensitive. As set out in the Green Paper, we will apply the open contracting data standard, and specify this in more detail in secondary legislation. Published data will be covered by open government licence where possible; personal data contained on the platform will be available without any licence.

Amendments 452A and 452B, tabled by the noble Lord, Lord Clement-Jones, would amend Clause 86 to ensure that regulations require publication on a single digital platform. These amendments are unnecessary as the Government have already committed to providing this platform.

The noble Lord, Lord Clement-Jones, has tabled Amendment 456, which imposes obligations on an appropriate authority in relation to standards and quality of data on the platform. Clause 86(1)(a) already makes specific provision for regulations to set out both the form and the content of information to be published under the various notices required by the Bill. This power is there to ensure that regulations can establish the very standards and formats that I believe the noble Lord is seeking.

On the noble Lord’s proposed new paragraph (b), a notice is usually a snapshot of a moment in time. Most notices should not be updated after the initial publication and it is the legal responsibility of the contracting authority publishing the information to ensure that it is timely, accurate and complete. The appropriate authority—a Minister of the Crown, a Welsh Minister or a Northern Ireland department—will not be in a position to verify all that information, which is why it is the responsibility of the contracting authority.

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The fundamental point is that we all want defence equipment programmes to be successful. We all want our country defended properly. I know that that is what the Government want—this is not a deliberate attempt not to do so—but why is it that continued reviews and resets still reach a position where this is happening? The fundamental point goes back to where I started: why will this Procurement Bill, which includes Clause 6, headed “Defence and security contracts”, and Clause 105, headed “Single source defence contracts” and goes to Schedule 10—it reforms various aspects of this procurement programme—work this time? Why will it be different this time? Why will this Procurement Bill mean that, in five, 10 or 15 years’ time, instead of a report that goes on about improving the performance of major defence equipment contracts, we have a report that asks how the MoD did it and reformed its contracts to ensure not only that there was value for money but that we got the equipment we needed to defend our country?

[Lord Alton of Liverpool (CB)]

My Lords, the noble Lord, Lord Coaker, has made a telling and persuasive case. I hope it will convince the Committee to support the tenor of Amendment 485 in particular; I added my name to it on Friday last. I strongly agree with what the noble Lords, Lord Coaker and Lord Hunt of Kings Heath, and the noble Baroness, Lady Smith of Newnham, are arguing for in that amendment, specifically on the role of the National Audit Office; it is long overdue.

I want to develop the points made by the noble Lord, Lord Coaker, a little further for the Committee. Here are some headline points: £4.8 billion has been wasted on cancelled contracts since 2010. Some £5.6 billion has been overspent on MoD projects since 2010, and £71 million spent on unplanned life extensions. Some £2.6 billion has been wasted on write-offs: there are 20 cases of wastage by write-off in the report that was referred to, contributing to some £2.6 billion—or 20% of total wastage—since 2010. Some £64 million has been wasted on admin errors, including £32.6 million in HM Treasury fines almost uniquely imposed on the Ministry of Defence for poor accountancy practices.

The noble Lord, Lord Coaker, referred to the ongoing International Relations and Defence Select Committee inquiry into future defence policies, not least on procurement; indeed, I mentioned at Second Reading on this Bill. Last week, we heard from Professor John Louth, who was the director of RUSI’s defence, industries and society research programme from 2011 to 2019. Today, he is a private sector consultant. He shared several important insights into the peculiarities and particularities of defence procurement, not least the need to work with significant uncertainty, because of the speed with which technology moves, and how to strike a reasonable balance between insisting on value for money and having appropriate flexibility. The committee also explored associated issues, such as whether there is an optimal balance between indigenous development and off-the-shelf purchases in defence procurement; what considerations would have to be made; how the Government would intervene to prioritise them; how much of our defence capability needs to be supplied by the state itself, and what can and should be sourced from private suppliers; and who the legitimate partners are in the UK’s defence enterprise—manifestly not companies owned or controlled by countries such as Russia or China.

It was clear that there were other factors which distort procurement in the case of defence contracts. I think the noble Baroness, Lady Goldie, enjoys the sympathy and understanding of this Committee that it is not an easy world in which to operate. Professor Louth suggested to our Select Committee last week that there had been some successes, mainly around innovation. However, when asked about this Bill, specifically the measures before us now, he said:

“I tried to read as much into the Bill as possible. But it proved hard to identify the end state which the Government was looking for”—


the very point the noble Lord, Lord Coaker, just made. Professor Louth continued:

“Seeing the approach as an attempt to streamline is sensible but we need an Act that identifies the sharing of risk. There are lines and lines of rhetoric; lines and lines of legal reform—some of it incomprehensible even for those of us who are academics.”


He saw the Bill and its provisions as a missed opportunity, saying that

“quite often the private sector does things best and mixing it directly with what the state does would help enormously.”

He pointed to a high degree of private wealth that is funding our defence research and emerging capabilities but said we would get more value for money if a combined commitment was identifiable.

The noble Lord, Lord Coaker, referred to Ajax. During last week’s Select Committee proceedings, I asked Professor Louth about this, to which he replied,

“Ajax has been a disaster.”


As we heard from the noble Lord, in June the House of Commons Public Accounts Committee warned about the delays to Ajax, a programme which has already been running for 12 years, a point picked up in this admirable amendment about projects that overrun and the costs to the public purse. It said, and I am sure we all agree, that this risks national security and compromises the position of our defences.

Ajax was intended to produce a state-of-the-art reconnaissance vehicle for the Army. It has cost a staggering £3.2 billion to date and yet it has failed so far to deliver a single deployable vehicle—not one. The vehicles were supposed to enter service in 2017, but Ajax has been subject to what the Commons committee describes as “a litany of failures.” The failures included noise and vibration problems that injured soldiers who were testing the vehicles. As the MoD has been unable to say, even now, when Ajax will enter service, perhaps the noble Baroness can tell us whether she has any further information on that, whether the safety issues have been resolved and if it is likely that they will ever be resolved.

Last week, I reminded our Select Committee that the Public Accounts Committee says the programme has been “flawed from the outset”, but also said it was illustrative of a deeper failing, commenting that the MoD had

“once again made fundamental mistakes”

in the planning and management of a major defence programme. Pulling no punches, it accused the Ministry of Defence of “failing to deliver” vehicles which the Armed Forces need to

“better protect the nation and meet … NATO commitments.”

In the current situation, with one eye eastwards on Ukraine, this is a very serious statement by a senior committee of this Parliament.

Meg Hillier, who chairs the Public Accounts Committee, spelled it out in these terms:

“Enough is enough—the MoD must fix or fail this programme, before more risk to our national security and more billions of taxpayers’ money wasted. These repeated failures … are putting strain on older capabilities which are overdue for replacement and are directly threatening the safety of our service people and their ability to protect the nation and meet NATO commitments.”


Some 324 hulls for Ajax-family vehicles have been built, along with 74 turrets, and 26 vehicles have been handed over to the Army for training purposes. The PAC report points to “operational compromises” which the Army has been forced to make, which include the prolonging of the use of ageing Warrior armoured vehicles which came into service back in 1987 and are expensive to maintain.

In total, the contract with General Dynamics is worth £5.5 billion, and the PAC says that it doubts whether the programme can be delivered within existing arrangements. We have a duty to make a forensic examination of what Professor Louth told us in the International Relations and Defence Committee last week has been a “disaster” and what lessons might be applied via this Bill, especially lessons about poor project management and inadequate contract performance, soaring costs and lengthy delays even before contacts were signed.

As we heard from the noble Lord, Lord Coaker, the same issues have been raised again and again in various attempts to reform procurement. This has all been at great cost to the public purse and, as I have argued, at a risk to our national security. This Bill should be much clearer about how it intends to put flesh on the bones of a strategic relationship with industry, focusing on delivery within the budget and on time. What a pity it is that this Bill is not in draft before both Houses, being examined by parliamentarians during pre-legislative scrutiny, rather than being placed in the context of the many other diverse issues that we have been considering.

In conclusion, Ajax was a heroic figure from Homer’s Iliad. Apart from Agamemnon, he was the only principal character who received no substantial assistance from any of the gods—perhaps they will come to the aid of the Minister today. She can at least be heartened that Poseidon struck Ajax with his staff, renewed his strength and joined in Ajax’s prayer to Zeus to remove the fog of battle to see more clearly the light of day. I have no doubt that the amendments in the names of the noble Lords, Lord Coaker and Lord Hunt, and the noble Baroness, Lady Smith of Newnham, will do precisely that. I hope we will lift the fog and support these amendments.

[Baroness Smith of Newnham (LD)]

My Lords, I support Amendment 485. I will also speak to Amendment 101, which was not signed by noble Lords on the Liberal Democrat Benches, although there is clearly some interest in the issue of whether we use British suppliers for defence. There were some reservations from the trade team, the international team and the business team about whether we should be focusing solely on looking at British suppliers for defence contracts.

One particular question I would like the Minister to consider, which may be something on which the Labour Front Bench also has view, links to the point made by the noble Lord, Lord Alton, about whether it is more appropriate to have bespoke defence contracts or whether sometimes it is better to have off-the-shelf procurement. In that context, I would very much like to hear the Minister’s response to Amendment 101.

The reason for not signing this amendment was not that we do not support British industry; clearly there are a huge number of opportunities in particular where we might be looking for small and medium-sized enterprises to be very closely involved in the delivery of defence contracts. Most of the high-level contracts we have talking about—the catastrophe of Ajax, the major extensions, the cost and time overruns and the failures of defence procurement—are about the high-level programmes, but there will be many subcontracts within them. Trying to support our small and medium-sized enterprises is clearly desirable. If there is a way of doing that, alongside ensuring best value for money, there could be some interest in this amendment. However, it needs a lot more exploration and perhaps, as the noble Lord, Lord Alton, said, it would have been better having pre-legislative scrutiny to explore how we look at procurement.

The noble Lord, Lord Coaker, stole many of my lines, including many of the notes I made during, and the points I raised at, Second Reading, to which the Minister did not have the opportunity to reply, because her colleague, the noble Lord, Lord True, was responding instead. In line with the noble Lord, Lord Coaker, I am very much looking forward to hearing a series of answers from the Minister which will enable us to understand in what way this Bill is intended to help defence procurement. In many ways, the idea of having a single Bill that deals with all types of procurement is superficially very attractive, yet, as the Grand Committee has already heard, it is not clear in any way, shape or form how this Bill is going to improve defence procurement.

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[The Minister of State, Ministry of Defence (Baroness Goldie) (Con)]

I am endeavouring, my Lords, not to tip my water down the back of my noble friend’s neck, although he might welcome that refreshment.

First, I thank all noble Lords for their contributions. I am in no doubt about the genuine interest which your Lordships have in defence. The noble Lord, Lord Coaker, articulately expressed that, and I respect that. I thank him for the way in which he expressed his sentiments. I know that he speaks for the other contributors to the debate.

I shall try to address the principal points which have come up, so I want in the first instance to address Amendments 101 and 485 and then proceed to speak to the government amendments in the group, Amendments 520 to 526 inclusive. As I have said, I shall endeavour to address the issues which have been raised.

I turn to Amendments 101 and 485, tabled by the noble Lords, Lord Coaker and Lord Hunt of Kings Heath, and, in relation to Amendment 485, also by the noble Baroness, Lady Smith of Newnham. They relate specifically to defence and security contracts and Ministry of Defence procurement.

Amendment 101 would require a contracting authority to disregard any tender from a supplier which is not a supplier from the United Kingdom or a treaty state or which intends to subcontract the performance of all or part of a contract to such a supplier unless there is no other tender that satisfies all the award criteria. I understand the sentiment behind the amendment from the noble Lord, Lord Coaker, which is laudable, but I will explain why I think this amendment is neither necessary nor indeed desirable.

The Bill already provides a discretion for the contracting authority to exclude from procurements suppliers that are not treaty state suppliers and extends this to the subcontracting of all or part of the performance of the contract to such suppliers. This includes defence and security procurements. It is important to note that, for the majority of defence and security procurement, market access is guaranteed only to suppliers from the United Kingdom, Crown dependencies and British Overseas Territories. For those procurements, a supplier established in another country would not be a “treaty state supplier”.

However, due to the nature of defence procurement and the defence market, a discretion to go outside of UK suppliers or treaty state suppliers is required where doing so would best meet the requirement that the contract is to serve—there may be an immediacy about that—and would offer best value for money. Further, to exclude non-treaty state subcontractors would probably make some defence and security procurement much less effective and, in some cases inoperable, as it would exclude, for example, suppliers from the United States, Australia, France, Sweden or Canada from the supply chain.

I assure noble Lords that industrial consequences and commercial strategies will be given case-by-case consideration—that is already how we conduct business—taking into account various factors, including the markets concerned, the technology we are seeking, our national security requirements and the opportunities to work with international partners, before we decide the correct approach to through-life acquisition of any given capability. Where, for national security reasons, we need industrial capability to be provided onshore or where we need to exclude a particular supplier on national security grounds, we will not hesitate to make that a requirement.

The noble Lord, Lord Coaker, raised the specific matter of fleet solid support ships. He will be aware that in the refreshed National Shipbuilding Strategy there is specific reference to the fleet solid support ships. The procurement is in train; the first ship is scheduled to enter into service in 2028 and the last in 2032. I hope that reassures the noble Lord that the matter is under active consideration.

I turn now to Amendment 485. In a sense, this amendment was preceded by a general observation made by the noble Lord, Lord Coaker, and echoed by the noble Lord, Lord Alton, and the noble Baroness, Lady Smith. In essence it was: what difference does this make? That is a fair question and one that deserves an answer. I would say that the Bill provides greater flexibility to the MoD and includes the use of a single system to encourage participation by small and medium-sized enterprises. That is an area not just of significance to the economy but of particular significance to such smaller entrepreneurial organisations. They have sometimes felt out in the cold when major contracts were being awarded by the MoD, principally because, traditionally, the structure was to have a very large primary contractor, with the primary contractor subcontracting various aspects. This is designed to encourage greater participation by small and medium-sized enterprises, which I think is to be applauded.

MoD derogations, and the Bill itself, provide more flexibility to deliver the defence industrial strategy—I will not rehearse that; your Lordships are familiar with it, but I think it is a very positive strategy and one which I think received support from across the Chamber. That strategy replaces the previous defence procurement policy of defaulting to international competition. I know that was of concern to many of your Lordships and, as I say, the strategy has altered that, and I think that is important reassurance on where we are in defence and the greater flexibility we now have. That is why I said earlier that industrial consequences and commercial strategies will be given much more case-by-case consideration, taking into account the various factors which I previously mentioned.

Amendment 485 would require the Ministry of Defence to commission a report from the National Audit Office setting out instances of procurement overspend, withdrawal or scrapping of assets, termination of pre-paid services, cancellation or extensions of contracts, or administrative errors with negative financial impacts. I would suggest the amendment is unnecessary, as what it seeks to achieve is already being delivered through existing processes or initiatives; let me explain what these are.

The National Audit Office already conducts regular audits across defence, which we know to our discomfort because the National Audit Office is an independent entity in that it does not spare its comments when it comes to the MoD, and that is right—that is exactly what it is there to do. In these audits, it regularly includes recommendations for improvement to which we pay very close attention. These include value-for-money studies, such as the yearly audit on the defence equipment plan, regular audits on defence programmes such as Ajax—which the noble Lord, Lord Alton, mentioned—and carrier strike, as well as financial audits. As I say, MoD pays close attention to what the NAO says.

The Infrastructure and Projects Authority also publishes an annual report. That tracks progress of projects currently in the Government Major Projects Portfolio and it provides an analysis of how they are performing. The MoD has successfully introduced several initiatives following on from such recommendations to improve capability and deliver and obtain better value for money, including the defence and security industrial strategy, the defence and security 2025 strategy and the introduction of the Single Source Contracts Regulations 2014.

[Lord Alton of Liverpool (CB)]

My Lords, I am sorry to interrupt the noble Baroness. On the question of the National Audit Office, I was wondering whether the Minister could tell us whether there had been any formal discussions between her department and the NAO about whether something more formalised—as anticipated in the amendment before your Lordships—would be beneficial. If not, might she consider having such a discussion before we return to this issue on Report?

[Baroness Goldie (Con)]

What I think is important is that we accord the National Audit Office the absolutely critical character of independence, which is necessary for it to do the job it does. I think that part of that independence is that it is quite separate from government departments, and, with the greatest respect, I think that is what the MoD should not be doing. The National Audit Office should be saying, “If we think you’ve got dirt lying under the carpet, we’re going to rip the carpet up and have a look at the dirt”, and I think that is the freedom we expect the National Audit Office to have and that is the freedom it has got. As I say, everyone, I think, will understand that the Ministry of Defence knows well the feeling of being on the receiving end of a National Audit Office report which makes uncomfortable reading.

--- Later in debate ---

[Lord Alton of Liverpool (CB)]

My Lords, it is a great pleasure to follow my noble friend Lady Boycott and to associate myself with the remarks she has just made, and also with the noble Lord, Lord Hain, who made an important contribution to the proceedings of the Committee this afternoon. We will all be interested to hear how his meeting with the right honourable Jacob Rees-Mogg goes on Wednesday.

I shall speak to Amendments 331 and 353. Amendment 331 in the name of the noble Baroness, Lady Hayman, and the noble Lords, Lord Coaker, Lord Bethell and Lord Fox, deals with serious human rights abuses. When the Minister responds I hope he will bear in mind the very helpful conversations he and I had when he agreed to meet me to discuss modern-day slavery and genocide. I should mention that I am a trustee of the anti-modern-day-slavery charity the Arise Foundation and a patron of Coalition for Genocide Response.

It concerns me that the word “genocide” has been put in a list that simply states that

“‘serious human rights abuses’ includes, but is not limited to”,

and then sets out a list from (a) to (f). It is not that any of these things are minor questions. Winston Churchill said that the horrors committed during the Nazi regime constituted a crime that had no name. It took Raphael Lemkin, the Jewish Polish lawyer, to create the name “genocide” to describe what had been done. Indeed, the 1948 convention on the crime of genocide came from that. Your Lordships will recall that the amendments to earlier legislation I moved specifically on the procurement of technology via Huawei and later on the Health and Care Bill, which the noble Baroness, Lady Stroud, referred to, were careful to set aside the word “genocide” from other questions.

I have one specific and, I hope, helpful remark to make to the noble Baroness and others, which is that if this amendment is to be pursued later, perhaps these questions can be separated, because there are many people who would be willing to vote on genocide not only in your Lordships’ House but in another place but who would not be willing to support something that was simply a list of serious human rights violations. I think that some further thought should be given to that.

On Amendment 353 on supply chain resilience against economic coercion and slavery, I shall try to be brief because I set out some of the arguments about this in our earlier debate about Hikvision and the role that companies such as that have played throughout procurement processes. They are surely what the Bill is dealing with, yet they operate with impunity from their base inside the People’s Republic of China and have been directly associated with the enormities that have been committed in Xinjiang, where it is estimated that more than 1 million Uighurs are held in concentration camps. All of us have read appalling accounts of their treatment, and anything we can do at any stage, we should try to do. I know that the noble Lord, Lord True, is sympathetic to this argument.

Therefore, let me briefly set out some of the arguments that have perhaps been put to him by officials or others who would oppose the excellent amendment in the name of the noble Baroness, Lady Stroud, which is supported by the noble Baroness, Lady Smith of Newnham, the noble Lord, Lord Coaker, and me. First, will this not have a chilling effect on government procurement? Yes, there will be a chilling effect on government procurement of slave-made goods—and so there should be. Businesses that do not rely on slavery for sourcing have absolutely nothing to fear. The amendment sets the bar low but establishes certain minimum standards. It is noteworthy that the Uyghur Forced Labor Prevention Act goes much further than this proposal—I drew it to the attention of the noble Lord, Lord True, during our discussions—and there has been no “chilling effect” documented in the USA. I will add that that legislation enjoyed significant bipartisan and bicameral support in the United States.

Secondly, will this not discourage competition and therefore crush markets? No. On the contrary, the amendment will incentivise business to raise its human rights game and encourage competition among entities which meet basic human rights standards. We should be using our purchasing power, this phenomenal amount of money, more than £300 billion, to nudge the business world. This amendment helps us to achieve that. It removes disadvantage for lawful performers, and that is something we should all welcome.

Thirdly, is this not just another anti-China amendment? No. The amendment does not even mention China. Forced labour is a global issue, whether it is exploitation in Brazilian mines or Malaysian tech factories or indeed Uighur slave labour. It is morally imperative that taxpayers’ money does not fund slavery, wherever it is and wherever it is practised.

Fourthly, does this not turn civil servants into police for business supply chains? Civil servants already assess those bidding for government contracts against certain criteria, and that is exactly how it should be. All the amendment seeks to do is to make the criteria more robust. Civil servants generally do not have the resources to inspect supply chains. As the noble Lord, Lord Coaker, probably knows better than any other noble Lord in this Committee, assessing what is going on in a supply chain is an extraordinarily complex, time-consuming and resource-ridden process. The amendment recognises that, and seeks instead to provide civil servants with more tools to ensure better anti-slavery standards around disclosure and transparency of sourcing inputs.

I wonder whether the noble Lord has had it put to him that we are presuming the guilt of businesses by blacklisting entire countries or areas. No, the amendment does not presume that a business operating in a particular area is de facto guilty of perpetrating slavery, although this is the assumption of the United States legislation, which imposes a rebuttable presumption. I admit that that is something that I personally favour, but it is not what is in the amendment. In the United States, that targets goods produced in the Uighur region because it is assumed that they are tainted.

I was struck that the noble Baroness, Lady Stroud, referred to that word when discussing earlier legislation the House passed, the Health and Care Act, which includes the word “tainted”. I think the Minister will forgive me for saying that that legislation was strengthened by civil servants from his department, who gave advice to the Department of Health. It would be absurd to have legislation that applies purely to the National Health Service, despite the fact that we spent £10 billion on PPE, but does not apply to other departments. You cannot have legislation, especially a procurement Bill, which is weaker than legislation already on the statute book. The amendment merely requires that the origins of goods and their constituent parts are disclosed.

What difference will this really make? Do we need more regulation? The Health and Care Bill was amended precisely because there was acceptance—the Government knew—that the existing regulation was not strong enough. It is to the credit of Sajid Javid that he recognised that and did something about it. The Government are widely suspected of procuring goods and services that may be tainted with slavery. In 2020, the Daily Telegraph reported that, for one contract alone, £150 million of PPE originated in factories in the Uighur region with a documented slavery problem. If stronger standards are good enough for the Department of Health and Social Care, they are surely strong enough for the whole of government, and this Bill gives us the opportunity to do something about it.

Finally, it is often said, “Not this Bill, not this time. There is a modern slavery Bill coming; why can we not just wait for that?” The amendment before your Lordships addresses government procurement and this is the Procurement Bill. It is entirely appropriate that an amendment seeking to improve certain standards regarding government procurement should be debated during the passage of this Bill. Moreover, we do not know what is likely to be in the modern slavery Bill; we were told a lot about it during the course of the Nationality and Borders Bill, which pre-empted its provisions then, but we still do not know what will be in it—and, after all, we are in the midst of a change of Government.

Engagement with the Government and this Secretary of State has been good and, as I finish, I pay tribute again to the noble Lord, Lord True, for his patience in putting up with representations constantly being made to him on this subject. But there is no guarantee that will continue. While Ministers smile on these efforts, we are keen to make the progress we can now, while Ministers such as the noble Lord are in place.

[Baroness Noakes (Con)]

My Lords, I have two small amendments in this group, Amendments 330 and 332. I must say that this group contains far too many issues to be debated effectively. My own are minor, so I did not degroup them, but I hope that in future other noble Lords will exercise their right to degroup so that we have sensible groupings to enable a proper Committee debate. I will probably get into trouble with my Chief Whip for encouraging noble Lords in this direction, because I think there is a view that large groupings are more efficient. However, I do not believe that; I believe in effective scrutiny in your Lordships’ House.

Amendment 330 probes the relationship between the mandatory exclusion of suppliers for improper behaviour in Clause 30 and the discretionary exclusion found in paragraph 14 of Schedule 7. I do not understand why the Bill has to have improper behaviour as an exclusion ground dealt with in two places. The definition of “improper behaviour” is virtually identical in each case, and they certainly seem to be aimed at the same behaviour. The processes are very similar, with rights given to suppliers in both cases, and they are both aimed at exclusion decisions. There are wording differences between the two parts of the Bill, but I cannot see anything of substance involved. It just looks as if two parliamentary draftsmen have been involved in different bits of the Bill and they have not known what was going on in the other bit.

Schedule 7 requires only that the decision-maker—which is usually the contracting authority, as in Clause 30—“considers” that there is improper behaviour, while Clause 30 requires a determination. However, in this context, I cannot believe that that is a distinction with any real difference attached to it. The main difference of substance is that Clause 30 results in mandatory exclusion, while paragraph 14 of Schedule 7 does not necessarily lead to exclusion. I hope that my noble friend the Minister can explain the subtleties of why improper behaviour has been dealt with in this way. My own view is that it would be easier to understand if Clause 30 were placed in the Schedules 6 and 7 structure of the Bill, since it deals with exclusion, and could have options of mandatory or discretionary exclusion. I certainly look forward to hearing what my noble friend the Minister has to say on that.

Amendment 332 is slightly different; it concerns paragraph 16 of Schedule 7, which itself sets out exclusions from the discretionary exclusions in Schedule 7. Under paragraph 16(4), there are four exclusions from some of the Schedule 7 things which have happened before the schedule came into force. It is my understanding that the existing procurement rules already contain three of the grounds for exclusion. So it does not seem logical that, when we shift to this new Procurement Bill, we disregard things that happened in the past that were exclusion grounds because they happened before the Act came into force—it seems to be an unnecessary discontinuity.

I believe that the new ground is “national security”, under paragraph 16(4)(d). For that, it is probably reasonable to disregard behaviour that occurred prior to the Act coming into force. I invite my noble friend the Minister to explain the logic behind paragraph 16(4).