Procurement Bill [HL]

Lord Alton of Liverpool Excerpts

Report stage
Monday 28th November 2022 Lords Chamber

[Lord Alton of Liverpool (CB)]

My Lords, I rise to support Amendments 3 and 17 tabled by the noble Baroness, Lady Brinton. In so doing, I echo what she said about how this Bill is better than the place we started from. Having spoken at Second Reading and in Committee and attended the meeting that the noble Baroness, Lady Neville-Rolfe, kindly organised so that we could learn more about the intricacies and granular detail of the Bill, I commend the Government for what they are trying to do. Although, I will give some painful examples to the House in support of what the noble Baroness, Lady Brinton, just said, I totally exempt the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord True, with whom I had a number of meetings in the run-up to the presentation of this Bill in the House. They have both been exemplary as Ministers.

The noble Baroness and I have been in correspondence over the weekend about some of the points I am about to raise. The reforms outlined by the Government are based on what I think are laudable principles of public procurement set out in the Green Paper. They are value for money, public good, transparency, integrity, equal treatment and non-discrimination. I urge noble Lords to keep them in mind as I proceed through my remarks.

Ministers have told us that streamlined new procedures will mean better commercial outcomes that deliver more value for money for taxpayers. This amendment would ensure that those public interest principles also extend to the National Health Service, as I believe they should. The NHS should not be regarded as a side issue or of little consequence, as it were. It should be within the same remit. In the year before Covid—2018-19—the DHSC spent around £70 billion on procurement in England, up from £68.3 billion in the previous year. Spending on health is far and away the most significant area of government procurement spending. It is more than three times defence spending. Around £18 billion is spent on medicine and, coming to a point that the noble Baroness made in her remarks a few moments ago, nearly £6 billion per year is spent on hospital consumables, which include gloves and syringes.

During Covid, vast sums were spent on procuring PPE. I have made a point regularly in your Lordships’ House, as other noble Lords have done, particularly from the Opposition Front Bench, about the kind of PPE that we have been buying from overseas, especially from the People’s Republic of China. The House of Commons Library, in a note published earlier this year, said that current estimates of the total cost of Covid to the Government range from about £310 billion to £410 billion, the equivalent of about £4,600 to about £6,100 per person in the United Kingdom. The portion of this spent by the Department of Health was put at £75.3 billion. Gross spending on public sector procurement increased by £53 billion, or 17%, between 2019 and 2021. Most of this increase was due to a £43 billion increase in health spending—a rise of 44%—and it is estimated that contracts for £14.6 billion were awarded for PPE.

I understand the argument that the Government have made on a number of occasions about the urgency of the public health crisis and that many public procurement procedures were expedited. In some cases, those procedures resulted in suppliers being chosen without the contract being put out to tender or otherwise advertised. I hope that part of the purpose of the Bill is that we have better procedures in place should another pandemic occur. Concern about how this was done led to a debate in the Commons on 21 June 2021 on a petition calling for a public inquiry into government contracts granted during Covid-19. Since the Minister will have seen the outrage in the Commons last week about profiteering from unusable PPE and widespread concern about politically connected companies benefiting from government contracts, I hope she will feel able today to respond to specific questions, some of which I asked in your Lordships’ House in January and March this year, during Committee and Report on the Health and Care Bill, to which the noble Baroness, Lady Brinton referred. I refer the House to col. 635 on 1 January and col. 1032 on 3 March.

Even before that, on 13 December 2021, I asked

“whether any … person, or … organisation, will be censured for defaults involving the 47 VIP public contracts for facemasks and surgical gowns; and what steps they have taken in connection with defaults associated with their contract with PPE MedPro.”

I referred the House to a report in the Daily Telegraph which stated:

“Ministers handed almost £150m to Chinese firms with links to alleged human rights abuses in Xinjiang amid a race to PPE after Covid hit.


The Health Department paid £122m to Winner Medical, which uses cotton produced by a supplier that works in the controversial region”.


That is in Xinjiang, where it is said that a million Muslims are incarcerated and where the former Prime Minister, Liz Truss, said that a genocide is under way. It continued:

“Another £19m contract went to pharmaceutical firm China Meheco and £16.5m was paid to Sinopharm, both of which have been linked to labour programmes in the province.”


In Committee I specifically asked about a Guardian report concerning Medpro, and on 19 January I was repeatedly told that details about PPE contracts are “considered commercially sensitive”. I have never been able to understand—this goes right to the heart of the noble Baroness’s amendment—why the Treasury could account for the £4.3 billion lost in fraud under the Covid support scheme but was unable to justify or identify the loss on PPE.

Even worse, I was told, “we have no plans to censure a single individual or organisation”. In January I asked why not, and I ask the same question again today. In January I was told that the Government are seeking to recover moneys paid to PPE Medpro in relation to a contract for the provision of gowns. It would be helpful for the House to know more about the remit of the public inquiry into Covid 19, chaired by my noble and learned friend Lady Hallett, and whether it will deal in detail with procurement under the terms of reference, especially in the sections dedicated to preparedness and our economic response.

Perhaps the noble Baroness could establish whether it will examine the concerns raised by the National Audit Office: first, the potential unequal treatment of suppliers in procurement processes; secondly, poor procurement practice due to procuring at speed—for example, retrospective contract awards, a lack of documentation on key procurement decisions and a lack of documentation on the management of potential conflicts of interest; and thirdly, lack of transparency over what contracts were awarded and how. We must not allow the concerns raised by the National Audit Office to happen all over again, and these amendments help us to do that.

But there are continuing challenges which need a response too. I was shocked to learn that we bought £1 billion-worth of lateral flow tests from the People’s Republic of China and spent around £10 billion of taxpayers’ money in the PRC on over 20 million items of PPE. Some 24.1 billion items have a country of origin recorded as China, including 10.7 billion gloves. This raises a lot of questions about dependency—lessons which you might have thought we had learned after Germany’s experiences with Putin—but it also raises questions about national resilience. Why could things such as this not have been manufactured here? Indeed, companies in this country that tried to get contracts, and which are capable of manufacturing these things, have told me that they could not even get into the competitive system because we suspended it. If nothing else, this begs a lot of questions about why such things could not be made in the UK.

I was also shocked to learn—I repeat this because I thought it almost unbelievable until I saw it revealed in a parliamentary reply in another place—that we have a further 120 million items of PPE that are still in China, and which it is costing taxpayers some £770 million each and every single day to keep there. I repeat: £770,000 each and every day to keep them—

[Noble Lords]

Oh!

[Lord Alton of Liverpool (CB)]

The millions and the thousands can multiply very rapidly in this debate. I apologise, but I think you get the point. It is over £20 million in the course of a year—£770,000 each and every single day.

I gave the noble Baroness notice of my intention to ask about this. Who authorised those acquisitions? Who decided that they should stay there? How much has it cost to date to store these items? How much has been budgeted to keep them in store at that cost of £770,000 every day, and for how long will they be stored? How much of the PPE that has been bought has proved to be defective and unusable? I would also like to know, first, how the Government intend to report the money returned to public funds by defaulting PPE suppliers through the actions of the faulty contract PPE recovery unit. Secondly, individual settlements are protected by commercial secrecy, so how will Parliament and the public be notified about money returned to public funds by defaulting PPE suppliers through the actions of the faulty contract PPE recovery unit? Thirdly, how do the Government intend to provide transparency and accountability in relation to money returned to public funds by defaulting PPE suppliers through the actions of the faulty contract PPE recovery unit?

It is clear that the NHS should be subject to far greater scrutiny, transparency and accountability. For all those reasons, I support Amendments 3 and 173 spoken to by the noble Baroness, Lady Brinton, which include the NHS in the definitions of a public authority for the purposes of the Bill.

[Lord Hunt of Kings Heath (Lab)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Alton. When he speaks about the frailty of the NHS supply chain—I must declare my past presidency of the Health Care Supply Association—I am sure he is absolutely right to put these penetrating questions to the Minister.

I have two amendments in this group, Amendments 171 and 172, but I also want to speak to Amendments 3 and 173 in the name of the noble Baroness, Lady Brinton. She has rightly pointed to the potential confusion between two pieces of legislation in relation to the National Health Service and the procurement regime that it is to adopt in the future. The difficulty is compounded because, of course, we have not seen the draft regulations in relation to Clause 111, nor have we seen the draft regulations in relation to the amendment made in the Health and Care Act 2022 to the National Health Service Act 2006, after Section 12ZA. The 2022 Act gave huge powers to Ministers to establish their own procurement regime through regulations.

Clearly, there is every potential for confusion as to how these two sets of legislation are to work together, particularly if only NHS clinical services are to be covered by the disapplication in the Bill. That leaves a lot of questions for those working in the health and social care sectors as to how they are to operate the new processes. Given the nature of NHS commissioning and services, there are big questions about what happens if a contract incorporates clinical and non-clinical services. Under which set of regulations is procurement to be undertaken? Large hospital contracts—PFI contracts—often contain a mixture of clinical and non-clinical services, and the terms of the contract can sometimes last for 20 or more years.

Indeed, the more fundamental question is how we define “clinical services”. Some hospitals contract with private sector operators to provide, say, laboratory services the staff of which are employed by the private sector contractor. I would have called those clinical services; they are clearly directly related to clinical outcomes for patients. I am not at all sure how that is going to be covered by the two separate pieces of legislation. Of course, the NHS Confederation, which represents the bodies that operate the health service at the moment, including integrated care systems and NHS trusts, is obviously concerned about the confusion and potential distinction between the two sets of legislation.

--- Later in debate ---

[Baroness Neville-Rolfe (Con)]

I think I have been clear on the background to why it is different. I have also promised that regulations and guidance are being put together and will make very clear the differences: where the NHS rules need to apply and where the Procurement Bill needs to apply. That is the way in which these Bills have been constructed together. There are reasons. Especially on small NHS contracts involving social care, clinical services and so on, it clearly makes a great deal of sense to have a separate regime.

I am sure we will come back to that at the end, but out of courtesy I turn to the other amendments. Amendment 4, tabled by my noble friend Lady Noakes, proposes to rework the notion of control in the definition of a contracting authority in amended Clause 1(3)(b), to be consistent with the notion of a controlled person in Schedule 2. We have looked at this again in dialogue with the concerned stakeholders, notably the Local Government Association.

The meaning of control in Clause 1 is different from that in Schedule 2, and they need to be kept separate. The use of “control” in Clause 1, which sets out the contracting authority definition, is intended to ensure that contracting authorities that have a board where public authorities appoint more than half the members are themselves considered to be contracting authorities. This might include, for example, some centralised procurement authorities.

By contrast, the “controlled person” for the purposes of Schedule 2 is much narrower and intentionally very limited as it is intended to capture only a narrow group of entities, closely owned and controlled by contracting authorities. It requires that the controlling contracting authority is a “parent”, within the meaning of the Companies Act 2006. Although this might cover some of the same ground as majority board appointments, the concept used in Clause 1, it is not the same thing, and the text of the amendment can be satisfied in other ways. There is also a secondary activity threshold, which means that 80% of the activities carried out by the controlled person must be on behalf of its controlling authority. I am afraid that neither factor is appropriate to the contracting authority definition and their inclusion would have the effect of taking many organisations outside the scope of the contracting authority definition.

I recognise that, as my noble friend said, consistency is often desirable, but these terms achieve different aims. It is important that the Procurement Bill covers, as closely as possible, the same scope of bodies as in the existing procurement regulations, both for certainty and continuity for our authorities and to ensure compliance with the definition of a contracting authority in our free trade agreements.

I should, in passing, thank my noble friend Lady Noakes for her Amendment 190, which reflects discussion in Committee and which the Government are glad to support.

Moving on, I come to some of the very wide points made by the noble Lord, Lord Alton, although it is possible that some of these will come up again later on Report. It may be disappointing to the noble Lord, but we cannot go into the detail of individual contracts. Where a contract has been found to have underperformed or the PPE provided was not up to standard, the Department of Health and Social Care is working to reach a successful outcome—this includes mediation—for the taxpayer.

Offers for the supply of PPE came from a wide range of people from within government and outside. No matter where they came from, offers went through a robust process of checks and controls led by officials. This included price and quality checks as well as due diligence and credibility. As for Medpro, this is a live issue; we are currently engaged in a mediation process with PPE Medpro and I am therefore unable to comment on the specifics of this contract.

More positively, however, the Covid inquiry will cover procurement and the distribution of key equipment and supplies, including PPE and ventilators. In my view, that is quite right. It will also identify the lessons to be learned from all this and inform preparation for future pandemics across the UK.

[Lord Alton of Liverpool (CB)]

I thank the Minister; that is a helpful reply and I am indebted to her. She has referred us to later amendments—I think she is referring to the amendment tabled by her noble friend Lady Stroud in the 10th group, on modern day slavery, which I am supporting—but a number of my questions go much wider than that. I would be appreciative if, between now and our discussion on Wednesday, she could give further consideration to what she can answer, some of which is not covered specifically by the point she has just made about confidentiality. Could she touch on what the noble Baroness, Lady Brinton, is saying now about how the NHS should be caught under the same terms as everything else that she has been arguing? Our failure to do this has been highlighted by the noble Lord, Lord Coaker, and others, and demonstrates an inconsistency in how we handle these things.