Local Government (Exclusion of Non-commercial Considerations) (England) Order 2022

Lord Jones Excerpts

Tuesday 28th June 2022 Grand Committee

[The Minister of State, Home Office and Department for Levelling Up, Housing & Communities (Lord Greenhalgh) (Con)]

My Lords, this order was laid before your Lordships’ House on Monday 25 May 2022, under Section 19(3) of the Local Government Act 1999, for approval by a resolution of each House of Parliament. The order was considered and approved in the other place on Monday 20 June.

The illegal invasion of Russian forces into Ukraine has shocked the world and has been met by unprecedented global condemnation. Soon after the invasion, many local authorities also gave their own public condemnation of the Russian state’s action. They were clear they did not want local taxpayers’ money to be used to fund this reprehensible attack, and many noted their own intentions to break contracts with Russian-controlled companies. Local authorities are, however, subject to Section 17 of the Local Government Act 1988, which prohibits “non-commercial considerations” playing a part in commercial decision-making. Such non-commercial considerations include, at Section 17(5)(e) of the 1988 Act,

“the country or territory of origin of supplies to, or the location in any country or territory of the business activities or interests of, contractors”.

With regard to Russia and Belarus, this element of the Act is untenable.

This limitation was laid out in the Cabinet Office’s policy procurement note 01/2022, which was issued in March. In this advisory note, organisations in scope—government departments, their NDPBs and executive agencies—were asked to review their contract portfolios to identify Russian and Belarusian prime contractors and consider the termination of these contracts. The PPN particularly noted that the Government were actively considering a solution for local government to enable councils to follow the Cabinet Office’s advice. Council leaders have rightly been calling for action, requesting a flexible approach for those councils that wish to divest themselves of any dependence on Russian state-owned companies. My right honourable friend the Secretary of State wrote to leaders on 11 March, preparing them to consider their exposure to Russian and Belarusian-owned companies.

Your Lordships will recall that we held a debate on 24 March regarding Gazprom UK. In that debate, noble Lords made clear their desire to amend public procurement rules to align local authorities with the rest of the public sector, so I am pleased that today we are considering this order, which will enable us to disapply the provisions I have referred to at Section 17(5)(e) of the Local Government Act 1988. The order will enable best-value authorities and parish councils in England, if they so wish, to terminate both proposed or subsisting public supply or works contracts, in accordance with the terms of the contract, where either: first,

“the country or territory of origin of supplies to the contractor”

is Russia or Belarus; or, secondly,

“the location of the business activities or interests of a contractor”

is Russia or Belarus.

As council leaders have requested, this order will allow relevant authorities the flexibility to terminate proposed and subsisting contracts should they so wish. It will allow them to take comparable action to central government, as set out in the PPN, and ensure they are not funding Putin’s war machine. It is important to note that the Government are not mandating the termination of contracts nor creating new burdens on local authorities. This is a permissive power and the decision to terminate contracts rests with the authorities in question. As the PPN sets out for central government, and as my right honourable friend the Secretary of State has advised local authority leaders, decisions to terminate such contracts should be made on a case-by-case basis, in accordance with the terms of the contract, and only where an alternative supplier can be sourced in line with value for money and affordability, and with minimal disruption to public services.

It is important to note that this policy will not enable these bodies to instigate their own unofficial municipal foreign or defence policies, but will not prevent them from undertaking their own divestment measures where these align with official government sanctions, as in this case.

As I have said, this will not add a new burden to local authorities. Nevertheless, the Government remain committed to engaging with any local authority with concerns about its financial position or service delivery or that may be facing pressures that it cannot take steps to manage locally. I reaffirm that commitment today.

This Government send a clear and strong message: Russia and Belarus should not benefit from public contracts and from the British taxpayer. We condemn Russia’s unprovoked, premeditated and illegal war. Across the United Kingdom and at all levels of government we remain steadfast in our support to ensure that Ukraine wins its battle for self-determination and that Russian forces withdraw.

This Government have introduced financial and investment sanctions. We provide military support, humanitarian aid and lead international efforts to support Ukraine’s objectives. We will continue to use all levers at our disposal in central government and, in the case of this order, local government, to cut off funds to Vladimir Putin’s war machine and demonstrate that we will not tolerate this abhorrent attack on Ukraine. I hope your Lordships will join me in supporting the proposed order. I commend it to the House.

[Lord Jones (Lab)]

My Lords, I support the Minister in what he has said and thank him for his introduction. I also thank him and his department for the Explanatory Memorandum, which is lengthier than usual, and very helpful. There was an echo of these matters in the Chamber less than an hour ago in one of the Questions, which was about Russia. This order is the consequence of the gangster style of Russian leadership, with its cruel and dreadful impact on the nation of Ukraine.

Time is of the essence. I will pose several questions to the Minister and, if he cannot answer at the moment, I ask that he write. First, does he know how many contracts might be involved as a consequence of his order? Following that, what might be the employment consequences? It is a question of numbers, and some answers on these matters might be helpful. Lastly, can he give an example or two—or more—of the sorts of contracts that shall be terminated? In the departmental consideration of the making of the order, surely examples were brought forward. It might help the whole House if answers to these questions were proffered, either now or later.

[Baroness Pinnock (LD)]

My Lords, I draw attention to my relevant interests as a councillor on Kirklees Council and as a vice-president of the Local Government Association. I support the terms of this statutory instrument, which, as the Minister said, is a reaction to the heinous acts of what has become a murderous Russian regime that is directing its unrelenting firepower on the citizens of Ukraine. As a result, it is incumbent on us to do whatever small act we can to reduce links that might enhance businesses based in Russia or Belarus.

Following on from the questions asked by the noble Lord, Lord Jones, does the Minister know, or can he find out for us, the total value of local government business currently placed with Russian or Belarusian businesses? If he does not have that information, will he write to us and perhaps put the information in the Library? People would widely welcome that information, I think.

When I saw this SI, I thought it demonstrated how overcentralised we have become that we must have secondary legislation to enable local government to make decisions about where it places its contracts. What the Minister said—that there was pressure from local council leaders on the Government to enable this action to take place so that local authorities did not open themselves to legal challenge—proves my point. It spoke to me. For goodness’ sake, precious government time has had to be spent on drawing this measure up so that councils can make the sane and sensible decision to stop making new contracts with Belarus and Russia. We need to change that. Perhaps we will get another SI from the Minister in future just to release councils from this burden of insensibility, but clearly I totally agree with what is contained in this order.

[Lord Greenhalgh (Con)]

My Lords, I thank the Committee for considering the order and for all the contributions to the debate. I am sure we can agree that it will further simplify our already strong message to Russia that we stand firmly with Ukraine and will use all levers possible to cut off funding to this illegal invasion. Allow me to try and respond to the points made by noble Lords.

I start with the points raised initially by the noble Lord, Lord Jones, and then backed up ably by the noble Baroness, Lady Pinnock, around what we know about which local authorities have contracts with Russian and Belarusian-backed companies and the value of those contracts. The Government do not hold data on how many contracts and sub-contracts are held by local authorities with organisations under the control of Russia or Belarus. However, we know that there are contracts and that the Secretary of State has been asked by a number of council leaders to amend legislation to allow councils to terminate such contracts.

The noble Lord, Lord Jones, wanted some examples of contracts that fall into this. I will give one, which makes two points that have been raised by noble Lords. The first is that Portsmouth City Council has a contract with Gazprom and has decided not to terminate the contract. I make this point because it is not for Ministers or central government to use the bully pulpit. In response to the noble Lord, Lord Ahmad, I say that we are giving a permissive power for local authorities to make the decision about whether they withdraw from these contracts or not. We want them to go through the process and have the ability to do so, which currently in theory they do not, which is why we are bringing in this statutory instrument. We have been asked by the noble Lord, Lord Jones, about the impacts of employment—

[Lord Jones (Lab)]

Did the Minister see the piece of paper his noble friend Lady Scott whipped fast to him under the papers she has just put down?

[Lord Greenhalgh (Con)]

What paper?

[Lord Khan of Burnley (Lab)]

It is Lord Khan, not Ahmad.

[Lord Jones (Lab)]

From the officials.

[The Deputy Chairman of Committees (Lord Beith) (LD)]

Has the Minister sat down?