Procurement Bill [HL]

Lord Moylan Excerpts

Committee stage
Monday 4th July 2022 Grand Committee

[Lord Moylan (Con)]

My Lords, I hesitate to appear to disagree with the noble Lord, Lord Berkely, but I shall humiliate myself by doing so. I venture to suggest that there is a definition of a “private utility” in Clause 5. It is only to be understood in its fullness if read with Schedule 4, at page 84, which specifies what “utility activities” are. If one looks at Clause 5 and Schedule 4, one can see what the Government are trying to do. However, I am not sure that what the Government are trying to do is worth while or appropriate. To that extent, I support the comments of my noble friend Lady Neville-Rolfe.

The background is that we are starting from an EU procurement directive that applied to the whole single market of 27 states, and which needed to take account of the fact that most utility activities in most of those states are effectively provided by arms of the state, whereas in the UK we have blazed a successful path of privatisation, so many utility activities that in other parts of the single market are carried out by the state are carried out here by private companies. The noble Lord, Lord Berkeley, makes a very important point when he says that those private companies are, in nearly all instances, subject to some form of regulation.

Before I go further, I draw attention to Schedule 4, which specifies those activities. The subheadings, which I know are not technically part of the Bill, include “Gas and heat”, “Electricity”—

[Baroness Neville-Rolfe (Con)]

I think electricity is later taken out, as I mentioned.

[Lord Moylan (Con)]

Oh well. I shall just work on the text I have; I mean, what is one meant to do? There is “Water” and “Transport”. “Ports and airports” and “Extraction of oil and gas” are also mentioned, but it is the first few that matter. It is striking that the rollout of broadband, the internet and such things do not count as a utility; I should have thought that they were characteristically examples of a utility. My noble friend will no doubt be able to give me a compelling rationale why they are not included.

I come back to the point I made a moment ago about the regulator. I read out the subheadings because noble Lords can see that the activities we are discussing are nearly all regulated, funded by the commitment of private capital with an assumption that private capital will be reasonably efficient in procurement, even if simply for the benefit of shareholders. This does not preclude defalcation, fraud, bribery or giving contracts to your best mate but, as I explained at Second Reading, the Bill does not deal with those issues. If they arose, be it in a public authority or a private company, they would be dealt with through the criminal law because they are all criminal offences. One would not pursue them for a trivial breach of a procedural requirement under the Bill; one would go after them for fraud, taking bribes or all these other criminal things, which are nothing to do with the Bill.

All that makes me think that including private utilities is not entirely appropriate. If it were felt that procurement undertaken by private utilities needed some form of statutory control it would be better in a separate Bill that actually focused on the principles, rather than the procedure, allowing private companies to pursue those procedures appropriate to achieving their shareholders’ ends, just as we allow Tesco to do—with the exception of selling cars next door to fruit. I cannot contemplate for a moment why the European Union should take exception to that, but apparently it did. Essentially, we leave Tesco to decide what procurement processes to follow because it is a private company risking private capital. That is the essential ground on which I make my point.

Finally, I turn to transport, because I have more direct experience of it as a utility than I do the others. There are some distinctions to be drawn. I take as an example Transport for London; as noble Lords may know, I served on the board. Transport for London perhaps should be subject to procurement regulations of this character, but Transport for London is in part categorised as a local government body. It is covered by some local government legislation, as well as by its own Act. That might be the rationale for including a body such as Transport for London, or some of its equivalent bodies that have been created around the country.

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[Lord Berkeley (Lab)]

I am grateful to the noble Lord for expanding fully on these amendments but in the case of some of the categories in Schedule 4, there is no regulator with the power to appoint companies to do things. Ports and airports come to mind; the Government will probably do those. Are we happy that the Government can do that without any sort of regulatory oversight?

[Lord Moylan (Con)]

Since that is technically an interruption to my speech—

[Lord Berkeley (Lab)]

I am sorry.

[Lord Moylan (Con)]

No, I am delighted. It adds much illumination.

[Lord Fox (LD)]

We can have more of you.

[Lord Moylan (Con)]

You could have more of me, my Lords, but I will simply say that I know nothing about ports. However, I know a little about airports and they are technically subject to economic regulation by the Civil Aviation Authority. It is true that that authority has, through its own risk assessment, decided that only Heathrow Airport will be subject to full economic regulation. Gatwick and Stansted are subject to some, while most other airports are not economically regulated; that is, they can set their own charges and if people do not want to fly into their airport, they will fly to another. It is not entirely true, it is fair to say, that where it matters airports are not economically regulated, because they are. I suppose that the Civil Aviation Authority could always reverse its decision, if it saw fit. It has the power to expand economic regulation to other airports if that were felt necessary. Having added that, I shall subside and look forward to my noble friend’s response.

[The Earl of Lytton (CB)]

My Lords, this is my first intervention on the Bill because on the day of Second Reading I was convalescing at home and not allowed to go anywhere.

On this business, regarding utilities, I am afraid I come at this from a simple property professional’s standpoint. It always used to be gas, water, electricity, drainage and telecoms; those were the utilities on which people relied for the use of buildings and property of all sorts. We seem to have dropped drainage, for reasons I cannot quite understand, when it is merely the dirty-water function of the clean-water provider of drinking water, which is referred to.

I declare my interest as one of those who serve under the chairmanship of the noble Baroness, Lady Neville-Rolfe, on the Built Environment Committee, as do the noble Lords, Lord Moylan and Lord Berkeley. I am very privileged to do that. Last week, when we were talking about the Product Security and Telecommunications Infrastructure Bill, it was noted that the very purpose of the telecoms giants was to try to convince government that they were a utility, should have utility powers and should, encompassed in that, have certain powers of coercion. They have come into that from the private sector, whereas dear old British Telecom, aka Openreach and a few other things, has come at it from the other direction—the hardwired traditional utility standpoint that was protected, with all sorts of powers to acquire wayleaves and so on.

The noble Baroness referred to imperfect policy development. I almost got up and said “Hear, hear” to that, because we need to start sorting out what exactly we mean by these utilities that look in lots of different directions. Some of them are very commercial—some are very controversial—and others come from a highly and necessarily regulated background because they are important for health, stability and all sorts of other basic things that require regulation as to quality and quantity in the essential needs of the public. It is not so much the voluntary needs, and perhaps even less the voluntary needs of business, but the essential needs of the public.

We seem to have an increasing muddle between what may be regarded as that essential element that has to be regulated for the purposes I have suggested and the wider commercial endeavour that goes with it. Because that distinction has been made ever less clear, for reasons that I perfectly understand—the utilities were privatised for reasons to do with funding, and I do not pass judgment on that—like Voltaire’s Candide I stand here noting both cause and effect. This is exactly the situation we are in; utility activities are mired in this very issue. I look forward very much to the Minister’s answer on that. He has a great grasp of these intellectual refinements, and I hope he will be able to enlighten us. I think a bit of a distinction needs to be made here between essential purposes and processes that are essentially voluntary and commercial.

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[Lord True (Con)]

I was asked that at Second Reading. An appropriate authority is a Minister of the Crown or a Welsh Minister. Indeed, the noble Lord’s colleague, the noble Baroness, Lady Humphreys, referred to this when we discussed the earlier group of amendments. We clarified it in some of the amendments that we tabled but were not brought forward earlier. Among them was an amendment to replace “appropriate authority”, although I cannot remember with what exact words—a Minister of the Crown or a Welsh Minister, I think.

[Lord Moylan (Con)]

I think that my noble friend is approaching his peroration. May I ask him for a little clarity? Take the example of the bus company. Bus companies operating under a franchise—for example, those in London—appear to be covered because they have a special and exclusive right. That appears to be what my noble friend is saying; if I am wrong, please correct me. Even though they have bid competitively for that special and exclusive right, and even though it generally lasts only for a number of years—this is to justify the balance of capital investment that might be required for them to allow—then comes back into competitive tender, they appear to be covered.

Bearing in mind that I am sticking with the text of the Bill as circulated, my noble friend says that Schedule 2(17) exempts them. However, that is not what it appears to do. It exempts a contract rather than a contractor, and says:

“A contract for the provision of public passenger transport services”.


In simple terms, is my noble friend saying that, when a bus company procures a building, a new piece of plant, some equipment or even some buses, it is or is not covered by the procurement regulations, even on the assumption that it falls into the special and exclusive category?