Procurement Bill [HL]

Lord Purvis of Tweed Excerpts

Committee stage
Wednesday 6th July 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, I shall add some questions to those posed so far on this group. Before I do, I thank the Bill team for the technical briefing this morning that I took part in remotely and for the further information that the Minister promised and which was provided and circulated with the explanatory statements. They were helpful. Of course, they do not answer all the questions, but that is the purpose of Committee.

Overall, it begs the question as to where we stand on the overall proportion of procurement that would be under covered and non-covered areas, and what is now under exempted areas. The Minister rejected my call for an updated impact assessment. At the moment, we have no information as to what level of procurement we are dealing with in these new areas. It would be helpful if the Minister could say what proportion of the procurement is now likely to be within the covered, non-covered and exempted areas.

With regard to ownership and persons, I posed a question to the technical team this morning, so I hope they have had time to provide some information to the Minister. There seems to be an assumption in the drafting that contracting authorities are either public or private bodies, but it is less clear on the other areas within the broad public sector, where there are, effectively, trust models for the delivery of services. These do not fall neatly into the category of a public or private body. Indeed, I am aware of procuring bodies that delivered services in the Scottish Borders, my former constituency area, that were hybrids between purely public authority bodies, charitable bodies, pension funds and public interest vehicles. I would be grateful if the Minister could confirm whether Amendment 11 will cover all these areas. If it does not, there will still be gaps when it comes to some of the consortia which are both traditional centralised bodies, as we discussed on Monday, and those that are other trust models.

I turn now to my second question, which I also posed to the technical team—to be fair to them, I got some form of answer. It relates to contracting authorities acting jointly when one is English and one is Scottish. What legal framework will they be operating under? The Bill team—I hope I relate this correctly; they have no right of reply, so I hope I am fair in what I say —noted that, later in the Bill, there are regulation-making powers to cover these areas. However, my concern is that, presumably, we would not be expecting regulations to be brought forward to suit individual contracting authorities acting jointly where one is Scottish and one is English. This is a slightly different point from which the Minister said on Monday he would write to me, because it relates directly to this amendment. I did not receive a letter clarifying these cross-border issues. The Minister may say that he was rather busy—

[Lord True (Con)]

The noble Lord has generously acknowledged, as others have, that the officials have been extremely busy. There will be a response to the noble Lord’s question, as I undertook. With respect to the officials, it is unreasonable to complain that a letter has not been received, given all the other activities going on. I repeat the undertaking. The noble Lord will receive a letter, but I must defend my officials.

[Lord Purvis of Tweed (LD)]

My Lords, I hope the Minister will reflect on his comments. At no stage did I criticise officials for not receiving a letter. This is a ministerial responsibility. A Minister gives an undertaking to write to a Member in Committee. A Minister brings forward and moves amendments in Committee which are pertinent to the issue I raised when the Minister said that he would write to me. I was not criticising any officials. If any criticism to be laid, it is against the Minister. I simply said that, in the absence of the letter he promised to send me, I am asking these questions for clarification. That is reasonable.

On exemptions, there has been some reference to legal services. I understand the point that has been raised about making sure that there is a distinction from Scottish legal services as appropriate, and I certainly support the Government doing that. However, my understanding is that, for some of the treaty suppliers, there are obligations under some of the treaties on the mutual recognition of professional and legal qualifications. My understanding is that the exemption for legal services under this Bill will cover those other areas where the mutual recognition of professional qualifications in carrying out certain legal services will also be excluded. I understand that a body would be unable to procure legal services that are separate from those exempted, but they are then covered in other areas of professional qualifications. This will leave certain gaps in our treaty obligations.

I reviewed the Australia agreement on the carve-out on legal services. It is broadly the same, so I understand where the Government are coming from as far as these exemptions are concerned, but it is not exactly the same. Perhaps the Minister could give some further explanation as to what is likely to be allowed under the provision of legal services by certain providers of legal services that have mutual qualification recognition, because the position on legal services is still uncertain. If the Minister could respond to those points, I would be grateful.

[Lord Coaker (Lab)]

My Lords, I start by thanking the noble Lord, Lord True, those who have been working with him and the officials for the briefing we received this morning and for listening to the anger, frankly, that there was on Monday about the situation. We were where we were; we are grateful to the Minister for doing what he could to degroup the amendments and sort things out as best he could. Clearly, there are still a number of issues, and many of us are still struggling to put together the various mountains of paper we have to try to make sense of it.

I congratulate the noble Baroness, Lady Noakes, on her extremely important Amendment 11A. I must say that, in my reading of Schedule 2, I had not picked that issue up, which shows part of the problem—I know that the Minister accepts this—of not having enough time. The noble Baroness’s point was on decisive influence and what that means. As the noble Lord, Lord Fox, said, the definition of particular words and phrases bedevils us at the present time. I pray in aid because, later on, I will point out one word in a couple of phrases that I think makes all the difference; I hope the Committee will bear with me and recognise that I am not being trivial—changing one word would make a significant difference to the meaning in the Bill. As well as pointing something out to us, the noble Baroness has made an extremely important point about what “decisive influence” means in paragraphs 2(2) and 2(3) of Schedule 2.

I would add to what the noble Baroness said. This is really important because is it not only

“a decisive influence on the activities of the person”;

it is also “directly or indirectly”. You then really get into the question of what on earth it means. To be frank, when you get into “decisive influence” and “indirectly”, it becomes extremely difficult. Again, I thank the noble Baroness. Like her, I look forward to listening to the answer the Minister gives with respect to that.

I agree with most of the remarks made by the noble Lords, Lord Purvis and Lord Fox, and others. I have decided not to read out my notes, because I want to try to get to the heart of this for the benefit of those who read our proceedings. If I get this wrong, the Minister will need to correct me. We need to understand where we are and what is happening.

My understanding is that the current procurement regime—not the regime envisaged by the Procurement Bill—operates under the existing Public Contracts Regulations 2015. Because we left the EU, the original Procurement Bill sought to transpose the 2015 regulations into British law. Unfortunately, in doing that, the Bill made a series of errors, and in particular around the Teckal exemption—however it is pronounced; I do not have the same mastery of languages as the noble Lord, Lord Moylan. That exemption was not actually in the original drafting. The Local Government Association and all the other bodies were horrified—from what I have seen of the statements they have made to the Government—because it meant that many of the things they were able to do under the 2015 regulations with the Teckal exemption would no longer be allowed and they would have to change their procurement processes. I apologise to the noble Lord, Lord Moylan, who gave the very good example of the transport initiative, of which he was proud, but the LGA and other bodies were worried that these sorts of arrangements would not be operational in the same way as was drafted in the original Procurement Bill.

The Committee will correct me if I am wrong, but this is the million-dollar question for me, and the reason I abandoned my notes: do the Government amendments in this group, led by Amendment 10, mean—as the noble Lord, Lord Moylan, other noble Lords, the LGA and many other organisations which have made representations to us are concerned it does—that the 2015 regulations have been transposed into the amended version of the Bill, along with the Teckal exemption to those regulations? That is what people will be looking for, because British law, as it will stand when this Bill becomes an Act, will mean that they can operate the various arrangements that they have either vertically with an entity in themselves, or horizontally with other local authorities or bodies.

If we look across the country, we see that in all the areas in which we live—including, I presume, Wales; I am not sure about Scotland, about which the noble Lord, Lord Purvis, may wish to say something—there are hundreds upon hundreds of models of procurement that have been adopted and worked on to deliver services in the way that a local authority, body or entity has decided to follow. The Minister will know this better than me, because of his experience. What they will be looking at is whether the Government’s amendments mean that their concerns have been met. That is why I decided to put down my amendment. I cannot debate law as well as many other noble Lords, but if I were someone from the outside looking at this, I would ask whether this means that I can carry on procuring in the way that I have been able to procure previously. That was my concern with the way that the Bill was originally drafted. That is the million-dollar question for the Minister.

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[Lord True (Con)]

My Lords, I am grateful to those who have spoken. Of course, this is Committee in your Lordships’ House, the whole purpose of which is to probe, challenge, ask and seek greater definition. I make absolutely no complaint about that; indeed, I welcome it. The issue is how and when most effectively we can give the appropriate response. I and my officials will always try to do that in the best possible way and the best possible time to enable your Lordships to do your work. That is the aspiration. I have no doubt that I will fall short of that aspiration and that I will be caned for that.

I will speak to Amendment 11A, which was tabled by my noble friend Lady Noakes, in a moment. First, I have been asked questions on a number of matters, which I will try to address. I fear that the exemption list was drawn up before my time, but I am advised that it was drawn up in consultation with various stakeholders with the appropriate interests covered. Analysis of the exclusions in WTO-Government procurement agreements and responses that the Government received to the initial Green Paper were the leading informatives, as I understand from those who were involved at that stage. However, I will be happy to engage with the noble Lord outside the Committee between now and Report if there is a particular item in Schedule 2, or if he wishes to address it in an amendment on any of those exclusions. That is where we are coming from.

I will deal with a couple of other things because I want to get on to the matters that largely affect local authorities and the amendments. The noble Lord, Lord Purvis of Tweed, raised a question—this is also germane to the point made by my noble friend Lady McIntosh—about the nature of the relationship with, say, the Australia agreement, which he cited. I understand that he raised that in a briefing session this morning in relation to postal services. Indeed, that would not be a defence matter. My officials agreed to clarify this. Since it has been raised, this is the point where we are. By the way, no one should Pepper v Hart anything that I am saying at this stage because this is an exploratory Committee stage and it is important both in correspondence around Committee and in engagement that we get to the right point—I totally agree with the point that the noble Lord, Lord Fox, made about the importance of definition, which is absolutely fundamental.

This is a complicated, technical matter, which requires us to understand both the Bill and how the Australia agreement is structured. However, I am advised that we are satisfied that the Bill is not required to cover postal utility activities. To determine whether a utility is covered by the Bill, one has to look at both the entity and the activities that it is carrying out. Utilities are defined as public authorities, public undertakings and private utilities that carry out utility activities. Utility activities are defined as activities of the type set out in Schedule 4—gas and heat, as well as transport, which we discussed briefly on Monday. It is true that the Australia agreement does not define the terms “utilities” or “utility activities”. However, it works on a similar basis. The agreement covers only the utility activities covered in section C of our market access offer and only for the entities set out in section C.

In the Australia agreement, section C of our market access schedule provides that only certain transport services are utility activities and that the only entities that are covered are public utilities. Section C does not include the postal sector or private utilities. Postal services in the Australia agreement are included as services only in section E. This means that those entities only are covered by the Australia agreement in annexes A, B and C of our market access schedule, which does not include utilities in the postal sector that are covered for the postal services in section E that they procure—for example, a local authority procuring mailshot services. It does not mean that entities such as Royal Mail that operate a private postal service are covered. That is the current advice that I have on that matter; I am sure that my officials would be happy to explore it further with the noble Lord.

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister for that and for answering at this stage a question that I have not yet asked about postal services. Our understanding is that that would be in the group with government Amendment 24 on the expansion of utilities. We will be raising some of these issues, but I take note of what the Minister said. The main thrust of my questions in this group were about the joint groups and the different types of ownership for them, but I am grateful for what the Minister has said so far.

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[Lord True (Con)]

My Lords, I hear what the noble and learned Lord says. Those remarks might also be addressed to the First Minister in Scotland. I expressed regret—I think it is shared across the Committee—that the Scottish Government have not wished to take part in the constructive way in which the Welsh Administration have. We have had good co-operation with the Welsh Administration, and that has had an impact on the Bill. Clearly, if the policy changes, then a Bill can be amended, but I am about to reply to a series of complaints about the Government taking all sorts of potential regulatory powers to change this, that or the other, and that would be quite a substantial secondary power to take. It is regrettable, but that is the position.

[Lord Purvis of Tweed (LD)]

Further to the point from the noble and learned Lord, I am less convinced at the response that this is discretionary as to the choice of Scottish Ministers. I understood that these provisions were for public passenger transport services that do not cross the border into Scotland. Therefore, these are for the provision of public transport services that begin and end in England.

If that is the case, they are within the scope of this legislation. If they are public passenger transport services which begin and end within Scotland, they would be under Scottish legislation. Therefore, this would not apply and the appropriate authority would not be Scottish Ministers. Would it not be better if the Bill simply stated where the public passenger transport services are? The area of concern for me is cross-border public passenger transport services, for which, under the 2016 legislation, there was further ministerial devolution to allow some form of regulations to be passed on cross-border public transport services. I declare an interest because I use them every week.

[Lord True (Con)]

I hear what the noble Lord says. I come to this House and I am asked to respect the position of the devolved Administrations. The position of the devolved Administration in Scotland is that they do not wish to be part of this legislation, so I am caught. If at a later stage, or even at this stage, the noble Lord wishes to put forward an amendment to change “appropriate authority” to include the Scottish Government, no doubt we can debate that matter, but the position now is the one I set out and I have given the explanation that is the policy decision of the Scottish Administration.

[Lord Purvis of Tweed (LD)]

We are making law so, for the record of the Committee, is the Minister saying that public passenger transport services under paragraph 17 of Schedule 2, for the exempted contracts, are public passenger transport services that begin and end in England? Is that correct?

[Lord True (Con)]

My Lords, the noble Lord is right to raise the issue of cross-border services. We will come to that later in the Bill. I am not excluding discussion of cross-border. It is an overall policy position that I am stating. We will come to the cross-border issue later in the legislation. I do not want the noble Lord to think that we are having a kind of Sicilian motorway approach, where the Mafia money ran out. I fully understand where he is coming from on that. I was really replying on the broader point.

Time runs on and I must get on to the specific and very important points made not only by the Delegated Powers Committee but by noble Lords who have tabled amendments. I will try to persuade the Committee that the amendments are unnecessary and that the strictures of the Delegated Powers Committee were strong. I heard the word “a scorcher”, but perhaps I do not necessarily need that. I heard the remarks from all sides on that. We will carefully consider them, notwithstanding what I say now. Obviously, it believes it is a reasonable position, but we will consider those remarks.

Amendment 18 would remove paragraph 17 of Schedule 2, which has been alluded to. The effect of this would be to remove an exemption for certain public passenger transport services that exists in our current procurement legislation. The exemption exists and it is necessary as procurement for such services is governed by a separate regime operated by the Department for Transport. It is important that the Bill does not impinge on that separate regime and that the exemptions under the Bill fully align to ensure that public passenger transport services are regulated by the correct regime. There is no intention to exempt public passenger transport services beyond those currently exempt and governed by the Department for Transport regime.

Amendment 21, tabled by the noble Lord, Lord Wallace of Saltaire, seeks to remove a provision that exempts concession contracts for air services provided by a qualifying air carrier. Removing this would bring those contracts within the scope of the Bill, which would be a fundamental change to the existing position.

Air services are separate markets driven and operated by the private commercial sector. The public sector does not generally procure or intervene in these services. Given the distinctive features of the air transport market, and the state’s historical limited intervention in it, it would not be appropriate to bring air transport within the scope of the mainstream procurement rules. However, I assure noble Lords that the power is limited to specifying the meaning of a “qualifying air carrier”, which is, in essence, someone licensed under the existing regime for air carriers. This power is not wide-ranging and is needed only to ensure that the definition refers to the correct regime. Therefore, I ask noble Lords not to press Amendments 18 and 21.

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[Baroness Scott of Bybrook (Con)]

My Lords, I start by clarifying what utilities are covered in the Bill. Utilities are defined in it as public bodies, public undertakings or certain private undertakings that carry out utility activities. Public undertakings differ from public bodies in that they do not have functions of a public nature; their activities are more economic and commercial in nature. While it is no longer one, before the Government sold their shares in 2015 Eurostar International Ltd was a public undertaking.

The Bill covers private utilities only where they have been granted a special or exclusive right to carry out a utility activity. These are rights that have been granted by a statutory, regulatory or administrative provision and that substantially limit other entities from carrying out those activities. Rights are not special or exclusive when granted by following a competitive procedure or where the opportunity was adequately publicised and the rights were granted on the basis of an objective, non-discriminatory criterion.

Private utilities which enjoy “special or exclusive rights” are effectively in a monopoly position and therefore they could, however unlikely it is, engage in preferential treatment that, for example, favours their own affiliates or strategic partners and discriminates against other suppliers bidding for the contracts. The Bill applies to utilities only where they are carrying out the utility activities set out in Schedule 4: specifically, gas and heat, electricity, water, transport services, ports and airports, the extraction of oil and gas, and the exploration for or extraction of coal or other solid fuels.

The two government amendments in this group are minor and technical in nature. Amendment 20 to Schedule 2 is consequential on government Amendment 231, which amends Clause 35(6) to ensure a single definition of utility is applied to the whole Bill. In Schedule 2, paragraph 28(2) is therefore no longer required. The definition at Clause 35(6) is exactly the same as that contained in the deleted sub-paragraph (2).

Amendment 24 amends Clause 5(1) to define a utilities contract as a contract

“wholly or mainly for the purpose of a utility activity”.

The addition of “wholly or” is to reflect the reality that a utility contract can include solely or predominantly utility activities. This amendment to the terminology ensures consistency with the approach to mixed procurement used elsewhere in the Bill; for example, with Clause 8(1) on light touch contracts, where the same principle applies. I beg to move.

[Lord Purvis of Tweed (LD)]

I am grateful for the Minister’s explanations. Her colleague the noble Lord, Lord True, previewed some clarification regarding the Post Office, so perhaps she was forewarned. I have two questions for clarification, further to what she said.

The more specific question relates to freeports, which I raised in the technical discussion this morning. I would be grateful if the Minister could respond now, but if not I would be happy if she does so in writing. There are a number of areas of government policy—I am not debating the rights and wrongs of this—which have activities linked to the provision of utility services but which are not directly, wholly or mainly a utility service. I am concerned, for example, about whether the more commercial activity of freeports, which are government policy and have the benefit of being linked with a utility but do not provide utility services, may well be exempted. That would not bring about the level of transparency in the thresholds that I believe there should be. I am still scratching my head about the status of freeports.

The element raised earlier by the noble Lord, Lord True, on postal services is concerning. I am particularly interested in the status of Post Office Ltd. The noble Baroness, Lady McIntosh of Pickering, raised Parcelforce. I understand that Royal Mail and Parcelforce have a relationship with Post Office Ltd, and they provide different services. I understand that the Post Office is not considered a Schedule 4 utility, but clarification on whether it is covered under the public undertaking elements would be helpful. I ask because postal business of the Post Office is included under the procurement chapter, referred to by the noble Lord, Lord True, and annexe 16A of the UK-Australia agreement, as are postal services, which relate to letters, parcels, counter services and other such services. The classification under the WTO which the annexe uses links with the pick-up, transport and delivery services of letters, newspapers and journals, whether for domestic or foreign markets. I am not entirely clear about the status of that when it comes to Royal Mail services. They are covered within the procurement chapter of the Australia agreement, but I am not sure of their status in this Bill.

This speaks to the wider point that we are now in the realm of having to look at each of the 24 agreements in the schedule. Any authority or likely bidder for any of these works will have to study all these FTAs and all the procurement chapters, in addition to the EU-UK TCA, this legal framework, and the Scottish and Welsh ones. At the very least, we are now replacing one system with 25—or more likely with 27. That means it is not a more efficient way of covering it.

Finally—I asked earlier, because it is not clear in the impact assessment, and Ministers might write to me on this—now that the Government are clarifying their position in the Bill on those that are covered, not covered and the exemptions, I would like to see an update on the information about the likely number of contracts and the values in all these categories. I would be grateful for that information and for clarification on the Post Office.