Public Procurement and the Civil Society Strategy

Lord Stevenson of Balmacara Excerpts

Thursday 23rd May 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, like others, I thank the noble Baroness, Lady McGregor-Smith, for securing this debate and I also thank her for her excellent overview of the case that she made for increasing the social value of public procurement.

There are not many of us here today. I suspect that the timing of the slot has not maximised the attendance. But I hope that lots of people will read this debate, because we have had excellent contributions from around the House, largely in support of the proposition in the Motion and drawing on experiences which, together, have woven a very convincing argument that I am sure will reach out beyond the very small number of people who have been able to attend today.

The general impression is that this issue, having been around for a few years, is now reaching the point where it needs more action and more support. I do not think that there would be very much concern if the Government decided that they wanted to put a motor under it. They should take comfort from the fact that, although there was a bit of a bad smell about this whole area after the big society—which did not really take off and never really seemed to resolve anything in one direction or another—out of it have come other good ideas and good issues that are worthy of consideration.

It is very interesting to read in the wider papers that other people are beginning to talk this up. For instance, there was a piece in the papers this week in which Andy Haldane, the chief economist of the Bank of England, was interviewed. He talked specifically about the need for civil society, which he thinks will be crucial in the technological age, and the need to rebuild it. If that is the level and range of the debate, and if we add in the fact that there is not much party difference on this—I think we can all support it, whichever part of the political spectrum we come from—there is an opportunity to do something.

Having said that, we have to ask ourselves some of the questions that have already been raised. Why has there not been growth in the quantum of activity in the public realm delivered by social enterprise? I remember being involved and interested in this towards the end of the last Labour Government and being very confused about why, with all the public support, political support and, eventually, legal support in terms of an Act, there had not been the lift-off that one would have expected.

Why has the activity been so patchy across the whole country—not just in relation to government involvement but in other areas, particularly the NHS? Some bits are good but others are not doing it. Why is that? In addition, what is the best legal form that will be required to help it to develop? The report produced by the noble Lord, Lord Young of Graffham, talked about vertical and horizontal increases in terms of the bite of this policy, but no answer was given as to how one might do that.

Others have picked up the important question of why we are not seeing linkages between this initiative and, as we mentioned, many of the other areas in which similar activity, thinking and developments are taking place, with particular reference to the public sector enterprise duty, which is something that I want to come back to. Whether or not we leave the EU at the end of the day, or whatever circumstances we find ourselves in, the point made by my noble friend Lord Haskel about the need to make sure that we protect ourselves and do what is right for the UK against external pressures is something that we need to return to.

The current legal framework, found in the Public Services (Social Value) Act 2012, although not implemented until 2013, requires commissioners to consider securing economic, social or environmental benefits when buying services which come in above the OJEU threshold. As was pointed out by most people, that is a rather weak formulation, and it may well be that it is the major issue that needs to be addressed. However, it poses quite a big dilemma for those who want to make policy in this area.

The social value Act is firmly rooted in best-value commissioning, yoked therefore to a requirement best expressed in pure monetary values. However, in truth, as we have heard, it is best considered as a tool to promote a much wider uptake of a particular approach to commissioning for best value—that is, social capital. At its most useful, the Act provides a way to think about public services in a more coherent way that plays into the redesign of those services for the benefit of users—what I think the noble Lord, Lord Shipley, called the outcomes. However, the tension between the two outcomes specified in the Act is at the root of the problem, and I very much hope that the consultation that is going on will, if not resolve it directly, at least recognise the dilemma and bring forward ideas.

I have already mentioned the review of the original Act carried out by the noble Lord, Lord Young of Graffham, and it is important to have that in our mind as we go forward. He found that where the Act had been taken up, it had had a positive effect, encouraging a more holistic approach to commissioning, which he felt was of value. The Act has made commissioners think about securing value through procurement in innovative ways. Some people are concerned that we have lost innovation, but he found it there, as well as significant cost savings and a more responsive way of delivering better services. But he pointed out a number of concerns that are still relevant and part of the debate.

The incorporation of social values into actual procurement appears to be very low compared with the number and value of procurements across the whole public sector; we have heard figures today from many speakers. Many respondents showed a lack of understanding of how to apply the Act, and that had led to inconsistent practice, making it difficult to evaluate this. The noble Lord felt that commissioners needed to be better able to measure and quantify the social outcomes we are seeking to embed in the procurement process. This comes up time and again and I am sure the Minister will want to address it in his response. So the Act is delivering positive benefits where it is operating well, but awareness, understanding and measurement are the main problems.

The consultation was launched in 2018 and we have a chance to see whether this can be brought forward. I understand that it is due to finish in early June 2019. The Minister is an expert at ducking questions of timing on this; I am sure he will say that the results will be out “soon” or “shortly”—I await a variation on that if there is one. We need this. As I have tried to hint, there is a bit of space here which could be filled if the Government were to come forward with some really heavy proposals; a lot more progress could be made.

As we have heard, the framework within which this has been discussed is a cross-governmental framework for social value with common policy themes, outcomes and metrics; that answers the questions raised by the noble Lord, Lord Young, about the difficulty in getting on with this if we do not know what we are trying to measure. I agree with those who have said that the minimum 10% social value weighting should be higher. There is a need for training and development for buyers working across central government procurement teams, and this will be brought out by having champions and those who might lead both centrally and locally.

There are questions arising from the consultation, which I am sure the Minister will respond to. How do we get the law better suited to the aspirations? Suggestions have been made today about extending it so that all public bodies have to do this, and to make sure that it covers all aspects of procurement: goods, services and works. If we add in the comments made on equality, not talking about major construction contracts looks like a strange decision.

Social value is not always a strategic priority; it is sometimes considered as something for procurement teams only, so opportunities are being missed. We have to make sure that those who implement this recognise that social value is about finding ways of using public money to support the well-being of all our citizens. If it is to be successful, measurement and reporting will have to be systematised within a national framework. However, with a national framework would come a concern that we would lose innovation—the chance to do things in a different way. Perhaps the mutuals that the noble Lord, Lord Maude, spoke about would find it difficult to chance their arms on an area that was not in the national framework. We should be careful about national frameworks if they suppress the sorts of things that we want to talk about.

The Government have been quite innovative in some of these areas. We should not forget the work on GDP, or on happiness as a substitute for GDP as a measure of the success of the economy. This work is bringing issues such as social value into the forefront of consultation and debate. So why do we not try to build on that? There is also a suggestion, which has some merit, about a “social value budget” based on social values generated by all departments affected by this, in the same way as for the green budget. That would be a way to get more discussion and debate going across the country.

I conclude by suggesting a number of questions to which the Government should respond. How will they make Whitehall the leading adopter of social value? Many people have spoken of the need to root out the differences between the various departments and the different approaches being taken. Obviously that is an ongoing and much wider debate. But the Cabinet Office is in a good position to do it. What is the trick that will make this work?

Can we come up with a proper definition of social value? In its broadest sense, it is about added value that creates jobs or uses more environmentally sustainable products, but what is the nature of the metric that we are talking about here? How will we ensure that we have a framework that will not prevent people being innovative? That is a point that I have already made. Will the Government lead on this, or will some other body be created that has responsibility? Will some sort of non-departmental body take this on? The system of government that we use will be important. Whatever is in place, it must be rigorous, and lead to comparable and transparent outcomes.

The Government might want to think about the difference between the social value Act and the requirements of the public sector equality duty because of the difference between “consideration” and being made “accountable”. If people have only to consider social value, they will not have the same approach as if they have to account for what they do in social-value terms. That is a very important point.

I was struck by the points made by the noble Baroness, Lady Finn, about the difficulties faced by SMEs. I endorse her view that this would be a great opportunity to try to resolve the bugbear about payment ratios to SMEs. She did not mention, but might want to look at, our argument in recent months for the need to give more powers to the Small Business Commissioner. If that person had more responsibility for making sure that prompt payment codes were implemented, they could also have a role to play on social value. That is a possible way forward. The post already exists and we would like it to take on these extra powers.

During a political hiatus such as that we are currently in, it is often the case that things that have clear political support all around can make progress. As I have hinted before, we would certainly like to get something done on this to make sure it works. I wish the Government well if they want to do so.

--- Later in debate ---

[Lord Young of Cookham]

My understanding is that it is advisory, because it was not included in the mandated list I just read out. If I am wrong I will write to the noble Lord.

The noble Lord asked why the strategy guidance has not been issued and whether we will produce a quick guide on it. We actually published guidance on how to work with central government, including social value, working with the VCSE Crown representative Claire Dove. The DCMS and the Cabinet Office are working with the advisory panel to understand the needs of the sectors and to prepare for the changes to social value. We will work with the sector representative bodies to produce the guidance the noble Lord just asked for.

The noble Lord asked for an annual report on social value procurement. Again, in his announcement in June last year the Chancellor of the Duchy of Lancaster included a requirement for central government departments to report on social value.

I was asked why large government contracts are out of scope for social value procurement. The answer is that the balanced scorecard is already in place to cover procurement of over £10 million. That already covers socioeconomic factors. The new social value framework covers everything below £10 million and above the Public Contracts Regulations threshold.

[Lord Stevenson of Balmacara]

On that point, use of large construction contracts was particularly mentioned. Could the noble Lord take that back and consider it further? The point is not so much the value of the goods and services concerned, but the point made by the Equality and Human Rights Commission—that the impact on employment and the way it is inclusive of a diversity of employees and on apprenticeships and training is so great that the sheer numeric value cut-off was limiting the effect of the social value Act. Would he consider that again?

[Lord Young of Cookham]

I will reflect on that. I understand exactly the point that the noble Lord makes and that there would be value in extending it upwards. Perhaps I will write to him when I have taken advice on that.

We would be very happy to discuss the network of social value champions with partners in the sector.

One of the main themes emerging from the debate has been the need for the Government to encourage as wide a range of suppliers as possible to deliver the objectives we have been discussing. We remain fully committed to supporting small and medium-sized enterprises and the voluntary, community and social enterprise sector, and indeed helping the mutuals that my noble friend referred to. Our work with sector bodies and individual companies through the Crown representative network will continue, unlocking more opportunities for smaller businesses and those owned by underrepresented groups, as well as mutuals and charities.

Initiatives around prompt payment, simpler bidding processes, better visibility of opportunities in the supply chain and the Public Procurement Review Service have all been established to stimulate SMEs and VCSE organisations as the lifeblood of the economy. Our approach underpins this. I understand the point made by my noble friend Lady Finn and the noble Lord, Lord Stevenson, about prompt payment. I believe prompt payment is a condition of any public sector contract. If a contractor does not promptly pay he runs the risk of being removed from the list of approved contractors. I was interested in the noble Lord’s suggestion that the Small Business Commissioner might have his energies harnessed in this area. I will certainly reflect on that.

With the Crown representative for VCSEs we are producing supporting guidance for smaller organisations bidding as part of consortia, and have helped buyers to better understand how they can level the playing field for SMEs and VCSEs in our introductory guidance on the social value Act. In line with best practice in policy-making, we are piloting the outline framework to see how it will be applied in practice and to help formulate the guidance on evaluating bids fairly and consistently. Two of these pilots are for major national contracts and one is a national framework agreement. Let me be clear that, in doing so, the Government are absolutely committed to ensuring it does not add complexity or cost to the procurement process. We do not want to restrict markets or exclude small businesses and voluntary, community and social enterprise organisations from government contracts.

It is always the misfortune of the Opposition spokesman to have the answers to his questions arrive right at the end of a debate. I am afraid that misfortune has fallen once again on the noble Lord, Lord Stevenson. I will convert the handwritten notes I have in front of me into something legible and typed up and write to the noble Lord to deal with the issues he raised about instilling social value procurement, what steps we are taking to create a standard definition, how this will link to the public sector equality duty, which is an important point that he raised, and how we will make Whitehall a leading partner in social procurement.

We want to see more good practice and to accelerate the opportunities available for the UK’s small businesses and VCSEs. In the words of I think my noble friend Lady Finn, we want to put social values at the heart of service delivery. This new approach is the next step in our journey of transforming how the Government are delivering smarter, more thoughtful and effective public services. We will utilise our huge purchasing power to deliver on our promise of a fairer society that works for everyone.