Outsourcing: Government Departments

Mike Wood Excerpts

Wednesday 29th January 2025 Westminster Hall

[Mike Wood (Kingswinford and South Staffordshire) (Con)]

I congratulate the hon. Member for Middlesbrough and Thornaby East (Andy McDonald) on securing this debate. He may not be surprised to learn that I do not agree with his general position. I thank the many Members who have contributed to the debate. I must admit that some of the contributions by Government Members left me feeling a little nostalgic, although I suspect that the Prime Minister and some Government Whips might prefer them to keep such views under wraps a little more.

It is a pleasure to speak in this debate on outsourcing, which, when handled well, delivers efficiency, value for money and innovation in the provision of public services. Unfortunately, however, the actions we have seen so far from the Government are further complicating and undermining effective public procurement. Rather than building on the progress made by the previous Government, Labour is making public procurement more burdensome, less efficient and increasingly dictated by trade unions. That will make it more difficult to make outsourcing work for service users and taxpayers.

The Procurement Act 2023 was introduced to ensure a streamlined, modernised and effective procurement system that would deliver better outcomes for taxpayers. The Act was designed to cut red tape, improve transparency and ensure that public contracts were awarded based on value and efficiency, but the new Government have delayed its implementation. They have announced plans for a new national procurement policy statement—

[Grahame Morris]

I am interested in the hon. Member’s contention about value for money. Does he actually believe that the prison maintenance contract delivers value for money for the taxpayer?

[Mike Wood]

Numerous reports, not least by the Institute for Government, have found that, in many areas of Government activity, outsourcing and public procurement from private providers improves service and value for money for the taxpayer. Of course, it can be done badly, and the Probation Service is the obvious example where it clearly never worked. Although the pandemic brought things to a critical point, it was becoming increasingly difficult even before then to argue that that private provision was providing a satisfactory service.

We are still waiting for the national procurement policy statement, less than four weeks before the Procurement Act is due to commence. The new Government claim that the Act, in its current form, does not meet their vision for harnessing public procurement to deliver economic growth, value for money and social value, but it looks increasingly as though what they mean is that they want to use public contracts as a vehicle to expand trade union influence in Government, imposing costly and unnecessary regulatory burdens on businesses. In the absence of a national procurement policy statement, the Government are introducing further restrictions and bureaucracy through what they call “Make Work Pay”, but for a lot of employers that looks a lot like just making jobs more expensive.

Businesses seeking Government contracts are to be required to demonstrate trade union recognition, access for union organisers, collective bargaining arrangements, adherence to so-called fair work standards that go well beyond legal obligations, and other social commitments. Recent parliamentary answers have confirmed that those requirements will apply not only to large firms, but to small and medium-sized enterprises, undoing a lot of the good work in the Procurement Act that aimed to open up public procurement contracts to a wider range of smaller businesses.

This is not about ensuring fair treatment of workers. UK employment law already provides robust protections. This is about allowing unions to dictate the terms of our public procurement, favouring firms that meet ideological criteria rather than those that offer the best value and most efficient service.

[Ian Lavery]

Does the hon. Gentleman think it is right that in certain private companies, individuals are able to claim universal credit, while directors of the very same companies are trousering thousands of pounds, as are the dividend holders? It is a burden on the taxpayer—does he agree?

[Mike Wood]

Businesses have to fulfil their legal obligations. The previous Government introduced the national living wage, which will increase this April under the current Government, and of course where businesses of whatever type are failing to pay the national living wage, there must be proper enforcement and legal consequences.

We need to be clear about what the Government’s changes mean in practice. Instead of being awarded contracts on the basis of cost-effectiveness and efficiency, businesses will have to navigate a minefield of additional requirements, making it harder for SMEs to compete for public contracts. The added complexity will inevitably drive up costs and reduce competition, and it will ultimately mean that taxpayers get less for their money and a poorer service.

Beyond increasing costs and inefficiencies, this approach risks distorting the market by prioritising ideology over quality. Public contracts must be awarded to the best providers, whether in house or private. That means those that offer the most efficient service at the best price, rather than those that can best navigate a politically driven procurement system. The increased focus on trade union influence in procurement raises serious concerns about political favouritism and undermines the principle of fair competition.

[Graham Leadbitter]

Will the hon. Gentleman give way?

[Mike Wood]

I really need to make progress so that the Minister can respond.

It is particularly troubling that Labour has refused to clarify exactly how the new procurement rules will work in practice. The NPPS, which is meant to lay out the Government’s plans, has yet to be published, leaving businesses uncertain about the future landscape of public contracts. The previous version was published nearly six months before the Procurement Act was due to commence. It is now less than four weeks before the date the Minister indicated that the Act will commence. There is no sign of what the new rules will be, and yet businesses will be expected to adapt.

Furthermore, it is essential to recognise that the regulatory burden placed on firms seeking Government contracts will have a chilling effect on investment, innovation and the growth that I understand the Chancellor is speaking of this morning. If businesses perceive that public procurement is more about politics than performance, they will simply withdraw from bidding for contracts. That will leave fewer providers and make us more reliant on a small number of mega-contractors, reducing competitive pressure to drive efficiencies. That would be disastrous for taxpayers, who deserve the best services at the lowest cost.

The previous Government recognised the need for reform and took decisive action to improve procurement. This Government, on the other hand, are undoing that work by creating a system in which trade unions hold the keys to public contracts and require businesses to comply with unnecessary and costly obligations that do nothing to improve service delivery.

Public procurement should be about securing the best services at the best price for the taxpayer, not about enforcing an ideological agenda. Labour’s approach will lead to inefficiency and waste, and will reduce competition —all at the expense of businesses and the public, who rely on well-managed services. If the Government continue down this path, they risk severely damaging the UK’s ability to run a fair and efficient public procurement system.

I have a number of questions that I hope the Minister will address. When will the Government next update their model services contract guidance and the outsourcing playbook? Are Departments still on track to save £550 million this financial year, as the Government promised they would in November? What steps are the Government taking to ensure that microbusinesses and SMEs are not excluded from bidding for, or engaging with, public sector outsourcing opportunities? What contact has the Minister had with the Business Services Association regarding any updates to the Government’s outsourcing policies? What discussions have she and her colleagues had with colleagues at the Crown Commercial Service regarding the operation of the RM6277 framework? Finally, do the Government still expect the Procurement Act to commence on 24 February? If they do, does the Minister think the very short time that businesses have to adapt between the publication of the policy statement and the commencement of the Act is acceptable?

Outsourcing and public procurement are a real test for this Government. Will they fall back on the ideology of the past or represent the interests of the public going forward? Are they working in the interests of those who use and pay for services, or in the interests of union paymasters?

[Sir Jeremy Wright (in the Chair)]

I will now call the Minister to respond. If there is any time left before 11 o’clock, I will invite Andy McDonald to wind up, if he wishes to.