Local Government: Ethical Procurement

Richard Burden Excerpts

Tuesday 15th March 2016 Westminster Hall

[Richard Burden (Birmingham, Northfield) (Lab)]

I beg to move,

That this House has considered local government and ethical procurement.

I am grateful for the opportunity to have this debate. As I look around, I see right hon. and hon. Members with very different views on Israel and Palestine, and people who disagree about what incentives or pressure should apply to either side to secure equal rights, including the rights of statehood and the right to security for the peoples of both Palestine and Israel.

As chair of the Britain-Palestine all-party parliamentary group, I take a close interest in the situation in the middle east. However, this debate is not primarily about whether any of us takes this view or that view on how to bring peace there; I sought today’s debate to hold Ministers to account and to require them to be clear about what their policy announcements mean and do not mean. This debate is also about the ability of those who are responsible in public institutions to exercise the judgments that they are appointed to exercise within the law when they make decisions. That could be in respect of how local authorities are accountable to their electorates for making decisions or of the ability of pensions trustees to make judgments in line with their fiduciary duties.

I welcome the Minister here today to answer questions about the procurement policy note issued by the Cabinet Office on 17 February entitled “Putting a stop to public procurement boycotts” and about the proposed changes to the rules governing the local government pension scheme’s investments—for which I understand the Cabinet Office is also responsible, for some reason. I look to the Minister to answer what he will be asked clearly and without ambiguity. That is always important, but it is even more important on these matters because the Minister for the Cabinet Office and Paymaster General has volunteered very little about them to the House. That is in stark contrast to the amount of publicity he has sought to generate for his proposals outside the House.

For where this all starts, we need to go back to the Conservative party conference last October. A press release was issued in which the right hon. Gentleman was quoted. It was headlined “Government to stop ‘divisive’ town hall boycotts and sanctions” and said that action was going to be taken against the

“growing spread of militant divestment campaigns against UK defence and Israeli firms.”

However, that press release also contained a note to editors, as press releases often do, that suggested that a large number of the local authorities and public institutions that were apparently due to be targeted by the new rules had not resolved to divest from companies on the grounds that they were Israeli or of any other nationality. They had made or were in the course of making procurement or investment decisions on the basis of the behaviour of companies, irrespective of their nationality. In fact, the behaviour most frequently mentioned in the press release was financial involvement with illegal settlements in the west bank, about which local authorities and others were concerned.

I know that in October last year, collective Cabinet responsibility was perhaps expected rather more than it appears to be these days. However, it is rather surprising that the Minister for the Cabinet Office took such exception to public institutions seeking to avoid dealings with companies involved with illegal settlements, given that the Foreign Office’s own website carries very different advice.

[Jo Cox (Batley and Spen) (Lab)]

I congratulate my hon. Friend on securing this vital discussion. As he will be aware, the UK Trade & Investment website, which is sponsored by the Foreign Office, states:

“we do not encourage or offer support”

to firms that trade with illegal settlements. Does my hon. Friend agree that we find ourselves in a perverse situation? The Foreign Office is warning UK companies and private individuals against trading with the settlements, while the Department for Communities and Local Government and the Cabinet Office are threatening to make it illegal for public bodies to do so.

[Richard Burden]

My hon. Friend is absolutely right. It is worth quoting directly from that Foreign Office advice, which is there to this day. It says:

“Settlements are illegal under international law, constitute an obstacle to peace”

and “threaten” the “two-state solution”. It goes on:

“There are therefore clear risks related to economic and financial activities in the settlements, and”—

as my hon. Friend just said—

“we do not encourage or offer support to such activity. Financial transactions, investments, purchases, procurements as well as other economic activities (including in services like tourism) in Israeli settlements or benefiting Israeli settlements, entail legal and economic risks stemming from the fact that the Israeli settlements, according to international law, are built on occupied land and are not recognised as a legitimate part of Israel’s territory.”

[Imran Hussain (Bradford East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Streeter. I thank my hon. Friend for securing such an important debate. Does he agree that local authorities are in fact a branch of the state and therefore have a duty to observe our obligations under international human rights law?

[Richard Burden]

I understand what my hon. Friend says, but this is also about different public institutions making judgments in line with the law and their best belief of what the situation is. I hope that all public institutions would pay due regard to international law.

[Andy Slaughter (Hammersmith) (Lab)]

Will my hon. Friend give way?

[Richard Burden]

Before giving way, I just want to finish this quote from the Foreign Office advice:

“This may result in disputed titles to the land, water, mineral or other natural resources which might be the subject of purchase or investment. EU citizens and businesses should also be aware of the potential reputational implications of getting involved in economic and financial activities in settlements, as well as possible abuses of the rights of individuals. Those contemplating any economic or financial involvement in settlements should seek appropriate legal advice.”

[Andy Slaughter]

Following the point that my hon. Friend the Member for Bradford East (Imran Hussain) just made, the Foreign Office guidance also talks about

“possible violations of international humanitarian law and human rights law”.

Indeed, the Foreign Office guidance is very clear, whereas the procurement policy note is very unclear. Does my hon. Friend the Member for Birmingham, Northfield (Richard Burden) agree that that may be intentional—that the actual aim is not to change the law, but to discourage and blackmail local authorities into not taking steps that may be perfectly legitimate and that the Foreign Office is encouraging them to take?

[Richard Burden]

The point that my hon. Friend makes is about the fear that a lot of people have about the agenda behind this procurement policy note.

[Stephen Pound (Ealing North) (Lab)]

My hon. Friend is constructing a very powerful case. Does he agree that this is about not necessarily Israel but a much wider issue? It is about the freedom of people in local government to do as I and five of my fellow councillors—who all subsequently became MPs—did in the London Borough of Ealing in 1982, when we were quite happy to disinvest in Barclays. Will my hon. Friend remind me about what element of parliamentary scrutiny or involvement there was when the statement was made by the Minister for the Cabinet Office in February this year? I do not recall it being mentioned on the Floor of the House at all.

[Richard Burden]

My hon. Friend is quite right. Parliamentary scrutiny of this matter has come down to a number of us having to ask questions—to which we have had not very detailed replies, I have to say—and to this debate. We had to apply for a debate in Westminster Hall to get any parliamentary scrutiny of this matter at all.

[Helen Goodman (Bishop Auckland) (Lab)]

I am grateful to my hon. Friend for securing this debate and for giving me an opportunity to ask him this question. I asked the Cabinet Office and a number of other Departments whether they had recently met people from the arms industry, the tobacco industry or, indeed, the Israeli embassy who may have lobbied for this measure. I am afraid that I did not get a substantive response from any of the Departments. Has my hon. Friend had any answers to questions such as that?

[Richard Burden]

I am afraid that my hon. Friend’s experience rather mirrors mine and that of a number of other hon. Members.

[Chloe Smith (Norwich North) (Con)]

This point is merely about the mechanics of parliamentary time. I simply wonder whether the hon. Gentleman knows how many procurement policy notes there have been in 2014, 2015 and 2016, and how many of those have merited parliamentary scrutiny in their own right.

--- Later in debate ---

[Richard Burden]

I have no idea about that, but if the hon. Lady thinks this is not a very significant public procurement note that merits parliamentary scrutiny, I wonder why the Minister for the Cabinet Office took the trouble of announcing it in a press conference with the Prime Minister of Israel on 17 February.

On 16 December, I asked the Secretary of State for International Development whether she agreed with the Foreign Office that it was perfectly reasonable for both public and private institutions to pay due regard to that Foreign Office advice when they make their own investment and procurement decisions. Her answer was unequivocal. She said:

“They should do that; that is good Foreign Office advice.”—[Official Report, 16 December 2015; Vol. 603, c. 1534.]

So my first question to the Minister is this: were civil servants consulted at all before the press release was issued at the Conservative party conference? I am happy to give way to him if he has a reply.

[The Parliamentary Secretary, Cabinet Office (John Penrose)]

I was planning to wait until the end and collect what I am sure will be a whole series of questions. Perhaps that will allow me to wrap them all up together in a series of responses.

[Richard Burden]

I am very happy for that to happen. I give the Minister notice that there will be six questions on which I am seeking answers.

Did Ministers really take the view that public institutions should not have the same rights and concerns as private institutions when it comes to good business practice and corporate social responsibility? What was it that Ministers were trying to outlaw? The public procurement note published on 17 February appears to suggest much less than the Conservative press release of October; it appears to say that institutions should not impose a blanket ban on contracts with companies on the basis of the nationality of the companies concerned, in line with existing EU and World Trade Organisation rules. We know that the WTO forbids the use of quantitative restrictions, such as a ban on imports—phrased in terms of products originating in the “territory” of another WTO member.

On 9 March, in answer to a question from my hon. Friend the Member for Hammersmith (Andy Slaughter) about whether the occupied territories could be considered part of Israel, the Under-Secretary of State for Foreign and Commonwealth Affairs, the hon. Member for Bournemouth East (Mr Ellwood), was absolutely clear:

“The World Trade Organisation does not define the territory of its members. The UK does not recognise Israeli sovereignty over the territories occupied by Israel in 1967. We therefore do not consider the Occupied Palestinian Territories to be part of Israel.”

So my second question to the Minister is this: is there anything in this public procurement notice or that is intended by the Government that in any way changes that?

European Union rules are also mentioned in the public procurement notice. They allow public institutions, on a case-by-case basis, to exclude companies from tenders on the basis of their behaviour, specifically where grave misconduct may be involved. What could that mean? Let us turn again to the Government’s own documents—to their 2013 national action plan on implementing the UN guiding principles on human rights and business. An extract from that states that the UK Government

“are committed to ensuring that in UK Government procurement human rights related matters are reflected appropriately when purchasing goods, works and services. Under the public procurement rules public bodies may exclude tenderers from bidding for a contract opportunity in certain circumstances, including where there is information showing grave misconduct by a company in the course of its business or profession. Such misconduct might arise in cases where there are breaches of human rights.”

My third question to the Minister is therefore this: does the February 2016 public procurement note in any way change or add to that advice?

My fourth question is about whether the Minister considers that a breach of the fourth Geneva convention is a breach of human rights. If he does, would the public procurement note restrict a public institution from resolving not to deal with a company that was involved in aiding and abetting breaches of that convention?

If the public procurement note is prompting these and more questions, so, too, are the changes that the Cabinet Office says it is going to introduce in relation to investment decisions of local government pension funds. So my fifth question is this: pension fund trustees are already covered by a fiduciary duty, but will the changes being introduced in any way fetter the judgments that they make in line with that fiduciary duty in relation to, say, not investing in fossil fuels, tobacco or the arms trade?

My sixth question logically follows from that: in order to be clear on these points, will the Minister outline what plans he has for parliamentary scrutiny of these changes to pension fund guidance? Specifically, will he commit to consulting on any draft guidance he intends to issue in respect of local government pension scheme investments before it is published and before Parliament, through whatever procedure, is asked to make any kind of decision on these changes?

[Stephen Timms (East Ham) (Lab)]

My hon. Friend is setting out a clear set of questions, and he has made it clear that there is some ambiguity about precisely what the impact of the guidance note is. Is his reading of it that the kind of disinvestment by a local authority pension fund that was referred to earlier—Barclays and activities in South Africa—would be ruled out?

[Richard Burden]

I should say in answer to my right hon. Friend that I honestly do not know. That is the whole point—the Minister has to answer these questions. The wording of the Conservative party press release would certainly indicate to me that that kind of thing would be outlawed, but the Minister has to give specific answers today to these specific questions. That is important because it simply is not acceptable for councils, pension funds or other public institutions to feel threatened away from acting in line with their best judgments, in line with their duties, as a result of innuendo broadcast by the Cabinet Office Minister at the Conservative party conference—or indeed, broadcast more recently in Israel.

[Stephen Pound]

I am not entirely sure whether the Church of England is counted as an institution in this context, but does my hon. Friend realise that it would certainly be caught up in this guidance note?

--- Later in debate ---

[Richard Burden]

My hon. Friend is absolutely right about that; that could be a seventh question for the Minister.

The Minister no doubt spoke to his right hon. Friend the Minister for the Cabinet Office before this debate, so perhaps he knows why his right hon. Friend decided to launch this public procurement note not in a statement to the House or under any House procedure, but in a press conference alongside the Prime Minister of Israel. If the reason was that he wanted to make a point on the world stage about this Government’s opposition to generalised boycotts of Israel, then okay—if he wants to make that point—but why did he apparently not feel any need to utter a word about other parts of Government policy, such as the fact that settlements in the occupied territories are illegal?

Why was there not a word about the fact that Israel had only recently withdrawn co-operation from an independent delegation of UK lawyers acting on a Foreign Office-supported project, which has found that Israel’s treatment of Palestinian child prisoners breached article 76 of fourth Geneva convention and several articles of the UN convention on the rights of the child? Why did the right hon. Gentleman not find time to mention that in the first six weeks of 2016, over 400 Palestinians have been displaced from their homes? That is over half the total number of Palestinians displaced in the whole of 2015.

I suspect that the Minister for the Cabinet Office’s apparent failure to say a word publicly about those things during his visit illustrates a rather strange set of priorities and a highly selective approach to UK policies on the Israel-Palestine question. He will have to answer for himself about his priorities and inconsistencies, but the Minister here today has an obligation to answer, on behalf of the Government, the specific questions about the procurement policy note and the changes they intend for local authority pension regulations. I have asked this Minister six specific questions and I ask him to do the House the courtesy of giving six clear and unambiguous answers to those questions today.

[Several hon. Members rose—]

--- Later in debate ---

[Richard Burden]

I always thought that public procurement notes were meant to clarify procurement rules, but the Minister has just demonstrated the art of muddying them through his explanation of this procurement note. He said that the note is not Israel-specific; it just happens that the Minister for the Cabinet Office announced it in a Conservative party conference press release that was almost entirely devoted to the situation in the middle east, and then announced the public procurement note itself in Israel.

If settlements are illegal, I fail to see how trade with those settlements and co-operation with businesses involved in aiding and abetting illegality is not itself illegal. That is what the Foreign Office advice to business is about. I know that the Minister has had a problem today; for some time now, we have been trying to work out which Minister would reply to this debate. I get the impression that this is a parcel that has been passed from pillar to post.

[John Penrose]

We are a flexible team.

[Richard Burden]

Eminently flexible—with flexible rules as well, by the sound of it. My six questions have not been answered to my satisfaction, nor have the questions asked by other hon. Members. I ask the Minister to answer in writing.

Motion lapsed (Standing Order No. 10(6)).