Local Authorities (Procurement)

Stephen McPartland Excerpts

Tuesday 24th April 2012 Westminster Hall

[John Stevenson (Carlisle) (Con)]

It is a pleasure to serve under your chairmanship today, Ms Clark.

The Government, I am delighted to say, are committed to a localism agenda, which I fully support and welcome. A key element of the agenda involves freeing up local government so that more decisions are made locally, ensuring that central Government funding is less prescriptive. Even now, we remain a highly centralised country and more needs to be done to give greater freedom and more power to local authorities, giving them the ability to make decisions on local matters. With greater powers comes increased responsibility, and local authorities will have to rise to the challenge that the Government are offering them, which I believe they can do. Whether or not we think that they can rise to the occasion, we must realise the important role of local government in our country. We national politicians and national Government often underestimate the influence and importance of local government.

As well as acknowledging that power needs to be decentralised, the Government have recognised that the regions and large cities of the country can and should be economic drivers. They can boost economic activity and bring prosperity and jobs to their own city or locality. That concept not only applies to the large urban centres, but can be of equal significance to the smaller cities such as Carlisle and the smaller towns such as Stevenage. Even smaller towns and regions throughout Britain can also play a role. It is therefore clear, certainly to me, that local government has an extremely important role in ensuring the economic success of our country, and not only in the success of its own local economy.

Part of that role is the recognition by councils that they are significant purchasers of goods and services. To some extent, they can influence the success or otherwise of local businesses. In the UK, government spends in the region of £220 billion each year procuring goods and services; £42 billion of that is spent by local authorities alone—almost 20% of the national procurement spend. It is therefore abundantly clear that such procurement is of significant importance to local communities as well as to local economies. When a local authority purchases goods and services from local businesses, it is spending money in its own community, which benefits the local economy and local people.

Take the example of a local business providing a service or a variety of goods to an authority. The business will employ local people to deliver the service or to provide the goods to the authority; those local people employed by the business will, in turn, spend their wages in the same local economy, feeding directly into the general economic activity of the area. Such a virtuous cycle can have enormous benefits to a particular town or city, especially the smaller ones. Again, good examples are my own city of Carlisle and somewhere such as Stevenage. By the same token, procurement of services outside an area might save the council some money in the short term, but could easily have a detrimental effect on the local economy in the long term.

Before raising a number of issues with the Minister, I accept that proper procedures have to be in place and that appropriate rules need to be applied to any procurement policy. I also acknowledge and accept that any procurement policy of an authority has to take into account European law and other international agreements, as well as our own domestic law and, in particular, competition policy. The size and value of the procurement is also a key issue.

[Stephen McPartland (Stevenage) (Con)]

Does my hon. Friend accept that European Union directives on public procurement are often gold-plated by local authorities and act as a barrier to the ability of local companies to provide services for those authorities?

[John Stevenson]

Yes, I do accept that. It probably happens at the national level as well. National Government should look at the issue and encourage local government to follow what could be their example if they watered down some of the policies coming out of Europe.

Clearly and rightly, an authority that wants to make a substantial purchase of goods or services must follow strict procedures, but there can and should be flexibility, particularly for smaller purchases of goods and services by local authorities. I accept that there must be clear procedures in place for smaller procurement contracts, that there must be openness and transparency, and that there must be no opportunity for inappropriate contracts. However, there are opportunities for local authorities through their procurement policies to help to support and to develop their local economy by procuring from local businesses and thereby benefiting the wider local community.

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[Stephen McPartland (Stevenage) (Con)]

It is a pleasure to serve under your chairmanship, Ms Clark. I thank my hon. Friend the Member for Carlisle (John Stevenson) for securing such an important debate.

The Minister is aware that more than £70 billion a year is spent by local government on the procurement of local goods and services, and even a small saving would make a huge financial difference. The Local Government Association is promoting the use of procurement hubs, which can save councils millions of pounds, and it should be congratulated on trying to develop tools to help councils come together to form those groups and deliver better value for money. It also promotes greater innovation: a subject close to my heart is that of using technology to promote jobs and growth. I commend the development of e-auctions in particular. Those are electronic reverse tenders, in which potential suppliers compete online in real time to win a contract. Case studies show a 15% to 30% saving.

My constituency of Stevenage is in the county of Hertfordshire and the 10 district councils have joined up with the county council to create Supply Hertfordshire, our own procurement hub. That has expanded to include the local NHS, the probation trust, Hertfordshire police, some housing associations and a range of other organisations.

[John Stevenson]

My hon. Friend raises an interesting point. I have been talking about local authorities, but he seems to be pursuing the line not only that local authorities have a role to play, but that other public bodies, such as the NHS and police, can be equally significant in their procurement policies and in effective local economies.

[Stephen McPartland]

I completely agree with my hon. Friend. In a county such as Hertfordshire, when the police, probation service and NHS are brought in, the amount of money that the Government are handing over to be delivered locally runs into billions of pounds.

Supply Hertfordshire’s ambition is to become the focal point for supplying to the public sector in Hertfordshire. That is an inspiring ambition and it has my full support. However, I am keen to ask the Minister what support the Government can give to help turn that ambition into reality and provide jobs and growth for my local economy. I am patron of an organisation called biz4Biz, which is a collection of local businesses. In Stevenage it is considered to be the voice of the small business community. It is involved in a range of projects, but we are all keen to understand why it is difficult for small companies, including many with multi-million pound turnovers, to get access to public sector contracts locally. I have been approached by businesses from all over the country that are concerned they are missing out on huge opportunities locally that would boost jobs and local economic growth because they cannot navigate the labyrinth of public sector procurement locally. Some companies have informed me that they have missed out on tenders a number of times, with very little feedback. As a result they can no longer afford the time and cost to their company of attempting another tender.

Other companies have been told that EU public procurement rules prevent them from even applying in the first place. I know that those EU rules are gold-plated locally at the expense of local companies, but that leads to a loss of opportunity, particularly for the younger members of our community trying to get their first job and first step on the road to a career. We can change that and we can make a difference. The Government are giving local people more powers under the Localism Act 2011, but we must go further.

Will the Minister consider asking local authorities to sign up to the principle that they, like the Government, should aspire to give 25% of their contracts to small businesses? In the case of local government, it would have to aspire to give 25% of its contracts to small businesses in the locality. Will he go further and urge local authorities to publish all successful tenders on their website, so that companies that do not succeed can benchmark their own bid against that of the successful bidder? They could then learn from their mistakes or possibly even challenge the local authority to have another look into it under the powers contained in the Localism Act.