Public Procurement (British Goods and Services) Bill

Steve Baker Excerpts

2nd reading
Friday 15th March 2024 Commons Chamber

[Sarah Champion (Rotherham) (Lab)]

I beg to move, That the Bill be now read a Second time.

I am delighted to bring this important but focused Bill to the House. It would make minor amendments to both the Public Services (Social Value) Act 2012 and the Procurement Act 2023 to encourage greater uptake of British products in UK Government contracts.

The Bill aims to increase transparency and raise the importance of the origin of goods and services, animal welfare standards and environmental impact, and the standard of employment in procurement decisions. It achieves this by requiring the contracting body to publish its data, demonstrating how these areas are met in the contracts awarded. In 2014, my ten-minute rule Bill on publishing the gender pay gap for organisations employing more than 250 staff made a similar obligation. First blocked, then adopted by the Government, it has revolutionised transparency and equality within those businesses. I hope that the Government will be similarly pragmatic when it comes to this Bill and give it a safe passage.

Every year, the UK Government spend more than £300 billion on public procurement, which accounts for almost a third of all public expenditure. However, despite this huge figure, the Spend Network’s analysis found that big corporations win 90% of the contracts that are deemed suitable for small and medium-sized businesses. As a result, SMEs are missing out on around £30 billion-worth of public contracts annually. That is £30 billion that could be going to British businesses.

SMEs are the beating heart of our economy, accounting for 99% of businesses in the UK and 61% of employment, which equates to 16.7 million jobs. It is therefore shocking that they are consistently missing out on so many suitable public procurement contracts. In addition, a worrying number of contracts are awarded to foreign suppliers. Research from Tussell found that in 2020 alone the public sector spent £18 billion with overseas suppliers rather than supporting their UK counterparts.

The Public Accounts Committee’s report, “Competition in public procurement” published in December, concluded that the Government

“has not demonstrated that it has consistently used its purchasing power to support local and national policies and objectives, or to drive healthy and competitive markets, including buying from SMEs.”

It also found that the Government have

“not been fully capturing data on procurement, much less using analytics from collected data to draw insights on how competition in public procurement is operating within government and give context to purchasing decisions.”

That has to change, and my Bill can do that.

In its report “Public Sector Procurement of Food” from April 2021, the Environment, Food and Rural Affairs Committee rightly stated that public procurement

“has the potential to create significant business and growth opportunities through increased participation for small and medium-sized enterprises”—

as well as—

“improving the public sector’s access to SMEs’ creativity and innovation”.

However, crucially, it noted that SMEs have long faced difficulties in accessing public procurement opportunities.

[The Minister of State, Cabinet Office (Mr Steve Baker)]

The hon. Lady makes a very good case, and I think she knows that the Government have quite a lot of common ground with her policy intent. She may know that officials in the Cabinet Office are preparing for a new national procurement policy statement to set out the Government’s strategic priorities. May I offer her and her task group, as well as my hon. Friend the Member for Colchester (Will Quince), in relation to food, an opportunity to meet officials and, if necessary, the Minister? I would be very grateful if she took up that opportunity, because we would like her expertise and that of the group. As we have only recently legislated, it is difficult for the Government to support her Bill, so I hope she will take up the offer of that meeting.

[Sarah Champion]

The Minister, as ever, is trying to find a solution which benefits us both—that is what I am trying to do with the Bill—so I absolutely take up his offer and thank him for it. I will talk more about the working group at the end, but I have brought together a group of industry professionals. We all want to see British businesses getting a fair slice of the £300 billion pie, because we want our businesses to flourish, so I thank him for that offer. I have one more Select Committee report, this time from the Defence Committee in July 2023, which simply stated that the UK defence procurement system is

“broke—and it’s time to fix it”.

I welcome the Minister’s offer.

To tackle these long-recognised issues within the UK Government procurement system, my Bill aims to: back British businesses for public contracts; champion the UK’s world-class manufacturing and food production; increase the visibility of British food procured by the public sector; encourage investment and jobs created in towns and cities across the country; improve transparency around contracts awarded to small and medium-sized enterprises; and, just as importantly, recognise and reward good employment practices.

Let me give some context to demonstrate the need, right now, for the Bill. The UK is in a recession and has experienced years of stagnant economic growth. The number of companies going bust in 2023 hit a 30-year high. More than 25,000 UK company insolvencies were registered last year. Those figures show that one in 186 active firms went bust in 2023. That grim economic outlook is compounded by the fact that many SMEs feel shut out of the public procurement system. Taxpayers’ money is being spent with big multinationals and foreign suppliers, when as much as possible it should be spent on supporting British businesses and jobs, as other countries do with their own industries.

The Government have long argued that the EU had rules preventing them from prioritising British businesses. Many saw Brexit as an opportunity for more taxpayers’ money to be spent with British suppliers. We were told that British businesses would be first in the queue for UK Government contracts once we left the EU. The 2019 Conservative party manifesto even stated, with regard to food procurement:

“When we leave the EU, we will be able to encourage the public sector to ‘Buy British’ to support our farmers and reduce environmental costs.”

This has simply not happened. Now is high time for some of the benefits voters were promised from Brexit to come to pass. My Bill, if the Government accept it, would deliver more contracts to British businesses.

This is not a new issue. Since my election in 2012, I have been continuously highlighting how the UK Government need to do more to support British steelmakers through public procurement. The UK steel industry employs almost 40,000 people directly, with another 50,000 jobs supported through the supply chain. It also directly contributes £2.9 billion to the UK economy and adds £3.8 billion indirectly through supply chains. My constituency of Rotherham is a hub for steel production. We are incredibly proud of that heritage. Liberty Steel employs 900 people locally and supports the employment of many more workers throughout the steel chain. We make unique, speciality green steel much valued around the world, especially in aerospace. Despite this expertise and the high-quality steel that Liberty and other steelmakers produce, our steel industry still needs Government support. Let me be clear that I am not talking about handouts; I am talking about public contracts. UK Steel analysis of the 2023 steel pipeline report found that of the £603 million-worth of steel procured by government in the last financial year, 2022-23, only £365 million-worth was UK-produced. Furthermore, the British Constructional Steelwork Association analysis of steel used in the HS2 project found that only 58% of steel contracts were awarded to British suppliers, despite the British steel industry having the capacity to have carried out 100% of the work.

I welcome the recent introduction of the UK steel safeguards and the fact that UK Government Departments are now required to report past buying and future purchase pipelines of UK-made steel bought by the public purse. Those measures, particularly the reporting of where the steel is procured from in projects, are designed to encourage the uptake of UK-produced steel. The mandatory reporting model is a good template for other industries and Departments, and I welcome it. My Bill takes that mechanism and seeks to use it to achieve similar results across the economy, compelling contracting authorities to publish where they are procuring from, and to encourage the uptake of goods and services from British suppliers.

Let me give another example. I am sure hon. Members are aware that the public procurement system is failing our great British farmers. I strongly believe we must support our local food producers by ensuring that we buy, sell, make and grow more of our food, entrenching Britain’s reputation as a beacon for quality food, high standards and ethical animal treatment. The UK public sector spends about £2.4 billion a year procuring food for organisations such as schools, hospitals and the armed forces. That accounts for approximately 5.5% of UK food sector sales. Despite that level of spending, there is no accurate measure of how much food the public sector procures from British farmers. My Bill will address that.

The British public support buying British. The online supermarket Ocado reported that 87% of its customers considered it important to support British farmers, with searches for British produce on its website up by 77% year on year—