My Lords, the Government are committed to securing an agreement on the UK’s exit from the EU but we must be prepared for all outcomes, notwithstanding yesterday’s votes. It is for this reason that I am today bringing forward two sets of regulations for approval: the Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations and the Public Procurement (Electronic Invoices etc.) Regulations. To be clear, in the event that the UK enters into a withdrawal agreement with the EU, the first of these sets of regulations will not be required.
The amendments in the Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations do not amount to a material change in public procurement policy but, to all intents and purposes, maintain the status quo for UK contracting authorities with regard to their obligations towards certain non-UK suppliers. They will ensure that the UK’s procurement system continues to function as intended post-EU exit in the event of no deal, and grant certainty to UK contracting entities that they can continue to procure goods and services in the same way as they do now after exit day. In this way, the Government are ensuring that these entities continue to be able to obtain value for money for UK taxpayers.
As noble Lords will be aware, the UK Government are working to secure continuity agreements with a number of our international trading partners, which will replicate as closely as possible trade agreements to which the UK is currently a party via its EU membership. We have already laid before Parliament agreements with Switzerland, Israel and Chile. All these agreements contain substantial provisions on procurement, which will provide UK businesses with guaranteed access to lucrative procurement markets in those countries. Where the UK has entered into an agreement which contains provisions relating to public procurement, we must ensure that our domestic procurement legislation takes account of the obligations in that agreement.
In their current form the Public Procurement (Amendment etc.) (EU Exit) Regulations 2019, which were approved by this House on
As noble Lords will be aware, the Trade Bill is yet to complete its parliamentary passage. In the consequent absence of bespoke implementing powers in that Bill, we have had to look at other measures which would enable the UK to demonstrate compliance with the agreements that we have worked hard, and continue to work hard, to conclude. It is the duty of a responsible Government to ensure that, once we have left the EU, we continue to reap the economic benefits that these agreements bring. It is also our duty to uphold our reputation as a valued and respected trading partner, by ensuring that the obligations we have committed to maintaining after our withdrawal from the EU are adhered to.
I am therefore bringing forward this second EU exit instrument, which will amend the first such instrument before it comes into force so that, instead of removing from the procurement regulations the obligations owed by UK contracting authorities and other entities towards non-UK suppliers immediately on exit day, that first SI would preserve these obligations for a period of 18 months after exit day. The need for there to be a second, amending instrument was referred to during debate on the first EU exit instrument in the other place: specifically, during its consideration in the Delegated Legislation Committee on
In practical terms, this preservation of obligations will have the effect of ensuring that, for a time-limited period, suppliers from certain non-EU trading partners will be afforded the same guaranteed rights of access to UK procurement markets that they enjoy now. This mirrors a similar provision already contained in the first SI in respect of suppliers from states which are party to the WTO government procurement agreement. That provision has already been approved by this House, but it is being extended so that it aligns with the other provisions in this instrument. By keeping alive the duties owed by contracting authorities as they exist already, the Government are ensuring that the UK can continue to meet its international procurement obligations. In turn, that will help to ensure that UK businesses continue to enjoy access to overseas public procurement opportunities and that UK contracting authorities can continue to obtain the best possible value for money when procuring, through robust supplier competition.
Noble Lords may at this point be wondering why, when the UK is leaving the EU, it is appropriate to preserve obligations arising from EU agreements to which we are no longer party, and whether doing so may produce any adverse effect on British businesses and authorities. The procurement obligations which arise from the UK’s continuity agreements are, in essence, the same as those which have arisen until now from the EU’s trade agreements, meaning that the amendments in this instrument represent a temporary technical solution to complying with the UK’s international procurement obligations until such time as the Trade Bill is enacted.
I reassure noble Lords once again that, in practical terms, the provisions in this instrument amount to a time-limited continuation of the status quo, which will create no additional burdens or costs for UK businesses or contracting authorities. Public sector contracting authorities and other covered entities across the UK will continue to be able to procure competitive goods and services from overseas suppliers as they do currently; and UK businesses will see no change as a result of this instrument in the way they go about bidding for and winning lucrative public contract opportunities, both in the UK and in countries with which the UK has a trade agreement. It is for this reason that it has not been necessary to publish an official impact assessment.
In summary, this instrument will ensure that the UK’s procurement system will continue to function as intended post EU exit in the event of no deal; that the UK can successfully ratify and comply with its international continuity agreements; and that UK suppliers and contracting authorities can continue to operate as they do now for the foreseeable future.
I now turn to the second of the two instruments: the Public Procurement (Electronic Invoices etc.) Regulations 2019. Unlike the other SIs which we have been debating today, we will need this if we secure an agreement—as I hope we will. In the event that the Government enter into a withdrawal agreement with the EU, we will be required, under the terms of this agreement, to continue to comply with EU procurement law during the implementation period. That includes this directive, which concerns electronic invoicing in public procurement. It is a short and simple measure which aims to promote the uptake of electronic invoicing in public procurement by requiring public bodies to accept electronic invoices from their contracted suppliers. Principally, this instrument is to transpose the e-invoicing directive; it also makes a small number of other technical corrections to the public procurement rules. There are numerous different types of e-invoice used across the EU. These varied formats cause unnecessary complexity and high costs for businesses and public bodies.
There are significant benefits to be realised in promoting the uptake of standardised electronic invoicing in public procurement, both in terms of a reduction in costs and administrative burdens for procuring entities and their suppliers and in terms of the environmental impact of a move away from paper-based invoicing. That is why, in 2014, the EU adopted Directive 2014/55 on electronic invoicing. This instrument transposes the e-invoicing directive into domestic law. It does so by amending existing procurement legislation applicable to the award of public contracts and contracts in the utilities sector. The Scottish Government have brought forward their own legislation to give effect to the directive, in similar terms to this instrument.
The directive contains one simple obligation for member states: to take the necessary measures to require public sector buyers and utilities to receive and process electronic invoices that comply with a common standard. Private sector suppliers, other than those privatised utilities remaining subject to public procurement rules, will not be obliged to use the e-invoicing standard unless they wish to do so. We are not imposing additional costs on suppliers. The measures we have introduced would oblige contracting authorities and other procuring entities to include within their contracts an express term requiring them to accept and process electronic invoices that comply with the standard where, of course, there is no dispute as to payment. In the absence of an express provision of the contract dealing with electronic invoicing, a term to that effect is to be implied. In that way, suppliers will be able to enforce their ability to invoice purchasers of goods and services electronically via the terms of the contract itself.
The European Committee for Standardization—CEN—was commissioned to draft the standard and the British Standards Institute was involved in its development. The standard was published in October 2017, following which the UK had 18 months to implement the directive’s requirements. The deadline for implementation is
For sub-central contracting authorities, such as local authorities and utilities, the directive confers on member states the discretion to postpone the application of implementing provisions until
As set out in further detail in the Explanatory Memorandum, we have also taken the opportunity in this instrument to make minor amendments to the way in which the Public Contract Regulations 2015 and the Concession Contracts Regulations 2016 refer to offences under the Modern Slavery Act 2015. The aim of the amendment to the Public Contract Regulations 2015 is to ensure legal certainty as to which offences under the Modern Slavery Act constitute grounds for mandatory exclusion from award of a contract. More specifically, the amendment omits a duplicate reference to offences under Sections 2 and 4 of the Act. That duplicate reference was included in error in 2016.
For the Concession Contracts Regulations 2016, the amendment is to ensure that offences under Section 1 of the Modern Slavery Act 2015 are included within the mandatory grounds for exclusion from participation in a concession award procedure, and ensure consistency in the grounds for exclusion across the procurement regulations. With this instrument, therefore, we have the opportunity to provide real benefits to both the supplier community and the public sector, and I look forward to seeing it progress through both Houses.
I hope noble Lords will agree that both sets of regulations brought forward today are necessary for the UK to adhere to the commitments it has made, both in its trade continuity agreements and under the terms of the withdrawal agreement. I hope they will also agree that these instruments will provide benefits to the public sector and to UK businesses. I commend them to the House.
I wonder whether the Minister’s notes allow him to comment on the following and, if not, he will agree to write. Currently, all UK public sector opportunities are published on Tenders Electronic Daily—TED—which is the EU service on which all public sector tender opportunities within the European Union are listed and updated, constantly. What might be the plan for UK public sector tender opportunities either to continue to be published on Tenders Electronic Daily or to be published separately? If so, where might they be published?
My Lords, I welcome the opportunity to debate these SIs, but I have one or two questions of clarification. Luckily, the Minister has already answered my question about the Modern Slavery Act.
As I understand it, the first of the two SIs, in practice, relates to third-country public procurement by the UK. I admit to having a concern about the interests of our own UK businesses and small operators that are involved in procurement. I refer to my registered interests, just in case any might be affected, although the impact assessment suggests that the impact of this order is negligible.
My experience is that we in the UK are more punctilious about enforcement of procurement rules based on,
“transparency, non-discrimination, equal treatment and proportionality”, and the remedies for breach of any of those; I picked up the wording from paragraph 6.2 of the Explanatory Memorandum. Perhaps the Minister would be kind enough to comment on the risk that the changes will put us at a future disadvantage and not be fully reciprocated by the third countries concerned in the procurement process. If there is a risk, how long will it last? The SI lasts for 18 months, but I am not clear whether that is 18 months altogether or 18 months during which contracts might be let. Of course, procurement contracts often go on for many years.
I was sorry to see that there was no public consultation on this SI, but perhaps my noble friend the Minister can let me know if any concerns have been raised since the SI was published. I fully support the second SI on electronic invoicing. The UK has led the charge in Brussels on permitting businesses and citizens, and people around the world, to take advantage of the magic of online. That includes invoicing, contracts and many basic things. Both in business and as a Minister, this is an area that I have strongly supported and I am glad to see that electronic invoicing continues to apply. Our support for online should continue in third-country and EU procurement, although I know that the latter may be more peripherally affected on this occasion.
My Lords, that is a question I shall leave on the charge sheet for the Minister to deal with in a moment. Indeed, there is a wider political question around these statutory instruments to which the Minister delicately referred, in careful language, which is that there are those Brexiteers who argued for Britain’s departure from the EU on the basis that we would be free of all these rules and restrictions, including those which, in sum and on balance, genuinely benefit British industry but which do not always suit either a particular business or a local authority which wants to give the business to some more local concern. This was one of the things that was so often quoted during the referendum debate as something we would get rid of, whereas most of us knew that these were so much to our advantage that, even if Brexit did happen, we would retain many of them, as we see is happening today.
I thank the Minister for explaining the two statutory instruments, displaying his usual ability, which we all need to emulate, to acquire and deploy new knowledge in areas that might not hitherto have been familiar; he does it so well. First, I have a technical point about the coming into force. I was rather puzzled that the exiting the European Union public procurement order uses a different formula from most of the other no-deal statutory instruments that we have been dealing with, because it comes into force “immediately before exit day”. Almost all the others I have dealt with come into force on exit day. Of course, for this purpose, exit day might be a moveable feast, in the light of discussions happening at the other end of the building. I also take it that this statutory instrument would be suspended by a withdrawal agreement Bill, if there were such an agreement and such a Bill: that would be the mechanism for deferring its operation until the actual exit day.
Both these orders seem to be pragmatic responses to the need to maintain things which have proved of real value from our work in the European Union—work which has often been led by the UK and has led to beneficial multinational and international commitments. The order I have started with explicitly allows for a transition as we move towards a wider range of countries being involved in agreements of this kind. That is very welcome and something we would want to encourage. It always seems a bit perverse when we amend statutory instruments passed only last year, but it seems to be the way of things at the moment.
The other order, the one about electronic invoices, is again something we developed together with other European countries, valuably, but of course it is different in character because it is part of the ongoing work we are engaged in as current members of the EU, rather than being a special provision for EU exit. It introduces, in effect, the EU-wide regulations. It aims to modernise and reduce costs for public procurement invoicing and we certainly support that. It is welcome and has the potential to allow efficiency savings across the public sector, but British companies will lose out on EU funds to implement this if they have not already applied for them. It is not clear to me whether any provision will be made by the Government for those companies that move into this process later, when they can no longer take advantage of the Connecting Europe Facility—the CEF programme—from which funding is currently available for companies engaging in this kind of improvement. This seems to me something that is desirable and to be encouraged and is a reminder that our participation in the European Union has been the source of many benefits which we do not want to throw away: many of us would prefer not to be engaging in this operation at all, but if it is to happen, let us preserve the best of what we have achieved.
I join the congratulations to the Minister for the breadth of expertise he brings each time he does one of these. We will now test him with some questions.
I turn first to the Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations, which, as the Minister set out, require contracting authorities for 18 months after exit to continue to meet the obligations to third countries which have procurement arrangements with the EU. As he said, it is an obligation on which we legislated recently—it was actually in February of this year, just a few weeks ago. That SI also provided for the eight-month period concerning signatories to the WTO government procurement agreement.
I have just three points arising from that. One to which I know he will not want to reply concerns the complete chaos in government which makes this sort of change necessary. We do not know when we are going to leave; we do not know whether there will be a deal; we have no idea what sort of trade agreements will exist, either with the EU or with other countries; and we have absolutely no idea if or when we will see the Trade Bill back in the Commons, let alone on the statute book—and of course it is the Trade Bill that the SI in February would have covered. In fact, now that in this House we have made sure that the Trade Bill rules out being commenced if there were to be no deal—and that we have included in it a requirement for the customs union—I have a funny feeling that the Bill might do a slippery little disappearing trick. In a sense, that is symptomatic of where we are at the moment. We are having to do legislation on the hoof. It is two weeks tomorrow that the Government still seem to think we might be able to leave the EU, and we are still having to do these little amendments.
My second question, to which the Minister will probably be more willing to respond, is on the substance of this SI. I understand the purpose: it is, a bit like the noble Lord, Lord Beith, said, to make up for the botched idea of Messrs Fox, Johnson, Rees-Mogg and the others that coming out of the EU was simple and painless. In fact, it raises lots of issues, and my major concern is exactly that mentioned by the noble Baroness, Lady Neville-Rolfe. While these regulations preserve the rights of suppliers within the EU system to have fair access to UK procurement, there is nothing in the Explanatory Memorandum to indicate whether reciprocity has been negotiated. Obviously it could not be allowed for in a domestic SI, but we are hoping that it has been negotiated so that our UK suppliers will have equal access to the procurement markets of interest to them during the various transition periods allowed for in these regulations. Could the Minister clarify whether such reciprocal access has been similarly preserved, albeit understandably not in a bit of UK domestic legislation?
If it is not provided for, it looks on the face of it as if these regulations unilaterally maintain the openness of our procurement market to a number of countries across the world—allowing them access to enjoy the benefits of our procurement market, which I appreciate can also be good for our procurers—without any assured obligations in return. It would be a bit like throwing British industry under the proverbial bus, competing with non-UK companies here and unable to compete elsewhere. Given yesterday’s 7 am announcement on tariffs, which is already frightening a number of businesses, some reassurance here would be very welcome. I know that at an earlier stage the Minister in the other place simply said that he would “expect” reciprocity, but a Minister’s expectation is probably not sufficient for those companies that need a degree of certainty on this issue. They need to know whether they are going to be able to bid for outside contracts.
My third point—although I appreciate that it might be only the second to which the Minister wishes to respond—is that we know from the Department for International Trade that the Government are anticipating what they call a short gap between the “in principle” agreed accession to the GPA and the “in law” joining of the GPA by the UK. When we did the earlier SI, I think we were told that the gap was because a number of countries needed to agree to our signing up. Could the Minister update us on how long the Government anticipate that the gap would be? Is it days or weeks? I hope it is not months.
The second instrument is a deal rather than a no-deal SI about electronic invoicing. Rather like the noble Baroness, we support anything that promotes the uptake of electronic invoicing in public procurement. I will ask only a couple of questions. First, if we leave two weeks tomorrow—although that does not look likely—can we assume that the regulations would apply, albeit on a voluntary basis, until April of next year, and that they would therefore apply immediately on exit, introducing that common standard that was agreed by the BSI in 2017, which would come in immediately as a standard for government, albeit not for the other authorities for another year? Once they have been introduced, whether it is this year for government or over a longer period for other agencies, what would happen if we were outside the EU at that stage and its European standards were reviewed and amended? Does the UK remain a party to discussions that take place on the standards in the European Committee for Standardisation, where the BSI has been Britain’s voice? Will we retain, through the BSI, a role in the standard-setting done by that committee after we have left? Would we then be able, if we wished, to adapt our own standards and the regulations that go with them so that they continue to follow those in the EU, even if we are outside it, in order that suppliers in particular will use the same format for invoicing, whether they are invoicing in our public procurement system or in that of other countries?
Secondly, when my honourable friend asked a question in the other place she received no reply at that stage—but that was a week ago, so I hope that the Minister now has an answer. It touches on the issue raised by the noble Lord, Lord Beith, on what support might be available for small businesses. At the moment, the Connecting Europe Facility provided, I think, €430 million between 2014 and 2016 to help UK businesses adapt to these types of changes—but, obviously, after we leave that source of funding will not be there. While the regulations will always remain voluntary, so businesses will not have to do that, we also know that if they do not use electronic invoicing, their paper invoices might be settled a little more slowly than if they were able to use it. Therefore, even though these standards will remain voluntary for businesses, it is obviously important for their cash flow and liquidity that they are able to do the e-invoicing and adapt to it, and in particular to the new standards that will come in. Once we leave the EU and do not have access to the Connecting Europe Facility funding, will the Government commit themselves now to replacing that sort of funding for issues such as these, which are, after all, laid down in legislation?
Finally, as a final cheeky little question, will the Minister confirm that the Government always use e-invoicing themselves, including between departments?
I am grateful to all noble Lords who have taken part in this debate. On the last question, the fast ball which the noble Baroness bowled, I shall have to take advice on the extent to which the Government use electronic invoicing when they invoice. Of course, under the regulations, we will be obliged to process e-invoices if they arrive, but it is a good question and I shall make inquiries on the extent to which we are up to speed on e-invoicing.
As I said, I am grateful to all those who have taken part and will try to go through the questions asked—not necessarily in order. The noble Lord, Lord Beith, asked what would happen if there was an agreement. The answer is that the SI would indeed be suspended, probably by the withdrawal Act. It would be switched off, as with a lot of the other no-deal SIs which have already been passed.
The noble Viscount, Lord Waverley, asked about the plan for the UK public sector and the arrangements for publication of notices on the OJEU TED. The withdrawal agreement provides for publication of notices on that site. If there is no deal, the UK has developed its own UK e-notification that will be ready for exit date if it is needed. This is called the Find a Tender Service—FATS. Details were set out in the Explanatory Memorandum to the first EU exit instrument and published in a procurement publicity notice, the latest of which was published on
My noble friend Lady Neville-Rolfe asked what the impact of the SI would be. The basic thrust of the SI is to ensure that there is no change, so, to the extent that there already is a problem, it makes it neither worse nor better: it is neutral. On the issue of public consultation, because the SI imposes no new regulatory burdens on UK businesses and as, as I said, its purpose is to maintain, in so far as possible, existing obligations on contracting authorities as regards suppliers, it has no direct impact on the public sector or the private sector, so it has been unnecessary to undertake consultation with industry. I shall come to my noble friend’s other points in a moment.
The noble Lord, Lord Beith, asked why this will come into force immediately before exit day, whereas everything else comes into effect on exit day. This SI comes into force immediately before exit day because it needs to amend the first SI before that one comes into force at the start of exit day, so we need to cancel the SI to which the noble Baroness referred before it comes into effect. That is why that has to be done the day before, but we hope that none of this will be necessary. The provision will expire after 18 months, after which guaranteed access will cease for suppliers from countries with which we have not made a continuity agreement.
My noble friend Lord Arbuthnot asked about last night’s vote. I hope that the Government will respect the decision of the other place. As my noble friend knows, the legal default in UK and EU law remains that the UK will leave the EU without a deal unless something else is agreed. We are planning for all eventualities with this SI, but I very much hope, as I am sure my noble friend does, that there will be an agreement and we will not need to leave without a deal. As former Members of the other place—as are a number of those who contributed to this debate—I am sure that we hope that the view expressed yesterday there will be respected.
The noble Baroness, Lady Hayter, and other noble Lords raised the issue of EU funds being available to support. As she said, no small business will be obliged to use e-invoicing. I am afraid that I do not have a direct answer to her question. The Government have guaranteed that certain grants paid out by the EU before we leave will be funded by the Government up to a certain date. I do not have the details to hand to say whether that guarantee applies to this particular funding issue but I undertake to write to noble Lords with the details. On whether certain invoices would go further down the queue if they were not e-invoices but paper ones, we have very strict rules about the prompt payment of invoices, whether they are e-invoices or paper ones. Certainly as far as the Government are concerned, there would be no such discrimination.
Does that apply to the Cabinet Office, which I gather has a rather bad record on paying promptly?
I did not catch the noble Baroness’s last words, but the Cabinet Office sets the targets so I would hope that it would be the first government department to ensure that it met them. If she has a specific invoice in mind, I will certainly make inquiries.
For the record, it was noted in the other place—this may well have been because of a glitch—that the Cabinet Office has one of the worst records on this matter. There were assurances that this would change but it is a bit frightening when the department supposed to be leading on prompt payments is not itself very good.
I stand rebuked on behalf of my department. I will make further inquiries about our prompt payment record and write to the noble Baroness and noble Lords who took part in the debate.
I was asked what would happen to this SI in the event of Article 50 being extended. I think I answered that. The withdrawal Act confers powers to enable the Article 50 period to be extended pending further negotiations so that the definition of exit day can align with the date and time that the EU treaties cease to apply.
On the 18-month extension, if no deal with the EU is reached and we do not yet have powers enabling us to give effect to the UK’s obligations under its own international agreements, the 18-month extension of rights would begin from the new exit day.
My noble friend Lady Neville-Rolfe made the point that we may be more punctilious in enforcement than other countries, and asked how we can guarantee reciprocal access. As I said, the SI makes no change to the terms of trade she referred to, but we are working with other countries to agree continuity agreements. Many of our discussions are at an advanced stage; some have already been agreed. That will ensure that our access is reciprocated. We will also have guaranteed access to markets in GPA countries, which account for the majority of contract opportunities by value to which the UK currently has access. All our agreements contain provisions relating to remedies for suppliers that have been treated unfairly.
I have just received some in-flight refuelling concerning the serious allegation made by the noble Baroness, Lady Hayter, about prompt payment. She is absolutely right that there was a decline in Cabinet Office prompt payment, which was due to the adoption of a new invoicing system—straight out of “Yes Minister”. That problem is common in other departments. I think I updated either her or another Opposition Member in the House on our progress in that regard a couple of weeks ago. In fact, in recent months, we have come back up to standard in the speed of prompt payments, but I would be happy to write to her to set out those figures in detail.
Turning to whether we will still have access to EU procurement markets if we keep EU obligations, after exit, UK businesses will still enjoy guaranteed access to many of the same procurement opportunities in the EU covered by the WTO’s government procurement agreement through the UK’s GPA membership. This provides access to £1.3 trillion of contract opportunities annually. However, the EU-linked continuity obligations, which we are retaining in this instrument, are obligations towards non-EU countries and so do not have a bearing on UK suppliers’ access to public procurement opportunities in the EU.
The noble Baroness, Lady Hayter, asked when we are expecting formally to accede to the GPA. As I think she knows, the GPA committee formally adopted a decision on the UK’s accession to the GPA in its own right at a meeting in Geneva on
I was asked about the BSI and our continued membership of CEN. CEN is a European institution rather than an EU one. I have a press release from the BSI which states that,
“following the decision taken in the general assemblies of both organizations, BSI will continue to be a full member of CEN and CENELEC regardless of the conditions under which the UK leaves the EU, including in the event that the UK leaves the EU without an agreement”.
I hope that gives the noble Baroness the assurance she seeks.
My Lords, on CEN and CENELEC, I think the one that dealt with this was the standards one. If it is a different one, perhaps the noble Lord would care to write to me. I refer to the European Committee for Standardization as opposed to CEN and CENELEC, which deal with electrical safety. Some clarification by letter would be helpful.
My understanding is that the BSI will continue to be involved in any future discussions about e-invoicing and standards, but I will certainly write to the noble Baroness.
I think that I have come to the end of the issues raised by noble Lords, but if by chance I have left any out, I will of course write. I beg to move.