My Lords, I should remind the House that I am a vice-president of the Local Government Association. I thank the noble Baroness, Lady McGregor-Smith, for enabling us to have this debate. She made a large number of important points in her speech. I was struck by her observation that the government consultation is too narrow and that far more could be achieved, and particularly by her view that up to 50% of a contract could be related to social value. I was going to say one-third, but if we can reach 50% I would be very happy with that figure.
I also thank the noble Lord, Lord Maude of Horsham, for reminding us about public service mutuals, which seem very important, and the three stages of the procurement process: the pre-tender process; the actual procurement assessment; and then contract management. As he rightly said, all the effort—certainly from Whitehall—seems to go into the middle of those three. In response, I observe that it is very difficult to do the first and the third from Whitehall.
In the debate yesterday on 20 years of devolution to Scotland and Wales in particular—but also to Northern Ireland, of course—I was struck that it has enabled a piloting of ideas in those nations. On procurement policy, the noble Baroness, Lady McGregor-Smith, reminded us that they have much greater pre-market engagement, which means that tenders can be talked about, can be more detailed and can avoid confusion between contractor and provider, with an agreed understanding of the specific outcomes that must be delivered.
It is important that we pause for a moment to consider the context of this debate. The context is that a lot of people in many parts of the country feel left behind. They have low pay and insecure contracts, and many have few opportunities to improve their lives—not least in housing and discretionary spending. Applying the principles of social value should help to reduce inequalities for those people, and for that reason the Government’s current consultation is welcome. It will help to encourage charities—particularly smaller ones— and social enterprises in the delivery of services and will reduce the Government’s dependence on a small number of large companies such as Carillion, with its 420 contracts from central government. It is clearly not in the public interest for such a concentration of contracting to occur.
The Government need to include goods and other works, as well as services, in their procurement policies. Social value should cover all public spending, not just central government spending; I will come back to that in a moment. Also, the consultation that is being undertaken is poor on the potential for procurement to reduce deprivation in specific localities. It is about not just consulting with deprived communities but finding ways of working with them to reduce disadvantage.
I wonder if the Minister will look closely at the 10% minimum weighting the Government propose for assessing the social value component of a contract. That low level could mean that contracts are let with poor social value outcomes. I am not clear why the financial value is set at 30%, when the social value is set at 10%. There are three factors in commissioning: the cost; the quality of what happens as a consequence of that commissioning; and the social value generated. I would like to think the proportions would be a third each, but I guess we could look further than that.
There is a problem of centralised decision-making in England. I mentioned a moment ago the 420 contracts awarded to Carillion basically following a value-for-money exercise. The Government’s procurement decisions have been too dominated by narrow value-for-money policies that seek simply to reduce costs. I remind your Lordships that one Whitehall department’s concentration only on value for money can be another Whitehall department’s extra cost, such as through the benefit system. Too often the silo management of Whitehall does not serve the public interest as well as it might.
There is research showing that up to 20% added value can be obtained from maximising social value in a procurement process. I think that the abolition of government offices in the English regions was a major mistake; those government offices could have led the development of social value in procurement policies at a local and regional level and kept a watching eye on them to ensure that commitments on social value were actually delivered. At present that is difficult to do, because contracting is run from Whitehall—often many hundreds of miles from where the contracts are implemented.
I emphasise that what matters with social value procurement is achieving social outcomes. It is not just about cutting costs, dressed up as value for money. Government at all levels should procure outcomes, not just services for services’ sake. This is a fundamental issue that the Government will need to get to grips with. It is vital that those who commission contracts should have the skills and knowledge to do it properly.
I shall ask the Minister a specific question, which I hope he will be able to reply to. Is local government part of this? The Government have said they want local government to support the use of social value criteria, but it is not clear whether it will be compulsory. I think it should, so I hope the Minister may be able to respond to that.
The Government’s civil society strategy is most certainly a start, not least in defining some key principles. The strategy requires government departments to account for, rather than to consider, social value. So far, so good—but it needs to be a local as well as national strategy. It should enable smaller charities to deliver at a very local level. I submit that only local government can achieve that; Whitehall simply cannot.
Why has statutory guidance not been published for the 2012 Act? There is some guidance but, as I understand it, no statutory guidance. I wonder whether that is wise, because there would be benefits from statutory guidance. I hope that once the consultation is complete, the Government might be willing to produce a guide for voluntary organisations and charities on how to bid effectively for contracts. Many lack the required expertise to pitch a bid at the right level. Of course, if we had government offices, they would be able to help here.
Might the Minister also explain why large construction contracts are out of the scope of the current consultation? There is huge potential here, not least for local apprenticeships, because building takes place in most areas. Creating a trained local labour force can be done all over the country, but it needs to be done in part through improving the social value element of contracting. Otherwise, labour forces can be brought in and do not derive from that local area.
In conclusion, I want to see the scope and strength of the social value Act expanded. I would like to see it applied to all goods, works and services and to oblige all public bodies to account for social value when negotiating contracts. The Minister might want to look at whether the Government can do more to audit social value outcomes. I have read in briefings about the possibility of social value budgeting and about local social value champions. I have also read about social value auditing locally. These ideas merit further consideration by the Government.
It may well be that the Government should produce an annual report to Parliament on what they have achieved in terms of the 2012 Act. It is one thing to have independent reports, as we had in 2015 on the functioning of the Act, but maybe there should be an annual report to Parliament. I hope that the Minister might be willing to give some thought to that, because there is a huge opportunity for social value to be expanded across the country and to make a difference to the lives of many people.