Clause 33 - Regulations about procurement

Small Business, Enterprise and Employment Bill – in a Public Bill Committee at 3:15 pm on 23 October 2014.

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Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills) 3:15, 23 October 2014

I beg to move amendment 57, in clause 33, page 28, line 40, at end insert—

“(a1) duties to establish the past payment performance of potential parties to a contract, before contracts are entered into;

(a2) duties to ensure contracts entered into include the contractors’ obligations for prompt payment of their suppliers.”

This amendment aims to ensure that the payment performance of potential contractors are known before contracts are entered into and that contracts entered into require companies providing goods and services to public sector contracting authorities to pay their own suppliers promptly.

Photo of John Robertson John Robertson Labour, Glasgow North West

With this it will be convenient to discuss the following:

Amendment 77, in clause 33, page 29, line 8, at end insert—

“(eA) duties relating to the assessment and publication of the extent to which apprenticeships and training opportunities were provided as a result of procurement of contracting authorities.

(eB) duties to publish reports about the amount and proportions of expenditure within procurement undertaken by a contracting authority in relation to—

(i) small and medium-sized enterprises; and

(ii) the area local to the contracting authority.

(eC) duties to disclose and explain any reasons why specified business or company, or specified category of business or company, may be excluded from consideration by a contracting authority, and

(eD) duties to publish information about the allocation, draw down, usage, sub-contracting or other third-party deployment, and results of the consumption of public resources by private entities.”

Amendment 78, in clause 33, page 29, line 16, leave out “negative” and insert “affirmative”.

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

I want to focus on amendment 77 in particular. Procurement is a hugely important function of government. Central Government spends about £45 billion a year on the purchase of goods and services. Local government spends about the same again—a quarter of its total annual expenditure. The NHS spends about £20 billion every year on goods and services. That is about one third of hospitals’ operating expenditure. In total, £230 billion is spent on the procurement of goods and services throughout the public sector. That is one pound in every three of total managed expenditure. Given the scale of spending, it is important that the  taxpayer gets effective value for money. I stress the importance of value rather than mere focus on the lowest possible price.

I am a strong advocate of the notion that procurement should not only be used to ensure that goods and services are purchased, thereby fulfilling a somewhat narrow and short-term role. We also need to procure in a smarter way that reduces costs for public sector authorities. Procurement must be used as an effective tool for public bodies to secure important long-term strategic, social, economic and environmental objectives.

Subsection (5) specifies the means by which regulations can impose certain duties on contracting authorities. Those duties relate, for example, to the process through which contracts are entered into, compliance with the regulations, procuring in an “efficient and timely manner” and electronic invoices. Amendment 77 tries to articulate further the means by which regulations could be used to advance social and economic objectives.

I am very mindful of the conflict between centrally imposed, one-size-fits-all national regulations and a more flexible and responsive model which emphasises the importance of local decision making and devolved powers. Members will have seen the submission to our Committee from the Local Government Association, which aims to see clauses 33 and 34 deleted from the Bill. We will perhaps discuss those concerns in more detail during the clause stand part debate, but I hope the Minister will reflect on this passage from the LGA’s submission:

“Local authorities support the objectives that the Government is seeking to achieve with this legislation. They are keen to work with small businesses and voluntary sector organisations because this increases the potential for retaining value within the local economy. There is no need for legislation to address these issues and the continuing work of the LGA and the Local Government National Advisory Group for Procurement creating a National Procurement Strategy will do much more to enforce these messages.

We fear that over-regulation may have the effect of discouraging local authorities from thinking strategically about procurement opportunities and preventing access to markets for small scale providers who may not have the capacity to acquaint themselves with and respond to statutory procedures.”

In tabling this amendment, I do not wish to stifle innovation or impose unnecessary regulation, but I do want to address how certain objectives could be met. We propose to amend subsection (5) to include at the end of that subsection the need for the regulations to include a duty for contracting authorities relating to the assessment of the training opportunities and apprenticeships that were provided as a result of procurement by those authorities. I think that is quite simple and straightforward and I would be surprised if it did not command the support of the Minister and the rest of the Committee. Public authorities are specially placed, given the scale of their collective expenditure each and every year, to ensure that some of that spend is devoted to improving the training and career opportunities of people as a result of that contract. A more skilled work force is more productive and therefore more competitive in the domestic and international fields. The economy as a whole improves its performance as a result; society is enriched by having a more skilled population that can enjoy better pay and higher standards of living and we have increased tax receipts for the Treasury. What is not to like?

There is much good practice around the country from various public authorities. The TUC has championed over the past five years or so the one in a million campaign, which aims to ensure that, as far as possible, every £1 million of public spend on procurement results in at least one apprenticeship opportunity for a young person. Local authorities up and down the country are carrying out good practice here. The Minister, as a former apprenticeships Minister, will no doubt say that apprenticeships have risen in recent years. That is true, but I hope he will also accept my point, as one former apprenticeships Minister to another, that the number of young people enrolled on an apprenticeship has actually fallen over the lifetime of this Government.

In 2009-10, when we left office and I left the Department for Children, Schools and Families, some 117,000 people aged under 19 were studying for an apprenticeship. That has fallen over this Parliament by 4%. The proportion of young people embarking on an apprenticeship as a proportion of the total number of apprenticeships has been turned around, and not in a good way. In 2009-10, 42% of all apprenticeship starts were for people aged 19 or under. In 2012-13, that proportion was just 23%. Those changes might have something to do with the fact that Government pay 100% of the training costs if the apprentice is aged between 16 and 18, 50% if the apprentice is aged between 19 and 24, and only up to half if the apprentice is aged over 25.

From the evidence, it looks as though the Government have tried to reduce their financial exposure by skewing apprenticeship starts to those over 25. The amendment could be deployed to ensure that those young people can be given apprenticeships and fresh opportunities in training, so that they get a really good start on the career ladder. It would provide increased transparency for those contracting authorities to be able to publish, and therefore demonstrate to a wider audience, what that particular organisation was doing to use procurement to provide apprenticeships and training opportunities. That is the purpose of subsection (5)(eA).

Subsection (5)(eB) would provide a duty for the contracting authority to publish, and therefore improve transparency and opportunities for scrutiny, the amount and proportions of expenditure within the procurement function used to spend money both with small and medium-sized enterprises and the area local to that particular contracting authority.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

My hon. Friend mentions the contracting authority. He will be aware that last week we had an urgent question on the position of Tata Steel. When the Scottish Government were procuring the steel for the new Forth bridge—a huge contract—they decided to procure it from China, because it was the cheapest. In fact, 34 miles down the road was a steel plant where they could have procured the steel and, although more expensive, it would have had much wider impact on the local community.

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

My hon. Friend makes an important point. He may recall that there were no Members from the Scottish National party present for that urgent question to question the Minister. Procurement can be used to enhance industrial capability—not to revive protectionism or ensure that a domestic firm or sector becomes flabby and uncompetitive, but to ensure that  our industrial capability is enhanced as much as possible. The Opposition certainly agree with that idea, and I think the Minister does, as part of his industrial strategy. We need to go further and faster in pushing our industrial strategy to be able to do that.

Photo of Stephen Doughty Stephen Doughty Opposition Whip (Commons)

My hon. Friend is making some key points. Is he aware that many British military uniforms are procured in China? It is a significant number. In the past, many were made in Remploy factories in Dundee and elsewhere. Does that not strike him as slightly odd?

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

That is a fair point. My hon. Friend has touched on a significant element of procurement, namely defence industrial strategy. Other countries around the world will be thinking, “If equipment from British defence firms is not good enough for the armed forces of the United Kingdom, which are held in very good regard, why should we buy it?” That sends out an important message.

There are a lot of positive moves in this regard, especially in local government. The FSB’s report of earlier this year, “Local procurement: making the most of small businesses”, revealed that local authorities spend around half of their total procurement expenditure with small and medium-sized businesses. Central Government have an awful lot to learn from local government: although the Government’s target is that a quarter of all spend should be with small and medium-sized businesses by the end of this Parliament, the current level is about 13%. They will miss their target by miles, to the detriment of many tens of thousands of small businesses up and down the country.

The FSB report found that 78% of small firms have not bid for or worked on any public sector contracts. They have been put off for several reasons, such as lack of awareness, a misplaced belief that Government would not be interested in dealing with a small firm and an inability to devote precious money and staff time to procurement exercises that are far too often seen as cumbersome, bureaucratic and downright hostile, and that involve pre-qualification questionnaires and other off-putting things. The CBI recently cited the example of a construction company that spent an average of £8,000 per PQQ. With 200 tender exercises a year, that put the pressure on the firm’s profit and loss account of an additional £1.6 million, for pre-qualification alone.

Research for the Specialist Engineering Contractors’ Group has found that its members’ firms spend more than 60,000 days a year filling in questionnaires. That is putting small businesses off bidding for contracts with public authorities. We need to ensure that bidding is made as easy as possible, including by publishing information and having a transparent relationship, so that the question can be asked, “What are you doing for small businesses?”

The purpose of proposed new subsection (5)(eB) is precisely to improve transparency. We hope that it will allow contracting authorities to explain how they are creating awareness of opportunities and engaging with and ultimately awarding contracts to smaller firms.

It is also important for reports such as that proposed in the amendment to include the amount of spend in a local area. There is incredibly powerful evidence for the  multiplier effect on local economies of spending in local areas resulting from small businesses getting procurement opportunities. Research carried out for the FSB by the Centre for Local Economic Strategies found that responding authorities had collectively spent more than £8.7 billion on procuring goods and services with local firms in the previous year, generating nearly £4.5 billion of additional benefit for local economies; that is an additional 51p for every £1 spent. When the effects of local spend were analysed, it was shown that every £1 spent by a participating local authority with local SMEs generated an additional 63p of benefit for their local economy, compared with 40p generated by large local firms.

The £4.1 billion that participating authorities spent with local small and medium-sized businesses generated £2.6 billion of additional economic benefit for local economies. That means that small local firms generated over £746 million more benefit for local economies than large firms by effectively circulating that spend through their local economy’s supply chain. That is despite their receiving over £500 million less than large local firms. The benefit of them is vast.

I am particularly pleased that my region—the north-east of England—is a shining light in this regard. The Association of North East Councils has stated to me that 63% of the total procurement spend by local authorities in the region was with north-east-registered suppliers, while spend with the region’s small and medium-sized suppliers was 52%—slightly higher than the national average. The amendment is not about forcing contracting authorities down a specified path but about stating on the face of the Bill that authorities should let in the sunlight of information by disclosing to a wider audience how much is spent with small and medium-sized companies and how much is directly contributing to the local economy.

Proposed subsection (5)(eC) states that the regulations should “disclose and explain” why a specified business or category of business should be excluded from any procurement exercise. I arrived at the amendment through the disgraceful practice of blacklisting. This ugly scar on the face of our construction industry has existed for the past few decades and needs to be eliminated as soon as possible. The notion that workers have been systematically denied employment opportunities because they have been a member of a trade union, engaged in trade union activities or raised concerns over health and safety is an absolute disgrace. It smacks of the worst form of McCarthyism, and I strongly believe that procurement can be used to ensure that blacklisting is gone from the United Kingdom forever.

Public sector bodies in Wales can exclude blacklisters from bidding for public sector contracts under Welsh Government guidance that came into effect in September last year. The Welsh Labour Government sent out a procurement advice note to all Welsh public bodies, outlining the necessary steps that can be taken through procurement to help eradicate blacklisting. The guidance makes clear the circumstances in which Welsh public bodies can exclude blacklisters from bidding for a public contract. That guidance is clear, up-front and not sneaky or surreptitious. It allows everyone concerned to be  fully aware of the circumstances in which a company will not be considered for the receipt of public funds and public contracts.

On introducing that guidance, Welsh Finance Minister and Labour Assembly Member Jane Hutt said:

“The use of blacklists is wholly unacceptable and I fully sympathise with the individuals and their families who have suffered a terrible injustice as a consequence of contractors engaging in this practice. Procurement is an important part of the overall policy toolkit of the Welsh Government. Under no circumstances is it acceptable for any business in receipt of public procurement expenditure to use blacklists. I am determined to take action in Wales. I trust that other Governments in the UK will take similar action if they have not already done so.”

I agree with every single word. If it is acceptable in Wales, why can we not have something similar in England? This seems incredibly straightforward to me.

Photo of Stephen Doughty Stephen Doughty Opposition Whip (Commons) 3:30, 23 October 2014

My hon. Friend is making a crucial point, which I wholeheartedly agree with. Would he also pay tribute to the many trade unions—including the GMB, of which I declare membership—that campaigned long and hard for that in Wales and have also campaigned at a UK level? We surely need to take that step against this disgraceful practice across the whole country.

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

I absolutely agree. I also declare an interest, as I am a proud member of the GMB. I understand that other trade unions may be available, although I cannot think of any at the moment. My hon. Friend is absolutely right that there has been strong campaigning. It is about making sure that public procurement is used to ensure good, ethical behaviour. We have not seen that with blacklisting, and we need to see it now.

I mentioned that blacklisting was at the forefront of my mind when tabling the amendment, but Members might think of other issues that could exclude companies from bidding for contracts. Contracting authorities might think about firms that are late payers to their suppliers or refuse to pay their employees a living wage being included in those categories. Proposed subsection (5)(eC) would allow such categories to be included in the regulations and ensure transparency and clarity. Amendment 57, tabled by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), would provide for that with regard to late payment.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

My hon. Friend is giving examples of where other authorities are able to use the legislation on procurement to deal with bad behaviour and provide good businesses with opportunities they might not have had before, and also to deal with some big policy issues. He will be as disappointed as I am that the Scottish Government had the opportunity through their public procurement Bill to include the living wage as part of the conditions of gaining a public sector contract, yet they voted against the proposal.

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

I thank my hon. Friend for raising that. It seems that the Scottish Government often talk one way and then in their actions, which they can take as a result of being in power, do something completely different. I am glad that my hon. Friend has exposed what they have done in that case.

Finally on amendment 77, subsection (5)(eD) would ensure that the regulations included

“duties to publish information about the allocation draw down, usage, sub-contracting or other third-party deployment, and results of the consumption of public resources by private entities.”

Put simply, the reason behind that is for people to be able to follow the money, find out where taxpayers’ pounds end up and ensure that proper transparency and accountability are available in all aspects of public procurement.

The Government have a clear policy of expanding the range of public services available to be bid for by private companies. That is one way of putting it—privatising our NHS is another. The Health and Social Care Act 2012 has dramatically increased the number of private contractors involved in NHS activity.

However, that sort of work is not confined to the NHS. The taxpayer often does not get a fair, or even a legal, deal with these contracting-out activities. The Committee may recall G4S and Serco, which were found to be charging the Government on their tagging contract for people who had been released or, in some cases, were dead. The cross-Government review instigated as a result of those irregularities—some would say fraud—concluded:

“The review’s overall conclusion is that in the majority of contracts there are weaknesses, some of which are significant, in the way these contracts are managed.”

It must be a concern for this House and the wider country that billions of pounds of taxpayers’ money are being spent without appropriate transparency or the ability to follow the money or ensure that there is consistency of approach and accountability between the various providers of public services.

The public sector is the victim of a very uneven playing field. As I said earlier, ever increasing parts of the NHS are subject to bids from private companies. Those companies are able to issue freedom of information requests from NHS trusts, gaining detailed knowledge of activity and cost. That information can then be used to undercut or outbid those same public sector bodies when procurement exercises take place, ensuring that those private companies can cherry-pick public services, which that cannot happen the other way round. That seems incredibly unfair.

The Select Committee on Justice examined that issue during the 2012-13 Session and expressed concern. The Information Commissioner, when giving evidence to the Committee’s inquiry, stated categorically:

“If more and more services are delivered by alternative providers who are not public authorities, how do we get accountability? The Prime Minister dealt with that the other day in one respect, by saying that it is about accountability, through tracking expenditure and outcomes. That is certainly part of it, but we nevertheless need to find ways of holding the alternative providers to account if they are trousering very large sums of public money and carrying out public purposes contracted by authorities.”

The purpose of proposed subsection (5)(eD) in amendment 77 is to articulate that concern, put it in the Bill, and support the Prime Minister in ensuring that it is possible to provide accountability through tracking expenditure and outcomes, and simply, as I said earlier, by being able to follow the money.

Amendment 78 is straightforward. I am a big believer in the affirmative resolution procedure when changes to regulations are proposed, and the amendment would  simply change the Bill’s provision for the negative resolution procedure to ensure that the House had an opportunity to discuss such matters properly. I hope the Minister will look at the amendments favourably.

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change

I am grateful for the opportunity to debate. Clause 33 is about providing the Government with powers to regulate in a way that supports public sector procurement and helps small businesses get more access to the £230 billion of public sector contracts. That, in turn, will help the economy grow.

Photo of Chris White Chris White Conservative, Warwick and Leamington

Would the Minister describe how the Bill will help the social enterprise sector, which is one of the fastest-growing sectors in the economy?

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change

Absolutely. Measures that we have taken, such as reducing burdensome pre-qualification questionnaires from a huge amount of low-value central Government contracts, opening up bidding to smaller enterprises, and getting more areas of Government to be provided by other organisations, including social enterprises, have done a lot to get the social enterprise public provision sector going. However, I want to see more and I hope that the steps in the Bill will ensure that where we have taken administrative steps to get central Government to open up, we are now taking statutory steps to get the whole of the public sector to do so.

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

Does the Minister think that there should be a Minister with specific responsibility for social enterprise in the Department for Business, Innovation and Skills? Currently social enterprise is covered by the Cabinet Office. Should there be someone in the Department with that responsibility?

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change

It works pretty well at the moment on the grounds that in Business, Innovation and Skills we try to make it easier for organisations, whether they are profit-making or not, to do business. There is a range of social and profit-making enterprises: pure charities that rely entirely on donations and do not raise any direct revenue from the activity that they do; social enterprises that raise revenue from their activity but have a social purpose and do not make a profit; others that make profit but are social in their goals; businesses that are there for the primary purpose of making a profit but, in so doing, create social value; and businesses that do not particularly create social value but undertake their actions for profit and, in some cases, indirectly create social value by creating jobs. Our job in Business, Innovation and Skills is to have a strong framework for enterprise, whether that is for a social purpose or not.

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

I am grateful to the Minister for the definition, although I already understood what social enterprise was. My point was that we have a Minister for small business, which allows a Government focus on that, and we have a Minister for social enterprise, but he is not in Business, Innovation and Skills; he is in the Cabinet Office, which says that social enterprise is a different kind of thing. Does he take the point that if there was someone in the Department who had a specific focus on social enterprise, it might help to have that businesslike focus on supporting that important sector?

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change

I do not particularly think that it matters where that position sits. However, issues of social enterprise within the Department are a matter for the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for East Dunbartonshire. She has ministerial responsibility for issues relating to social enterprise but all of us in the Department have a duty and a role to improve the environment for business, whether that is a social enterprise, a profit-making enterprise or anything else in between—hence my description of the broad spectrum of organisations that we hope to support in flourishing.

The purpose of the clause, which is broadly defined, is to insist that public authorities will improve the ways that they procure. For example, in terms of benefits over time, we expect more proportionate and efficient procurement time scale; less bureaucratic processes, making it easier and cheaper for small businesses to compete and win more business; and more pre-market discussions between contracting authorities and businesses to help formulate procurement, meaning better management of contracts. The success of those reforms should be demonstrated in seeing an increase in the amount of contracts being won by smaller businesses. The hon. Member for Hartlepool raised the point on the proportion of contracts won across Government by smaller businesses. That has increased dramatically and, contrary to what he says, it is on track to reach a quarter, but my goodness, there was a lot of work needed. This situation was not in a happy state in 2010 and the number then was much lower.

However, we are determined to work to make that better and have a stronger and broader array of business, including small businesses, in the supply chain for the Government. After all, Government procurement is an enormous part of overall procurement.

I come now to the individual amendments. Amendment 57 would ensure that contracting authorities know about the historical payment performance of suppliers before they enter into public contracts with them. It would ensure that the companies entering into those contracts pay their own suppliers promptly. We agree that it is important for suppliers to be paid promptly and there are some circumstances in which a contracting authority can take account of a supplier’s past record on payment performance. In fact, we discussed earlier in the week the transparency that we are introducing around payment practices so, in a sense, that is taken care of. The measures in the Bill complement the wider package of regulations, not least the transposition of the 2014 EU procurement directive, which we will put into action in early 2015.

The new regulations will require 30-day payment terms to be passed all the way down the public sector supply chain. The essence of amendment 57 is to ensure that we have prompt payment in the public sector, and that it is cascaded down the supply chain. That will happen and will apply to all parties in the supply chain, from the largest to the smallest. In that way, the public sector will lead by example on issues of payment. The package of new regulations will also require the public sector to publish annually the number of invoices paid  late to its tier 1 suppliers and show how it has performed in that area. The mystery shopper scheme, which we will come on to in clause 34, will also conduct spot checks on contracting authorities to ensure compliance with the prompt payment legislation and will publish the outcome of its investigations. Therefore, the measures that we are already taking forward, as part of either the Bill or the transposition of the EU directive, are already tackling the issues raised by amendment 57.

Amendment 77 is designed so that several additional reporting requirements can be placed on contracting authorities through regulations. We agree that transparency in reporting public sector procurement is important. Indeed, we are already working towards that 25% target for small business procurement. Having said that, the overarching aim of public procurement will always be to achieve value for money. In some cases that includes specific requirements. For instance, the Crossrail contract includes requirements for training and apprenticeships. HS2, which is holding a suppliers conference today, is also ensuring that we provide the necessary training, including through the new national college for rail engineering that we are putting in place. That is part and parcel of those contracts, but if that duty is put on the face of the Bill in the way suggested in the amendment, the difficulty is that it is essential always to ensure that the overarching aim is to achieve value for money for the taxpayer, because, after all, it is taxpayers’ money that we are spending.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East 3:45, 23 October 2014

In terms of value for money for the taxpayer, is it not reasonable to take a slightly wider view at times on exactly what that is and whether it is purely financial or not? A supported employment factory in my city closed down—it was not Remploy, it was separate—and lack of Government contracts was one of the things that caused it problems. However, the people who work there are costing the taxpayer a great deal of money when they are not working.

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change

I agree with the hon. Lady that the broader considerations for value for money should be taken into account. That is why it is sometimes right to put these details in the contract. Opposition Members mentioned the steel for the Forth road bridge. I understand their disappointment at the Scottish Government’s decision. It shows that the Scottish Government often do not act nearly as much for Scotland as they claim when they wrap themselves in the saltire. I want to reassure hon. Members that we remain very open to views on transparency measures. They are a part of the consultation that we launched last week on the implementation of the clauses.

Finally, amendment 78 is designed to increase the level of parliamentary scrutiny for any regulations under the clause by introducing the affirmative resolution procedure. I acknowledge the hon. Gentleman’s suggestion. I think the current negative resolution procedure provides for that parliamentary scrutiny, should it be required, because anyone can pray against a negative resolution. Nevertheless, I think this is worth considering. I want to do some more assessment of its impact and the likely frequency of amendment of these regulations.

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

When the Minister referred to amendment 77, he did not mention the living wage. The UK Government and the Scottish Government seem to have an aversion to using public procurement to try to resolve the fundamental issue in this country of poverty pay.

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change

As I said, the overarching aim of public procurement must always be value for money. I am a supporter of companies paying the living wage when they can. I am a very strong supporter of the minimum wage and, indeed, have strongly supported the first rise in real terms, this month under this Government, since Labour’s great recession. I do not think it is within the parameters of this debate, but I would be delighted to spend all day debating the minimum wage and how this Government, through having a strong economic policy, can raise it. The Opposition proposition is to have a lower minimum wage, as confirmed by the former Labour Cabinet Minister, Alan Milburn, only this week. I do not think that this argument is necessary, but I certainly think that Alan Milburn was very surprised to see a lower proposition.

Photo of John Robertson John Robertson Labour, Glasgow North West

Order. I think we will go back to what we should be talking about and not Mr Milburn.

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change

I agree. With those assurances that these things will be taken into consideration in many cases and that I will look again at the case for an affirmative resolution, I hope that the hon. Member for Hartlepool will withdraw the amendment.

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

I am grateful for the Minister’s undertaking to go away and look at amendment 78. On amendments 77 and 57, however, he has not gone as far as I would like to reassure me. He said the primary aim of procurement was to secure value for money. He is absolutely right, but how do we define value for money? Someone could buy a contract or purchase goods and services, say rolling stock for a train, and it could be at the lowest possible price, but it could be at the expense of the viability of the UK rolling stock manufacturing sector and tax receipts flowing through.

EU procurement allows a public contract to be given on two possible grounds: the most economically advantageous tender or the lowest price. When MEAT is used as a criterion it could be for things like quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost effectiveness, after-sales service and where that contract will be delivered. So on the Crossrail project and Bombardier, for example, it would have been possible to ensure that it was manufactured here in the UK.

To reiterate this important point, EU procurement processes allow social issues such as on-site vocational training to be taken into account. I wanted them articulated in the Bill and I am disappointed that the Minister has not agreed with us. On that basis, I would like to test the opinion of the Committee on amendments 57 and 77.

Question put, That the amendment be made.

The Committee divided: Ayes 6, Noes 10.

Division number 7 Decision Time — Clause 33 - Regulations about procurement

Aye: 6 MPs

No: 10 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Amendment proposed: 77, in clause 33, page 29, line 8, at end insert—

“(eA) duties relating to the assessment and publication of the extent to which apprenticeships and training opportunities were provided as a result of procurement of contracting authorities.

(eB) duties to publish reports about the amount and proportions of expenditure within procurement undertaken by a contracting authority in relation to—

(i) small and medium-sized enterprises; and

(ii) the area local to the contracting authority.

(eC) duties to disclose and explain any reasons why specified business or company, or specified category of business or company, may be excluded from consideration by a contracting authority, and

(eD) duties to publish information about the allocation, draw down, usage, sub-contracting or other third-party deployment, and results of the consumption of public resources by private entities.”—(Mr Wright.)

Question put, That the amendment be made.

The Committee divided: Ayes 6, Noes 10.

Division number 8 Decision Time — Clause 33 - Regulations about procurement

Aye: 6 MPs

No: 10 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

Will the Minister comment on the revised EU procurement directive and how it affects clause 33?

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change 4:00, 23 October 2014

Yes. The procurement directive 2014 is being introduced in the UK and parts of it will be introduced in the new year. In particular, we want to ensure the 30-day procurement rule cascades down though the supply chain from public procurers. That change will come in early next year.

This is one of the most significant changes in the Bill, given the scale of Government procurement and the fact that it will cascade into private contracts between  tier 1 suppliers and their supply chains. It will make a big difference to the culture. It is the culture change that we all seek.

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

The Local Government Association said that clause 33 will allow central Government guidance and regulations to be imposed on local government, which is contrary to the principle of localism set out in the Localism Act 2011. Does the Minister agree?

Photo of Matthew Hancock Matthew Hancock Minister of State (Department for Business, Innovation and Skills), Minister of State for Portsmouth, The Minister of State, Department of Energy and Climate Change

Several clauses in the Bill broadly cast the requirements for public sector procurement. It is important to improve public procurement terms in all public authorities. Therefore, legislating to insist that all public authorities follow a high-quality public procurement process is a legitimate and reasonable step to take at a national level. If some local authorities want to argue that it should be down to them, as a principle of localism, to choose to have less good procurement policies, then I think that is a mistake. I think it is better that we have high-quality public procurement rules across the whole of the public sector.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.