Angela Rayner, Deputy Leader of the UK opposition Labour Party, announced new policy initiatives in the public procurement arena today at the party conference. Given the current opinion polls, and reaction to last week’s is-it-really-a-budget “financial statement”, there is a pretty good chance Labour will have a chance to implement these ideas in the next few years.
The focus was mainly around choosing suppliers based on their wider contribution to “social value” – procurement with purpose, we might say. Now to be fair, some of the ideas are really just developments of the policies implemented over recent years by the Conservatives. Already, buyers are supposed to consider social value in terms of most major contracts, and there have also been procurement-related initiatives around climate change and modern slavery. But Rayner wants to take matters further.
One key area is tax. The headline in the Guardian on Saturday was “One in six UK public procurement contracts had tax haven link, study finds”.
The article says, “The companies behind the taxpayer-funded deals were owned by firms that were at least partly domiciled in one of 27 tax havens around the world, including the British Virgin Islands, Panama and Jersey. The contracts, with a combined value of £37.5bn between 2014 and 2019, cover sectors including health, transport and infrastructure, according to the Fair Tax Foundation. The figures raise questions over the government’s public procurement process”.
Between 2014 and 2019, government procurement spending must have been something a little over £1 trillion, so £37.5 billion is actually a fairly small proportion of that. So I’d like to see more on the methodology behind the analysis. But the idea is that these firms would not be able to bid for public sector contracts.
Whilst the intent to favour firms that pay more tax is intuitively reasonable, being domiciled in a tax haven is not illegal. So is it right to use public procurement to try and address the wider policy issue i.e. that not enough tax is paid in the UK by some large firms? Maybe the government should just say that firms domiciled in tax havens are not allowed to trade in the UK? And of course several of the “best” tax havens are British territories anyway! So whilst I have sympathy with the objective here, I can see difficulties in applying procurement rules to this issue, and I am not convinced it is the best approach.
Anyway, Labour has a “five-point plan” for procurement. Rayner pledged guidelines that will make sure “contracts are awarded in the public interest”. Labour will promise “to reward businesses that create local jobs, skills and wealth, treat their workers fairly and pay taxes responsibly, making social value mandatory in all contracts”. Smaller firms will be helped, bidding will be “streamlined” and incompetent suppliers truck off. Those last two points are both in the current (Tory) Procurement Bill going through Parliament, it should be said.
I don’t have an issue with this. The challenge though comes with implementing the right processes and approaches around implementing effective procurement that incorporates these factors. We’ve written much here and in the Procurement with Purpose book about both the positives and the challenges of following a “social value” approach to public procurement. For a start, we have to make sure suppliers chosen are actually capable of carrying out the contract properly, not just that they tick the right social value boxes.
And I do worry about fraud and corruption. Local government in the UK has seen many examples in recent years of both fraud and gross financial incompetence. Making procurement decisions more opaque and based on what can be pretty subjective factors could work against good procurement if it is not implemented carefully. So I would like to see more and better auditing and preventative measures to mitigate the risk of corruption across public procurement in every sector.
On that note, Rayner in her speech said, “we will guarantee transparency about how taxpayers’ money is spent through a public dashboard of government contracts. Inspired by Ukraine’s anti-corruption blueprint. Even under attack from Russia they are honest about how they spend public money.”
She’s obviously read the paper I wrote a year ago… There are proposals for some additional transparency in the Procurement Bill too, but I assume Rayner is contemplating more radical measures.
Labour also proposes “the biggest wave of insourcing in a generation”. “Before any service is contracted out, public bodies must show that work could not be better done in-house”. Again, the devil is in the detail. I would personally love to see the water industry nationalised, and services such as children’s social services insourced. But there is scope to waste huge amounts of public money if this is not executed well.
Rayner said that the Conservatives had built “a legacy of sleaze, cronyism and corruption, with the British people left to pick up the bill”. That may be a little harsh; but then you think about many aspects of pandemic procurement, not to mention the way competition has been replaced by single-tender supplier selection in many cases. That last issue demonstrates an important point – we can’t just blame the politicians for wasted money. If Labour really wants to make a difference in public procurement, it will need to address not only the strategic level political issues, but also the skills issues and the bad practice that has been enthusiastically embraced by some civil and public servants.