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Public Procurement

Volume 541: debated on Tuesday 6 March 2012

I beg to move,

That this House considers that European Union Documents No. 18966/11 and Addenda 1 and 2, relating to the Draft Directive of the European Parliament and of the Council on public procurement, and No. 18964/11 and Addenda 1 and 2, relating to a Draft Directive of the European Parliament and the Council on procurement by entities operating in the water, energy, transport and postal services sectors, do not comply with the principle of subsidiarity for the reasons set out in Chapters 2 and 3 of the Fifty-seventh Report of the European Scrutiny Committee (HC 428-lii); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.

This debate gives the House a welcome opportunity to consider the subsidiarity questions—pronouncing that word will be one of today’s challenges—identified in the draft directive on public and utilities procurement. It may assist the House if I give some general context on subsidiarity, after which I shall turn to the draft directives under consideration, focusing in particular on the subsidiarity concerns.

This is the fifth time the House has considered a motion for a reasoned opinion on subsidiarity. The first three related to financial services, and one related to justice. The Under-Secretary of State for Justice, my hon. Friend the Member for Reigate (Mr Blunt), read into the record on 7 December—at column 313—a very good definition of subsidiarity. That is not only my opinion; the hon. Member for Stoke-on-Trent South (Robert Flello), speaking for the Opposition, said precisely the same thing, so there is clearly general approbation on both sides of the House for that definition. I do not propose to trouble the House by reading out the definition again—[Interruption.] There is approbation for that from those on the Government Benches behind me. However, colleagues can, of course, read it for themselves, if they so wish.

The Government support the Lisbon treaty provisions to uphold the principle of subsidiarity and want to work with Parliament to highlight any subsidiarity concerns that the Government may share. Our explanatory memorandums on the proposals in question drew attention to those concerns, and I am very pleased that the European Scrutiny Committee—chaired by my hon. Friend the Member for Stone (Mr Cash), who is present—decided to pursue the matter with suitable dispatch. I also note that the National Assembly for Wales has written to the European Scrutiny Committee expressing concerns about subsidiarity in respect of the procurement proposals.

We have looked into whether other member states share these concerns, and I know of at least one case: the Swedish Parliament has raised similar concerns and tabled reasoned amendments on both proposals in very similar terms to those of our motion.

Does the Minister agree that the principle of subsidiarity is too little used and too little understood? We take it seriously, but many other European Union member states do not. Should we not take a lead on this issue more often?

I agree. It is an important principle, and where it is sensible to raise it, we should do so.

Let me turn to the substance of the proposed directives. Although the motion before the House rightly refers to the draft directives as a whole, the specific issue on which the ESC has drafted the reasoned opinion is the requirement that member states must establish “national oversight bodies”. I will therefore briefly outline the proposals as a whole and the Government’s position, and then I shall turn to our specific concerns, which are shared by the Committee, about the oversight body provisions.

To recap the background, since the early 1990s there have been EU rules governing procurement by public authorities and utilities. In this context, utilities are certain bodies operating in the water, energy, postal and transport sectors, where those bodies have certain special rights or a monopoly position. The directives currently in force were adopted in 2004, and were transposed into law in the three United Kingdom jurisdictions in 2006 by means of procurement regulations. In line with the devolution settlement, the Scottish Government did that separately in Scottish law by making their own regulations; that is relevant, as I shall explain shortly. In addition, there are directives that govern the rights and remedies available to aggrieved suppliers or other interested parties if a public body or utility breaches the rules when awarding contracts. In the UK, those remedy rules have been implemented by amendments to the procurement regulations.

The directives require EU-wide advertising of many requirements and establish specific procedures to promote fair, open and transparent procurement decisions to promote open market public procurement across the EU, encouraging competition, innovation and value for money. The Government are keen to see that those rules are properly respected across the Community to ensure opportunities for UK businesses and a level playing field for all.

Perhaps at this point I should say a few words about the Government’s wider position on public procurement. My right hon. Friend the Minister for the Cabinet Office and Paymaster General announced a series of major reforms to public procurement with the aim of using the public sector’s considerable purchasing power to promote efficiency and growth. The reforms will fundamentally change the way in which the Government buy by providing an open door for current and future suppliers to discuss upcoming procurement opportunities; making it faster to do business with Government by speeding up the procurement processes to world-class standards and removing unnecessary wasteful practices; working with industry to identify and address any key capabilities needed to meet future demand; ensuring that SMEs can access the value of procurement; and reforming the EU directives that govern public procurement.

Following consultation by means of green papers, the Commission published proposals for new directives. Its declared aim is to modernise, simplify and increase flexibility in the procurement rules. The public procurement proposal covers five main areas of improvement: simplification of procedures; the strategic use of public procurement to meet new challenges, such as increased innovation and environmental protection; better access for SMEs; sound procedures to discourage corruption and favouritism; and improved governance procedures. As the European Scrutiny Committee’s reports mention, the Government support many of those elements of simplification and modernisation and I am pleased to note that the Committee also welcomes those improvements.

There are some areas where the Government will continue to press for further improvements through the negotiations, working with other member states when they have similar aims. Those improvements include a review of and increase in the financial thresholds as early as possible consistent with wider international procurement agreements and a specific time-limited exemption for mutuals, so that they can become established before being subject to competition.

The Minister is setting out the rules to which the Government will work to ensure that there is free and fair competition across borders, but is not the rest of Europe ignoring all those rules and, in some instances, has no intention of opening up its markets to British companies? By not taking the same position, are we not disadvantaging our businesses?

There are two separate issues. The first is what other European countries do, and the European Commission should be our ally in taking action to open up those markets. The second is what we do to open up competition, and I do not think that our adopting a protectionist strategy benefits us at all. Our companies trade globally, not just in the European Union, and we need them to be competitive and to be able to win business not just in the EU but in countries with fast-growing markets.

Let me give an example. Recently, all police forces have decided to buy foreign cars with no parts made or manufactured in the UK. Can the Minister name another European country with a car industry where that has happened? I do not think there is one.

Off the top of my head, no, as I do not pretend to have an encyclopaedic knowledge of all public procurement for cars across Europe. We will not help our car industry by having people make procurement decisions to buy such cars regardless of other criteria. We need to ensure that we take into account a wider range of criteria and the hon. Gentleman will know that the Government set out our steps towards making procurement decisions, taking wider features into account. The European Commission suggests using public procurement strategically to meet challenges such as increased innovation and environmental protection to ensure that some of those extra, wider issues are built into procurement decisions.

On this matter of trade, we do not so much have a problem with the rest of the world, but we have a serious trade problem with the rest of the European Union where we have a very big trade deficit. That is evidence that the other parts of the EU do not play fair on trade, particularly when it comes to currency. The Germans have persistently maintained a low parity for their currency over many decades, which has meant that their manufacturing sector has been built up at the expense of ours.

I note the hon. Gentleman’s point but I think that you would restrain me, Madam Deputy Speaker, if I felt tempted to get into a debate about the merits or otherwise of the eurozone so I am going to resist that temptation.

A big issue that has cropped up in the past year is that of Bombardier. The question that the hon. Member for St Helens North (Mr Watts) just asked is apposite because this is not simply a question of whether there are fair rules on procurement in terms of competition. Because a legal framework has been created, there is a special and fundamental requirement to comply with those rules because they are part of the legal process. The problem is not merely whether proper competition is being avoided but whether the law is being breached as well.

I thank my hon. Friend for making that point. On the specific issue of procuring rolling stock, he will know that when this came up in the House last year the then Transport Secretary made it clear that the bids were being evaluated by criteria laid down by the previous Government. The problem was that we had to follow the criteria that were already laid down. The then Secretary of State also said that we would look at procurement in the growth review that was under way, and that we would look at what happens in other EU countries that are constrained by the same rules and at best procurement practices to make sure that, where appropriate, we include appropriate socio-economic criteria in the procurement decisions. That has to be done right at the beginning; we cannot set out the criteria and then change the rules part way through the process to favour domestic bidders. I have looked in detail at the particular case my hon. Friend mentions and it was made clear that the decisions that people are not happy with were taken under the previous Government and that we had to implement them. The alternative would have been to suspend the procurement process completely and go right back to the drawing board.

I, too, wanted to raise the issue of Bombardier. Does my hon. Friend agree that there is growing interest in this among British citizens and that they want the Government to be more resolved to buy British goods, particularly British agricultural products, when it comes to supplying our armed forces? How will the Bill enable us to do that?

My hon. Friend makes a very good point. The Government have been doing a great deal of work on this, and my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs has been setting out some of the Government’s policies to improve that position. However, I shall not go into those in depth, because that would take us away from the focus of this reasoned opinion.

I shall take one more intervention on this, and then I shall set out our concerns about the oversight body, which is the focus of the reasoned amendment.

The Minister is being very patient and generous in giving way. On Bombardier, is it not the case that with such complex and big contracts, it is very hard to make judgments between bids? Over time, the Siemens bid might turn out to be a lot more expensive and a lot less good than we first imagined.

If the hon. Gentleman will forgive me, I have answered the point made by my hon. Friend the Member for Stone about the procurement process and I am not going to go into specifics about a particular procurement decision because I have not seen the detail and I was not involved in making that decision. The hon. Gentleman makes a good point about such procurement contracts being significant and complex and there is a need to get the specification right in the first place. There has been a considerable amount of controversy about that particular case.

First, as a previous Transport Minister may I tell the hon. Gentleman that the Germans always buy German trains and the French always buy French trains? They make it very clear how they do that. Secondly, going back to police cars, I do not know what he does on a Saturday night but if he watches any of the police series from various European countries, he will notice that if they are from any country that produces cars they always drive their own vehicles. I do not want to get into specifics, but this is about the mindset of our civil service. The French, German, Spanish and Italian civil services back their industry. What is wrong with the culture of our civil service that it is always trying to do British industry down?

That is a very good point and I will leave it hanging. I have not seen any evidence that our civil servants are always trying to do our industry down. No doubt the right hon. Gentleman will respond by giving me evidence of that on another occasion.

After 28 years in this place one gets a sense for when a Minister wants to get to the end of his speech as quickly as possible, particularly when he is being assailed on all sides. May I just ask whether a full analysis has been made by the Government through the appropriate Department—not his Department, but the Department for Business, Innovation and Skills—of whether there has been a real investigation into the way public procurement operates in this country as compared with the rest of Europe?

The short and honest answer is that I do not know. I will find out and make sure that I or my right hon. Friend the Minister for the Cabinet Office writes to my hon. Friend to let him know.

I was not close to sitting down because I was about to set out the three areas in which the Government have subsidiarity concerns about the proposed oversight body—concerns that are shared by the European Scrutiny Committee. First, the oversight body was not proposed in the Commission’s consultation green paper or otherwise consulted on, so neither member states nor anyone else had an opportunity to comment on the proposal. The Commission’s impact assessment does not provide a clear or detailed justification. The European Scrutiny Committee expressed similar concerns about the inadequacy of the Commission’s impact assessment when we debated the common European sales law.

Secondly, the proposal for a single, national oversight body in each member state does not recognise or respect the different legal systems within the UK. As Members are well aware, Scotland has a separate and distinct legal system. Under the devolution arrangements, the development and application of public procurement policy and the implementation of public procurement legislation are devolved matters in both Scotland and Northern Ireland. As I have mentioned, Scotland has chosen to implement the procurement directives separately. The requirement for a single national oversight body for a member state is inconsistent with those settlements, and the Commission has not demonstrated any objective necessity for a single body in each member state.

The third substantial concern is the proposal that the oversight body should be empowered to seize the jurisdiction currently resting with the courts to determine some disputes about compliance with the procurement rules. That would be a judicial function, whereas the other functions of the body would be administrative or regulatory. If they were all combined in one body, that would intrude unjustifiably in national legal and judicial structures. That would be inconsistent with the UK’s legal traditions in which a clear distinction is made between judicial and administrative functions. The remedies rules that I mentioned earlier leave it to member states to determine the legal structures that enforce the rules. There seems to be no clear justification for departing from those now. This might affect other member states as well.

As I have said, a number of other member state Governments will have issues with the national oversight body, whether on grounds of bureaucracy, cost, incompatibility with existing arrangements or subsidiarity. The Parliament of one country has already set out similar concerns to ours in a reasoned opinion. The debate has been very helpful and the European Scrutiny Committee’s motion is very welcome. I look forward to listening to other Members and having the opportunity to support the motion and have this House take a sensible decision today.

I begin my brief remarks by joining the Minister in thanking members of the European Scrutiny Committee for their thorough work in producing the draft reasoned opinion. As the Minister said, the report concentrates on two key areas: the Commission’s apparent failure to adhere to proper processes and the question of infringement of the principles of subsidiarity. On both those issues, Labour Members are in general agreement with the European Scrutiny Committee’s conclusions.

First, we share the concern that the draft directives in question fail to comply with the Commission’s procedural obligations. In an apparent breach of article 2 of protocol No. 2, the Commission neither consulted member states properly on the possibility of setting up a single national oversight body to monitor procurement nor carried out the required “detailed statement” assessing the implications.

Secondly, on the substance of the directives, we are particularly concerned by the proposal that would require the UK to allow the introduction of a single oversight body with the power to “seize” jurisdiction from British courts. As the Committee makes clear, that proposal would force the UK to combine non-judicial and judicial responsibilities within the same organisation. Crucially, the proposal could be seen as breaching the principle of subsidiarity due to it requiring an administrative body to carry out functions that would normally be dealt with by UK courts. As the Committee states,

“this aspect of the proposal amounts to an unwarranted interference in the domestic legal order of the UK, in which administrative and judicial powers have traditionally been exercised separately.”

In addition, the National Assembly for Wales has said that the proposal to introduce a single oversight body in the UK fails also to have proper regard to the principle of devolution.

The Commission’s draft proposals are simply not the right approach. Indeed, it is our view that they amount to little less than another power grab by the European Commission. As the European Scrutiny Committee has outlined, they will add another layer of bureaucracy.

There is a growing public perception in the UK—one that has been echoed by Members on both sides of the House during the debate—that when it comes to EU procurement rules, the current system does not function fairly. The Commission has to face up to that perception. How the rules are interpreted has been allowed to vary too much from country to country over the years. Too often, it seems like one rule for us and another for other member states. Too often, weaker Ministers, in all Governments, have been rolled over by officials, often at the Treasury, who, at best, have an ambivalent attitude to British industry. They have used EU procurement rules as a basis to make recommendations to Ministers that simply do not do the right thing by the United Kingdom.

I have always thought that there was precious little to commend Chairman Mao’s misrule in China, but his policy of sending recalcitrant officials back to the countryside for re-education seems to have something to commend it. Would not undertaking a shift in respect of Britain’s manufacturing be salutary for many of our civil servants, who are letting Britain down?

I thank my right hon. Friend for his intervention: he is not noted for being on the left of any party, so it is refreshing—surprising—that he refers to Chairman Mao, but he is of course right.

I referred to weaker Ministers, but I pay tribute to my right hon. Friend: whether he was a Defence Minister or a Transport Minister, he was assiduous in standing up for British industry and challenging his officials—indeed, challenging other Ministers, whether in this Government or the previous Government—on behalf of the UK taxpayer and British industry.

The strictest and most inflexible approach to EU procurement rules seems to be almost an article of faith for some parts of the system here at home. Officials and Ministers might believe that they are acting like good Europeans, but the truth is that they do not act like other Europeans. Little wonder that the British public remain so sceptical of many of the European institutions.

Is it not worse than that? Even when British civil servants and Ministers have a right not to apply European rules—for example, in defence—on more than one occasion we have seen those same civil servants advising Ministers to buy something that is not created in the UK.

I shall happily give way to the shadow defence procurement Minister in a moment. We should consider the development of defence industrial policy, which formed the basis of the defence industrial strategy: it was written into the rules that Ministers would have to consider the impact on UK industry and UK exports as part of the criteria by which they made decisions. I thought that was an enormously important improvement, and it is a great pity that the Government are rolling back in that determination.

My hon. Friend is absolutely right. We talk of an Anglo-French defence treaty and further co-operation, but I am already picking up from British industry concerns that the French Government are one step ahead of us and are already lining up contracts for small and medium-sized enterprises in France to pre-empt anything that emerges from that. We do lose out. People in industry are deeply concerned that this Government are not fighting for them.

I thank my hon. Friend for that intervention, which echoes my conversations with industrialists in defence and in other sectors. The attitude—the mindset—that my right hon. Friend the Member for Warley (Mr Spellar) referred to was plain to see when the Government cited EU procurement as justification for not choosing Bombardier for the £1.4 billion Thameslink contract.

Such a decision would have been unthinkable in any other member state, supposedly subject to the same EU procurement rules. Ensuring effective and equal access to public contracts across the single market is important, but, as my right hon. Friend the Leader of the Opposition said today, instead of Ministers standing rather idly by in the Department for Business, Innovation and Skills and other Departments:

“We should be using the power of procurement to support innovation and jobs here”

in the United Kingdom.

Opposition to protectionism is right, but opposition to industrial activism is wrong. Contrary to the apparent direction of travel inside the European Commission, there is an increasingly strong argument that there should be greater application of subsidiarity and flexibility in the EU’s attitude to procurement. It is important to remember, not least from the point of view of public confidence, that in spending UK taxpayers’ money, Governments of all political persuasions should be mindful of the implications for the domestic UK economy and for the people who pay those taxes. That is especially the case in tougher economic times, when the pressure on resources is even greater.

We will no doubt return to the issue in the coming months. Labour Members agree with the European Scrutiny Committee’s overall view that the Commission has failed to show that the proposal to set up a single oversight body produces clear benefits that cannot be achieved at national level. We support the motion, and in so doing we agree that the reasoned opinion should be forwarded to the Presidents of the European institutions.

My hon. Friend the Member for Stone (Mr Cash), the Chairman of the European Scrutiny Committee, asked me to make a speech on behalf of the Committee and on his behalf because he thought that he would not be here, but such is the attraction of a European debate that he is in his place anyway. None the less, the Committee is grateful to Her Majesty’s Government for facilitating the debate so quickly. The time scale under the Lisbon treaty for national Parliaments to submit a reasoned opinion on a subsidiarity issue is extremely tight. In this instance, the European Scrutiny Committee received the views of the National Assembly for Wales only a couple of days before the Committee’s meeting last Wednesday, when it recommended that the House adopt the draft reasoned opinion.

The Government have welcomed the proposals, and many of the detailed measures in them, and have provided an impact assessment that suggests that the benefits would significantly outweigh the costs. However, as we have heard from the Minister, they have one major concern—namely, that the proposals would require member states to establish a national oversight body, which would not only have a range of administrative and regulatory powers, but would be able to “seize” jurisdiction of the courts and pre-empt their functions in a way that the Government consider might infringe the principle of subsidiarity.

As I mentioned, this concern was echoed in the letter from the Chairman of the Constitutional and Legislative Affairs Committee of the National Assembly for Wales. I understand that the Scottish Parliament takes a similar view. Let me say from the outset that this concern is shared by the European Scrutiny Committee for reasons that I will come on to in a moment. So the debate today is not about the generality of the draft directive, in spite of some of the comments that we heard earlier. Rather, it is about a subsidiarity issue that the Government, two of the devolved Assemblies and the European Scrutiny Committee have identified.

Before I turn to the subsidiarity issue, I should explain that a reasoned opinion is a new procedure under the treaty of Lisbon, available to national Parliaments if they wish to challenge Commission proposals for legislation on subsidiarity grounds. National Parliaments have eight weeks from publication of a proposal to submit a reasoned opinion. The deadline in this case is midnight Brussels time, which would be 11 pm Greenwich mean time, on 8 March 2012.

If such opinions represent one third of all votes of national Parliaments—the bicameral UK Parliament has two votes—the Commission has to reconsider its proposal. We understand that, as the Minister mentioned, one other national Parliament, Sweden’s Riksdag, is also submitting a reasoned opinion on similar grounds. Even if the threshold is not met—in reality, the numbers required mean that it is highly unlikely that it will ever be met—the Commission responds to each reasoned opinion it receives. In addition, national Parliaments can, acting through the Government, now challenge EU legislation on the grounds that it infringes the principle of subsidiarity.

The principle of subsidiarity is born of the wish to ensure—if you believe this, you would believe anything—that decisions are taken as closely as possible to the nationals of individual EU member states. It is touted as a buffer against unnecessary supranational—not supernatural—legislation but it has been largely unsuccessful. If only the legislation were supernatural, we might find that our experience of the European Union was a happier one. None the less, its definition is important. It is set out in article 5(2) of the treaty on the functioning of the European Union, which states:

“Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.”

In addition, the treaty requires the EU institutions to ensure “constant respect” for the principle of subsidiarity as laid down in protocol No. 2 on the application of the principles of subsidiarity and proportionality. Accordingly, article 2 of the same protocol obliges the Commission to consult widely before proposing legislative Acts. This is one of the parts that has not taken place. Such consultations are to take into account regional and local dimensions, where necessary. If the Commission fails to do so, a reason must be given in its proposal.

Does my hon. Friend agree that the principle of subsidiarity would work far better if rather than just being able to prompt a response from the Commission, groups and national Parliaments were able to strike down policies of the Commission?

If I may divert from the set text from the European Scrutiny Committee, it is always worth remembering that subsidiarity started as a theological term in the Roman Catholic Church, of which I am a member. That is one of the most centralised bodies of any organisation anywhere in the world, with power vested in the Holy Father, so I have always been rather suspicious as to what the purpose of subsidiarity is.

As a fellow Catholic, may I ask my hon. Friend whether he agrees that it is one thing to have the Jesuitical concept of subsidiarity, which has been brought into the rule-making of the European Union, as a theological question, and that it would be far better if the matter were regarded purely as one of theology and not exclusively one for political purposes?

I am grateful to my hon. Friend for his helpful intervention. I do not think one should use the term “Jesuitical” too pejoratively, as the Jesuits are a fine body who, I believe, educated my hon. Friend—

With enormous success, which is acknowledged around the country and for which we are all grateful. However, I agree with the fundamental point that it is a political rather than a theological reality in this case.

By virtue of article 5 of protocol No. 2, any draft legislative Act should contain a “detailed statement” making it possible to appraise its compliance with the principles of subsidiarity and proportionality.

I turn now to the Committee’s view, as expressed in the draft reasoned opinion. The first conclusion we came to was that the Commission had failed to consult member states in the Green Paper, or otherwise, on the possibility of setting up a single national oversight body. This is in clear breach of article 2 of protocol No. 2, and I ask the Minister to say whether he agrees with this, and whether he intends to pursue it with the Commission.

Similarly, there is no evidence in the Commission’s explanatory memorandum or impact assessment of it carrying out the requirement under article 5 of protocol No. 2 to prepare a “detailed statement” containing

“some assessment . . . in the case of a directive of its implications for the rules to be put in place by Member States, including where necessary the regional legislation”.

As a consequence, the draft directive on public procurement and, by implication, the draft directive on procurement by public entities is said by the National Assembly for Wales to breach the devolution principle in both Wales and Scotland. I quote from the letter of 23 February from the National Assembly for Wales:

“The proposal also fails to have regard to the principle of devolution in imposing the duties on a single body.”

I agree wholeheartedly with the thrust of the hon. Gentleman’s speech. The only weakness that I perceive is that it is clear to me that the Commission believes that there is not fair trade within Europe. Some countries abide by the rules and others do not. We have heard examples of that today. How would the hon. Gentleman address that problem?

I am in complete agreement with the hon. Gentleman that one of the problems of the European Union has long been that we as a nation are particularly good at obeying the rules and our continental colleagues are not necessarily so good at obeying the rules. This is for all sorts of historical reasons and understanding of our constitution as against their constitutions. The problem, and the reason why I am fairly relaxed about them not obeying the rules, is that one would have to argue for more Europe and more intrusive regulation to get them to obey the rules. That would be a bad thing. I happen to believe, though I am not sure that Opposition Members share this view, that one-way free trade encourages efficiency in the home economy, that one can compete very effectively even with one-way free trade, and that we should be relatively relaxed about how they cheat, if I am allowed to use such a term in relation to our continental friends.

The National Assembly for Wales went on to say about the proposal:

“It fails to reflect the way in which separate implementing regulations have hitherto been made in Scotland, and the way in which extensive administrative and advisory functions in relation to procurement in Wales are exercised by or on behalf of Welsh Ministers.”

The Government’s explanatory memorandum does not consider the impact of the proposals on the devolution settlement, so I would be grateful if the Minister said whether the Government agree with the concerns raised.

Before turning to the Committee’s final conclusion, I should emphasise how important it is that the Commission, which has considerable executive power to initiate legislation, is obliged to consult properly, and prepare a “detailed statement” which assesses its proposals for compliance with subsidiarity. If it does not do so, we risk ending up with a provision such as this, which conflicts with a fundamental principle of the UK’s constitution. I trust that the Government agree with this and will take the Commission to task over it.

Finally, I turn to the proposal to establish a national oversight body, which not only would have a range of administrative and regulatory powers, but could “seize” the jurisdiction of the courts. The Committee thought this an alarming proposal, and it really is. It hits against the heart of our understanding of the separation of powers between governmental agencies and the judiciary. Again, no consultation on that proposal took place and it was not in the Green Paper—it came out later—so we have this great leap in our understanding of the law without any proper consultation. The Committee concluded that the proposal amounted to an unwarranted interference in the domestic legal order of the United Kingdom, where administrative and judicial powers have traditionally been exercised separately, and so infringed the principle of subsidiarity.

The Committee also considered that the combination of functions would be likely to prevent the oversight body from acting judicially without suspicion of a conflict of interest—we looked at that fairly recently when the European Court of Justice ruled in its own favour over the pay of EU officials, so we know how corrupt these EU courts can be—contrary to article 6(1) of the European convention on human rights. That is the core of the matter. It undermines one of the principal objectives of these two directives: to increase legal certainty in the award of procurement contracts. It is for these reasons that the Committee asks the House to approve the Government’s motion on subsidiarity.

It is always a great pleasure to listen to the hon. Member for North East Somerset (Jacob Rees-Mogg), whose speech was properly prepared and helpful to the debate. I am very pleased with the Government’s motion, and it is not often that I am unqualified in my support for the Government. Indeed, from time to time I am critical of my own side, although the robust speech by my hon. Friend the Member for Barnsley East (Michael Dugher) was also very welcome. We also heard some particularly helpful interventions from both sides of the House, and I concur with them all.

I am happy to speak in favour of the motion and support the principle of subsidiarity in this instance. The proposal states:

“The subsidiarity principle applies in so far as the proposal does not fall under the exclusive competence of the EU.”

I am rather pleased that the national health service and various other public bodies do not fall under the exclusive competence of the EU. In fact, I rather like them being under the exclusive competence of the British Parliament, but that is my personal view. I think that we ought to decide democratically what we do with our public services and not be dictated to by anyone else.

We are putting forward a reasoned opinion, but I would go even further and call it a reasoned opposition. Indeed, I think that opt-outs or derogations would be preferable to subsidiarity, as I have argued from time to time. The Government have talked about the possibility of regaining some powers from Brussels, and I could suggest one or two to be returned—but that might go beyond the boundaries of the debate.

The draft directive is about contracting authorities or public bodies, but some of those are now more or less in the private sector, so I am not sure whether they really fall within the scope of the EU’s proposal. The idea of a national oversight body, presumably set up by the British Government, that would police British contractors or contracting organisations on behalf of the EU is bizarre. If the EU wants to set up a body to police things, it should do that itself. It should not expect us to do it. Even then, I would, of course, object.

We are talking about the EU trying to lever public services into the marketplace, and the EU marketplace rather than the British one. I am in favour of strong public sector organisations with public sector employees, paid for publicly and accountable to this Parliament, local authorities or other public bodies. I am against the privatisation of our public services in principle, but if there is to be any private involvement it should be British private involvement, and we should not see our public services sold off to foreign organisations over which we have little control, if any. The whole proposal is unacceptable.

The European Scrutiny Committee’s document refers to social services. It states:

“The evaluation on the impact and effectiveness of EU public procurement legislation has shown that social, health and education services have specific characteristics which make them inappropriate for the application of the regular procedures for the award of public service contracts.”

That is a long way of saying that it is inappropriate for the EU to intervene in our public services, and I strongly agree. I am a member of the European Scrutiny Committee. Sadly, on this rare occasion I was unable to attend the meeting at which the matter was discussed, as I was out of the country on parliamentary business—I obviously missed an interesting and serious debate—but I absolutely support the Committee’s decision.

There have been some general comments on public procurement, what other countries do and what we do, and it has been observed that some countries seem expert at somehow managing to secure contracts for their companies rather than foreign ones. Indeed, I remember some years ago Signor Agnelli, the proprietor of Fiat, being asked why there seemed to be Fiat cars everywhere in Italy, whereas other countries seemed to import cars. He denied the existence of any sort of protectionism or arm-twisting in Italy and said that it was simply because Italians preferred to drive Fiat cars. We all know that Italy is completely above suspicion in these matters, so I will go no further.

Members also talked about railways. I really think that we have made a terrible mistake in offering the Thameslink contract to Siemens. I have been travelling on Thameslink and its predecessors for 43 years, and if the contract proceeds as we expect, I shall be very unhappy about the fact that in future I will be travelling on Siemens trains rather than Bombardier trains made in Derby.

I am known to be sceptical about the EU arrangements. I want voluntary arrangements with our fellow European countries. I am an enthusiastic European in the genuine sense. I love Europe as a place, the countries, the people, the politics and the philosophies that have come out of this great subcontinent, but I am not in favour of an ever-growing EU that is increasing its control over our lives and economies and trying to dictate how we run our countries. That should be done by democratically elected Parliaments. I hope that in time other countries will feel as we do about that. With the current crisis in the eurozone, I suspect that other countries are already starting to think in those terms. The Greeks are very unhappy about what is happening, and who can blame them? Around 25% of their population are unemployed. Wisely, the UK has been somewhat more sceptical of the EU, and perhaps has been leading the way towards a more sensible future for the whole of Europe in the coming years.

I see that the Minister is anxious to get to his feet and am sorry to have to disappoint him, but it will not be for long.

As my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) dealt so well with the European Scrutiny Committee’s representations, I want to look at some of the context within which this all takes place and, in particular, draw attention to the explanatory memorandum provided by the Government. It states:

“Public procurement plays an important role in the overall economic performance of the European Union. In Europe, public purchasers spend around 18% of GDP on supplies, works and services. Given the volume of purchases, public procurement can be used as a powerful lever for achieving a Single Market fostering smart, sustainable and inclusive growth.”

There is one point to which I am bound to draw attention, and that is the figure of 18%, which is a monumental percentage of the European Union’s GDP. We therefore want to be absolutely certain that it is not subject to abuse.

There is a good degree of cross-party support on this question, and when intervening during the debate I mentioned that there are important reasons for ensuring that we are not cheated through any fancy practices by other member states. I voted for the Single European Act 1986 and wrote a letter to The Times about it, drawing attention to the difficulties that might arise if any mistakes were made in the Act’s operation. At the same time I tabled an amendment stating that nothing in the Act would derogate from the sovereignty of the United Kingdom Parliament.

As it happens, the then Speaker, Bernard—Jack—Weatherill, and I had a discussion, because I disagreed with the House officials on the selectability of my amendment. I was told in those days—I repeat, in those days—that the question of derogation from the sovereignty of the United Kingdom Parliament was regarded as reopening the whole issue of the European Communities Act 1972. In fact, it did no such thing, and I am glad to say that since then such amendments, including those on the sovereignty of the United Kingdom Parliament, have been accepted on several occasions.

That raises the question of the extent to which a single market, and the legal framework carried with it, is compliant with the general principles of competition, because we live in a global environment. We live in a world where there is a great deal of international competition, so constraining economic performance and public procurement within the single market raises one or two issues.

On the question of the manner in which the report has been put together, the explanatory memorandum states that

“the European Commission conducted in 2010/2011”—

only a short time ago—

“a comprehensive evaluation of the impact and effectiveness of EU procurement legislation drawing on an extensive body of evidence and new independent research.”

I raised that question from the UK point of view with the Minister, because it is one thing for 18% of the EU’s entire GDP to be looked at by the European Commission, in which some of us have not very much confidence, but it is another thing to ask whether the UK Government have looked at the implications for the UK, particularly in the light of recent examples, such as Bombardier.

The Minister replied, “Well, that was done under the previous Government,” but, although that is no doubt true, the question of whether it is a matter for political point-scoring does not necessarily lead us to the right conclusion. I am interested to know now what impact public procurement has on the UK vis-à-vis other member states of the European Union. That is why I asked the Minister if he would be good enough to take it up with the Business Department, and he has graciously agreed to do so.

It is clear that Germany has a monumental advantage, some of it created by its own success, when it comes to foreign direct investment in other member states—particularly in those with economic and political ties to Germany, as geographically, politically and economically such links give Berlin substantial leverage over those countries. That process is in part leading to a distortion of the EU’s overall objectives, hence the increasing concern that Germany is becoming not merely the predominant member of the European Union but the dominating element. I say that in no hostile sense—just that I think it is bad for Germany, for Europe and for the UK.

It has been said that the European Union is one way of avoiding conflict between the nations of Europe, but, with the pressures inside the eurozone at the moment, tensions are being exacerbated by the European Union, not lessened.

I do not need to go any further down that route, other than to say that public procurement amounting to 18% of the EU’s GDP represents a significant advantage to countries with the maximum degree of foreign direct investment, if they are able to induce the Governments and official bodies of those countries to procure for them the return that they no doubt feel is justified, given the contribution that countries such as Germany make to the European Union as a whole. All that requires a great deal of careful analysis.

I do not want to be unduly suspicious, but I fear that there is a considerable amount of hand-wringing over the extent to which Germany is expected to contribute to the European Union in relation, for example, to Greece and to Spain, when in fact, as Wolfgang Münchau said in the Financial Times a couple of days ago, the root problem is the imbalance that Germany is creating by its refusal to import. I cannot be sure about this, but BIS should ask itself the serious question whether there is not a similar problem in relation to public procurement.

If Germany, for example, makes massive contributions to other countries in Europe, no doubt it believes that if it in turn obtains contracts for the roads, railways and all the other things that make up the public procurement system, it will therefore, through the contracts that it has secured there, receive a repayment—with fantastic profits attached, no doubt—that returns the money to Berlin. That is no doubt what it wishes to achieve—and is achieving.

The hon. Gentleman hits on a real problem. As far as I can see, the German authorities, whether they be the Government, civil servants or politicians, all tend to see manufacturing as the core of what they do. They make every effort to maximise the potential work that they can generate for their own manufacturing industries. That is not the case in the UK, and we are in an unfair position because of it, so do we, as well as the Germans, need to change?

I am glad that the hon. Gentleman raises that issue, because it is very much the direction in which we should go. We need an analysis and we need to know whether the UK is stepping up to the plate. We know that we have incredibly good industries, but are we making the most of them? Are we being cheated? Are we—if it falls short of cheating—being taken for a ride? Are the rules being properly complied with, and should BIS not conduct a strategic analysis of the issue, irrespective of the fact that the Business Secretary, being a Liberal Democrat, has an apparent abhorrence of investigating what I should like him to look at in terms of the inadequacies and manipulations of the European Union?

I am not being hostile or over-suspicious, but when 18% of GDP is tied up in such public procurement, it is very important for us to be completely sure that we are having a calm and collected look at the extent to which it operates for or against us. The evidence on Bombardier suggested that things had gone badly wrong. I do not really care which side of the House is at fault; as far as I am concerned, this is an opportunity to get it right. I am glad to see that those on both Front Benches are nodding in agreement, because I know that their main concern is to serve the national interest, and that would be well achieved by making such an analysis.

The document contains, as part of the study that the European Union conducted, issues relating to small and medium-sized enterprises. Bigger manufacturing industries tend to be able to look after themselves, but some SMEs need to be carefully monitored and given every possible advantage to enable them to get into the procurement market. The document also refers to the “strategic use” of procurement in Europe—strategic, I imagine, in the context of global trade.

There are deep concerns about the extent to which our water, electricity and many other main utilities are exposed to degrees of competition that are apparently not complied with in some other countries. I hope that that, too, will form part of the overall strategic analysis.

Some of our utilities, such as electricity and water, are owned by foreign companies—even foreign state-owned companies—and there is a suggestion that they are exploiting the British market to subsidise their own markets.

Yes. This is all part of what I would like someone to look into very carefully. We are far too used to hearing generalisations and soft words when we are in fact talking about very substantial sums of money—on a monumental scale—and the question of whether this is a fair and free market that benefits us. I take into account the remarks of my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) about the manner in which free trade operates, but for practical purposes, in terms of public procurement, I would want to be satisfied that it always works on a fair and reasonable basis and does not in any way upset the UK economy.

This is a very important debate, albeit not one that has attracted a vast amount of interest. I am afraid that these European debates, the contents of which are extremely important, do not necessarily attract the degree of attention that they deserve, because although they deal with people’s daily lives, with whether the UK economy will function effectively, and with many other areas within the rubrics of the European Union’s legislative framework, they do not have the word “domestic” stamped on them, and people think that when we talk about “Europe” we do not mean the UK. The truth is that the UK is affected very directly by everything that happens in the EU, and I want to be entirely satisfied that we get the full benefit of the trading system that the single market is supposed to provide.

The work that the Chair of the European Scrutiny Committee does, in which some of us try to support him, does make a difference, and this House does hear about the realities of the European Union. I think that our Front Benchers, possibly our civil servants, and certainly the public outside appreciate that we are taking these things seriously. I pay particular tribute to the hon. Gentleman in that regard.

That is extremely generous of the hon. Gentleman. I feel very strongly that we have a duty to look at these matters and to do what we can to help in debating them for the benefit of our constituents in the United Kingdom as a whole.

The explanatory memorandum contains a reference to the impact assessment and its executive summary, which gives us reason to believe that the impact on the European Union has been considered. However, the European Union is not an end in itself; it is an artificial framework that has been created for the purpose of an objective, which is, ultimately, political union. We know that. We also know, from what Chancellor Merkel has been saying recently, that that is very much tied up with her own agenda; I do not need to go down that route. We must consider the impact on the United Kingdom of the huge amount of money involved in public procurement, and the effect in relation to utilities, which may determine whether we get any energy and whether we have a proper water system, electricity system, and so forth. Enabling other countries’ companies to have control over those matters is a question not only of trading but of national security.

It is very important to have these things properly looked at. I am sure that the Minister and the duty Whips will pass on my messages to BIS, and that we will end up with a virtuous circle whereby we have a proper analysis to ensure that the United Kingdom gets what it deserves out of the European Union, and does not participate in it in ways that are, as our debate on subsidiarity amply demonstrated, unnecessary.

With the leave of the House, let me respond briefly to some of the concerns raised during the debate. I will try to keep my remarks as focused as I can on the motion before us, tempting though it is to range more widely over the whole gamut of European policy.

I, too, pay tribute to my hon. Friend the Member for Stone (Mr Cash) for the excellent work that he does in chairing the European Scrutiny Committee. His wider concerns about growth, trade, jobs and our success as a country were exactly the focus of the recent European Council, the details of which my right hon. Friend the Prime Minister set out so ably yesterday, when my hon. Friend was in the Chamber. From our perspective, the purpose of being in the European Union is to ensure trade, jobs and success for the United Kingdom.

I welcome the comments of the hon. Member for Barnsley East (Michael Dugher) and his general support for the motion. He referred to concerns that he had picked up about officials and “weaker Ministers” at the Treasury. I can only assume that he has reached those conclusions from his close working with the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who has great experience of the Treasury and must have encountered such things in the 10 years that he was Chancellor.

My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) entertained us, as ever, on behalf of the European Scrutiny Committee, leaving an opportunity for my hon. Friend the Member for Stone to range more widely. My hon. Friend the Member for North East Somerset made an excellent speech that took us down one or two little byways. The House will be pleased that I am going to resist the temptation to engage in any kind of theological debate about subsidiarity, or even supernatural law-making. The National Assembly for Wales, to which he referred, had two main concerns: first, about the oversight body and subsidiarity in general; and, secondly, about specific issues to do with devolution. The Government agree with those concerns, as I explained in my earlier remarks.

My only other point is about the wider procurement issues. It is worth noting that recent analysis showed that UK companies won 17% of all the public procurement contracts awarded to companies from other member states across Europe. I will leave it to hon. Members to draw their conclusions about whether that is good or could be better, but it is a fairly substantial chunk of GDP.

Finally, on the subject of how other European countries do their procurement, there are remedies for aggrieved suppliers, which countries have to implement. I urge any British company that feels that it has been hard done by to use those remedies to ensure that it gets a fair bite of the cherry.

Question put and agreed to.


That this House considers that European Union Documents No. 18966/11 and Addenda 1 and 2, relating to the Draft Directive of the European Parliament and of the Council on public procurement, and No. 18964/11 and Addenda 1 and 2, relating to a Draft Directive of the European Parliament and the Council on procurement by entities operating in the water, energy, transport and postal services sectors, do not comply with the principle of subsidiarity for the reasons set out in Chapters 2 and 3 of the Fifty-seventh Report of the European Scrutiny Committee (HC 428-lii); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.