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Local Government: Ethical Procurement

Volume 607: debated on Tuesday 15 March 2016

[Mr Gary Streeter in the Chair]

I beg to move,

That this House has considered local government and ethical procurement.

I am grateful for the opportunity to have this debate. As I look around, I see right hon. and hon. Members with very different views on Israel and Palestine, and people who disagree about what incentives or pressure should apply to either side to secure equal rights, including the rights of statehood and the right to security for the peoples of both Palestine and Israel.

As chair of the Britain-Palestine all-party parliamentary group, I take a close interest in the situation in the middle east. However, this debate is not primarily about whether any of us takes this view or that view on how to bring peace there; I sought today’s debate to hold Ministers to account and to require them to be clear about what their policy announcements mean and do not mean. This debate is also about the ability of those who are responsible in public institutions to exercise the judgments that they are appointed to exercise within the law when they make decisions. That could be in respect of how local authorities are accountable to their electorates for making decisions or of the ability of pensions trustees to make judgments in line with their fiduciary duties.

I welcome the Minister here today to answer questions about the procurement policy note issued by the Cabinet Office on 17 February entitled “Putting a stop to public procurement boycotts” and about the proposed changes to the rules governing the local government pension scheme’s investments—for which I understand the Cabinet Office is also responsible, for some reason. I look to the Minister to answer what he will be asked clearly and without ambiguity. That is always important, but it is even more important on these matters because the Minister for the Cabinet Office and Paymaster General has volunteered very little about them to the House. That is in stark contrast to the amount of publicity he has sought to generate for his proposals outside the House.

For where this all starts, we need to go back to the Conservative party conference last October. A press release was issued in which the right hon. Gentleman was quoted. It was headlined “Government to stop ‘divisive’ town hall boycotts and sanctions” and said that action was going to be taken against the

“growing spread of militant divestment campaigns against UK defence and Israeli firms.”

However, that press release also contained a note to editors, as press releases often do, that suggested that a large number of the local authorities and public institutions that were apparently due to be targeted by the new rules had not resolved to divest from companies on the grounds that they were Israeli or of any other nationality. They had made or were in the course of making procurement or investment decisions on the basis of the behaviour of companies, irrespective of their nationality. In fact, the behaviour most frequently mentioned in the press release was financial involvement with illegal settlements in the west bank, about which local authorities and others were concerned.

I know that in October last year, collective Cabinet responsibility was perhaps expected rather more than it appears to be these days. However, it is rather surprising that the Minister for the Cabinet Office took such exception to public institutions seeking to avoid dealings with companies involved with illegal settlements, given that the Foreign Office’s own website carries very different advice.

I congratulate my hon. Friend on securing this vital discussion. As he will be aware, the UK Trade & Investment website, which is sponsored by the Foreign Office, states:

“we do not encourage or offer support”

to firms that trade with illegal settlements. Does my hon. Friend agree that we find ourselves in a perverse situation? The Foreign Office is warning UK companies and private individuals against trading with the settlements, while the Department for Communities and Local Government and the Cabinet Office are threatening to make it illegal for public bodies to do so.

My hon. Friend is absolutely right. It is worth quoting directly from that Foreign Office advice, which is there to this day. It says:

“Settlements are illegal under international law, constitute an obstacle to peace”

and “threaten” the “two-state solution”. It goes on:

“There are therefore clear risks related to economic and financial activities in the settlements, and”—

as my hon. Friend just said—

“we do not encourage or offer support to such activity. Financial transactions, investments, purchases, procurements as well as other economic activities (including in services like tourism) in Israeli settlements or benefiting Israeli settlements, entail legal and economic risks stemming from the fact that the Israeli settlements, according to international law, are built on occupied land and are not recognised as a legitimate part of Israel’s territory.”

It is a pleasure to serve under your chairmanship, Mr Streeter. I thank my hon. Friend for securing such an important debate. Does he agree that local authorities are in fact a branch of the state and therefore have a duty to observe our obligations under international human rights law?

I understand what my hon. Friend says, but this is also about different public institutions making judgments in line with the law and their best belief of what the situation is. I hope that all public institutions would pay due regard to international law.

Before giving way, I just want to finish this quote from the Foreign Office advice:

“This may result in disputed titles to the land, water, mineral or other natural resources which might be the subject of purchase or investment. EU citizens and businesses should also be aware of the potential reputational implications of getting involved in economic and financial activities in settlements, as well as possible abuses of the rights of individuals. Those contemplating any economic or financial involvement in settlements should seek appropriate legal advice.”

Following the point that my hon. Friend the Member for Bradford East (Imran Hussain) just made, the Foreign Office guidance also talks about

“possible violations of international humanitarian law and human rights law”.

Indeed, the Foreign Office guidance is very clear, whereas the procurement policy note is very unclear. Does my hon. Friend the Member for Birmingham, Northfield (Richard Burden) agree that that may be intentional—that the actual aim is not to change the law, but to discourage and blackmail local authorities into not taking steps that may be perfectly legitimate and that the Foreign Office is encouraging them to take?

The point that my hon. Friend makes is about the fear that a lot of people have about the agenda behind this procurement policy note.

My hon. Friend is constructing a very powerful case. Does he agree that this is about not necessarily Israel but a much wider issue? It is about the freedom of people in local government to do as I and five of my fellow councillors—who all subsequently became MPs—did in the London Borough of Ealing in 1982, when we were quite happy to disinvest in Barclays. Will my hon. Friend remind me about what element of parliamentary scrutiny or involvement there was when the statement was made by the Minister for the Cabinet Office in February this year? I do not recall it being mentioned on the Floor of the House at all.

My hon. Friend is quite right. Parliamentary scrutiny of this matter has come down to a number of us having to ask questions—to which we have had not very detailed replies, I have to say—and to this debate. We had to apply for a debate in Westminster Hall to get any parliamentary scrutiny of this matter at all.

I am grateful to my hon. Friend for securing this debate and for giving me an opportunity to ask him this question. I asked the Cabinet Office and a number of other Departments whether they had recently met people from the arms industry, the tobacco industry or, indeed, the Israeli embassy who may have lobbied for this measure. I am afraid that I did not get a substantive response from any of the Departments. Has my hon. Friend had any answers to questions such as that?

I am afraid that my hon. Friend’s experience rather mirrors mine and that of a number of other hon. Members.

This point is merely about the mechanics of parliamentary time. I simply wonder whether the hon. Gentleman knows how many procurement policy notes there have been in 2014, 2015 and 2016, and how many of those have merited parliamentary scrutiny in their own right.

I have no idea about that, but if the hon. Lady thinks this is not a very significant public procurement note that merits parliamentary scrutiny, I wonder why the Minister for the Cabinet Office took the trouble of announcing it in a press conference with the Prime Minister of Israel on 17 February.

On 16 December, I asked the Secretary of State for International Development whether she agreed with the Foreign Office that it was perfectly reasonable for both public and private institutions to pay due regard to that Foreign Office advice when they make their own investment and procurement decisions. Her answer was unequivocal. She said:

“They should do that; that is good Foreign Office advice.”—[Official Report, 16 December 2015; Vol. 603, c. 1534.]

So my first question to the Minister is this: were civil servants consulted at all before the press release was issued at the Conservative party conference? I am happy to give way to him if he has a reply.

I was planning to wait until the end and collect what I am sure will be a whole series of questions. Perhaps that will allow me to wrap them all up together in a series of responses.

I am very happy for that to happen. I give the Minister notice that there will be six questions on which I am seeking answers.

Did Ministers really take the view that public institutions should not have the same rights and concerns as private institutions when it comes to good business practice and corporate social responsibility? What was it that Ministers were trying to outlaw? The public procurement note published on 17 February appears to suggest much less than the Conservative press release of October; it appears to say that institutions should not impose a blanket ban on contracts with companies on the basis of the nationality of the companies concerned, in line with existing EU and World Trade Organisation rules. We know that the WTO forbids the use of quantitative restrictions, such as a ban on imports—phrased in terms of products originating in the “territory” of another WTO member.

On 9 March, in answer to a question from my hon. Friend the Member for Hammersmith (Andy Slaughter) about whether the occupied territories could be considered part of Israel, the Under-Secretary of State for Foreign and Commonwealth Affairs, the hon. Member for Bournemouth East (Mr Ellwood), was absolutely clear:

“The World Trade Organisation does not define the territory of its members. The UK does not recognise Israeli sovereignty over the territories occupied by Israel in 1967. We therefore do not consider the Occupied Palestinian Territories to be part of Israel.”

So my second question to the Minister is this: is there anything in this public procurement notice or that is intended by the Government that in any way changes that?

European Union rules are also mentioned in the public procurement notice. They allow public institutions, on a case-by-case basis, to exclude companies from tenders on the basis of their behaviour, specifically where grave misconduct may be involved. What could that mean? Let us turn again to the Government’s own documents—to their 2013 national action plan on implementing the UN guiding principles on human rights and business. An extract from that states that the UK Government

“are committed to ensuring that in UK Government procurement human rights related matters are reflected appropriately when purchasing goods, works and services. Under the public procurement rules public bodies may exclude tenderers from bidding for a contract opportunity in certain circumstances, including where there is information showing grave misconduct by a company in the course of its business or profession. Such misconduct might arise in cases where there are breaches of human rights.”

My third question to the Minister is therefore this: does the February 2016 public procurement note in any way change or add to that advice?

My fourth question is about whether the Minister considers that a breach of the fourth Geneva convention is a breach of human rights. If he does, would the public procurement note restrict a public institution from resolving not to deal with a company that was involved in aiding and abetting breaches of that convention?

If the public procurement note is prompting these and more questions, so, too, are the changes that the Cabinet Office says it is going to introduce in relation to investment decisions of local government pension funds. So my fifth question is this: pension fund trustees are already covered by a fiduciary duty, but will the changes being introduced in any way fetter the judgments that they make in line with that fiduciary duty in relation to, say, not investing in fossil fuels, tobacco or the arms trade?

My sixth question logically follows from that: in order to be clear on these points, will the Minister outline what plans he has for parliamentary scrutiny of these changes to pension fund guidance? Specifically, will he commit to consulting on any draft guidance he intends to issue in respect of local government pension scheme investments before it is published and before Parliament, through whatever procedure, is asked to make any kind of decision on these changes?

My hon. Friend is setting out a clear set of questions, and he has made it clear that there is some ambiguity about precisely what the impact of the guidance note is. Is his reading of it that the kind of disinvestment by a local authority pension fund that was referred to earlier—Barclays and activities in South Africa—would be ruled out?

I should say in answer to my right hon. Friend that I honestly do not know. That is the whole point—the Minister has to answer these questions. The wording of the Conservative party press release would certainly indicate to me that that kind of thing would be outlawed, but the Minister has to give specific answers today to these specific questions. That is important because it simply is not acceptable for councils, pension funds or other public institutions to feel threatened away from acting in line with their best judgments, in line with their duties, as a result of innuendo broadcast by the Cabinet Office Minister at the Conservative party conference—or indeed, broadcast more recently in Israel.

I am not entirely sure whether the Church of England is counted as an institution in this context, but does my hon. Friend realise that it would certainly be caught up in this guidance note?

My hon. Friend is absolutely right about that; that could be a seventh question for the Minister.

The Minister no doubt spoke to his right hon. Friend the Minister for the Cabinet Office before this debate, so perhaps he knows why his right hon. Friend decided to launch this public procurement note not in a statement to the House or under any House procedure, but in a press conference alongside the Prime Minister of Israel. If the reason was that he wanted to make a point on the world stage about this Government’s opposition to generalised boycotts of Israel, then okay—if he wants to make that point—but why did he apparently not feel any need to utter a word about other parts of Government policy, such as the fact that settlements in the occupied territories are illegal?

Why was there not a word about the fact that Israel had only recently withdrawn co-operation from an independent delegation of UK lawyers acting on a Foreign Office-supported project, which has found that Israel’s treatment of Palestinian child prisoners breached article 76 of fourth Geneva convention and several articles of the UN convention on the rights of the child? Why did the right hon. Gentleman not find time to mention that in the first six weeks of 2016, over 400 Palestinians have been displaced from their homes? That is over half the total number of Palestinians displaced in the whole of 2015.

I suspect that the Minister for the Cabinet Office’s apparent failure to say a word publicly about those things during his visit illustrates a rather strange set of priorities and a highly selective approach to UK policies on the Israel-Palestine question. He will have to answer for himself about his priorities and inconsistencies, but the Minister here today has an obligation to answer, on behalf of the Government, the specific questions about the procurement policy note and the changes they intend for local authority pension regulations. I have asked this Minister six specific questions and I ask him to do the House the courtesy of giving six clear and unambiguous answers to those questions today.

Order. Nine colleagues wish to catch my eye and have roughly 40 minutes in which to do so. Perhaps I could impose a voluntary restraint of four minutes each, and we will see how we get on.

Thank you, Mr Speaker—I mean Mr Streeter—for calling me to speak. Aside from promoting you, I congratulate the hon. Member for Birmingham, Northfield (Richard Burden) on having secured this debate.

I will take as my starting point the wisdom that regularly emerges from the mouth of the hon. Member for Ealing North (Stephen Pound), for whom I have great respect. He said that the issue was not about any one country’s policies but about local government powers. I believe that it is wrong for councils to attempt to use local government pension funds and procurement practices to make their own foreign policy.

First, it is wrong because foreign policy is reserved to Westminster as a matter for national Government. Having policy made in town halls can damage foreign relations, to the detriment of Britain’s national and international security.

Does that principle extend to banning city councils, for example, from giving the freedom of their cities to notable figures from abroad? Would that fall within her ban on a foreign policy for local government?

If the hon. Gentleman will wait for the rest of my speech, he will hear that I intend my contribution to be about council expenditure of taxpayers’ money. I know that Labour Members are not so hot on the expenditure of taxpayers’ money, but perhaps he will allow me to make the rest of my comments.

I am sorry, but I must continue because there is so little time left.

My second reason for believing that it is wrong for local government to make their own foreign policy is that local boycotts in and of themselves can damage integration and community cohesion. That is highly unfortunate.

Thirdly, to attempt to hold an item of foreign policy locally is likely to be unlawful. I do not know whether the hon. Gentleman found it impossible to read procurement policy note 01/16, but I took from it very clearly that EU and UK procurement legislation, backed up by the World Trade Organisation, can result in severe penalties against the contracting authority and the Government. That takes me on to my answer to the hon. Member for Stoke-on-Trent Central (Tristram Hunt). It is at the heart of this debate that we should not seek to put taxpayers’ business rates or council tax at risk of substantial fines that could arise from unlawful treatment of suppliers. The Government are very clear in the note that they will always involve the relevant contracting authority in these proceedings, so there is nowhere to hide.

Finally, the other reason why such a policy is wrong is that it does not provide taxpayers with value for money. Procurement is quite simply for purposes other than political. It is the act of buying something because taxpayers need it, not because the council leader wants to wear a particular political pin badge that week. I want local taxpayers’ money to be used for the goods and services that they need, and only for what they need.

I do not know whether the Labour party really thinks there is any money to spare after they left the cupboard bare, but until public finances are back in order, the job in hand is to get the best deal for taxpayers. What I want in local procurement is the best possible value for money from the total spend, which may amount to tens of billions of pounds; a strategic approach to procurement rather than political whim, which may be ultra vires; reduced procurement bureaucracy, such as the welcome removal of pre-qualification questionnaires for low-value contracts and standardisation for high-value procurements; sound commercial and contract management of that spend; accountability for the services or goods bought; wherever possible, local SMEs benefiting from spending decisions because that value stays in the community and can often provide huge innovation; and prompt payment to contractors. Why do I want those simple goals? Because when budgets are squeezed, local taxpayers should come first. Every public body should do better for the British economy and not be distracted elsewhere.

It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate my hon. Friend the Member for Birmingham, Northfield (Richard Burden) on securing this debate. I want to put on the record something that will appear in the Register of Members’ Financial Interests when it next comes out. I recently visited the west bank and Jerusalem, the trip being sponsored by the UK branch of Fatah.

I want to emphasise some of the questions my hon. Friend asked. Does the guidance on pension investments and procurement change the law in any way? Does it in any way fetter local authorities’ decisions on best value in procurement? That is not simply about cheapness. We are not going back to the compulsory competitive tendering days. The last Labour Government brought in best value, which takes account of social and environmental matters, as the Government have confirmed. Does it in any way fetter the discretion of pension trustees to exercise their fiduciary duties, which go far wider than the narrow responsibility for public sector pensions? Will the Government confirm that the guidance for private businesses on their engagement with the settlements, on goods from the settlements, and on trade with the settlements, applies to public bodies as well? Can we have clarity on that?

During the 1980s, some local authorities sought to sever links with firms that traded with South Africa. I think local authorities were right then and I think there is a lot of shame on the Conservative Benches about the action that the then Conservative Government took in defence of the apartheid regime.

There is a story about what happened. Shell took Leicester city council to court because it said that by refusing to allow it to compete for a tender, the council was losing out on a potentially cheaper contract. Shell won in court. Sheffield city council decided not to put Shell on the tender list for a contract because of its dealings with South Africa and justified that because it had wider responsibilities for good race relations and to take account of the views of its citizens. Shell did not take Sheffield city council to court because it was recognised that it had behaved legally in taking those views into account.

The Secretary of State has said that the actions of councils have caused community division. The Minister must say precisely what examples he has of that division. The Government have a responsibility not just for race relations but, under the Equality Act 2010, for equality impact assessments and public sector equality. The Act requires public authorities to have regard to a number of equality considerations affecting race, and also religion.

The House of Commons Library has produced a good note, which says:

“A Minister must assess the risk and extent of any adverse impact and the ways in which such risk may be eliminated before the adoption of a proposed policy and not merely as a ‘rearguard action’”.

Have the Government done that? Where is the equality impact assessment? Do local authorities not have a duty to have regard to the effect on equality in their area in terms of both race and religion when considering whether to buy goods from the illegal Israeli settlements? Can the Minister explain what he thinks the effect will be on race relations in my constituency, which has a large number of people of Muslim faith from a background of Pakistan, Bangladesh, Yemen, Somalia and Somaliland? What would be the impact on them if they saw their council tax being used to buy goods from the illegal Israeli settlements? How could that possibly be good for community relations? That is where the division is in this argument and the Minister must come clean about the Government’s objectives, how they assessed them and whether they think local authorities have the wider responsibility that I contend they have.

It is a great pity that this has been promoted as a debate about local government when in reality it is just a thinly disguised attack against the legitimate and democratic state of Israel. Why has there been no discussion about the repression in other middle eastern nations such as Saudi Arabia and Iran? Why does the Boycott, Divestment and Sanctions organisation spend all its time demonising Israel and ignoring Hamas and Hezbollah as they pour rocket fire down on Israel? The premise of the debate has more to do with cheap political point scoring than with the lives of individuals. Palestinian workers would risk losing their jobs if such actions by BDS were successful and economic sanctions were directed against Israeli firms that employ them. [Interruption.]

Those Palestinian workers are paid on average three or four times more than they could earn elsewhere. About 500 Palestinians lost their jobs in October 2015, when international pressure from the BDS movement led to the closure of SodaStream’s factory in Ma’ale Adumim. That demonstrates that the BDS movement only seeks to harm Israel, with little consideration of how its actions will affect the livelihood of Palestinians, even though Palestinians employed by Israeli companies enjoy substantially higher wages and improved living conditions than those employed elsewhere.

No, I will not. Supporters of the movement claim to embrace the boycott tactic as a non-violent way to pressure Israel into negotiations. The campaign is clearly a biased effort to demonise Israel and place the entire onus for the conflict on one side—the Israelis.

No. The BDS campaign rejects a two-state solution and denies the Jewish right to self-determination and statehood in favour of supporting the right of return for Palestinian refugees and their descendants.

No. In fact, the BDS movement has an anti-Semitic foundation. [Interruption.] No. One of its co-founders is on record as rejecting the right of a Jewish state in Israel—[Hon. Members: “Give way!”] No.

Indeed, reports of anti-Semitic attacks being perpetrated in Europe can be directly linked with the hateful rhetoric espoused by many BDS campaigners, and BDS founder Omar Barghouti has repeatedly expressed his opposition to Israel’s right to exist as a state of the Jewish people. But most telling of all is that the Palestinian Authority themselves do not support a boycott.

The subject of this debate is local government and ethical procurement. We have got so far from that subject as to be ridiculous, in my opinion.

If the hon. Member for Hendon (Dr Offord) was out of order, I would have called him out of order. It is actually the point that has been raised by the opening speaker, so I call Dr Matthew Offord.

Thank you, Mr Streeter, for your wise words.

In December 2013, Mahmoud Abbas stated that, with the exception of settlement goods, the Palestinian Authority do not support a boycott on Israel. He said that

“we do not ask anyone to boycott Israel itself. We have relations with Israel, we have mutual recognition of Israel.”

I and my constituents welcome the Government’s announcement of new rules to curtail silly left-wing town halls and all publicly funded bodies from adopting politically motivated anti-Israel boycott and divestment campaigns.

Apology accepted. The BDS movement says that having such interests makes companies “complicit in war crimes”, as they help to entrench the occupation and settlements. If that was the case, why did not BDS and its supporters seek a ban on British goods and services when Tony Blair decided to invade Iraq? The simple reason is that British goods and services had no influence over British foreign policy, as indeed academics and universities and goods and services in Israel have no influence over Israeli foreign policy.

What Labour and the Scottish National party failed to achieve in the general election—a majority or coalition Government to decide foreign policy—we will not let them seek to achieve at local level. Such policy is made in this House. There is no place for that in town halls, whose duties are simply to deliver local services and not to make foreign policy.

It is a pleasure to serve under your chairmanship, Mr Streeter. I particularly thank the hon. Member for Birmingham, Northfield (Richard Burden) for securing the debate. Like other hon. Members, I am quite curious as to why the Westminster Government want to censure local government authorities for making ethical decisions on where to invest their own pension funds.

I thank my hon. Friend for that intervention. I agree with him: that is the reason why we are here today—to discuss the ethical decisions that have been made by local authorities. I shall proceed as fast as I can, Mr Streeter.

The whole thing strikes me as not good practice; indeed, it could be called bad practice. I would like the Minister to explain to me the reasons for that interference by the Government with the principles, with the decisions made by trustees on behalf of local communities, who appoint tried and trusted fund managers to look after the pension funds for them. The Government are quite breathtaking in their contradictions. The Chancellor of the Exchequer has stated that he wants to start northern powerhouses; he wants to give local people more say in what is happening in their local communities. Yet he is telling them, “Sorry, you’re not going to get a say in what your pension funds do.” That is an absolute shambles of a policy, and it sounds to me as if he just made it up as he went along—for what reason, I would love to know. It would not be right to deny pension funds the right to direct their fund managers on how they want their investments to work for them. It is that local authority’s business. Local authorities alone are answerable to their communities in terms of how they want their funds to work for them.

Can the Minister explain to me and others why this policy differs from the one that I have just mentioned? The Government want to introduce powerhouses in the north of England to give people more powers, but now they are introducing this policy. I want to hear an answer on that. It sounds like an absolute and total contradiction. There is one rule for the Government and another rule for local authorities. That is absolutely and blatantly wrong.

We can compare the Westminster Government with the Scottish Government, who take a much more considered approach, with proper regard, respect and trust for the social and environmental investments made by pension fund managers on behalf of local authorities in Scotland. My local authority in Falkirk has £1.8 billion in its fund and at this moment might well be looking at investing with the Green Investment Bank. If that bank moves away from its original purpose—God forbid—of investing in green energy, surely an authority has the right to withdraw funding from that organisation; it will need to alter its investments accordingly. And the same is true for that pension fund with regard to international developments. That statement of investment principles must be honoured.

It is a pleasure to serve under your chairmanship, Mr Streeter. I start by declaring an interest: both I and my wife are members of the Cheshire local government pension fund.

I congratulate my hon. Friend the Member for Birmingham, Northfield (Richard Burden) on securing this extremely important and timely debate, but of course it should not have been left to members of the Opposition to drag the Minister into a debate to explain the Government’s policy, so I hope that when he responds, he will, as my hon. Friend said, set out why he thought that it was appropriate to announce a change in policy in front of the media in another country rather than in this House, where proper scrutiny could have followed.

As well as the failure to follow any kind of proper process, I am extremely concerned by the tone that Ministers have adopted when addressing this issue. The Secretary of State for Communities and Local Government has accused councils of adopting policies that

“undermine good community relations, and harm the economic security of families by pushing up council tax.”

Those are very serious allegations, but people will note that no specific examples have been given and no specific authority has been referred to. It is therefore a smear against local government as a whole. I challenge the Minister to name a single authority that has increased its council tax as a direct result of the issues that we are discussing today. If he cannot, he should urge the Secretary of State to retract that totally groundless comment and to start treating local politicians and public servants with the respect that they deserve.

Of course, when making such sweeping statements, the Minister ignores the fact that councils are having to increase council tax this year to address the damage that the Government have caused to local government and, in particular, the social care sector. The Secretary of State for Communities and Local Government has so far failed to claim that an explicit demand from the Chancellor to raise council tax, in violation of Conservative manifesto commitments, is harming the economic security of families. That is in stark contrast to the subject matter of this debate. It is only the latest in a series of announcements that set out what this Government really think about devolution, and the contempt with which they continue to treat local government. Their policy on devolution can now be summed up in one sentence: “We will give you as much power as you want, as long as we get to choose what those powers are and exactly how they can be used.”

The Government have so far discussed the changes only in terms of so-called boycotts, but there is understandable unease in the sector about the wider implications for ethical procurement, which is vital if councils are to use their purchasing power to deliver wider benefits to their communities and to honour their election pledges.

Local government procures around £12 billion a year of goods and services, much of it from the UK, but some from the global supply chain. Ethical procurement can produce tangible benefits. For example, in my local Labour council, Cheshire West and Chester, the new adult social care contracts adhere to Unison’s ethical care charter, which stipulates that 80% of the workforce must be on contracted hours, not zero-hours contracts. In the domiciliary care contract, providers pay at least £7.68 per hour.

My hon. Friend is making a very powerful speech, in contrast to Government Members. The point about local government is that democracy is not all focused in this place. Decisions about spending, representation and taxation can also be made at a local level. If we strip that out, it undermines the pluralism and democracy of this country.

Absolutely. That is the central point of what I am trying to say today. Our local authority had all-out elections last May. Ethical procurement was one of the key parts of the manifesto commitment, and it has been delivered. I do not believe that any Member of this House would say that that is not a legitimate practice of the local authority. The council is now looking to see how it can use future procurements to encourage more employers in the area to improve the terms and conditions of their staff.

As a result of the Labour group’s suggestions, the council has decided not to use companies involved in union blacklisting. That is a value judgment by the democratically elected councillors about who they want to do business with. I am struggling to see any rational basis for distinguishing between those sorts of decisions and choices and the sorts of decisions referred to in the draft regulations. That is the nub of the matter. If local government is to have genuine autonomy, there might be occasions when people say, “I do not agree with what you are doing, but I recognise your democratic right to exercise that choice.” So I say to Ministers: resist the temptation to micromanage local government. Show us that the Government are genuine about devolution and withdraw the regulations.

I thank my hon. Friend the Member for Birmingham, Northfield (Richard Burden), who knows more about these matters than possibly any other Member of the House, certainly with regard to Israel and Palestine. He has probably enabled us all to stay within our four-minute limit because he has asked most of the relevant questions. I also thank my hon. Friend the Member for Sheffield South East (Mr Betts), who referred to my declaration in the Register of Members’ Financial Interests. Last month, I was on a visit to the Occupied Palestinian Territories, funded by Medical Aid for Palestinians and organised by the Council for Arab-British Understanding.

When I arrived in Jerusalem, the first thing I got was a call from the BBC to ask me whether I wanted to comment on the arrival of the Minister for the Cabinet Office and Paymaster General, who was due to arrive in Tel Aviv the following day to make an announcement on local government procurement. I was a local authority council leader for quite a few years and I remember lots of procurement directives and announcements, particularly on the issue of compulsory competitive tendering in those dark days of the 1990s. I do not remember any of them being made from Tel Aviv.

I have a great deal of respect for the hon. Member for Norwich North (Chloe Smith), but she presented a rather thin argument—a thin but measured argument, as opposed to a thick and unmeasured argument, which we have also heard from the other side. The idea that, for instance, London—or any local authority, particularly in our great cities—should not be able to take a view on such matters is a thin and transparent argument, especially when the current Mayor of London spends half his life touring the world, quite rightly promoting British trade and matters of that kind. This is a thin and transparent argument, and it comes from the fact that this ridiculous advice note comes out of the Conservative party press notice, as my hon. Friend the Member for Birmingham, Northfield has said.

I will make just three points. First, there is a conflict between the established and well drafted Foreign and Commonwealth Office advice, which has been quoted extensively—it is very clear in its advice to businesses not to get involved in settlement trade—and the obscurity, lack of clarity and, indeed, disingenuous nature of the procurement policy note, which does not appear to say very much but hints at a great deal, mentioning things such as community cohesion and other matters of that kind, and also favouring national suppliers.

Secondly, there does not appear to be in that note—I hope the Minister will clarify this—any breach of the World Trade Organisation or European Union guidance, because there is no discrimination based on nationality, contrary to some of the almost hysterical things that we have heard today. The specific issue being dealt with in this debate and that the Minister is being asked about—it was the one dealt with in the answer to my question—relates to the Occupied Palestinian Territories. We all know that the occupation is unlawful under international law and that they are not recognised by the UK and many other countries as part of Israel.

This issue should not be conflated with BDS. Different people have different views on BDS. The fact that we have labelling guidance, which the Government have maintained, allows people to make individual choices. Some may argue that it is open to public bodies or others to make such choices if they want to, or for Members of Parliament to make statements in relation to such matters, but that is a different matter from illegal settlements. Illegal settlements should not be traded with, and if local authorities wish to make such a decision, that should be open.

Let us remember what we are talking about here: theft of land, occupation, colonisation, and the arbitrary detention of many thousands of Palestinians. Those are crimes in international law as great as anything that happened in South Africa. They are not happening within one country; they are happening in somebody else’s country. That is the reason why action needs to be taken, and it is perfectly reasonable that it is done in this way.

I was not intending to speak in this debate, but it has been very interesting to listen to and I would like to add a few brief remarks.

In respect of the comments made by the hon. Member for Birmingham, Northfield (Richard Burden) about the Minister and the press conference at which the announcement was made—or made at least the second time—in the presence of the Prime Minster of Israel, by coincidence I happened to be at that meeting. [Interruption.] Clearly, it was not by sheer coincidence. I was not with the Minister—was what I meant to say—but with a group of MPs and Members of the House of Lords. A cross-party group was sitting in the room, so there were many witnesses of all parties. The hon. Member for Birmingham, Northfield, who otherwise made a sensible case—I do not agree with it, but it was sensible—was wrong in that respect, because various points that he and those who feel strongly in support of the Palestinians would have wished to be raised were raised at that meeting by those present, including by the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Bournemouth East (Mr Ellwood). I recall important points about the peace process and specific asks about Gaza and fishing rights being raised, so that should be corrected for the record.

I want to make three brief points. First, the genesis of this debate is the BDS movement, and we should acknowledge that. There are differences of opinion. I think that BDS is unlikely to further the peace process. I personally believe that settlements are extremely unhelpful. I support the British Government’s policy in objecting to them and trying to use any opportunity, such as that meeting with the Israeli Prime Minister, to try to change minds and to further that argument, but I do not think the BDS movement is at all likely to further that argument. In fact, it is likely to be totally counterproductive.

My second point builds on one from another hon. Member, which was in respect of community cohesion. That is a consideration for us as Members of Parliament. Indeed, if I were on a local council, I would like to bear that in mind, but it is worth recognising that the BDS movement has an impact on community cohesion, which is a negative one for many, particularly Israelis living in the United Kingdom and the Jewish community. Not everybody, clearly—that would be an outrageous oversimplification—but a number of those involved in the BDS movement are linked to intolerance and to anti-Semitic behaviour, and they make life extremely unpleasant for Jewish people living in our communities.

I checked on Twitter a few minutes before walking into this debate. One only has to type in “BDS” to see some very unpleasant tweets, including one that actually asked whether my right hon. Friend the Minister for the Cabinet Office and Paymaster General was a Jew himself. It said, “Is Hancock an Ashkenazi name, because he would come up with a policy like this?” Such behaviour is totally intolerable and whatever side we on in this debate, we should recognise that and condemn it.

It is a pleasure to serve under your chairmanship, Mr Streeter. I pay tribute to my hon. Friend the Member for Birmingham, Northfield (Richard Burden), who made a fantastic and important speech, as did my hon. Friend the Member for Sheffield South East (Mr Betts). He made a helpful speech. Both of those contrasted starkly with what I found to be one of the most disappointing speeches I have heard in the six years I have been in this place, from the hon. Member for Hendon (Dr Offord). I was disappointed with the content and the delivery.

I have four quick points to make; I will rattle through them as quickly as possible. First, I have concern about where the Minister for the Cabinet Office made the announcement, and I think the Minister should explain the situation. Secondly, ambiguity is an issue for me. The Government have said that the aim of the changes is to stop politically motivated boycott and divestment campaigns by town halls against UK defence companies and Israel. That is despite the Foreign Office advice already outlined—so I will not go into it—by my hon. Friend the Member for Birmingham, Northfield. There is no doubt that there is confusion, because in January the Government said they were opposed to the development of settlements in the west bank. In one breath the Government condemn the illegal settlements and in another they say that local authorities will face severe consequences should they choose to avoid investing in them. The entire advice needs to be cleared up, and perhaps the Minister will shed some light on it.

The third point I wanted to make is about the World Trade Organisation. The Government appear to suggest that local authorities could be in breach of rules, but in fact they cannot, so perhaps the Minister will provide clarity on that. Fourthly, and finally, I am concerned about local government being treated in such a way. The issue is about local democracy and the need for decisions to be made by elected members, rather than imposed by central Government.

It is lovely to serve under your chairmanship again, Mr Streeter. I congratulate my hon. Friend the Member for Birmingham, Northfield (Richard Burden).

Spending is inherently political, as we can see when we think about the Chancellor, and austerity and its effect on communities. Watering down and limiting the impact of local democracy because of disagreement about Government policy is wrong. Only this week a constituent came to see me about divesting from the West Yorkshire pension fund. I will take that up on behalf of my constituent, and it is only fair that councils make their decisions ethically.

If we are to have a nanny state that tells councils where they can and cannot invest, where will the line be drawn for procurement? I am disheartened, because Conservative Members are trying to skew the debate and turn it into an anti-Israel debate. BDS is about upholding international law. Nobody in the House is saying we should boycott Israel; what we are saying is that councils and people should have a legitimate right to make decisions on procurement.

I will not be on the wrong side of history in this House. It was a shameful patch in our history when this House voted against sanctions on South Africa. That is not how I want to go down in history. I feel that we are moving towards governing in the shadows, with people making bigger and bigger decisions without bringing them to the House and without due democratic process. A smaller and smaller group of people is making decisions that affect bigger and bigger issues. That is surely not acceptable to the House.

To raise the matter of international law again, in 2004 the International Court of Justice ruled that all states have an obligation not to provide aid to Israeli violations of international law. The question is international law, not boycotts. I feel very disheartened that Conservative Members are trying to stifle debate by bringing up the issue of anti-Semitism, and that narrative is playing out while we are trying to have an honest conversation. That is all it is about. In local procurement, should we not go green or buy fair trade? We need to stop what is happening at some point, and here is where it must stop. We cannot endorse the change, and we cannot carry on with it. I certainly will not vote for it.

I, too, should start with a declaration of interest, having recently visited Palestine, courtesy of Fatah UK.

I thank the hon. Member for Birmingham, Northfield (Richard Burden) for securing this timely debate. Thankfully, the latest procurement policy note not does not directly apply to Scotland, where procurement is devolved and the Scottish Government lead on related procurement regulations. Of course, both Scottish regulations and the regulations for the rest of the UK must adhere to the same set of underlying EU directives, and it is those that set out the limits on the situations in which authorities can exclude bidders from a procurement process.

The Scottish Government strongly discourage trade and investment with illegal settlements. Such decisions must be taken in compliance with procurement legislation. For a company to be excluded from competition, it has to have been convicted of a specific offence or committed an act of grave misconduct in the course of its business. One view, supported by the Scottish Government, is that where a company exploits assets in illegal Israeli settlements in occupied Palestine, it may be guilty of grave professional misconduct, and it may therefore be permissible to exclude it from a procurement process.

It must never be forgotten when engaging in such considerations that local government is always answerable to the interests and wishes of its local communities and electorates. I know from my own mailbag that many local residents in Linlithgow and East Falkirk feel very strongly about this issue. There is a general presumption that decisions taken in their interest should be ethical where possible, and there is particular outrage that the UK Government appear to favour promoting goods from the illegal Israeli settlements. I genuinely fear that if the UK Government’s proposals effectively force local councils and other public bodies to invest unethically in areas such as the Israeli occupation or arms companies, where local opinion would have directed them otherwise, we will be at risk of serious democratic failings.

Rather than attacking local democracy, the Government should take steps to support it. An approach akin to that being taken in Scotland would be good, but at the very least a full clarification from Ministers regarding the recent guidance is essential.

I congratulate my hon. Friend the Member for Birmingham, Northfield (Richard Burden) on obtaining the debate, and I thank Martin Linton, the former Member of Parliament for Battersea, for the background work he has done. I declare an interest because I visited Jerusalem and the west bank recently with a Labour delegation funded by the excellent organisation Medical Aid for Palestinians, with which I am proud to be associated. As a Front Bencher, I do not want to speak for long, but I have a particular wish to speak because of my visit to Jerusalem and the west bank.

Like many Opposition Members, I was very concerned about the nature of the announcement that has been made. I was concerned that the Cabinet Office Minister announced the proposals not in the Commons—which was in recess—but at a press conference in Israel, with the Prime Minister of Israel, Benjamin Netanyahu. That announcement coincided with our delegation to illegally occupied Palestine.

People’s attention has already been brought to the statement by the Secretary of State for Communities and Local Government:

“Divisive policies undermine good community relations, and harm the economic security of families by pushing up council tax. We need to challenge and prevent the politics of division.”

I wish to say something about divided communities, after our recent delegation to the illegally occupied territories of Palestine. The experience that we had in the west bank clarified why some councils might want to take some action on illegal settlements. The policies pursued by the Government of Israel in allowing illegal settlements to flourish are a physical and political barrier to peace and a two-state solution.

I want to draw my brief remarks to a conclusion by asking the Minister whether he has been to the west bank and seen the Israeli settlements. Does he agree with UK Government policy that settlements are illegal under international law? Does he see any contradiction in the local authority devolution agenda when they are freeing up policy on business rates while freezing powers on pension investment and procurement decisions? Government regulations threaten councils with “severe penalties” if they fail to reflect foreign policy, but why is it so wrong to impose a ban or boycott with respect to settlements that the Government deem to be illegal?

Does my hon. Friend agree that the point about sanctions and boycotts made by the hon. Member for Hendon (Dr Offord) was quite ridiculous? On that basis, why do we boycott Iran, Syria, Russia, individuals, Afghanistan, Ukraine and Zimbabwe? It seems to be an illogical position to take that we should not have sanctions or boycotts.

I agree with my hon. Friend that we should make democratic choice the key part of this debate but, after hearing some contributions from Government Members, I think that they are not in favour of democratic choice in relation to this matter.

These proposals are a step too far. Britain has a clear position on settlements: they are illegal under international law, constitute an obstacle to peace and threaten to make a two-state solution impossible. This is about democracy, and the proposals are an affront to democracy, choice and local power, and the comments of the hon. Member for Hendon (Dr Offord) are an absolute disgrace.

The hon. Gentleman’s comments from a sedentary position and when he stood up to speak. His comments were an affront to local democracy.

As we move towards the Front Bencher’s speeches, may I thank you all for your co-operation in getting us through in time for the wind-ups?

I draw hon. Members attention to the Register of Members’ Financial Interests, as I also had the fortune to go to the west bank on the Fatah UK trip that has been referred to.

When we saw that the topic for the debate was local government and procurement policy, we wondered whether it had much to do with Scotland. As my hon. Friend the Member for Linlithgow and East Falkirk (Martyn Day) noted, those matters are a matter for the Scottish Government—I shall return to that in a moment. However, it quickly became apparent—I think all parties understand this—that this is a debate not about local government, but about foreign policy. It is interesting that, rather than choosing an English town hall in which to make a pronouncement about the affairs of local authorities, the Minister for the Cabinet Office and Paymaster General, travelled to Tel Aviv to make an announcement alongside the Prime Minister of Israel, and chose to illustrate his announcement by referring to the impact of local authorities’ actions on the settlements in the occupied territories.

Now, if we are to say—as some Government Members have suggested—that local councillors should not be having a foreign policy and should concern themselves with local matters, we might rightly ask ourselves, “What are the Ministers responsible for the UK civil service and English local authorities doing travelling to foreign countries to make pronouncements on foreign policy?” We need to understand whether this is actually a dispute among colleagues in the Cabinet and an attempt by some who disagree with the established position of the Foreign Office to undermine it, or whether it is a genuine confusion that has arisen. Perhaps the Minister will clarify the position in his response.

We should be absolutely clear that what is under discussion here is not the state of Israel, but the activities in the illegal settlements in the Occupied Palestinian Territories. Now, I know that the Israeli Government refute the fact that the settlements are illegal, but the UN Security Council, the General Assembly of the UN, the European Union, every NGO I can think of, and our own Government regard the settlements as illegal, so I hope that we can at least agree that engagement in those activities is unlawful.

I have witnessed these settlements, and I think that when some people refer to community settlements, they still believe that they are small, little, cutesy villages that are being developed. In fact, these are massive conurbations of thousands—sometimes tens of thousands—of people, with all the infrastructure we would expect from a modern city. Although many of the settlements have been built effectively as dormitories for people working inside Israel proper, it is clear that if they are to continue, they must develop their own economy and, therefore, the capacity to develop trade and production in those areas is vital for their survival.

We need to ask ourselves a question: is it the role of public agencies in the UK to assist in that illegal process or is it right and proper that they should do something about it? I think it is entirely proper that they should do something about it. The advice of the Scottish Government is consistent with that of the Foreign and Commonwealth Office, in saying that there is a general presumption against trade and investment in illegal settlements and telling local councils that they should make a decision on individual matters of procurement according to procurement legislation and take into account the circumstances that apply, but reminding them that when it comes to the term “gross misconduct”, which colleagues have mentioned, it is entirely right and proper to regard the support for an international illegal operation as gross misconduct.

Looking at some of these contracts, people should be advised that they need to understand whether the contract will be secure—whether the agency or company with which they are contracting has the legal right to sign the contract, and to use the resources and occupy the lands and premises that they say they do. If a local authority is being prudent and making a careful judgment about that, it is acting in the interests of the people who elected it, and that is right and proper.

I have a minute or two left, so I want to say to the hon. Member for Hendon (Dr Offord) that in his speech, which I thought he galloped through with rather undue haste—it would have been better for him to have taken some interventions, because it might have demonstrated better confidence in his own arguments—he attempted, as others have, to suggest that this is an attack on Israel. It is not. I believe in the two-state solution. I would like to see a viable state of Palestine and a viable state of Israel, but I firmly believe that the actions of this right-wing Israeli Government and their refusal to take moves to end the military occupation are putting the prospects of a two-state solution in severe jeopardy.

I am grateful to the hon. Gentleman for his contribution because he is consistent, unlike, unfortunately, the hon. Member for Stoke-on-Trent Central (Tristram Hunt), who has hurriedly left the Chamber. Does the hon. Member for Edinburgh East (Tommy Sheppard) not agree that the disinvestment strategy promoted by the BDS would actually lead to ending the possibility of a two-state solution, which would mean that there would not be peace in the middle east?

No, I do not make that connection or draw that conclusion in the slightest. In fact, I have visited the area recently and spoken to many Palestinians who are involved. They are absolutely of one mind in telling us that they want us to call for disinvestment in the illegal settlements in the occupied territories. That is their position and it is incumbent on us to try to understand, respect and advocate that position if we can.

I have limited time, but I very much welcome the fact that we are having this debate, which the hon. Member for Birmingham, Northfield (Richard Burden) secured. I welcome the attendance and the level of contribution. I do think that it is time, following this discussion, that we sought a debate in the main Chamber and devoted rather more time not just to this issue, but to the underlying aspects behind it. It is incumbent on us to do that because the overriding impression that I brought back from my recent trip to the west bank was one of desperation and despair among people who really feel that the world has given up on them. We need to show them that we have not.

It is a pleasure to serve under your chairmanship, Mr Streeter. I suppose I will start where the hon. Member for Edinburgh East (Tommy Sheppard) left off—why we are having this debate. Well, we are having the debate because my hon. Friend the Member for Birmingham, Northfield (Richard Burden) asked for it, and I congratulate him on that. He spoke with his typical eloquence and knowledge of the situation—eloquence and knowledge that I have been familiar with since I was a teenager listening to his speeches when he came to the Mechanics Institute in Manchester in the mid-’90s.

I have followed my hon. Friend’s career closely ever since. I think I speak for everybody in thanking him for securing the debate, but the reality is that we should not be having the debate in this Chamber; we should be having it in the main Chamber—and not on the initiative of an Opposition Member through the usual processes and channels or as a result of the Backbench Business Committee; I wonder whether the hon. Member for Edinburgh East was hinting at that. We should be having this debate because the Minister for the Cabinet Office and Paymaster General, who announced the policy at the Conservative party conference and then again on a trip to Israel, should have given the House the courtesy of coming to the House, outlining his change in procurement policy and allowing hon. Members to question him.

I entirely appreciate the point made by the hon. Member for Norwich North (Chloe Smith), who said that there had been a number of changes to procurement policies over the years. I do not doubt that she is right: she is a former Cabinet Office Minister and is very experienced, but other experienced Members know that Members on both sides of the argument have sincerely held views and those experienced Members appreciate that the issues are sensitive. Given that, the Paymaster General should have come to this House to announce the shift in Government policy and allowed us all to question him.

The hon. Member for Newark (Robert Jenrick) was lucky enough to be on a delegation with the Paymaster General in Israel. At that time, the Paymaster General may well have been happy to answer questions about what the issue meant for Government policy and for the Palestinians. Well done! We are pleased that the hon. Gentleman got that opportunity, but everybody else in the House should have that opportunity, too. That is why Members on both sides of the Chamber will want to hear the Minister answer a number of questions; it is a pleasure to see him in his place. I will not take up too much time with my remarks, because I know that Members are anxious to hear the Minister’s response. I want to give him ample opportunity to answer satisfactorily the questions of my hon. Friends and colleagues.

When I came back from Israel, I assumed that there might be an urgent question in the House on the issue. Did the shadow Minister request an urgent question?

It is not for me to criticise Mr Speaker and his team of Deputy Speakers on the selection of urgent questions. That is not in order—is it, Mr Streeter?

It is not in order to criticise Mr Speaker when he grants or does not grant an urgent question, so far as I am aware.

The hon. Gentleman makes his usual witty sedentary contribution, but let us get back to the substance of the issue.

As my hon. Friend the Member for Hammersmith (Andy Slaughter) said, there has been a conflation in what the Government are hinting at about our relations with Israel. They seem to be suggesting that we need to clarify the rules on procurement because, according to them as far as we can tell, the procurement rules are not clear and we need better guidance on whether local authorities are allowed to procure and not be in contravention of the various World Trade Organisation rules. Is it the view of the Cabinet Office that the guidelines were vague and that proceedings were taken to the WTO about local authorities making decisions in contravention of those guidelines? How many proceedings have been taken?

The reality is that this is more about politics. When the Minister for the Cabinet Office and Paymaster General announced the policy at the Conservative party conference, he said that it would

“prevent…playground politics undermining our international security.”

Yet, as my hon. Friend the Member for Birmingham, Northfield highlighted, in the briefings, the editors’ notes and the suggestions to the newspapers, and so on, councils such as Leicester City Council and Tower Hamlets Borough Council were being highlighted. Those councils were not making decisions about Israel as a nation; they were responding to the illegal settlements in the occupied west bank. It was not about the nation of Israel; it was about illegal settlements, which the Government recognise and accept are illegal settlements.

When the Paymaster General says that this is “playground politics” and that he is taking the decision in order not to undermine international security, why, as Members have said, does guidance on the FCO website talk of the risks of trade with the illegal settlements? The guidance discourages such trade, as the hon. Member for Edinburgh East said. What discussions has the Minister for the Cabinet Office had with the relevant Foreign Office Ministers on this matter? If he really believes that this is undermining international security, how does he sleep at night when he sees that guidance on the FCO’s website?

As the hon. Members for Falkirk (John Mc Nally) and for Edinburgh East, our colleagues from north of the border, told us, the Scottish Government, in procurement notices of last year, or two years ago,

“strongly discourages trade and investment from illegal settlements”.

Is the Minister for the Cabinet Office saying that the Scottish Government are undermining international security? Is that really the view of the Paymaster General? Is this not about democracy at local level, as various Opposition colleagues have said, including my hon. Friends the Members for Ellesmere Port and Neston (Justin Madders) and for Leeds East (Richard Burgon)? Is it not ironic that all this comes from the Government who talk of and celebrate localism and from a Prime Minister who told us:

“When one-size-fits-all solutions are dispensed from the centre, it’s not surprising they…fail local communities”?

In 2009, the Prime Minister told us that

“We’re going to trust local authorities”.

How are these decisions trusting of local authorities?

Is it not right that local councils should make such decisions and be accountable to the people who elect them? Leicester City Council, the area I represent, made its decisions in 2014—the Government always quote Leicester City Council in the newspapers—and the councillors who put those decisions to the council chamber stood for election in 2015. They were re-elected with people knowing about those decisions on trade with illegal settlements in the west bank, not trade with Israel. [Interruption.] The right hon. Member for Rutland and Melton (Sir Alan Duncan) knows Leicester well.

My hon. Friend is right; the issue is not just about the content and the context of the decision made by the Minister for the Cabinet Office. The Government seem to be saying that it is completely out of order for local government to have any regard to ethical or valid policy considerations when it comes to procurement or supply. Yet when we passed the Modern Slavery Bill in the last Parliament, this House improved the Bill and the Government, against their first position, accepted the need to include responsibility for supply chains and procurement in the Bill. How can we legislate for that in the private sector and then abolish it for local government?

My hon. Friend makes a good point, and I look forward to the Minister’s response. I will speed up, because I know that people want to put points to the Minister and want him to answer. Will he tell us what “severe penalties” he has in mind for local authorities if they do not follow through on the regulations? Given the scepticism about what the regulations actually mean, will he answer my hon. Friend the Member for Sheffield South East (Mr Betts) and tell us whether the guidance actually changes the law in any way? Will he answer the six questions put to him by my hon. Friend the Member for Birmingham, Northfield?

Will the Minister confirm that the guidance is simply restating existing law that states that public bodies cannot refuse to award contracts to companies purely because of their nationality? Will he confirm whether the Government think it is still lawful for public bodies to refuse to award contracts to companies for reasons other than nationality, such as their human rights record, compliance with international law or connection with trade such as the arms trade or fossil fuels?

The Paymaster General talked about “playground politics.” Well, there are many in this House who take these issues extremely seriously and who have sincerely held views on both sides of the argument. When the Paymaster General talks about playground politics, perhaps he should look a little closer to home.

It is always good to have your sure hand guiding our proceedings, Mr Streeter. I start by joining the chorus of congratulations to the hon. Member for Birmingham, Northfield (Richard Burden) on securing this debate. He is right that this is an important issue. He is also right to say what it is about and what it is not about, and to acknowledge that there are sincerely held views on both sides of the broader issue. He is right to put that point up front and pay it due respect. I echo those points.

As the hon. Gentleman has asked some distinct questions, and other questions have embroidered around them, I will try to address those questions as I go through my speech. I am sure he will pick me up if I do not. I will try to make sure that he has a minute or so at the end to sum up.

At the beginning of his comments, will the Minister clarify an important point of fact, which is the kernel of this issue? Will the Government’s proposed procurement rules permit a local authority to adopt a policy against investment in, or purchase from, Israeli settlements in the Palestinian west bank?

The answer is that it depends; I am sorry to be a little indistinct. I will come on to the details. I hope to give my right hon. Friend a proper answer, rather than just a straightforward yes or no, because there are situations where councils will be able to and situations where they will not.

The overarching principles behind public procurement are twofold. First, public sector procurers are required to seek the very best value for money for the taxpayer. Secondly, public procurement must be delivered through fair and open competition. Public sector procurers have to follow detailed procedural rules laid down in the Public Contracts Regulations 2015, which implement the Government’s domestic procurement policy and wider EU and international rules, including the EU procurement directives and the WTO Government procurement agreement; a number of right hon. and hon. Members have referred to the GPA in this debate.

Under those obligations, our contracting authorities are required to treat all suppliers equally, regardless of their geographic origin. The regulations have recently been updated and modernised, but the basic principles are long-standing and have been in place for many decades. Any breach of the rules puts public authorities and the Government themselves at risk of breaching all sorts of laws. Serious remedies are available to aggrieved suppliers through the courts for breaches of those rules, including damages, fines and what lawyers call “ineffectiveness”, which basically means contract cancellation.

A number of colleagues have mentioned that ethical procurement has a much wider meaning than we have focused on here. We could talk about it in relation to arms firms, defence industry investment or investment in the tobacco industry. However, we have focused, perhaps understandably, on a specific example. The point is that “ethical procurement” is not a defined term—it means different things. There are many examples of how procurers take ethical considerations into account. For example, the rules allow authorities to exclude suppliers that have breached certain international social, environmental or labour laws. In addition, we already ensure that prime contractors behave ethically towards their subcontractors—for example, by requiring 30-day payment terms. That applies through supply chains, as the hon. Member for Foyle (Mark Durkan) said.

The Public Services (Social Value) Act 2012, which came into effect in 2013, placed a requirement on commissioners to consider the economic, environmental and social benefits of their approaches to procurement before the process starts.

In that case, is there anything in the Minister’s list that includes the illegal origin of the products to be bought?

The point is that although we are clear that the settlements themselves are absolutely illegal—I am happy to clarify the Government’s foreign policy—that does not necessarily mean that activities undertaken by firms that happen to be based there are themselves automatically illegal. A separate, case-by-case decision must be made about whether each potential supplier satisfies the rules. I will give more detail about that as I go, if I can.

We have flexibilities in our procurement rules. Some things are explicitly ruled out—

We are back to the point about how to distinguish between one activity of an organisation and another when deciding whether to have a relationship with it. To go back to banks, for example, it was rightly decided not to have any dealings with Barclays back in the 1980s because of its particular link with South Africa. One could not distinguish between the money it lent to South African firms and the money that it lent to other firms. How then does the Minister distinguish between the activities of financial organisations now and their treatment of the settlements?

I am explaining how the law is, rather than how the hon. Gentleman might like it to be. As I said, we are clear that the settlements themselves are illegal, but a firm based or trading within one of those settlements may be operating in an entirely whiter-than-white, above-board fashion in how it treats its suppliers, staff and customers. Therefore, I suggest, one cannot assume that absolutely everything done in a particular place is implicitly wrong.

There are flexibilities in our procurement rules. Some things are explicitly ruled out. Discrimination is absolutely ruled out as a matter of law and policy. The problem with boycotts in public procurement is that they may often stray over the line from acceptable ethical procurement within the rules that I have described to become an act of discrimination. The principles of non-discrimination and equal treatment underpin the UK’s whole approach to public procurement policy—we have heard examples of that from other speeches already—and are mandatory under UK, EU and World Trade Organisation procurement rules.

Moreover, public policy that includes decisions on whether to impose Government sanctions on other countries is a matter reserved for central Government. We are devolving a great deal down to local government and other Parliaments within the UK, but foreign policy, particularly sanctions against other countries, is a matter still reserved for central Government. It is therefore the Government’s position that discriminating against any supplier based on geographic location is unacceptable unless formal, legal sanctions, embargoes or restrictions have been put in place by the UK Government here.

Despite those long-standing rules, we have been concerned to learn that some authorities have decided to impose local-level procurement boycotts, which is why on 17 February, as we have heard, the Government published guidance to remind authorities of their obligations in that respect. I hasten to add that it is not an Israel-specific policy, nor is it focused on the Israeli settlements, in line with the initial remarks of the hon. Member for Birmingham, Northfield. It is general guidance about procurement principles, so it does not address directly or in detail any questions about procuring from Israel or the illegal settlements. The Minister for the Cabinet Office highlighted the guidance when visiting some technology companies during his trip to Israel to reassure them that the UK Government marketplace is open to overseas bidders, despite what they might have read elsewhere.

Of course, the WTO Government procurement agreement has its limitations. It applies only to countries that have signed up to it. Israel is a party to it, so it clearly applies to Israeli suppliers, whereas the Government do not recognise the illegal settlements as part of Israel.

I should have declared an interest earlier: I recently visited the west bank with colleagues and Medical Aid for Palestine. I am grateful to the Minister for his somewhat grey explanation of certain areas, but can he help me with this point, with which I am sure other hon. Members will agree? He has accepted that the settlements are illegal. On what basis, legal or otherwise, is he asserting that the businesses operating within those illegal settlements are operating legally? Can he explain that to me, please?

I believe I already have. Although it is difficult, it is entirely possible for a settlement to be illegal while the businesses operating within it are entirely within the law, treating their staff, suppliers and customers properly and so on. It is possible for both those things to happen at once.

I must make progress. In spite of those flexibilities, local authorities must still be careful not to make discriminatory policies even where they believe that the GPA does not apply. The rules also provide mechanisms to protect authorities from dealing with risky suppliers.

To answer the question asked by my right hon. Friend the Member for Rutland and Melton (Sir Alan Duncan), I should say that authorities can take into account the legal and economic risks of dealing with particular suppliers. The rules include various grounds on which individual suppliers can be excluded from bidding, such as where the company is guilty of criminal offences, corruption or grave professional misconduct or in breach of environmental, social or labour laws and so forth. This is a key point: the rules must be applied on a case-by-case basis, company by company, rather than on the basis of an entire geographical area, as a blanket ban or boycott would inevitably do—that would make them discriminatory.

Local authorities have significant flexibilities and can exercise pretty wide discretion within the rules—I hope that I am answering my right hon. Friend’s question—but the rules themselves are clearly necessary to protect them by ensuring that they do not take actions that could land them and us in court. Nobody wants to waste public money on costly court cases.

I am running out of time, so I will stop to allow the hon. Member for Birmingham, Northfield time to respond, but I emphasise that on foreign policy, we have clearly not changed our approach to the Palestinian occupied territories or to settlements around the pre-1967 boundaries of Israel. With that, although there are many other things that I would have liked the opportunity to address, I want to leave the hon. Gentleman a chance to respond. I will sit down and leave the floor to him.

I always thought that public procurement notes were meant to clarify procurement rules, but the Minister has just demonstrated the art of muddying them through his explanation of this procurement note. He said that the note is not Israel-specific; it just happens that the Minister for the Cabinet Office announced it in a Conservative party conference press release that was almost entirely devoted to the situation in the middle east, and then announced the public procurement note itself in Israel.

If settlements are illegal, I fail to see how trade with those settlements and co-operation with businesses involved in aiding and abetting illegality is not itself illegal. That is what the Foreign Office advice to business is about. I know that the Minister has had a problem today; for some time now, we have been trying to work out which Minister would reply to this debate. I get the impression that this is a parcel that has been passed from pillar to post.

Eminently flexible—with flexible rules as well, by the sound of it. My six questions have not been answered to my satisfaction, nor have the questions asked by other hon. Members. I ask the Minister to answer in writing.

Motion lapsed (Standing Order No. 10(6)).