My Lords, as outlined in the civil society strategy, central government is stepping up our ambition to deliver social value through commercial activities. In future, social value will be explicitly evaluated as appropriate, rather than considered, and extended to goods and works contracts in addition to contracts for services. This joint programme between DCMS and the Cabinet Office puts social value at the heart of an estimated £40 billion of public spend each year. The Government intend to publish a Green Paper consultation on possible procurement reforms to make the rules simpler, more flexible and better placed to support improved commercial outcomes and meet the UK’s specific needs.
I thank the Minister for that Answer and for taking the time and trouble to meet me last week. I think we both agree that social value is an incredibly powerful tool to create benefit for communities of all kinds. Does she also agree that social value needs to be central to the procurement process and not just an add-on, and that 10% of contract value is entirely insufficient to enable the full potential of social value to be realised?
I absolutely agree that social value is central to our procurement process: it is a massive lever. It is £49 billion of central government expenditure, but total public sector expenditure was £284 billion in the last financial year, so it is one of the biggest levers we have in terms of our focus on place and on levelling up. The 10% is a minimum, and my experience going around the country is that areas frequently go above and beyond when they get this. I was in Durham last week, where more than 55% procurement is through social value, and Manchester has set a minimum of 20%.
The Government are developing a measurement framework. There have been two approaches. Most local government procurement uses a form of financial metric. Central government procurement, in consultation with the voluntary and community sectors, uses a more qualitative approach. My colleague the Crown rep for the voluntary and community sectors is working very hard to make sure that this is embedded effectively.
My Lords, further to that question, the review led by the noble Lord, Lord Young, five years ago specifically highlighted measurement, the need for a methodology, and the need to set standards and to propagate those across the sector. The Government have had five years, so when will we have a rigorous system for measurement that everybody understands? It is very important to measure the value of what we are doing.
We will implement the system this year. We are keen to be able to measure the distance travelled for individual departments and for procurement overall. Training is being rolled out to 4,000 procurement officers, and is available to strategic suppliers as well as to smaller voluntary and community sector suppliers.
My Lords, a number of local authorities across the country have made a commitment to pay their staff and contractors the living wage, as calculated by the Living Wage Foundation. This commitment goes well beyond that required under the Act. The Prime Minister has stated that he wants full sovereign control of procurement policy as part of his commitment to close regional inequalities. Does the voluntary living wage form part of his plans?
My understanding is that all aspects of these issues are being reviewed as part of that. I do not know specifically about the voluntary living wage, but in the short term a big focus is being placed on procurement that includes a number of diversity metrics, including ethnicity, disability and women leaders of organisations.
My Lords, when the forthcoming Green Paper is published, will the Minister discuss with her colleagues the idea of providing government incentives for public services and others to join together in procurement at local levels? Social value can be cascaded into the wider economic value that can accrue when different agencies and institutions are able to jointly procure, in a way that has been pioneered in areas such as Preston and my own city of Sheffield. Then we can see a much greater critical mass developed, which can have a major impact on the growth and productivity of an area as well as the social value we have discussed this morning.
The noble Lord makes a very important point. The proportion of procurement spending in the Preston area has increased almost fourfold in the past four years, with big economic impacts. We are already working to support smaller voluntary organisations to be able to bid in consortia so that they are not excluded, although I appreciate that that is wider than the point he is making.