Monday 4 July 2022
Arrangement of Business
My Lords, if there is a Division in the Chamber while we are sitting, which may be likely, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Procurement Bill [HL]
Committee (1st Day)
Relevant document: 3rd Report from the Delegated Powers Committee
1: Before Clause 1, insert the following new Clause—
“Procurement and covered procurement
(1) In this Act—(a) “procurement” means the award, entry into and management of a contract;(b) “covered procurement” means the award, entry into and management of a public contract.(2) In this Act, a reference to a procurement or covered procurement includes a reference to—(a) any step taken for the purpose of awarding, entering into or managing the contract;(b) a part of the procurement;(c) termination of the procurement before award.(3) In this Act, a reference to a contracting authority carrying out a procurement is a reference to a contracting authority carrying out a procurement—(a) on its own behalf, including where it acts jointly with or through another person other than a centralised procurement authority, and(b) if the contracting authority is a centralised procurement authority—(i) for or on behalf of another contracting authority, or(ii) for the purpose of the supply of goods, services or works to another contracting authority.(4) In this Act, “centralised procurement authority” means a contracting authority that is in the business of carrying out procurement for or on behalf of, or for the purpose of the supply of goods, services or works to, other contracting authorities.”
My Lords, in moving Amendment 1 I will speak to the first group of amendments. Before so doing, I give notice to the Committee that Amendment 528—which I discovered only this morning had been grouped with this group, but which refers to matters relating to the health service—has been degrouped, because it is logical and to the benefit of the Committee that we discuss issues relating to the NHS part of the Bill together. I will address all the other amendments in this group.
I start by acknowledging and sincerely apologising for the number of government amendments. At Second Reading, in what I thought was all candour at the time, I said that I recognised there were areas of the Bill that would need refinement in Committee. However, the volume of amendments is still regrettable. I assure noble Lords that many of the amendments in this group and others are narrowly focused and technical in nature. We are putting them forward now only to ensure that the Bill functions properly and effectively.
We have issued a Keeling schedule setting out where the range of government amendments will fit in if your Lordships are pleased, eventually, to accept them. The bulk of the amendments in this group and others do not change the general policy intent of the Bill. Indeed, some of them serve to reflect more fully the original policy objectives as set out in the Government’s Green Paper and subsequent responses to it. I know from discussions at Second Reading and in the engagement I have already had with many of your Lordships—which I undertake to continue, not only between Committee and Report but, in the light of concerns that have been expressed, during Committee to clarify anything that is concerning noble Lords—that many noble Lords wish to get closer to the original policy objectives. That is evident from the number of non-government amendments that have been proposed, which we will be discussing. That is not an indication necessarily that we will have a meeting of minds on those, but some of them flow from that.
In many cases the need for amendments has been highlighted by external organisations. We are grateful for their scrutiny and input into improving the Bill. The interconnected nature of the Bill inevitably means that a single small amendment to a definition in one clause leads to multiple amendments to reflect the same definition where it features in later clauses to ensure coherence and consistency. Obviously, that frequently happens in the passage of legislation.
I repeat that I accept with all sincerity that the number of government amendments is not welcome and is undesirable. However, their end effect, when your Lordships have had the opportunity to reflect on them fully, of providing greater legal clarity will be beneficial to the Bill as a whole and to the large procurement community that will use it for many years to come.
The first group contains some of the Government’s amendments with the most general effect on provisions in the Bill, though these remain technical in focus. Amendments in this group relate to the introduction of the concept of “covered procurement” and to the devolved Administrations.
The proposed new clause before Clause 1 includes technical amendments to the definition of procurement and, as I just said, the introduction of the term “covered procurement” to distinguish between the categories of contract subject to different obligations under the Bill. “Covered procurement” refers to those contracts fully regulated by the Bill’s provisions; “procurement” refers to those contracts that are less regulated but none the less catered for to an extent, such as the below-threshold contracts and international organisation procurement. These changes recognise obligations under various trade agreements. The group also contains a number of consequential amendments to reflect this amended definition throughout the Bill.
Other amendments in this group did not originate from the Government but were requested by the devolved Administrations to amend how the legislation applies in Wales or Northern Ireland. As I said at Second Reading, we have been very grateful for discussions with and input from colleagues in Wales and Northern Ireland. These amendments include a small number of derogations from particular provisions in the Bill where they do not align with those Administrations’ policy goals. We have listened to the concerns of the devolved Administrations, and I hope noble Lords will agree that it is sensible to make these changes at an early stage to ensure that we have legislation that works for all contracting authorities in England, Wales and Northern Ireland.
I realise it is unusual to intervene on the opening speech, but it may be for the convenience of the Committee to understand the changes with regard to the devolved Administrations. Can the Minister confirm that these have all been agreed with the Welsh Government, in the case of Wales, and, where they relate to Northern Ireland, in Northern Ireland, or are there some here that, because of the time pressure, there has been no opportunity to discuss with the devolved Administrations?
My Lords, I will have to be advised on that. I have been advised that they are the result of discussions. If that is not the case, I will set the position clearly and straightly when I come to wind up the debate. I have been led to believe, and know from my own involvement in the matter, that there has been a good deal of agreement between the United Kingdom Government and the Government of Wales. I will certainly confirm that in winding up.
The group also contains a number of technical amendments which are required to ensure that provisions relating to the Bill’s application in the devolved Administrations function properly.
To repeat what I said at Second Reading, I regret that the Scottish Government have opted not to join the Bill. They will retain their own procurement regulations in respect of devolved Scottish authorities. I am sure we would all welcome our Scottish friends if they wished to join the new system proposed by the Bill. Taxpayers and public services alike across the whole United Kingdom would benefit from that. However, at this juncture I am able to lay only those matters requested by the devolved Administrations in Wales and Northern Ireland. I beg to move.
My Lords, I thank the Minister for his apology at the beginning, which I believe to be sincere and heartfelt. I also thank him, I think, for his introduction of the first of these 50 amendments; it was relatively short, given that they come with little explanation. It is said that there is a productivity crisis in this country—not so in the Cabinet Office amendment-generation department. The Minister can be proud of its performance.
More seriously, I commend the Bill team and the Government Whips’ Office, who have been wrestling with this leviathan of amendments, not least over the weekend. I thank them for their hard work. I will return to the process we are facing after making a few comments on the amendments, particularly around the covered procurement element.
Amendment 1 and several others seek to clarify things by defining covered procurement. I remain confused about where this phrase comes from and why it was necessary. There was no sense from the Minister’s introduction as to why it was necessary to come back after Second Reading with a new phrase. Can he say where this term comes from? Is it employed elsewhere in legislation? I think it is in contract law but it was difficult to find other manifestations of it. I should remind the Minister that, every time a new term like this arrives in legislation, it proliferates a great deal of other legislation because each new word or term will be tested to the limit in the law. If we start bringing in new terms such as this, the Bill will be a lawyers’ enrichment fund—I can see the lawyer opposite nodding in agreement—and that is not a good thing for the country or for government.
In his discussions, the Minister said that many of these new amendments came from consultation that was subsequent to Second Reading. Avoiding the obvious question as to why Her Majesty’s Government did not consult more beforehand, I would like to know which organisations and individuals put forward the need for this change. My guess is that it was not an external force but an internal one, and possibly that the Cabinet Office, having used one lawyer, decided to use a different one who had a whole set of different opinions on the legal nature of the Bill, and that is where the vast majority of these amendments have come from. Far be it from me to say what the benefits are of changing a horse half way across a stream, but we are, I suspect, reaping the consequences. If I am wrong, I am happy for the Minister to tell us so or to publish the consultation that happened subsequent to Second Reading. I will be happy to admit that that was not the truth.
As we noted at Second Reading this is an important Bill, dealing as it does with the technical process for managing a considerable amount of money spent on behalf of the British people by public institutions. We support this process. We noted that it needs to be in the public interest, as well as providing value for money. The objective of this Committee process should be, and should remain, to have a proper debate around how such issues are brought to the fore in this legislation. However, because of the sheer incompetence of the Cabinet Office—a Cabinet Office that, I note, recently published its guide to improving the quality of the legislative process—we are instead pulled into a debate around process.
During Second Reading, there seemed to be a measure of good will. My noble friend Lord Wallace spoke about the need for a co-operative process and the Minister seemed to agree. Subsequently, as the Minister has pointed out, with fewer than four days before the first day in Grand Committee, we were confronted with 350 government amendments. That could have been managed in a co-operative way, but that did not happen. Even if we had to have the amendments, to drop them with no warning so near to the process was an inappropriate way of being co-operative.
Then, at 8.56 am on Sunday, which I remind everybody was yesterday, we all received an updated grouping of amendments. In this, there were 77 changes from the document we had received on Friday—I repeat, 77 changes—with the shape of the groups radically changed. For Members to be presented with so many changes, and then for those changes to keep on moving, right up to the wire, is unacceptable. I stress again that this is not the fault of the Government Whips’ Office, which I suspect was kept at work all weekend thanks to this process and the Minister’s insistence that we plough on with the Bill in the way that was originally planned.
In the House, the Chief Whip made much about the availability of the Keeling schedule, as did the Minister. As your Lordships know, this is essentially a marked-up or tracked version of the Bill. As far as I am aware, it has not been made available in a printed version and has been circulated by email only to interested parties. I will take correction if it has now been made public.
I will correct my speech. It has not even been received by all the interested parties, which makes it worse.
Furthermore, to date, the Cabinet Office has not provided proper explanatory statements for each of the new government amendments. There is nothing in the current Marshalled List. The eighth group, which we had planned to debate today, contains a group of amendments that was wholly absent from the Minister’s original letter and the table that some, if not all, of us received when that letter came. Essentially, we have had no time—hours, at best—to consider these amendments.
More than that, the Minister stressed the value of the external community and the input we get from interested parties in this legislation. Those interested parties have not had a little time to consider these amendments; they have had no time. They are not on the record for those bodies that can feed in and positively reinforce your Lordships’ legislative process. We are missing all that. So never mind the unintended consequences of this legislation—we do not even know what the intended consequences are.
For this reason, I put the Minister on a warning that I will object to each of his amendments. When the Question on Amendment 1 is put, I will be not content. My understanding of the process is that, in Grand Committee, this will mean that the amendment will need to be withdrawn.
My Lords, where do I start? This is a really important and long-awaited Bill, so it is incredibly disappointing that, after so much time, the Bill was not fit to have been published when it was. With all these amendments, it is quite different from what we debated at Second Reading, even if many of the amendments are technical and there to tidy up. The Government really should have thought about this and got their act together before the Bill was published in the first place.
I know that the Minister is someone we can work with constructively on Bills—I appreciate that—but the Government’s incompetence over the weekend and the way this has been done challenge our ability to work together constructively. That is something else that disappoints me personally. As the noble Lord, Lord Fox, pointed out, it puts too much pressure on staff, who were expected to try to pull this Bill into shape over the weekend.
I reiterate completely what the noble Lord, Lord Fox, said about providing proper Explanatory Notes rather than annexe A, which was very thin on information and, in some cases, did not cover everything that the amendments were about. I spent most of the weekend trying to get my head around a lot of these amendments and cross-reference with the annexe. This is an important Bill and a lot of it is technical. I am not a procurement law expert, so I need support in the Explanatory Notes to understand exactly what is happening and what the amendments will do. When we are cross-referencing and trying to make sense of things, it is hard. As a member of the Opposition, let me say that this is not just about holding the Government to account; as I said, it is about working constructively to make legislation better. The Government have not helped us to do this.
My plea to the Minister is that we really need to move on from this and make sure that we can scrutinise Bills in a much better way. We are where we are with the Procurement Bill.
I totally understand and support what the noble Lord, Lord Fox, said about objecting to some of the amendments, because all this has been deeply unhelpful. Okay, we will do only three groups today, but at some point we have to get stuck in. It took me over two hours yesterday to go through all the amendments in group 1—group 2 has about three times that number. If we are going to do this properly, and actually look at the amendments rather than take the Government’s word on what is in them, it will be very time consuming.
I am afraid I am going to share with noble Lords some of what I did yesterday. It needs to be spelled out how complicated and confusing it is when we try to manage something such as this. Obviously, I started with group 1 and the proposed new Clause 1, which is about procurement and covered procurement. I read the amendment. I did not really understand what covered procurement it is, so I looked at section 5 of annexe A, which is just definitions; there is no further information. I still do not really understand the implications of changing this terminology. That is something we need to get across to the Government. We need to know exactly what is happening. This also has an impact on Amendments 55, 301, 405, 406, 408, 411, 416, 453 and 454. This affects many parts of the Bill, so we have to understand what is going on here.
I then looked at Amendment 172 to Clause 30, which would delete the word “procurement” and insert
“the award of a public contract”.
Apparently this is in annexe A, sections 3 and 8. Section 3 just says “replaces references to associated supply with associated person and expanding the concept”, but again, why? Why is that important? Why do we have to do that? Section 8 is about ensuring clarity on how a contracting authority must treat a supplier. Why do those changes do that? What is the purpose behind changing the terminology?
We have talked about the devolved Administrations. Amendments 282 to 285 to Clause 51 are about Northern Ireland. This is covered by sections 26 and 27 of annexe A, which say that “contract deal notices in respect of light-touch regime contracts must be published in 180 days.” Again, there is no proper explanation of how that affects Northern Ireland and what it means for the way it carries out procurement.
Moving on, I came to Amendments 342, 349, 356, 378, 380 and 383, which also refer to Northern Ireland, and Amendments 392 and 433, which refer to Wales. But the annexe also mentions Wales for the amendments that are supposed to be about just Northern Ireland, so it does not cover everything that the amendments say they do. I had had about four cups of coffee by this point just to try to keep going.
Amendments 377, 381, 385 and 387 would insert the word “was”, but the parts of the Bill they would amend already have the word “was”. Again, I am really confused about why we need another “was”.
Amendments 379, 382, 386 and 388 would insert
“as part of a procurement”.
If that is something that needed to be spelled out, I find it extraordinary that it was not written in in the first place.
Amendment 389 would delete subsection (10), which says:
“This section also does not apply to … defence and security contracts, or … private utilities.”
That is not tidying up or technical; it would delete a subsection that says something. I ask the Minister: what does that actually mean? What does it do? Why is that subsection being deleted? What is the purpose behind it?
Amendment 390 would delete a paragraph that reads,
“the value thresholds in subsection (2)”.
Again, it is not a tidying-up but a deletion. What does this actually mean? I am sure I am confusing everyone here because they do not have the Bill in the right places in front of them—I could read out the actual page numbers, if noble Lords want.
Amendment 391 would delete “in subsection (7)” on page 46, line 9. Why are those words being deleted? What is the purpose behind it?
Amendment 395—there are a lot like this—would delete “supplier” and add “person”. If this terminology was wrong, why was it not picked up so much earlier, when the Bill was being first drafted?
Amendment 424 would delete
“the award of a contract”
and insert “procurement”. Again, if that is the terminology that should have been used, why was it put in wrong in the first place?
In Amendment 425, “unless it is awarded” is to be deleted and “other than procurement” inserted. Those do not really seem the same to me, so what is the point of that change? What are the Government trying to do?
Amendment 426 would delete paragraph (c) on page 50, line 18:
“in relation to the management of such a contract.”
Why do we need paragraph (c) deleted? What is the purpose of it? Annexe A does not tell us any of this information.
Amendment 437 says:
“Page 53, line 3, leave out paragraphs (a) and (b)”.
Why are we deleting paragraphs (a) and (b)? What is the purpose and what are the consequences?
Amendment 438 says:
“Page 53, line 17, leave out ‘or services’ and insert ‘, services or works’”.
That seems the sort of thing that should have been drafted correctly in the first place.
Amendment 439 says:
“Page 53, line 26, leave out from ‘procurement’ to end of line 27”.
That is also the same in Amendment 462. Again, it looks to me like something that should have been done properly in the first place.
Amendment 440 says:
“Page 53, line 37, at end insert”,
and noble Lords can see the words on the Marshalled List—there is a lot there, and I really do not think that anyone wants me to read it all out. Again, this is not a technical adjustment but inserts quite a substantial amount of text. What are the implications? These may all be marvellous changes that benefit the Bill, but the point is that we do not know because we do not understand what is going on here.
Amendment 463 would delete subsection (8) on page 57, line 7. Amendments 439 and 462 do the same thing. What is the purpose of deleting subsection (8)?
I will not cover Amendment 528, because it has been moved to a different group. Noble Lords will be glad to know that I have only two left.
The annexe says that Amendment 540 is to define expressions. It inserts “covered procurement” and “debarment list”. What does “covered procurement” mean? Why does it reference the “debarment list”? That is similar to Amendments 542 and 543.
I will finish there. I just wanted to get across to the Committee and the Minister how very confusing this is and how little back-up information we have. We want to work constructively with the Minister. We want this to be a good Bill. For goodness’ sake, we just need to be able to get it sorted.
My Lords, I am the bearer of a simpler brain than the noble Baroness, so I may not cast too much helpful light, but I will do my best. I come to this more in general terms than trying to work from the specific to the general.
I thank my noble friend very much for taking out Amendment 528. I was going to ask him to do that, because we should consider the health service issues together, including Amendment 30 relating to the scope of the light-touch contracts.
I fear I agree with the noble Lord, Lord Fox: I do not understand where the term “covered procurement” came from and why it was inserted. I looked back to the public contract regulations, thinking that perhaps we were reintroducing something, but it is not there either. We have lived without the term “covered procurement” for a very long time. What does it add now?
Let me put it to my noble friend, and if I am wrong, his explaining why I am will help me and, I hope, other noble Lords. I am working on the basis that, as things stand, the Bill defines procurement by reference to the management, et cetera, of a public contract. In Clause 2, public contracts exclude below-threshold contracts, so “procurement” for these purposes under the Bill relates to contracts above the threshold, not below.
In my understanding, Amendment 1 then introduces two concepts of procurement. There is procurement in its normal meaning and “covered procurement”, which is the procurement of a public contract—public contract later defined by reference to the threshold. In Amendment 1, we bring within the scope of the Bill—on things such as those in Clause 12 and the question of the national procurement policy statement—all the procurement undertaken by contracting authorities in relation to below-threshold values; otherwise, they would be left out, because procurement under Clause 12 would mean procurement above the threshold, not below.
In my understanding, that is what “covered procurement” does. If it did not, Clause 12 would introduce a national covered procurement policy statement, but it does not and there is no such amendment. Clearly, the intention is to have two concepts running through the Bill: procurement, which is every kind of procurement, and covered procurement, which is above the threshold. I do not understand why that is necessary, but at least I think I see what is going on. If I am wrong, I am happy to be put right.
I found the explanation of the noble Lord, Lord Lansley, quite interesting, but whether he is correct, we will have to wait for the Minister’s response to find out.
My problem, as has been mentioned by my noble friend and the noble Lord, Lord Fox, is that of definitions and the lack of reasons for change. For me, procurement is the process of awarding a contract. We need to know the definition of what is a public contract—perhaps the noble Lord is right; perhaps he is not—and what is not. In Amendment 1, the only difference between procurement and covered procurement is the word “public”, as he said. Where is the definition of uncovered procurement, if you like? We need that, and we also need an explanation of all these amendments, but I shall not go on, because my noble friend has delivered a massive argument. She said she spent all weekend on this, but she is just scratching the surface—which is even more frightening.
At the end of Amendment 1, we get something called the “centralised procurement authority”, which seems to be the top level—perhaps they are very large contracts. Can the Minister give some examples of what kind of contracts will be covered by that? It states that that is a
“contracting authority that is in the business of carrying out procurement for or on behalf of, or for the purpose of the supply of goods, services or works to, other contracting authorities.”
We can all give examples of those, and I am sure we will come to them later, but it is important that we have a definition of “public” and of “procurement”, and of how that is different from awarding a contract. Procurement, to me, is a process. It starts with tendering and ends up with, you hope, an award of contract. Why all these changes? There needs to be a definition and explanation against each one.
I will say just one more thing, because I am sure that everyone else will have spent the weekend going through each of these amendments. Amendment 440, which a noble Lord—I cannot remember who—just mentioned, refers to
“a supplier’s association with a state”.
“State” is an interesting word. What is a state? Is it Scotland or Wales? My noble friend next to me will have views on Wales but there needs to be a definition of “a state”. It suddenly pops up in Amendment 440. Presumably, if it means separate states, such as Wales and England, there will be frontiers between the two to make sure that goods go in the right direction.
I wanted to cover those two small issues, and want explanations from the Minister. I end by wishing the Minister well in taking the Bill forward. Noble Lords who have already spoken, in particular my noble friend Lady Hayman, have done a magnificent job but we are probably going to have several weeks of going through each of these amendments and asking the questions that she so rightly asked.
My Lords, I will speak briefly, as I intervened on the Minister’s opening speech. I want to reinforce the points that have been made and perhaps add a little to them.
I come to this from the viewpoint of the Welsh Government, who have worked closely with the UK Government on this matter over a period of time; designated civil servants from the Welsh Government have been co-operating on it. Therefore, this is not a matter of contention in that way; it is a question of making sure that there is an understanding and that the end product will work for both. Where it is necessary to have some fine-tuning for the sake of Wales or Northern Ireland, but not Scotland in this case—
Scotland may come in but, at the moment, it is doing its own thing. This is a matter of getting a process where fine-tuning is possible.
It is not so much the content that concerns me—frankly, I was engaged in other things yesterday and did not have an opportunity to work through the amendments. As I said in the Chamber, the previous Sunday I worked through every one of the 80-odd amendments, so that I could have a coherent conversation with the Welsh Minister, civil servants in Cardiff and noble Lords who were involved, including the noble Baroness, Lady Humphreys, and the noble and learned Lord, Lord Thomas of Cwmgiedd. I did so in order to get their understanding. To be fair, they were constructive about this Bill—as the Bill stood, relatively few points were of contention to them. But as I indicated earlier, I am concerned that they have an opportunity to see whether any of the changes that are now being made through this large number of amendments might have an effect on their understanding of its slightly different application in Wales than in England.
That is the general intention: to get a system of procurement that can work for the Welsh Government in delivering their economic targets, which they have using successfully over the past few years, and to do so in a way that does not disrupt the UK market. A balance must be struck there. It is essential that both ends of the M4 understand each other on this. I am sure that the noble Baroness who opened for the Opposition will have had conversations with Welsh Ministers and will know about their concerns.
This is not about undermining or opposing the Bill. It is about making sure that it works properly, as intended, for both sides. That is what I hope for. If it is necessary to step back at this point, check and make sure that that is the case, it would be far better for us to do that now rather than pass into law things that become challengeable in the courts, at which point we will end up with all sorts of mess.
My Lords, I regret I was unable to participate in Second Reading. However, I followed that debate and have read the Minister’s letter to those who took part. I also have amendments that we will be discussing later in Committee.
The noble Lords, Lord Fox and Lord Lansley, the noble Baroness, Lady Noakes, and I are now veterans of legislation that the Government have sought to change quite radically. There were at least two iterations of the Trade Bill, and then there was the Professional Qualifications Bill. That has raised a wry smile on the noble Baroness’s face, and it has brought back significant memories.
The difference, however, is that, for those Bills, the Minister was able to recognise not only the mood of the House but the practical consequences of bringing forward significant changes without there being a degree of consensus—as the noble Baroness, Lady Hayman, has said—at least on understanding what the Government were intending to do before they brought forward the changes. The passage of the Professional Qualifications Bill was paused. The Government recognised that their case had not been made, preparations had not been in place and that the materials were not available for Parliament to do its constitutional duty to scrutinise. I hear the Minister repeat time and again in the Chamber how much he values this Parliament, and this House in particular, doing our job. However, on this Bill, which he is responsible for, he is denying us the very tools to carry out this proper scrutiny work.
There is a precedent of other Ministers and other departments recognising that a pause is not a government defeat but will strengthen their case when they bring back their properly worked out amendments. Indeed, on the Professional Qualifications Bill and Trade Bill, there was consensus on the amendments brought forward at the end. It helped the Government carry out their job, as we were sincere in believing that they had faith in their proposals.
If we are to be soothsayers as far as understanding what the Government are seeking to do, then the noble Lord, Lord Lansley, made a reasonable fist of trying to interpret Amendment 1—the Minister chose not to do so. If the noble Lord is right or wrong, we should at least know what the Government intend when changing that proposal because, as my noble friend Lord Fox, and the noble Baroness, Lady Hayman, indicated, not a single government amendment has come with an explanatory statement.
I refer to the Cabinet Office Guide to Making Legislation from 2022, which the Minister is responsible for—I am certain the Minister has a copy; I can lend him mine if he wants. Section C is on “Essential Guidance for Bill Teams”; I think the Bill team is sitting behind him. In paragraph 22, on Amendments—this is from the Cabinet Office’s own guidance, not from me—it says:
“All government amendments require an explanatory statement, in plain English, setting what an amendment will do.”
So, why did the Minister refuse that on this Bill? It is a mockery of the guidance.
The Minister, after making his apology to the Grand Committee, chose not to outline any of the amendments. He did not explain whether Amendment 1 and the others will have significant policy implementation differences. If the noble Lord, Lord Lansley, is correct, then they will. That is how all of those who will be putting together procurement and replying to tenders will interpret the legislation, so of course it will have an implication on that. That is why we look at impact assessments to consider what level of consequence there will be.
The Government have not felt it necessary to bring any changes to the impact assessment—unlike for the Professional Qualifications Bill, I remind the Minister. However, this is also stated categorically in the Guide to Making Legislation in paragraph 13, on impact assessments:
“The … impact assessment … will need to be updated during parliamentary passage to reflect any changes made to the bill”.
I therefore ask the Minister: why has there been no update to the impact assessment to take into consideration any changes made to the Bill?
If the noble Lord, Lord Lansley, is correct, there will need to be some quite significant changes to the impact assessment, because the cost is all predicated on the streamlined approach that has been presented under the Bill before the Government sought to amend it. The Committee does not need to be reminded that the Government now want a far more competitive, flexible, streamlined procedure, moving from seven systems to three. If it is now the dance of the three and half veils, of “covered” or not covered, and organisations are having to work out which area they are going to fill in, of course there will be impacts that need to be outlined.
Another reason why we expected to have explanatory statements was so that we could see what some of the consequences are—such as those outlined by the noble Baroness, whose perseverance I admire in going through all of the list. I was hoping that the Minister might have taken the opportunity, at the very least, to speak to the other amendments in his group but, unbelievably, he chose not to. Why? There was nothing in his speech about changes to non-discrimination on goods as well as suppliers and interaction with the internal market. There was nothing to do with the light-touch regimes on public contracts and modifications. Why? There was no explanation as to why Northern Ireland was forgotten about in the drafting of the legislation and has now been recalled in Committee. There was nothing with regard to the potential implications of the impact on Scots law when it comes to some of the changes to domestic legislation on civil law reform in Amendment 349. The list goes on. Depressingly, I do not think that the noble Baroness’s list was exhaustive.
There was nothing from the Minister outlining any of the consequences beyond the covered and not covered. I hope that, when he sums up, we will hear, in lieu of explanatory statements, exactly what these amendments are, because we have nothing to go on. I reread the Government’s consultation response; there was no mention of covered or non-covered, of course. There was no indication as to what some of the consequences could be, but perhaps that was because of the TCA with the EU. Perhaps the Government have now realised that the Bill as drafted is not consistent with those elements in the TCA. There is nothing from the Government with regard to how this legislation will accommodate elements of the TCA on a single point of contact for interest; on ability to take into consideration the track record of those previously applying, or indeed if there is an interaction with the subsidy regime, which is a requirement of the TCA but absent from this Bill; or on why social, environmental and labour considerations are not spelled out for procurement under this, given that they are there.
If the amendment which the Minister has introduced but not spoken to has consequences that go far beyond simply the below-threshold—as the noble Lord, Lord Lansley, had to indicate—the Minister must explain it. This set of amendments should be withdrawn or not moved so that, before the next day in Committee, explanatory statements can be attached to them. The Minister must give me the commitment now that the impact assessment will be updated and that there will be a new, entire set of explanatory statements. That is the least that the Minister could do, as other Ministers have done in situations far less bad than this.
My Lords, I totally agree with everything that has been said. The rubric “technical amendments” has been bandied about in these discussions. The next group of government amendments, and the one after that, are described in the email from the Whips’ Office as “technical”. This group is not described as technical. If it is not technical, my presumption is that there are substantive changes involved and that no one, least of all the Minister, has told us what they are. I cannot see how we can agree the amendments today unless we are told what the substantial changes involved are.
My Lords, I apologise for not having spoken at Second Reading. I have taken a keen interest in the Bill, particularly in the devolution aspects. I will speak to government Amendments 355, 392 and 433.
I share the concerns of my noble friend Lord Fox, who speaks for the whole Lib Dem team, and other Peers who have spoken about the manner in which the Bill has been presented to us. Like others, I am particularly concerned about the large number of new government amendments tabled last week, the vast majority of which had no Member’s explanatory statement attached to them. The confusion over the weekend, when some amendments were removed from groupings and others were duplicated, must have been as stressful for staff as it was for Members trying to prepare for today. I echo my noble friend Lord Fox’s admiration for the efforts of the Government Whips’ Office staff.
Had the Government withdrawn the Bill after Second Reading, taken some time to incorporate the 300-plus amendments into the body of Bill and presented us with an entirely new document, life would have been so much easier for us all, including the Minister. Of course, it is not the Government’s job to make life simpler or easier for us, but it is their job to help us make good legislation, as the noble Baroness, Lady Hayman, said. We have the potential to be, as we are now, in a situation fraught with difficulties, confusion and recriminations.
Having made my own personal protest about the Bill, I must commend the UK Government and the Welsh Government on the working relationship between them as they work together on issues in the Bill. We heard from the Welsh Finance Minister about the excellent working relationship and the efforts of all concerned to approach discussions in a cordial and constructive manner. I thank the Minister for that.
I understand that a number of amendments have been agreed between the two teams and that some of them are in this group, but I am slightly worried that in all the confusion with the tabling of 342—or is it 350?—new government amendments, key agreements might be missed out or overlooked. It would help us greatly to scrutinise the devolution aspects of the Bill if we could receive a list of the agreements between the two Governments and the amendments to which they refer.
I am pleased that the three amendments I am speaking to recognise the role of the Welsh Ministers. In Amendment 355 to Clause 64, “An appropriate authority” is replaced by the more specific
“A Minister of the Crown or the Welsh Ministers”,
recognising the role of Welsh Ministers in the publishing of payment compliance notices.
Amendment 392 adds new subsection (12) to Clause 70:
“A Minister of the Crown or the Welsh Ministers may by regulations amend this section for the purpose of changing the percentage thresholds.”
In Amendment 433 to Clause 80, the reference to
“A Minister of the Crown or the Welsh Ministers”
confirms the amending power of Ministers in relation to changing the number of days within which sums may be paid.
All these are very welcome, but I would have been grateful for explanatory statements to help me decipher which of the other 300-plus amendments have implications for devolution. Can the Minister confirm that all the amendments requested by the Welsh Government have been included? Are there any outstanding issues that would prevent the Senedd passing an LCM for the Bill?
My Lords, I do not want to prolong the debate. I must say that, having spent the weekend worrying whether I was thick-headed in not understanding the concept of a covered contract, I am relieved to discover that I am by no means alone. In a different tone, we on the Liberal Democrat Benches are very grateful to the Minister for the extremely helpful briefing we had today on the digital platform. That is precisely the sort of relationship we should have as we approach a Bill such as this one.
The Minister should remember that, while the Government are having their own consultations with outside interests, we are doing the same, with rather fewer staff. We have had some very helpful conversations over the past two weeks with various outside interests and groups, and will continue to have others. But, of course, we have had no opportunity to discuss with them the implications of the latest amendments which the Government have tabled. Some 60% of the current amendments are government amendments, and a minority come from outside the Government.
We have heard so far that this Committee is in no sense convinced that Amendment 1 is necessary. We have all struggled to understand why the Government have introduced all these amendments, and some of us have struggled with various other concepts in the Bill. I am grateful to the officials who explained the concept of dynamic markets to me; I am still not entirely sure that I understand the difference between a centralised contracting authority and a contracting authority, and we have tabled an amendment on that. These things are important in getting the Bill through. It takes time and it takes sympathy between the Government and those trying to scrutinise the Bill. As the first House to do this, we are now clearly in some difficulty over where we have got to.
My Lords, I want to raise a question about the wording of the definition in Amendment 1. I am troubled by the word “covered”. It does not spring off the page as an explanation in itself as to why there is a distinction between procurement pure and simple and this other procurement, described as “covered”. Having looked at the language in paragraphs (a) and (b), I think the obvious word to choose in paragraph (b) is “public” procurement. However, having listened to the analysis of the noble Lord, Lord Lansley, I am doubtful as to whether that distinction is what the definition seeks to describe. But if it is not doing that, and the word “public” would be wrong, is it not possible to find a more obvious word than “covered”?
The choice of language is crucial in a definition clause. It ought to be possible for the reader to take from the definition an immediate explanation as to why there is a distinction between the types of procurement in paragraphs (a) and (b). If it is necessary to go through the hoops that the noble Lord, Lord Lansley, did, I wonder whether it is possible to achieve anything sensible by ordinary language—which is a reason to say it might be better not to have the definition at all. However, if the definition is thought to be necessary, please could a better word than “covered” be found, so that the definition helps us, at the beginning of this complex Bill, to truly understand the distinction between paragraphs (a) and (b)?
My Lords, I am grateful to all those who have spoken, although I cannot say it always made for the easiest listening. I have been in opposition, and will be again one day, so I fully understand where those noble Lords who expressed concerns are coming from. I have also been on the Back Benches on my side, and will be again one day, so I fully understand where my colleagues are coming from as well.
It is unsatisfactory that so many amendments have been laid. I apologised for that. It is not, in any of your Lordships’ submission, sufficient. I could tell a few tales out of school, but I am a believer in the old concept that the Minister at the Dispatch Box takes full and personal responsibility for the criticisms that are made. I accept that. The amendments should have been brought forward in a more informative—to use the word from the very impressive speech by the noble Baroness opposite, whom I look forward to working with on the Bill—and timely manner.
I hope we can do better as we go forward. I will certainly pass on to my right honourable colleague who is leading on the legislation the concerns expressed by your Lordships. I will certainly take away and act on the request your Lordships have made in different guises in this debate.
I regret to learn that the Keeling schedule has not been available to all. I was informed that it had been published on the Bill’s website, but perhaps not enough was done to bring it to the attention of interested noble Lords. I will make sure that access to it is made available to all those participating in your Lordships’ Grand Committee.
On the amendment before us—I will deal with the rest of the group in the broadest terms—my understanding is that, as a result of frank and useful discussions in the usual channels, there is an understanding that many of your Lordships are unhappy about proceeding at this juncture without further explanation. Without going through each amendment at this stage, given it is likely that many of them will come forward at a later stage—although this remains to be the outcome of ongoing negotiations—I certainly give an undertaking that I will ask insistently that the Committee has the kind of explanation that the noble Baroness asked for on the amendments that the Government have tabled. We will begin on Wednesday with another clump of government amendments. I fully take the criticisms and will ask that a much clearer schedule is put before your Lordships, bit by bit, on each of the matters we are asking you to deliberate on. Indeed, I heard what was said about the dearth of detailed explanatory statements on the matter. We will do better. I will take that concern away.
My understanding is that the only way this could be done better is for the Government to withdraw the amendments and bring them back with explanatory statements. Explanatory statement cannot be tabled separately, so if the Minister is sincere that the Committee will not face continuing lists of government amendments without explanatory statements, the sensible course of action would be for him to withdraw them and bring them back with explanatory statements so that we can consider them properly.
That was, in a sense, the implication of what I was saying. We are debating only Amendment 1 at this stage, but for the avoidance of doubt, if it helps the noble Lord, at the end of these remarks I will beg leave to withdraw Amendment 1. Your Lordships could indeed obstruct these matters, but I will withdraw the amendment and see that we fulfil the undertaking that I have given.
More generally, important questions were asked about definitions. I must say to the noble and learned Lord that, until relatively recently—I use that word because I do not want to define it more narrowly—I was not familiar with the concept of “covered”. However, it has come forward after careful reflection by the Cabinet Office and the Bill and legal teams. It is intended to make the concepts in the Bill clearer to use and understand. I mentioned “covered procurement” in my opening remarks. “Covered” was intended to refer to those contracts that are fully regulated by the Bill’s provisions, whereas “procurement” refers to those contracts that are less regulated but none the less catered for, such as below-threshold contracts and, as the noble Lord, Lord Purvis of Tweed, said, international organisation procurement.
I think the problem may be in the language of paragraph (b), because it does not fulfil what the Minister has been saying is the intention of “covered”. You could keep “covered” but reword paragraph (b) so that it explains more fully what “covered” means, which is what I think the Minister is attempting to do. As it stands, it is very confusing. A confusing definition is a bad way to start a Bill.
My Lords, I listened carefully to the noble and learned Lord’s remarks. We will take them away. I have said that I will withdraw the amendment.
My noble friend Lord Lansley was accurate in divining the Government’s intention with this. The intent is to distinguish between the fully regulated—I will not use the word “covered”—and the less regulated.
I am sorry to interrupt my noble friend, but I am glad that I was not misdirecting myself.
On the noble and learned Lord’s point, I understood what it meant only when I looked at what “public contract”, as defined by Clause 2, means. Once one looks at Clause 2, it becomes very straightforward to check it. I looked at Clause 1 and realised that it is not a national covered procurement policy statement but a national procurement policy statement. None of the amendments change that bit, which told me that what we are dealing with here is the Government proposing that there should be a mechanism for talking about procurement in its broadest sense, while intending to regulate procurement in a slightly narrower sense by regulating everything above the value threshold. This did not seem intrinsically confusing to me once I understood what it is we are trying to do here.
I do not think that, in public remarks that will be recorded for all eternity in Hansard, Ministers should ever agree to the idea that anyone might be confused by the crystalline words that come before the Committee, but I must say that I did not, at first blush, understand these proposals when they were put forward and laid. I understand the objective, and think that both the noble and learned Lord and my noble friend have understood and divined it. We believe that it meets the requirement but, in the light of what your Lordships have said, I am sure that we can reflect on that. I will withdraw this amendment so that we can come back to it.
My advice from legal advisers is that this amendment adequately achieves the objective we sought. As to the elegance of it, I am not going to go into a disquisition of other circumstances in which “covered”—
While the Minister is reflecting, might he be able to comment today on the legal advice that he has clearly received? He kindly referred to my reference to international obligations, including the TCA. In the legal text of the TCA, “covered procurement” is stated as the area where the TCA and the UK have an agreement. It is unclear whether the definition, and what the Government are seeking to do in this Bill, will have the same meaning as “covered procurement” in the TCA. Can the Minister clarify that point?
My Lords, I was going to make a proposal. The legislation obviously reflects our existing international obligations, including the TCA, but this is not the only definitional point that has been raised. I cannot find the others in my notes but the noble Lord, Lord Berkeley, for example, asked about a centralised procurement authority. A centralised procurement authority is a body that sets up procurement or purchasing arrangements for use by other contracting authorities; examples would be the Yorkshire Purchasing Organisation or the Crown Commercial Service. That is one definitional issue. The noble Lord asked about the meaning of “state” in Amendment 440. That refers to a country with which we have an international agreement.
It is regrettable that this should happen after we have had this debate. Having heard the strength of feeling expressed by your Lordships on these amendments, especially the definitional ones such as the definition of “covered procurement”, I will ask my officials to hold a technical briefing on these matters for interested Peers. I will ask for invitations to be sent out by my office after the debate, in the hope that some of these points can be clarified. I know that is not to the greatest convenience of your Lordships because the Committee is due to come back on Wednesday, but it should help further to explain the rationale and necessity for some of these late amendments, which were advised on us by our legal advisers. I or my office will be in touch with noble Lords who are here with that offer, so that we can undertake that.
I was asked by the noble Lord, Lord Purvis of Tweed, about the impact assessment. Again, we will reflect on that point but my advice, even in the light of these amendments, is that as there has been no change to the general policy intent of the Bill, there is therefore no change to the costs and benefits of the impact assessment. I am therefore not advised that it is necessary to revise it, but I will second-guess that advice in the light of the noble Lord’s contribution. Although there are wording changes, to take up what my noble friend Lord Lansley said, the general intent of the Bill remains the same.
On the question of the devolved Administrations—obviously, there is a particular issue at the moment in the case of the Northern Ireland Executive, which is why some of these matters are ongoing—I am grateful for what the noble Baroness, Lady Humphreys, and the noble Lord, Lord Wigley, said about the sense of co-operation. I believe that is reflected in both directions. I was asked whether all these things had yet been formally agreed. As I understand it, most of these amendments have been; some have been agreed and discussed at official level but may not technically have been signed off by Ministers. It is certainly our intention and, I believe, the Welsh Government’s intention that we will reach full and constructive agreement, which will enable the proposals to be recommended to the Senedd. This has been an area of good and striking co-operation. I say publicly to the Committee again how much we appreciate that, as I did in my opening remarks.
I hope I have briefly dealt with the question of “covered”, “not covered” and some of the other definitional things. I hope that the further formal briefing I have offered can be arranged at a convenient time for most Peers tomorrow, and will go some way to answering this. I give a commitment that, when we go forward, I will not accept to lay before your Lordships and take to a vote something where there is no proper explanation of the individual amendments in the manner that the noble Baroness opposite quite rightly asked for. There should be a clear explanatory statement. I will ask for that to be done in respect of the amendments that are coming forward to explain the whys and whats in detail, and how the various groups interlock. Again, I will not tell tales out of school, but one of the issues is that there are interconnections between these different groups and how they have been sliced. I repeat that commitment.
I thank the Minister for that. I do not think he answered the question my noble friend asked. Accepting that government Amendment 1 will now be withdrawn, will the government amendments in this group, from Amendment 47 to Amendment 543, be retabled for us to have a proper debate on each of them? As the noble Baroness set out, there are a lot of questions around each of them, none of which have currently been addressed. I am unclear on the mechanism by which those amendments will be retabled. Can the Minister confirm that that will happen so that we can have a proper debate on those amendments?
I will have to take procedural advice on that. My understanding is that if I withdraw Amendment 1 it is not the case that the group has been negatived and therefore that the other amendments do not lie on the Order Paper. The Government would obviously have preferred, despite all the justified criticisms—
I hate to interrupt the noble Lord in full flow, but a Division has been called in the Chamber.
Sitting suspended for a Division in the House.
In order to finish, as I was just about say, we wish to facilitate proper discussion. Obviously, how to proceed is a matter to be discussed in the usual channels. There are matters in the amendments in this group which are technical and one or two raise definitional issues, and so on. We will work on the advice to your Lordships that I promised. In parallel—I cannot speak for usual channels—we will have discussion in the usual channels about how best to proceed in a way that does not lead to a recurrence of this undesirable situation, for which I repeat apologies. There are important, specific and thematic amendments—I like amendments to be thematic. The Government sometimes have good ideas and the Opposition have good ideas—sometimes—and the best way is if all these things are grouped thematically, which is why, when I saw that this health amendment had suddenly crept in, I said, “We should surely do that later.”
We will have usual channels discussions. I hope we can proceed, but we will find which way we can proceed that is best for your Lordships and does not result in a situation such as this. As I said, I shall not come back without explanations that are clear and timely—I cannot remember the phrase I used. We will see what we can do.
With that undertaking and that for usual channels discussions, in the light of the brief earlier discussion with the noble Lord, Lord Wallace, and the noble Baroness, Lady Hayman, I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
Sitting suspended for a Division in the House.
Clause : Contracting authorities
2: Clause 1, page 1, line 10, leave out sub-paragraph (iii)
Member’s explanatory statement
These amendments would remove private utilities from the ambit of the Bill which at present allows the government and devolved authorities by order to regulate industry and its procurement practices.
My Lords, I am glad that we have been able to move on to this group of amendments, all of which were tabled in good time. I thank my noble friend the Minister for his apology, tone and constructive response on the last group. I have some sympathy with him since, when I was on the Front Bench, I used to do Lords starters and they can be difficult because you have less stakeholder involvement and input than in the Commons. However, there is more scope to change a Bill that starts in the Lords, and that can be a good thing. I thank the Bill team for passing me its copy of the Keeling schedule, and I look forward to the child’s guide to procurement.
I apologise for not having spoken at Second Reading. If I had been able to, I would have brought my experience of procurement in government and in the EU, and in buying and selling everything from services to beans at Tesco. We were even stopped from selling cars alongside groceries by EU rules. I am a former director of Capita, and I register a current interest as chair of Crown Agents, the not-for-profit international development company with considerable expertise in procurement.
First, I am particularly interested in delegated powers and in supporting the noble Lord, Lord Wallace of Saltaire, on that issue. Secondly, I am keen to find a way of helping small businesses to better access procurement opportunities and encourage productivity and growth. Thirdly, as ever, I am concerned about costs to businesses and citizens—I know the noble Lord, Lord Purvis of Tweed, is too.
I also want to understand and test the reach of this legislation, which is the subject of my 12 amendments on private utilities, starting with Amendment 2. It is kindly supported by my noble friend Lord Moylan and the noble Lord, Lord Berkeley. We all sit on the Built Environment Committee together and are steeped in the problems of public transport in towns and cities at present.
In his Second Reading speech, my noble friend Lord Moylan questioned whether we needed this Bill at all, certainly on its current scale, and he bemoaned the bureaucratisation of procurement. I also worry about this, because of its enormous cost both to the state and to bidders and deliverers of contracts. When I was in retail, we always tried to reduce red tape and cut costs, and pass on the benefits in lower prices, which helped to attract customers. There is less sign of that here than I had hoped. There are fewer regulations, but I fear that the burdens imposed are in fact greater than those being removed, particularly in this area of public utilities. In my direct experience, it is not only the number of rules that matters but their impact.
It seems wrong for a Bill about public procurement to cover private utilities. I appreciate that there is an EU directive and UK implementing regulations that the Government want to replace, but I am not entirely sure that this should be done here. Indeed, the Government seem a little hesitant themselves, as they have taken a power to remove private utilities from the scope of the Bill or alter the rules as and when they legislate elsewhere. This is wrong and novel. As the excellent report by the Delegated Powers and Regulatory Reform Committee says, this appears to be the use of
“a tool to cover imperfect policy development.”
I compare the situation to my time as a civil servant heading a Bill team—imagine it—when we were generally obliged to have the subordinate legislation in draft to accompany a Bill and, as a result, we avoided a lot of errors that would have required corrective Bills or regulations later. In the EU, many utilities are in public hands, as some are here, which I am sure explained the need for the original utilities directive. In the UK, many transport, water and telecoms utilities are in private hands and make a huge contribution to the economy as a result. I see that electricity has already been taken out in Schedule 4, at least in some respects.
Some might say, “Why not cover private utilities and force them to embrace transparency and comply with the many cross-compliance measures set out in this Bill?” “Government knows best” seems to be the modern approach. Because they are in private industry, not government or local government, we should be extremely careful about regulating private utilities. If I worked in a private utility, my advice to my shareholders on reading the Bill would have been to get out of the sector. It is proposed that they should embrace public sector bureaucracy—which is still very substantial, despite all the good efforts of the Cabinet Office in putting the Bill together—but they continue to have a private sector degree of risk.
I would add that the transparency proposed here may be especially helpful to overseas suppliers. This is not necessarily a benefit to the UK overall; it is certainly rarely, if ever, reciprocated, as I know from my experience as a Minister working overseas, and indeed from my working life.
I look forward to the Minister’s answer and would particularly request an impact assessment on these provisions. This should compare the EU way with what is now proposed, and the cost to business of all the bureaucracy it will encounter as it becomes clear which bits of legislation it will be subject to and which it will not. Of course, I would very much appreciate a fleshing out of the Government’s current plans for private utilities.
My Lords, I added my name to Amendment 2, and tabled Amendments 25 to 27. The noble Baroness raised some interesting questions. I will start by trying to establish some definitions. Clause 1(1)(b)(iii) refers to “a private utility”. We all know what a utility is, but there are subsets of risk and government involvement. It would be nice to know what exactly the Government mean by “a private utility” in the context of this Bill. That is my first question and the reason for my putting my name to this amendment. The Bill defines a “public authority” and a “public undertaking”, but it does not define a “private utility”. I think it should. I have lots of questions and examples that I could ask the Minister to come back on, but I will not do that now.
When one reads about the problems of utilities, whether water, gas or transport, they all have regulators of some description but they often have slightly different powers. I have noticed over the past 10 or 15 years in the water sector that, when the regulator changes the instruction or whatever that it gives a company, it sometimes changes dramatically. If the Government do not like it, they can either advise the regulator quietly, “Would you mind doing it slightly differently?”, or, in extremis, I believe they can sack the regulator.
Then we get into the question of whether these utilities should be in the Bill at all. We had a Question in your Lordships’ House today about a passenger franchise rail operator that was roundly criticised by a number of noble Lords for its bad performance. Should the appointment of those operators be subject to competitive tendering? Should they be appointed by the regulator? They are certainly not at the moment. The regulator is supposed to keep an eye on them, but they are effectively appointed by the Government. One could argue, “What’s wrong with having it in here?”, but I believe they are an excepted utility at the moment anyway.
I am afraid I get confused by all this. I hope that the Minister can explain the exact reasons for excluding these utilities. I am in a bit of a quandary as to whether they should be excluded. It probably comes down to the risk the noble Baroness referred to and whether you like what they are doing. That is not a good reason for doing it, because what we might individually or collectively like is not necessarily the same.
I come back to this question of “a public authority”, “a public undertaking” and “a private utility”. I will give one other example. Some noble Lords will know I have been involved in trying to get the Council of the Isles of Scilly, where I live, to put in a proper bid to get a new ferry. Unfortunately, it has decided that it would like to get £48 million from the Government to give to the monopoly supplier of transport services without any competitive tendering. To me, competitive tendering for all these things is vital because you get not only value for money but a much better service on the whole.
On the whole, the contracting authority should be able to make changes if the people it is contracted with are not performing. I therefore ask the Minister: why are utilities excluded? Is it for the right reason, or will the Government find another way of doing what they presumably want to if the regulators—I think the noble Baroness, Lady Neville-Rolfe, said that the regulators have the last say in this—do not have the scope to award contracts?
As I said on the previous group, we need explanations and definitions. I am afraid that I shall go on a bit about this, because it is very difficult to understand it all if you do not get them.
My Lords, I hesitate to appear to disagree with the noble Lord, Lord Berkely, but I shall humiliate myself by doing so. I venture to suggest that there is a definition of a “private utility” in Clause 5. It is only to be understood in its fullness if read with Schedule 4, at page 84, which specifies what “utility activities” are. If one looks at Clause 5 and Schedule 4, one can see what the Government are trying to do. However, I am not sure that what the Government are trying to do is worth while or appropriate. To that extent, I support the comments of my noble friend Lady Neville-Rolfe.
The background is that we are starting from an EU procurement directive that applied to the whole single market of 27 states, and which needed to take account of the fact that most utility activities in most of those states are effectively provided by arms of the state, whereas in the UK we have blazed a successful path of privatisation, so many utility activities that in other parts of the single market are carried out by the state are carried out here by private companies. The noble Lord, Lord Berkeley, makes a very important point when he says that those private companies are, in nearly all instances, subject to some form of regulation.
Before I go further, I draw attention to Schedule 4, which specifies those activities. The subheadings, which I know are not technically part of the Bill, include “Gas and heat”, “Electricity”—
Oh well. I shall just work on the text I have; I mean, what is one meant to do? There is “Water” and “Transport”. “Ports and airports” and “Extraction of oil and gas” are also mentioned, but it is the first few that matter. It is striking that the rollout of broadband, the internet and such things do not count as a utility; I should have thought that they were characteristically examples of a utility. My noble friend will no doubt be able to give me a compelling rationale why they are not included.
I come back to the point I made a moment ago about the regulator. I read out the subheadings because noble Lords can see that the activities we are discussing are nearly all regulated, funded by the commitment of private capital with an assumption that private capital will be reasonably efficient in procurement, even if simply for the benefit of shareholders. This does not preclude defalcation, fraud, bribery or giving contracts to your best mate but, as I explained at Second Reading, the Bill does not deal with those issues. If they arose, be it in a public authority or a private company, they would be dealt with through the criminal law because they are all criminal offences. One would not pursue them for a trivial breach of a procedural requirement under the Bill; one would go after them for fraud, taking bribes or all these other criminal things, which are nothing to do with the Bill.
All that makes me think that including private utilities is not entirely appropriate. If it were felt that procurement undertaken by private utilities needed some form of statutory control it would be better in a separate Bill that actually focused on the principles, rather than the procedure, allowing private companies to pursue those procedures appropriate to achieving their shareholders’ ends, just as we allow Tesco to do—with the exception of selling cars next door to fruit. I cannot contemplate for a moment why the European Union should take exception to that, but apparently it did. Essentially, we leave Tesco to decide what procurement processes to follow because it is a private company risking private capital. That is the essential ground on which I make my point.
Finally, I turn to transport, because I have more direct experience of it as a utility than I do the others. There are some distinctions to be drawn. I take as an example Transport for London; as noble Lords may know, I served on the board. Transport for London perhaps should be subject to procurement regulations of this character, but Transport for London is in part categorised as a local government body. It is covered by some local government legislation, as well as by its own Act. That might be the rationale for including a body such as Transport for London, or some of its equivalent bodies that have been created around the country.
However, when it comes to saying that a bus company which has been franchised—my eyes do not work quickly enough but I am now looking at Clause 5(4), the subsection which captures the activities—a private bus company, shall we say, should be subject to the full panoply of this regulation and lumped in with a body such as Transport for London, which is partly an arm of local government, that goes too far. I would have thought that a distinction along those lines should commend itself to the Government and that. largely speaking, with the exception of the sort of body, such as Transport for London, which I referred to, at least as relates to transport, the private companies could be removed from the ambit of the Bill altogether.
I look forward to hearing what my noble friend has to say and whether he can explain the rationale, along with the question of the internet and broadband. Unless I have mistaken it, that is not in Schedule 4 and if it is somewhere else in the Bill, I have not found it.
I am grateful to the noble Lord for expanding fully on these amendments but in the case of some of the categories in Schedule 4, there is no regulator with the power to appoint companies to do things. Ports and airports come to mind; the Government will probably do those. Are we happy that the Government can do that without any sort of regulatory oversight?
You could have more of me, my Lords, but I will simply say that I know nothing about ports. However, I know a little about airports and they are technically subject to economic regulation by the Civil Aviation Authority. It is true that that authority has, through its own risk assessment, decided that only Heathrow Airport will be subject to full economic regulation. Gatwick and Stansted are subject to some, while most other airports are not economically regulated; that is, they can set their own charges and if people do not want to fly into their airport, they will fly to another. It is not entirely true, it is fair to say, that where it matters airports are not economically regulated, because they are. I suppose that the Civil Aviation Authority could always reverse its decision, if it saw fit. It has the power to expand economic regulation to other airports if that were felt necessary. Having added that, I shall subside and look forward to my noble friend’s response.
My Lords, this is my first intervention on the Bill because on the day of Second Reading I was convalescing at home and not allowed to go anywhere.
On this business, regarding utilities, I am afraid I come at this from a simple property professional’s standpoint. It always used to be gas, water, electricity, drainage and telecoms; those were the utilities on which people relied for the use of buildings and property of all sorts. We seem to have dropped drainage, for reasons I cannot quite understand, when it is merely the dirty-water function of the clean-water provider of drinking water, which is referred to.
I declare my interest as one of those who serve under the chairmanship of the noble Baroness, Lady Neville-Rolfe, on the Built Environment Committee, as do the noble Lords, Lord Moylan and Lord Berkeley. I am very privileged to do that. Last week, when we were talking about the Product Security and Telecommunications Infrastructure Bill, it was noted that the very purpose of the telecoms giants was to try to convince government that they were a utility, should have utility powers and should, encompassed in that, have certain powers of coercion. They have come into that from the private sector, whereas dear old British Telecom, aka Openreach and a few other things, has come at it from the other direction—the hardwired traditional utility standpoint that was protected, with all sorts of powers to acquire wayleaves and so on.
The noble Baroness referred to imperfect policy development. I almost got up and said “Hear, hear” to that, because we need to start sorting out what exactly we mean by these utilities that look in lots of different directions. Some of them are very commercial—some are very controversial—and others come from a highly and necessarily regulated background because they are important for health, stability and all sorts of other basic things that require regulation as to quality and quantity in the essential needs of the public. It is not so much the voluntary needs, and perhaps even less the voluntary needs of business, but the essential needs of the public.
We seem to have an increasing muddle between what may be regarded as that essential element that has to be regulated for the purposes I have suggested and the wider commercial endeavour that goes with it. Because that distinction has been made ever less clear, for reasons that I perfectly understand—the utilities were privatised for reasons to do with funding, and I do not pass judgment on that—like Voltaire’s Candide I stand here noting both cause and effect. This is exactly the situation we are in; utility activities are mired in this very issue. I look forward very much to the Minister’s answer on that. He has a great grasp of these intellectual refinements, and I hope he will be able to enlighten us. I think a bit of a distinction needs to be made here between essential purposes and processes that are essentially voluntary and commercial.
My Lords, I am sure the Minister will pick up on the noble Earl’s Voltaire reference and tell us that we live in the best of all possible worlds. In my previous intervention, I mentioned the Government’s productivity. The noble Lord, Lord Moylan, appears to be spoiling that, trying to do in two Bills what the Minister is trying to do in one. I think one Bill on this may be enough.
The point raised by the noble Lord on utilities, developed by the noble Earl, is extremely pertinent. It is a wider question that spreads into things such as the Building Safety Act, for example, where there is an assumption that utilities have a particular role to play. Are hardwiring, broadband and things such as that utilities or not? There are wider implications in this than simply the nature of the Bill. There are questions to be answered.
There is also a precedent already forming in the Bill about public services being carved out. That is the NHS issue, of course, where separate legislation is pulling out some aspects of the jurisdiction of this Bill. I do not expect to have that debate on this group, because the Minister has helped us to move everything into one group. We can have that debate later, but the principle of carving things out has been accepted by the Government. In that respect, the tablers of these amendments have something to go on. The interesting question they are providing through these amendments is: what is in and what is out? In a sense, that covers part of our curiosity around the Bill.
We should not be too obsessive about this, and nor should the noble Lord opposite, because Clause 109,
“Power to amend this Act in relation to private utilities”,
allows the Government to turn the whole thing upside down anyway. Clause 109(1) says:
“An appropriate authority may by regulations amend this Act for the purpose of reducing the regulation of private utilities under this Act.”
In fact, none of this debate makes any difference because, by regulation, the Government can ignore themselves in any case. We already have a problem, Houston.
The noble Lord talked about the difference between private delivery of services and the noble Baroness, Lady Neville-Rolfe, talked about the fact that these organisations took on risk. With the train operating companies, when the risk turned around they just surrendered their licences. It is not real risk in the sense we might understand it in the private sector; it is a different world.
For that reason, I find it very difficult to go along with the amendments that try to extract private delivery of public service from the Bill’s ambitions. Large sums of money that have, lest we forget, originated from the pockets of UK citizens in the form of tariffs, fares or subsidies are then disbursed, or potentially disbursed, by the private companies as they procure things to deliver from their private sector the public services they are pledged and allowed by licence to supply. The Bill may, as the noble Baroness, Lady Neville-Rolfe, set out, interfere with the board’s licence to operate on a wider scale when it decides how to go about making purchases, but that is not unreasonable, given that it has hitched its wagon to a public service. When capital enters the business of delivering a public service, in my view it sacrifices the true independence to operate that it would have if it delivered a private service to private individuals. That is the deal: business gets to ply its trade on the condition that government and usually a regulator, but not always, meddle with its business model. It is a condition to operate.
For this reason, I am very interested to hear how the Minister will respond to your Lordships’ questions. These have been very worthwhile amendments and I thank the tablers. I look forward to the Minister explaining, first, what a “public service” is, secondly, what a “utility” is and, thirdly, where they sit in the context of the Bill.
My Lords, this has been an interesting debate. It has been interesting to listen to comments on this area, particularly from the noble Baroness, Lady Neville-Rolfe, and my noble friend Lord Berkeley in their introduction to their amendments. Clearly, the changes proposed could have huge implications for utilities. There was a greater amount of flexibility for utilities in the Utilities Contracts Regulations 2016 that this Bill loses. The Government have acknowledged that consolidating the UCR with the Public Contracts Regulations will be a major and complex legislative exercise. Considering the issues we debated earlier, I hope that this is an area where we can work together to make sure we get it right for everybody involved.
One of the things we have to be careful about is not increasing bureaucracy when at the heart of the Bill is the desire to speed up procurement processes. I will note a few things in the briefings I have had on the Bill. First, it is worth noting the international Agreement on Government Procurement, which is within the framework of the WTO. It establishes rules requiring that
“open, fair and transparent conditions of competition be ensured in government procurement.”
Although it does that, it does not require WTO members to implement procurement rules for the utilities sector.
Furthermore, as we have heard, the UK is no longer obliged under EU law to implement procurement rules for the utilities sector. The UK’s utilities sector is, of course, very different from those in many of its European counterparts. Therefore, using solutions that were originally designed for European markets may not be appropriate for the UK. We need to take note of all that.
The Law Society of Scotland sent over a very interesting briefing. It draws attention to the fact that Clause 5 reintroduces the purpose test for a contract to constitute a utility contract, which was previously contained in the 2012 regulations but is not in the 2016 regulations, under which a contract will be a utilities contract only if the goods, services or works are
“mainly for the purpose of”,
rather than relating to, a utility activity. Its concern is that this may lead to a return to the pre-2016 view, where the courts were required to consider whether a given good, service or work was required for the purposes of a utility activity.
This is very interesting and there is quite a lot to consider, so I am interested to hear the Minister’s response. I guess we all want to understand how the decisions around the utilities part of the Bill were reached.
My Lords, it has been an interesting and important debate, which we will reflect on as we go forward in the normal way between Committee and Report. I was asked a couple of definitional questions again, including: what is a public undertaking? Clause 1(2) defines a public undertaking as
“an undertaking that is not a public authority but … is funded wholly or mainly from public funds, or … is subject to contracting authority oversight.”
Public undertakings differ from bodies that are also funded wholly or mainly from public funds, or are subject to public authority oversight but which are considered to be public authorities, in that public undertakings do not have functions of a public nature, which means their activities may be more economic and commercial in nature—these are some of the things we have been discussing. For example, although it is no longer a public undertaking, before the Government sold their share in 2015, Eurostar International was a public undertaking. I am sure that people will examine that definition in Hansard. I will come on to some other points shortly.
On the question of what a private utility is, utilities are public sector bodies—public authorities or public undertakings—that carry out utility activities, or certain private organisations carrying out utility activities, which are the private utilities. The Bill covers private utilities only where they have been granted a “special or exclusive right” to carry out a utility activity. Rights are “special or exclusive” where they have been granted by a statutory, regulatory or administrative provision, and the granting of that right in itself substantially limits other utilities from carrying out those activities—it is a competition issue. This effectively puts them in a position of a natural monopoly and therefore they could, however unlikely it may be, engage, for example, in preferential treatment that favours their own affiliates or strategic partners and discriminates against other suppliers bidding for contracts, which could negatively impact the market and customers. That would not be good for the industry or consumers.
Furthermore, though I listened with great interest to what the noble Baroness opposite said in relation to international agreements, the UK is required by various international agreements to ensure that private utilities do not discriminate against foreign suppliers with rights under international trade agreements, known in the Bill as “treaty state suppliers”, and that they adhere to the rules we have agreed for utilities procurements. This is why the Bill regulates private utilities but only to the extent required by those international agreements and where we consider it appropriate or necessary to make the regime work.
There has been a lot of debate in relation to the extent of coverage; I will come on to that. A philosophical question was posed by the noble Earl, Lord Lytton, and the noble Lord, Lord Fox: what is in and what is out? I am sure that we will debate and discuss this in our engagement as the Bill goes forward. There was a slight difference of opinion. Behind me, I have been hearing, “Everybody out”, whereas, on the other side, the noble Lord, Lord Fox, seemed at one time to stray towards a definition of private delivery of public service. That sounds like the kind of concept that might have led Mr Benn or Mr Corbyn to say, “Let’s have them all in. They provide food, the banks and all these things”. I do not think that one would want to go that far but obviously there is a question of how far; indeed, my noble friends behind me have posed the question of “if at all”.
I was alarmed by what my noble friend Lady Neville-Rolfe said, with her immense experience both in the public sector in Europe and in business. She said that, as it is drafted, she would find the Bill a deterrent to applying for public business. That is certainly not what the Government intend at all.
I will come back to the question of coverage shortly but we have included a number of measures that will reduce the regulatory burden for private utilities. For example, the Bill contains a number of provisions unique for all types of utilities, such as the higher financial thresholds and the utilities dynamic markets, which are available only to utilities. In framework agreements, public utilities can let closed frameworks for up to eight years and there is no maximum term for frameworks entered into by private utilities. In addition, with contract amendments, there is no 50% financial cap on the value of permitted modifications.
Obviously, the Bill seeks to reduce the regulatory burden on private utilities in terms of transparency. The transparency requirements for private utilities are the minimum required by international agreements—that is, the tender notice, the transparency notice in cases of direct award and the award notice. Regarding mandatory and discretionary exclusions, the Bill retains the flexibility under the current regime where the application of mandatory exclusions is discretionary for a private utility. Private utilities are not restricted in the duration of closed frameworks, which is generally four years for non-utilities. The terms of any closed framework are their commercial decision. Private utilities will also not be subject to oversight by the procurement review unit, which we will come to discuss later in the Bill.
I was asked about broadband and drainage. I am not sure that I have an answer on drainage except to say that I always evoke the great spirit of Bazalgette. Schedule 4 sets out that the Bill covers utilities operating in the water, energy and transport sectors that are regulated in our international trade agreements to minimise the burdens on utilities. Broadband is not covered by those trade agreements so we have not chosen to regulate public or private utilities in that area.
In relation to that, I was asked about private bus companies and Transport for London. Private utilities that run transport services, such as private bus companies, are regulated as they operate services where they have special or exclusive rights to do so. That limits competition and is reflected in international trade agreements; for example, the World Trade Organization government procurement agreement specifically lists Transport for London as being covered by that agreement. The Bill exempts it under paragraph 17 of Schedule 2 as it will be regulated by Department for Transport regulations.
The noble Lord, Lord Berkeley, asked about the reasons for excluding certain utilities. I will turn to his amendments now. Schedule 4(8) includes certain utility sectors that are exempt from the regulations. As they have proved to the European Commission, they are exposed to competitive forces. Schedule 4(8) provides an exemption determination for those decisions. If other sectors can do similarly, we will be able to exempt them from procurement regulations.
Regarding the amendments tabled by the noble Lord, Lord Berkeley, Schedule 4 sets out the scope of utilities activities, largely mirroring the coverage of the existing regime domestically. I repeat: this reflects our commitments in trade agreements such as the WTO’s GPA. Amendment 25 would extend the exclusion for the supply of gas and heat produced as a consequence of carrying out a non-utility activity to all contracting authorities where this is currently available only to private utilities and public undertakings. This would breach our commitments in the WTO government procurement agreement and other international agreements where this exemption applies only to private utilities and public undertakings. It does not apply to contracting authorities that are public authorities.
Amendments 26 and 27 seek to remove from the scope of the Bill utility contracts related to public transport services and contracts associated with activities for the provision of airports and ports, as was discussed by the noble Lord, Lord Berkeley, and my noble friend Lord Moylan. Both activities are covered under the existing regime, and are required by our international commitments under the WTO GPA and other international agreements that require access to utility contracts in the transport, ports and airports sectors. The Bill therefore regulates these utility activities to comply with our international obligations.
As my noble friend Lady Neville-Rolfe said, the Bill provides for a mechanism in Schedule 4(7); this was alluded to in a different context by the noble Lord, Lord Fox. This will be developed to permit an appropriate authority to exempt utilities operating in these sectors where they are exposed to competition. This would apply to all utilities and is permissible under our international obligations.
I will reflect carefully on—
I was asked that at Second Reading. An appropriate authority is a Minister of the Crown or a Welsh Minister. Indeed, the noble Lord’s colleague, the noble Baroness, Lady Humphreys, referred to this when we discussed the earlier group of amendments. We clarified it in some of the amendments that we tabled but were not brought forward earlier. Among them was an amendment to replace “appropriate authority”, although I cannot remember with what exact words—a Minister of the Crown or a Welsh Minister, I think.
I think that my noble friend is approaching his peroration. May I ask him for a little clarity? Take the example of the bus company. Bus companies operating under a franchise—for example, those in London—appear to be covered because they have a special and exclusive right. That appears to be what my noble friend is saying; if I am wrong, please correct me. Even though they have bid competitively for that special and exclusive right, and even though it generally lasts only for a number of years—this is to justify the balance of capital investment that might be required for them to allow—then comes back into competitive tender, they appear to be covered.
Bearing in mind that I am sticking with the text of the Bill as circulated, my noble friend says that Schedule 2(17) exempts them. However, that is not what it appears to do. It exempts a contract rather than a contractor, and says:
“A contract for the provision of public passenger transport services”.
In simple terms, is my noble friend saying that, when a bus company procures a building, a new piece of plant, some equipment or even some buses, it is or is not covered by the procurement regulations, even on the assumption that it falls into the special and exclusive category?
My noble friend has very characteristically not only picked up an onion but begun to peel it into various levels of the commitment and nature of the activity. I will look into the particular issues in relation to buses referred to by the noble Lord, Lord Berkeley, and my noble friend Lord Moylan.
What I was going to say does not really amount to a peroration. Indeed, at this time, one does not really need a great peroration. What I am here to do is to listen. A range of very interesting and important points have been raised by noble Lords on all sides in relation to the operation of the legislation on private utilities. I will look carefully at Hansard and undertake to have discussions on these matters between now and Report. I am grateful to all noble Lords who have spoken—
I sense that the Minister is winding. I have a quick question, which I think is best responded to by a letter. It is regarding international agreements and particularly telecoms, which were mentioned. The Australia agreement carves out specifically kit and hardware, but not telecom services, which appear to be left in. Will the Minister write to us about what the carve-out on broadband services is in, for example, the Australia trade deal and other trade deals?
Yes, my Lords. I have committed to write in relation to that and I will pick up other questions that have been raised, including by the noble Lord. Obviously, there are existing international agreements that are, if you like, deposited, and which we have to work with, as well as issues of how we move forward case by case, but I will certainly address in a letter the point the noble Lord asks about. It is a legitimate question. The status of international agreements was also raised from the Front Bench opposite, and I will write to the noble Lord on that matter and copy it to colleagues in the Committee.
My Lords, this has been a workmanlike discussion, the unpeeling of the onion—the first of many unpeelings of onions, I think. I thank my noble friend Lord Moylan for his support, and the noble Lord, Lord Berkeley, the noble Earl, Lord Lytton, and the noble Lord, Lord Fox—the philosophy of scope is a good phrase. The noble Baroness, Lady Hayman of Ullock, made a strong point about the WTO, which leads me to ask the Minister whether in his follow-up letters he will be able to give us a little more feeling about what is in and what is out for each of the utilities.
I am concerned about that because when we come on to talk about what is covered, it makes a difference—for example, doing special things for small businesses, could we have rules that are not too bureaucratic? Schedules 6 and 7 look quite burdensome through the eyes of a small company. It seems that a lot is covered and then there are executive powers to decide what is taken out and excluded, so the power is with the Minister. I would like to come back to that when we debate the amendment tabled by the noble Lord, Lord Wallace of Saltaire, on delegated powers. It is an important issue.
Can we find a way of not making things too bureaucratic? The noble Baroness, Lady Hayman, made the same point from the other side. Can we improve productivity and growth, which we all desperately want to do in the current circumstances? Can this Bill be a vehicle for that and for improving our international competitiveness? I beg leave to withdraw the amendment.
Amendment 2 withdrawn.
3: Clause 1, page 1, line 21, at end insert—
“(3A) A university is not a public undertaking for these purposes.”
My Lords, I am glad to have the opportunity, by way of Amendment 3, to probe—I think it is literally that—how the Bill is to be interpreted in relation to the activities of various organisations. I am using universities as a way of trying to understand how it works. Clearly, universities are charter bodies. I assume they are not included in a definition of public authorities, since they do not exercise an authority of a public nature. That is question No. 1.
Question No. 2 is: if they are not a public authority under Clause 1, are they a public undertaking in that they are
“funded wholly or mainly from public funds”
“subject to contracting authority oversight”?
Are they subject to such an oversight? Is the Office for Students such a contracting authority? I suspect it might be, and might have oversight. Is the intention that universities, purely by way of an example, should be included in the definition of public undertakings for these purposes? If they are, I come back to Amendment 3 and say: perhaps they should not be because, as charter bodies, they are self-governing institutions and, I would have thought, can be perfectly comfortable outside the scope of the legislation.
I will not comment on other amendments in the group, other than to say that they afford an opportunity, not least for my noble friend Lady Noakes—I think she is not intending that hers be moved—to explore the way in which public contracts are to be defined, the extent to which there are exempted contracts within those and the rationale behind the listing of the exempted contracts in Schedule 2. I will leave that to my noble friend. Suffice it to say that I am, as my noble friend the Minister said, generally in a position of us trying to regulate less rather than more and to get to the point where people are clear where they are pursuing things competitively, where they are self-governing institutions and where they have other forms of accountability. Where we are not required by our international obligations or other reasons to impose regulatory requirements on them, we should try to avoid doing so. I would be grateful if my noble friend if he uses the example of universities as a way of helping us understand how the specific provisions in Clause 1 are to be interpreted. I beg to move.
My Lords, I have a number of probing amendments in this group and throughout the Bill. The majority of them have been inspired by Professor Sanchez-Graells of the Centre for Global Law and Innovation at the University of Bristol Law School. I am grateful to him for sending me his research-based analysis of the Bill, which listed 50 areas to explore further. Noble Lords will be relieved to know that I have whittled this down to a smaller number of probing amendments.
In this group I shall speak to Amendments 4, 8, 9, 23 and 29 in my name. Amendment 4 is a probing amendment in relation to the definition of “public authority” in Clause 1. Subsection (2) includes authorities or undertakings
“subject to contracting authority oversight”,
which is defined in subsection (4). That says “contracting authority oversight” exists
“if the authority is subject to the management or control of … a board more than half the members of which are appointed by a particular contracting authority.”
My amendment probes whether this is the right definition.
The Bill’s definition appears to turn on whether board members are actually appointed by a contracting authority. Company boards are appointed by shareholders, so who is appointed by whom depends on whether the shareholders exercise their voting rights in any election of directors. A contracting authority may own a majority of shares and hence be capable of appointing a majority, or even all, of the directors but may not in fact exercise its rights, whether by accident or design. Nevertheless, the authority will be capable of voting for board appointments and would, in normal parlance, be treated as having control. Most definitions of “control” in other legislation use that concept and I suggest that the Bill would be better drafted on the ability to control, rather than on what votes have taken place in the past.
My Amendments 8, 23 and 29 probe why the Bill, with its admirable aim to consign EU procurement code to history for the UK, has persisted in using language that can only have been derived from the EU and is not part of UK usage. I raised this at Second Reading. When I searched online for “pecuniary interest”, which is the particular phrase used, the only references that came up were to declarations of pecuniary interests in connection with standards in public life. The term is used in that way in secondary legislation dealing with local authorities. It never seems to be used in the context of contracts.
My amendments propose replacing “pecuniary interest” with “consideration”, which is a term that has a long-standing pedigree in contract law. An alternative could be to remove the words entirely, as it is not clear why it is necessary to restrict contracts that state a consideration, monetary or otherwise.
My last amendment in this group is Amendment 9, which probes another term that is used in Clause 2. A contract within the scope of the Bill is one for the supply of goods, services or works to a contracting authority. The context in which I tabled this amendment was to see whether it covered contracts where a contracting authority contracts for services to be provided to some other person; for example, where social care services are procured. This is clearly the intention of the Bill, but I am not clear that it has been drafted to achieve that.
On reflection, I query whether the words “to a contracting authority” were at all necessary in the clause. It may be a hangover from the EU rules, which we have by no means escaped with this Bill. Every time words are put into legislation, there is a question about what they mean or do not mean. This came up earlier when the noble Lord, Lord Fox, was speaking. It is important to be clear that we use words only when we absolutely have to and that they have definite meaning.
Sitting suspended for a Division in the House.
I shall finish by offering a comment on another amendment in this group. Amendment 5, in the name of the noble Lords, Lord Wallace of Saltaire and Lord Fox, is a bit like déjà vu all over again.
The Member’s explanatory note says it is probing why ARIA is excluded from the scope of the Bill. The noble Lord, Lord Fox, is well aware from his involvement in the passage of the Advanced Research and Invention Agency Act that it is excluded because Parliament has already decided to exclude ARIA from procurement regulations. I know he did not like it then and he clearly does not like it now, but it is clear government policy that has been approved by Parliament in order that ARIA can be a nimble research body, free to pursue its aims without being shackled by a lot of unnecessary bureaucracy. Nothing has changed since that Act was passed.
I am delighted to follow my noble friend with a few brief remarks. I say at the outset that I regret that I was unable to contribute to Second Reading. I shall limit my remarks today to my arguments probing why Clause 2 and Schedule 2 are part of the Bill. This raises a more general question as to why we actually need the Bill, as I understand that we are already in the GPA. We have had a number of Statements about this and discussions in this regard with the Minister responsible for trade, my noble friend Lord Grimstone. I would be grateful if my noble friend could elaborate on what I am about to put to him.
As I understand it, the purpose of the Bill is twofold: first, to reform the UK’s public procurement regime following our exit from the EU; and, secondly, to create a simpler, more transparent system that better meets the country’s needs rather than being based on transposed EU directives. I understand that we are to have a separate exercise where we go through all the retained EU law, when we come to what is euphemistically known as the Brexit freedoms Bill, to decide which of those retained EU directives we may wish to keep.
My understanding is that much of what is before us today, as my noble friend has explained, is already covered by the World Trade Organization Agreement on Government Procurement—the GPA, as it is called. The aim of that agreement is to mutually open government procurement markets to those party to that agreement. The threshold values are, curiously, almost identical to the thresholds that had to be met through our membership of the European Union, which was roughly €136,000. We are now looking at £138,760 as the threshold for the general agreements for goods; for services, it is the same amount and, for construction, it is £5 million-plus.
As my noble friend Lord Lansley rightly assumed, I am trying to ascertain through this debate the way in which public contracts can be defined. I am assisted in this regard by paragraph 16 of the Explanatory Notes, which sets out that:
“The Public Contracts Regulations 2015 will be repealed and new rules on procurement will be set out in the new regime. Most central government departments, their arms-length bodies and the wider public sector including local government, health authorities and schools will have to follow the procedures set out in the Bill in awarding a contract with a value above set thresholds to suppliers.”
If, for example, there is a public procurement contract for food, for vegetables and meat, for a local school, hospital, prison or some other public body, what is the procedure that will have to be followed after the adoption of the Bill and, more specifically, the regulations that will flow from it?
That is the specific question that I would like my noble friend the Minister to address. How will public procurement for contracts over the threshold be treated? For the purposes of the Act, will they be treated differently from those that already apply under the GPA? How will the contracts apply for those that are under the magic threshold of £138,760? In effect, will the same procedures apply as before we left the European Union? I am particularly interested in food, fruit and vegetables, for the reason that we were all told this was going to be a benefit—a Brexit dividend from leaving the European Union—but I am struggling to see how this dividend will be delivered in this regard. When these contracts are put out for tender, whether they are above or below the threshold, how will that procedure apply? Can those that are under the stated threshold be awarded to local suppliers without being put out for international tender, or could we have Spanish or, indeed, African companies applying to deliver these?
I admit to being confused, because we were told that this was something that would happen after we left the European Union, and I am still struggling to see how these contracts are going to happen. We were told that it would boost local growers in this country to have these contracts put out for tender once we were no longer in the European Union. I look forward, with great anticipation, to my noble friend the Minister’s reply.
My Lords, up to her final couple of sentences, I was going to recommend that the Minister listen very closely to the advice from the noble Baroness, Lady Noakes. This group of amendments essentially carries on the theme of what is in and what is out, which is the existential theme of almost everything we are debating that is not a government amendment. In that respect again, it is a welcome set of amendments and I think, all joking aside, that the noble Baroness’s points are really important points for the Minister to clear up. I do not understand where we are on this and if the noble Baroness, Lady Noakes, does not then it probably is not understandable.
The noble Lord, Lord Lansley, spoke in favour of removing universities. Of course, universities will spend an awful lot more public money than ARIA ever will—if ARIA ever gets off the ground and spends any money. To some extent, perhaps the Government are looking at the right end of the telescope.
My understanding of legislation is that if a subsequent Bill legislates law that is different from a preceding Bill, the subsequent Bill wins, but the noble Baroness, Lady Noakes, may correct me on that.
The purpose of this probe is really to investigate. If one listens to the Minister and listens to some of the briefings we have had, there is potentially enormous benefit from this platform for purchasers of public services. If there is this benefit, deliberately excluding ARIA from potentially having it seems to me a bit stupid. I agree with the noble Baroness, Lady Noakes. If we are talking about procuring quantum physics services from someone, I do not imagine that this platform will be at all useful. But if it is buying utilities or basic services such as cleaning, that, it seems to me, is what this platform is there for. To deliberately exclude ARIA totally from it does not make a great deal of sense.
The other point that I would like to make is about the three areas excluded in the legislation in Clause 1(5)(a), (b) and (c). Paragraph (a) concerns the “devolved Scottish authorities” and there is a Scottish Parliament which oversees that. Paragraph (b) is:
“the Security Service, the Secret Intelligence Service and the Government Communications Headquarters”.
All of those have scrutiny, albeit secret.
Then we have
“the Advanced Research and Invention Agency”
which essentially has no scrutiny at all. It has the Secretary of State, who may or may not choose to scrutinise it. Within those powers, ARIA can buy property for example. It can buy things—anything it likes, effectively—with essentially no public scrutiny. We are dealing with a Procurement Bill, and to deliberately put in place an organisation that can spend hundreds of millions of pounds—if, as I say, it ever manages to find a top team and get itself in order—with no scrutiny whatever is remiss. It would be remiss of your Lordships on this Committee not to consider this and it would be remiss of the Minister not to respond directly as to why there should not be some form of scrutiny. It could be the same sort of scrutiny that the Security Service enjoys or something different, but simply relying on the Secretary of State, as currently, is not good enough.
My Lords, I shall speak on this set of amendments, particularly Amendment 42. It is the first time that I have been able to speak on the Bill. I was not able to participate in Second Reading, but I have followed the debate and, like many noble Lords, spent the weekend probably losing a little hair trying to make sense of the number of amendments that have come out. I thank the Minister for the withdrawal of Amendment 1 and for looking to find a way forward with some of the issues that those amendments made.
Particularly with Amendment 42, I raise my interests in the register, particularly as a vice-president of the Local Government Association and as an adviser to the Robertson group of organisations, which does work with the public sector. Amendment 42 is genuinely probing. It addresses what is in, what is out and what is the autonomy and the role of local authorities within the Bill. In particular, when a local authority works with others, how do some of the provisions within the Bill work—whether it is a central purchasing authority or not—particularly when they overlap with other procurement legislation in, for example, the Health and Care Act?
I shall put a couple of scenarios to the Minister and genuinely look forward to hearing some of his replies. First, local authorities are being asked to significantly integrate social care and health. They will be part of integrated care boards, which are purchasing organisations. Some public sector money from local authorities will come forward as part of that. When they are purchasing as an integrated care board and significant amounts of local authority money is put in there, which provisions will the local authority be asked to enact? Will it be the provisions within this Bill or the provisions under Sections 79 and 81 of the recently enacted Health and Care Act? There will be potential conflicts of interest as to by which procurement rules two different partners procuring a public good will be bound. I hope the Minister can help to explain that scenario.
There are also lots of local authorities that have significant public-private partnerships. Again, what rules will the public-private partnership be bound by, particularly when the local authority purchases significant services or goods with a private sector organisation which are to be used for public procurement? How will the private sector organisation be bound by that? For example, what rules will there be for that public-private partnership when purchasing a good, depending on whether the 51% amount has been put forward by the public sector—the local authority—or by the private sector entity?
I understand from reading the Bill that there will be the national procurement policy statement. I just need to understand from the Minister what autonomy local authorities will have to move away from the procurement guidelines that will be in the NPPS.
Finally, it would be helpful if local authorities could be put in the Bill as centralised procurement authorities. Is there any particular reason why the Government did not take that on board in the Bill?
There are many general questions about local authorities; those are a number that I wish to probe. I genuinely look forward to the Minister’s answers.
My Lords, I very much welcome the question of the noble Lord, Lord Scriven, about local authorities. They are so often underappreciated and undervalued, and we need to know what can and cannot be done in a collective way—the question he is rightly probing. For example, a simple question would be: for planning services—where my committee has identified a huge shortage of talent and resources in some planning authorities—could you have a collective procurement, and would that be caught by this Bill?
I also ask what the GPA does on telecoms and the internet infrastructure. I must say that I tried in vain, as a Minister, to get contracts for the roll-out of infrastructure around Washington DC—there was not a level playing field. I fear that overseas interests will benefit preferentially from this Bill, as they have done in some other areas, such as contracts for difference in energy. Can the Bill help to hold the GPA to level the playing field?
I strongly support my noble friend Lady Noakes, both on her brilliant technical points, which I barely understand, and on ARIA. On the latter, I agree with her that it must be free from hassle—I think we agreed that in our debates in this House. It probably does not have enough money, but it is important to ensure that it can proceed without the benefit of lots of new regulations, which could be quite bureaucratic to them.
My Lords, I shall speak to my Amendment 7. I do not think I need comment on any of the other amendments in this group. I tabled this probing amendment to ask why this particular piece of text is here:
“This Act does not apply to Her Majesty acting in her private capacity.”
That is quite unusual in Bills. Usually at the end there is a clause that says something along the lines that Her Majesty and, often, the Duke of Cornwall have given their consent to that piece of legislation. Sometimes when I ask the Minister what relevance the Bill has to the Duke of Cornwall they cannot answer; no one seems able to because it is nicely confidential.
Obviously I can see why Her Majesty acting as the Crown is included in this Bill because effectively the Crown is the Government. However, why is the Duke of Cornwall not included in the Bill in his private capacity? He usually appears alongside Her Majesty. The Duchy of Cornwall has said it is in the private sector, which means, whatever we are going to call it, that it is a private sector organisation that presumably will have to comply with every other part of the Bill.
It is interesting to see where the sovereign grant for transport comes in. I happened to get a Written Answer today. I asked who funded the return charter flight of the Duke of Sussex from the United States for the jubilee. According to media reports, it was the most expensive charter plane that you could possibly get, and it seemed to me that, as in so many of these matters, they could actually have gone on the scheduled service. The answer I had was that it was not funded by the sovereign grant because that
“only covers expenses incurred by other Members of the Royal Family when they undertake official duties on behalf of Her Majesty”,
and clearly that was not the case. When it comes to the sovereign grant and the award of contracts for helicopters or planes across the world that the Royal Family—or even occasionally members of the Government—might take, presumably that will be subject to competitive tendering because they are acting in their public capacity.
It would be good to hear from the Minister what correspondence, if any, took place before Clause 1(9) came into the Bill. Are the Government quite happy with it? I look forward to hearing his answer.
My Lords, my name is on some of these amendments. My colleagues have spoken to several of them so I shall merely add a few things.
I was particularly concerned by the term “centralised”. The context in which we are operating is that England is by far the most centralised country in the developed world. The concept of a centralised procurement authority implies, “Whitehall tells the rest of you what to do”. For that reason, we think it important to put a number of phrases into the Bill emphasising that local authorities have a part to play. In particular, we should put here the idea that consortia of local authorities—for example, the local authorities of West Yorkshire operating together—have the ability to co-operate as centralised procurement authorities.
There will be a number of other occasions in the Bill where I and my colleagues will want to put in social enterprise, social values, non-profits and charities. They were strongly emphasised in the Green Paper and the consultation; they are not in the Bill. We think that including those elements will help to broaden the way in which Ministers and officials will approach outsourcing and public contracting. This relates also to the issues that my noble friend Lord Purvis raised about the international dimension and the importance of trade and co-operation agreements, and the point the noble Baroness, Lady Neville-Rolfe, made about the unbalanced way in which these occasionally operate: we are much more open to others than they are to us.
I was very struck and, indeed, appalled at the outbreak of the Covid pandemic that one of the contracts for test and trace was given to a multinational company headquartered in Miami, Florida. It seemed so obvious that knowledge of the ground, local circumstances and where to put your test and trace things was held already by local public health officers across the country. The outsourcing then should probably have been done through local authorities and the services they could provide; giving it to a multinational with very little experience of operating in England was clearly counterfactual, counterintuitive and likely to be grossly inefficient, as indeed it proved. The importance of putting in the Bill that local authorities and consortia of local authorities can operate as these unfortunately named “centralised contracting authorities” is because we want to make sure that this does not end up with Whitehall and Ministers taking yet another large bite out of what used to be local autonomy and local initiative, and so that the Bill gives adequate space for those local contracting authorities and others to be involved as fully as possible.
My Lords, I shall speak to my Amendment 19 and comment very briefly, because it was a pleasure to follow my noble friend, simply to emphasise the point that he and my noble friend Lord Scriven made about local authorities. I want to add just two other elements of that and combine it with a comment, since we started on this group with the noble Lord, Lord Lansley, about universities. In the case of my former constituency, Heriot-Watt University was part of a number of consortia with other universities and other organisations, which included charitable trusts, research trusts and other groups. Since they became procurement bodies themselves, it would be very useful for the Government to be very clear as to how this Act will consider an institution as a procuring body, including as part of a consortium of which the partners are not covered by this legislation.
On the point about local authorities, I would be grateful if the Minister would clarify for those local authorities that work cross-border. There is the borderlands consortium of local authorities in England and Scotland. In my understanding of how the Bill is drafted, that consortium would not come under the Bill because only local authorities, or local authorities in Scotland that operate on fully reserved matters, would do so. The consortium does not operate on fully reserved matters but it is a single consortium that receives a borderland deal from the Treasury and is a procuring authority. It would be very helpful if the Minister would clarify the status, under the legislation, of the border consortium of local authorities.
The purpose behind Amendment 19 is to develop that probing and to ask for consideration of the treaty state suppliers and the international agreements. What comes under the terminology of international agreements? The noble Lord, Lord Lansley, and I have raised questions on many occasions about what the Government consider to be a treaty for international agreement purposes. I understand entirely that the Government’s purpose behind this legislation is flexibility, but also transparency. I support those, particularly the transparency angle. We therefore need to look carefully at the areas that are exempted.
The noble Baroness, Lady Noakes, raised the point about ARIA; I will not intervene in the mutual relationship between her and my noble friend Lord Fox on the relationship with ARIA, and I know that UK Research and Innovation is not linked with ARIA. However, I found it interesting that UK Research and Innovation is included in our trade agreement with Australia under the procurement chapter by virtue of it being a listed body. If we need to look at which bodies will be included in this legislation, there are exhaustive lists—it says: “This list is exhaustive”—in our trade agreements, which are now in scope of this legislation but which many Members may think are not. For example, at 6.9, UK Research and Innovation is included.
Most interestingly, the Bill excludes Government Communications Headquarters, but it is included in the list of bodies in our FTA with Australia under the procurement chapter. I do not know how they will interact. We will come to this when we come to the elements of international trade, but where does GCHQ sit as regards procurement? We are obliged to cover it under the Australia FTA but we are seeking to exclude it under the Bill. I simply do not know the answer, so I look forward to the Minister clarifying that point.
The amendment on international agreements is to clarify what the Government consider an international agreement. Paragraph 19 of Schedule 2 states:
“A contract awarded under a procedure specified in an international agreement of which the United Kingdom is a signatory relating to … the implementation of a joint project between the signatories to that agreement.”
That could be extraordinarily wide, and if it includes agreements which are not under FTAs it could be enormously wide.
I just need to look at two contemporaneous cases under memoranda of understanding. These are agreements which the Government say are underpinned, with commitments to honour them. One is the Rwanda MoU on immigration—I visited the centre in Kigali two weeks ago. There is procurement that could be under that agreement, whether for the aircraft which have been brought from Spain to fly individuals out there, or indeed the Hope Guest House Ltd, a private limited company in Kigali that is to be the reception centre for these people and which I visited myself. I asked the authorities there: “If it is a limited company, how do I know what the details are—the terms and conditions?” They told me that it was under a one-year rolling contract but I have no idea how it was procured, and the same goes for the British side. This is a joint agreement with joint procurement, and I believe that it should be transparent, but under the Bill the Government are seeking to exclude that.
There are a number of different areas. There are international higher education partnership agreements. Even if the noble Lord, Lord Lansley, is successful with his amendment, it would be rendered useless under paragraph 19 of Schedule 2 because the Government will be able to say that it is under an international higher education agreement. We have signed between 15 and 18 agreements with China on preferential market access, including investments through UK pension funds, which potentially come within scope of this as well. We have an investment partnership with the UAE, the details of which have not been published; I have not been able to find them and the Library has asked the DIT for the text but it has not been forthcoming. However, these are potentially joint procurement agreements. Some may be beneficial; others I look at with a cautious eye. Depending on how they are defined and on how the Government wish to use them, the transparency elements of procurement could be bypassed because of paragraph 19 of Schedule 2. Therefore, I would like the Government to explain.
In closing, because it links to a number of international agreements and has been previously referenced on treaties, I recognise the 24 treaties listed in Schedule 20, but the impact assessment relates only to 20, so I do not know why there is that discrepancy. It would be helpful if the Minister could clarify the discrepancy between the two.
My Lords, it is a pleasure to follow my noble friend Lady Hayman after her remarks. I apologise to the Committee for being a few minutes late; I was unavoidably detained on other business. I also thank the noble Lord, Lord True, for dealing with a really difficult situation with—as we might all agree—his normal courtesy. I think it was the best that could be done in the circumstances; withdrawing government Amendment 1 allowed us to move to this group of amendments. We all appreciate his offer of continuing discussions in the next day or so to consider how we take all this forward. It would be remiss to not start with thanks to the Minister for that, otherwise the Committee would have been a complete and utter catastrophe. As we can see, however, with this group of amendments we have got on to the real purpose of the Committee, which is to get to the real detail, as seen in the various contributions made by all noble Lords. All the amendments put forward have asked very reasonable questions, which seek to clarify the Government’s intentions. I shall certainly make those points in the few minutes that I speak for.
I start by saying that I was really interested in the amendment of the noble Baroness, Lady Noakes, because it goes to the heart of the issue. You can read “pecuniary” in all sorts of ways. I looked it up with the help of my noble friend Lady Hayman and it has to do with money, so I was quite pleased to read that—from a non-legislative point of view—because I thought it meant that it was about the supply of the contracts, the pecuniary interests would not matter and it was a “standards in public life” type of approach, but of course it is not. The amendment of the noble Baroness, Lady Noakes, has clarified that for me. What “pecuniary” means in this context is a really interesting point: why are the Government including it and why would the amendment of the noble Baroness, Lady Noakes, not be an improvement? Again, the details of some of these amendments are really worthwhile points to look at.
I wanted to raise some of the points that the noble Baroness, Lady McIntosh, started to get to in the debate on whether Clause 2 and Schedule 2 should stand part. There is also the question of where Schedule 1 takes us. The noble Lord, Lord Fox, will be interested in this, having asked who will police this. The Government use the term “estimated value” in Clause 2 and, to be fair to them, that is very important for this aspect of a public contract. Clause 3 deals with how estimated value is worked out; then, in Schedule 3, it is done by regulation. Schedule 3 lays out how the estimated value may be set, so I will not go through it. What I could not find out—a point also made by the noble Lord, Lord Fox—is who ensures that it is properly done; in other words, that the estimated value is a proper estimated value and that the system laid out in Schedule 3 works. If I understood the Minister, he said that it is a matter for the Minister—a matter for the Crown. Could he just clarify who polices this? Who ensures that the estimated value is indeed a proper estimated value? That would be helpful to the Committee.
In Schedule 1, as the noble Baroness, Lady McIntosh, and the noble Lord, Lord Lansley, pointed out, it is all laid out for the purposes of public contracts. Where have all these threshold amounts come from? I think the noble Baroness, Lady McIntosh, said that they were in the EU legislation in euros and that all we have done is convert them into pounds. I do not know whether that is true, but how have those threshold amounts been worked out to be the appropriate ones for each of the contracts in the 12 circumstances laid out in the Bill? It is really important to know how these amounts have been arrived at.
How these amounts can be changed will be set out by regulation. But as we will hear later, the Delegated Powers Committee report—I hope the noble Lord, Lord Wallace, does not mind me referring to it—is very worried about the use of regulations. Can these thresholds be moved up or down—presumably the Minister decides that? Can the Minister confirm whether these thresholds can be moved up or down by negative or affirmative procedure? I think it is negative, but I will be corrected if I am wrong. I would have thought that, as we are debating whether Schedule 2 stand part of the Bill, changing these threshold amounts—which are crucial to the determination of whether a public contract is awarded because it is above or is exempt because it is below—would be very important from that perspective.
I cannot find anything in the Explanatory Memorandum setting out the reasons for that or in what circumstances these thresholds could be changed. I am a pretty reasonable man. If the Minister turned around and said that it is laid out that it will be an inflationary increase according to whatever, that would be fairly reasonable, to be honest, but suppose that someone had another reason. We need greater clarity on that.
We have all sorts of use of regulations in Schedule 2. Can the Minister say something about how all these different bodies were arrived at? We have a list of all the various contracts which will be exempted—I understand that some are defence and security contracts. How was this list arrived at? It would be useful to know the criteria used to determine that these are the appropriate contracts to be exempted from the provisions of the Bill. I think the Committee would find that helpful to understand.
We are discussing whether Schedule 2 stand part, and we will discuss this in more detail when we come to the debate on group 5 and the amendments from the noble Lord, Lord Wallace. Page 10 of the Delegated Powers and Regulatory Reform Committee’s report on the Procurement Bill specifically gives an example of where the committee is worried about the use of regulations and the inability of Ministers properly to explain the power they are giving themselves.
The committee uses as an example
“paragraph 17 of Schedule 2—power to exempt from regulation under the Bill contracts for the provision of public passenger transport services”,
but there will be others. It states:
“According to the Memorandum, this power is being taken because … procurement for public passenger transport services by rail and metro is to continue to be regulated by separate legislation and reflecting this in the Bill would be problematic because it ‘would involve provision for a number of complexities in UK legislation and retained EU law and how they interact’; and … the regulation of such services is to be ‘the subject of forthcoming changes’… However, it does not explain why it is considered appropriate for the power to be so broad that the issue of which kinds of contracts for the provision of ‘public passenger transport services’ are to be exempted is left entirely to regulations.”
There is nothing of substance in the Bill which explains any of it. There is real concern about that.
It also states:
“Example 5: paragraph 34 of Schedule 2—power to exempt from regulation under the Bill concession contracts for air services provided by ‘qualifying air carriers’ specified in regulations”.
The Government have failed to provide any justification for leaving entirely to regulations the question of which concession contracts for air services provided by air carriers are to be exempt from the Bill. We will come to this later but, in Schedules 1 and 2, there are numerous powers given to the Minister, through regulation, to determine real issues of policy.
To conclude on this, later on, the report is scathing in its criticism of one of the powers that the Government are taking to allow them to change primary legislation through negative secondary legislation. That cannot be right. We cannot expect secondary legislation to change primary legislation through the negative process, although admittedly that happens in another part of the Bill. Can the Minister confirm that nothing we are passing in Schedules 1 and 2 will allow the Minister, through negative secondary legislation, to change primary legislation? That is the only example the committee gives but are there other examples, specifically with respect to Schedules 1 and 2? I know that the Minister will seek to answer these questions but this goes back to the points made in the amendments from the noble Lord, Lord Lansley, the noble Baroness, Lady McIntosh, and other noble Lords, such as my noble friend Lady Hayman.
At last, now that the process is starting to be sorted out, the Committee can start doing its job, whether that is in the amendment of the noble Baroness, Lady Noakes, or in any other amendment. We seek to scrutinise the detail of the Bill to understand what is going on. The purpose of the Committee is to improve the legislation and make it work, even if sometimes there is an ideological clash about some of it. Everybody wants this Procurement Bill to work because having a better system of purchasing that conforms to the standards we all want is in everybody’s interest. It is in Committee that we can examine the detail in order to do that.
Again, my Lords, I am very grateful to all those who have spoken. There have been some interesting speeches. Indeed, I will certainly take the final speech by the noble Lord, Lord Coaker, in which he seemed to deplore the idea that the Government should have any regulatory powers, back to my right honourable friend. We will certainly watch for that as we go forward.
On his more general point in relation to the Delegated Powers Committee and so on, I do take what he said seriously. We will have a debate on that in the next session. I will look into his specific point about secondary and primary legislation. If there is an answer that is an advance on what is already in the public domain, I will certainly have that for the next session when we will look at delegated powers.
I am not really a fan of wide-ranging groups that cover a whole range of different subjects. They seem to have become the habit of our times. When I first had experience of your Lordships’ House, we had quite short debates on relatively narrow subjects, which enabled the Minister and the House generally to concentrate. So I will endeavour to answer all the various points that have been made but some of them may have to come in writing. We will look very carefully at Hansard because there was a very broad range of questions, which started with the questions on universities.
Can I just point out that the grouping comes from the Government Whips’ Office? We could have extracted all our amendments, one by one, and created a larger number of groups but, probably in deference to the will of the Government, we did not. The future of how many amendments you have in a particular group lies very much in the hands of the Government, not Her Majesty’s loyal Opposition’s or ours.
My Lords, they are negotiated in the usual channels. Sometimes it is a fatal thing in your Lordships’ House to express an opinion, in all respect to your Lordships, of how I think things may be done. We are all imperfect—I am sure the usual channels are not perfect—but having a large group does raise challenges in terms of accountability.
I will try to address the various points raised. I apologise if they were so broad that I may miss some of them, for whatever reason. We started on universities with Amendment 3 from my noble friend Lord Lansley. His amendment would exclude universities from a definition of public undertakings within the definition of a contracting authority, and consequently from the scope of the public procurement rules. He asked about public undertakings and public authorities. Public undertakings are relevant only in the context of the utilities that we were discussing. The universities will be public authorities if they meet the public authorities test, and not caught if they do not meet it.
Universities are included in the UK’s coverage commitments under the World Trade Organization’s Agreement on Government Procurement as contracting authorities that are subject to the rules, where they are publicly funded. The existing definition of a contracting authority in the Public Contracts Regulations 2015 contains tests of the extent to which a body is publicly funded or publicly controlled. These tests are then applied by the body in question to determine whether they are caught by the definition. The definition of a contracting authority in the Bill is intended to capture the same bodies. Universities are therefore in scope of the procurement rules, but only to the extent that they are mainly publicly funded or controlled. The position is likely to vary depending on universities’ funding streams, and those that derive the majority of their revenue from commercial activities would likely be out of scope.
Amendment 4 in the name of my noble friend Lady Noakes would adjust the definition of a contracting authority in such a way that bodies would be brought into scope where they are subject to control by a board if more than half the members are “capable of being” appointed by a contracting authority. I think there was some interest in that proposition on both sides of the Committee. Our initial feeling is that it would mean a more prescriptive and potentially wider scope than the proposed definition, which brings into scope only bodies controlled by a board that has been
“appointed by a … contracting authority.”
Again, the definition of contracting authority in the Bill is intended to capture the same bodies as in the existing Public Contracts Regulations. We are not seeking to change the scope of bodies covered in any way, though some adjustments have been necessary to replace references to European concepts such as bodies governed by public law with the more relevant UK analogous concept of bodies undertaking public functions. Ensuring consistency is necessary not only for practical continuity purposes but in respect of the United Kingdom’s international market access commitments in free trade agreements, which use the existing definition as the basis of the UK’s coverage offer.
The current definition brings into scope bodies that have a board more than half of whose members are appointed
“by the State, regional or local authorities, or by other bodies governed by public law”.
The definition in the Bill is consistent with this by bringing in bodies that are subject to the management or control of
“a board more than half … of which are appointed by a … contracting authority.”
The existing definition in the Public Contracts Regulations does not contain any reference, as per the proposed amendment, to the notion of board members “capable of being” appointed by a particular contracting authority. Whether or not an authority chooses to exercise its right to appoint members to a board is not addressed, and was not intended to be addressed, within the definition. For that reason, we do not currently consider that it would be appropriate to adjust the definition in the way the amendment suggests.
However, I have listened carefully to what my noble friend has suggested. We will consider further whether it is possible to exercise control without making appointments by the threat of control. For the moment I ask my noble friend not to move the amendment, which we cannot support as it stands.
Amendment 5 is in relation to the Advanced Research and Invention Agency and others have spoken about the fact it is excluded. I know there is a good old thing in a nice Italian opera house: when an aria is sung, if the crowd shout “bis” then, luckily, it is sung again. However, I say to the noble Lord that he has really now had two goes at this and I am not going to shout three times. As my noble friend has pointed out, ARIA was covered by an Act passed only on 24 February this year. While it is perfectly possible for Parliament to change its mind, it would be odd when presenting a Bill to your Lordships’ House for it not to be in line with what Parliament had approved only a month or two before. We have not changed our view and that is where we stand.
Amendment 7 from the noble Lord, Lord Berkeley, on another theme, would extend the Bill to Her Majesty acting in her personal capacity. The noble Lord is right to say that procurements undertaken by the Crown in its public capacity, such as by government departments and executive agencies, are regulated under the Bill as the Government obviously govern in Her Majesty’s name. Procurement conducted using the Crown Estate’s vote expenditure forms part of the UK’s offer under the World Trade Organization’s Agreement on Government Procurement and will also be regulated under the Bill.
Procurement rules are, however, designed to regulate the purchasing activities of public bodies and not those of private businesses or individuals, with the exception that we discussed earlier of private utilities operating under a special or exclusive right. The current rules do not therefore extend to Her Majesty acting in her personal capacity. While the Crown activities I have described would be included, it would not be appropriate for the Bill to include Her Majesty in her personal capacity.
Turning to the next set of themes—I am trying to respond to as many as possible—my noble friend Lady Noakes put forward amendments to make an identical change to three corresponding definitions. The noble Lord, Lord Coaker, also asked about the meaning of the definition of the
“contract for the supply, for pecuniary interest, of goods, services or works”.
The amendments, as my noble friend explained, would replace part of that with the notion of consideration.
I was asked why “pecuniary interest” was selected. First, it has the benefit of consistency with the definition it replaces in the long-standing regulatory scheme. “Pecuniary interest” is used in the definition of public contracts in the Public Contracts Regulations 2015, and is consistent with the long-standing definition of concessions contracts in the Concessions Contracts Regulations. Secondly, “pecuniary interest” has a more precise meaning than “consideration”, which could take any form. Doing something, not doing something or promises can all be forms of valid consideration. This is important because the Bill is not intended to capture purely compensatory or supportive arrangements, such as grants or sponsorship agreements. The third reason for “pecuniary interest” is that it is well understood by the legal community and practitioners alike. However, I heard what my noble friend said about the experience of practitioners. Again, we will consider her remarks.
We believe that the notion of “pecuniary interest” achieves the desired effect of capturing contracts made with profit in mind and ensures consistency in the switchover from the existing scheme to the new one. The word “consideration” could lead to wider scope for the Bill, and to regulation of arrangements made without any idea of profit in mind. This might have the unintended consequence of stifling innovation and removing the flexibility for the Government to support schemes which are purely compensatory in nature or provide non-pecuniary support which helps foster the development of British businesses.
Amendment 9 makes explicit that the definition of “public contract” includes contracts
“for the benefit of persons other than the contracting authority.”
I assure noble Lords that it is implicit that even contracts let by contracting authorities for the benefit of other persons will still fall within the definition. Indeed, many of the contracts let by contracting authorities will be for the benefit of communities or persons other than the authorities themselves. It would be a significant reduction in the scope of the regime if that were not to remain the case. For these reasons, I hope I have reassured my noble friend that there is no need to adjust the definition to clarify this matter and that the proposed definition maintains the same approach as the long-standing rules.
Amendment 19 in the names of the noble Lords, Lord Purvis of Tweed and Lord Wallace of Saltaire, which seeks to remove sub-paragraph 19(b) of Schedule 2, would seriously impair the UK’s current ability under the Public Contracts Regulations 2015 and the Defence and Security Public Contracts Regulations 2011 to conduct joint projects with our international partners, particularly in the field of defence. I will write to noble Lords on some of the particular points made in relation to government communications; defence and security matters will partly be covered by my noble friend Lady Goldie, but obviously they will understand why I will do that.
I am grateful. Just so that the Minister writes the correct letter to me, I am fully aware that sub-paragraph 19(a) relates to agreements about
“the stationing of military personnel”.
However, sub-paragraph 19(b) is so broadly drawn that it is not directly linked to military agreements. I hope that the Minister does not write to me concerning anything to do with military procurement because that is absolutely not what I raised. My concern about sub-paragraph (b) regards the other agreements that are not military.
I was actually coming on to the rest of that but, with respect, the noble Lord asked me a specific question about government communications in his utterance; therefore I was responding to it.
Going further, in line with the existing exemption under the current regime, as provided for in the GPA, partner nations will typically agree to the rules for the award of contracts in a joint project by one or more of the partners in an international agreement. We cannot expect our international contracting partners, each with different national procurement procedures in some cases, to follow the specific procedural rules in this Bill. The ability to switch off the procedural rules in the legislation where there is a clash with what was agreed with the parties to the international agreement is essential to facilitate arrangements; however, I will clarify that further for the noble Lord. Again, I ask that this amendment be withdrawn.
I turn to Amendment 42, which relates to local authorities. I apologise for the length of my speech but a number of different themes came out here. Given my life and my having been involved in setting up joint arrangements with other authorities, I understand where the noble Lord, Lord Wallace, is coming from in seeking to add to and amend Clause 10 to make it explicit that a group of local authorities forming a consortium may constitute a centralised procurement authority. As an old local government hand, I do not particularly like that phrase; on the other hand, earlier, I cited the Yorkshire procurement arrangements as the type of thing that would be permitted and would be a centralised procurement authority.
My Lords, I suggest looking at the definitions in Clause 112. I note that the terms “central government authority”, which clearly does not apply, and “centralised procurement authority” occur together. I suggest that, in introducing an amendment on Report, the Government may care to consider something that replaces “centralised” with “combined”? That would not have the implication of being run from Whitehall and would express much more explicitly what is intended.
I will certainly reflect on anything that is said in Committee. “Combined authority” has a particular meaning and understanding. Local authorities can procure things together without being a combined authority; perhaps the noble Lord, being a good Liberal Democrat, might like to propose a federalised approach. I will take away the point he made. I was going to say that I agree with him and the noble Lord, Lord Scriven, that it is correct that local authorities can band together to form consortia to undertake procurements; that is something we wish to encourage. I will look into the particular case of border lands that the noble Lord—
I am not sure that the First Minister is looking for a federation.
Where a procurement is being undertaken by one or more local authorities that are in the business of carrying out procurement for others, as when they form a consortium to undertake several procurements over a period of time, those authorities would constitute whatever we call it—a centralised procurement authority, for the purpose of the Bill—without the need for the amendment. Conversely, where a group of local authorities come together to undertake joint procurement on a one-off or ad hoc basis, they are entitled to do that as joint procurement under Clause 10(4)(a).
There are other aspects in relation to local authorities. The Government have a clarifying amendment in the megagroup that comes up next, which I hope will also give some reassurance to noble Lords opposite that we want freedom for local authorities—although they will have to have regard to the priorities and national procurement strategy, as any other body will. Ultimately, they will remain accountable to their electorates for their own procurement decisions.
I was asked about how integrated care boards fit into the Bill. I understand that we are still in discussion with the Department of Health to agree what matters are within the health and care procurement rules. This will be debated later on in the Bill; I hope to come forward with more clarification on that.
Finally, a lot of general matters were raised relating to Clause 2, not only by my noble friend but by the noble Lord, Lord Coaker, opposite. My note-taking was running out a bit but I will obviously pick up as much as I can of the remarks and write further.
I was delighted that the noble Lord, Lord Coaker, was able to pursue some of things that I touched on. What concerns me most, particularly given what my noble friend the Minister said about the earlier amendments in this group, is that I am at a loss to understand why we need this Bill if so much of it is already set out in the GPA or in existing law. Can my noble friend explain the role of the thresholds, particularly in the provision of food to public authorities?
My Lords, we need the Bill because we need a national procurement structure. I hear what my noble friend says but there has been agreement across the Front Benches and from the Liberal Democrats that we need to establish a framework that will last. People may have different views on whether it diverges enough or not at all from the arrangements we have—doubtless that will be explored—but we need to have such a framework and a body.
Clause 2, which is probed, classifies three types of contracts that are public contracts. The first category covers contracts for the supply of goods, services and works, provided that they are not subject to an exemption. I was asked about how each of those exemptions was arrived at. I cannot answer on all of them here but I can certainly provide information to the noble Lord. The second category covers frameworks—that is, contracts providing for the future award of other contracts. The third is concession contracts, which we will discuss.
I turn to the concerns around what Schedule 2 is about. It sets out the types of contracts where the contracting authority does not need to apply the rules for the contract award procedure; they are exempted from the procurement rules. The Bill needs to ensure that contracting authorities have the freedom to carry out the most appropriate procurement where the rules in the Bill might otherwise be unsuitable, for example where it is necessary to protect national security interests and the procurement is too sensitive to advertise; where the contract award procedures are governed by other legislation, as in rail services, which are currently awarded under a separate regime operated by the Department for Transport; or where it is necessary to protect the Government’s ability to make public policy interventions, such as on broadcasting content.
The noble Baroness asked how above-threshold and below-threshold procurement will be different. The GPA threshold will still apply. Above-threshold contracts will benefit from the simpler rules in the Bill compared to the old EU-based rules, and below-threshold contracts involve some light transparency obligations but can also be reserved below threshold for United Kingdom firms. As for who ensures a proper estimation of contract values, these are contracts, and ultimately there are remedies for rule-breaking in a contract, and wilful misestimation would be a breach of contract rules. There is also a proposed procurement review unit to monitor compliance.
As for the thresholds, they are set by the GPA, which is why they are funny figures. I am not quite sure the original currency in which they were denoted, but they are translated into sterling. They will be adjusted by negative secondary legislation when they are changed by the WTO GPA.
Above all, the Bill maintains the current exemptions in domestic procurement law and, we contend, simplifies how the exemptions are framed and ensures the terminology used reflects domestic law and current practice on the ground. The exemptions are compatible with our international obligations—in particular, those in the WTO government procurement agreement. I hope that explanation has reassured noble Lords about the necessity for Clause 2 and Schedule 2, and that they will feel content that they stand part of the Bill.
I am sorry to speak at such length, but a large number of matters were raised and, if I have missed any, I apologise to colleagues in the Committee; we will pick them up in correspondence.
My noble friend should not feel he has to apologise for responding to colleagues in Committee who raised a number of points. That is precisely what we are here for, and we are grateful to him for that; he did so extremely well, and it helped us to realise some of the important links in the Bill, how it is structured and why it is structured as it is. For example, the fact that we have for a long time been signatories to the Agreement on Government Procurement, the GPA, has been reflected in EU legislation; in the absence of EU legislation or carrying it forward as retained EU law, we want our own legislation, but the GPA does not apply in the United Kingdom unless we legislate for it. That is how our domestic legislation works, and we have to have a structure to do that.
Coming back to my Amendment 3, I had not understood that the GPA itself was the basis for the interpretation of whether universities are public authorities for these purposes. Happily, I do not think it will distress universities too much, as it is a continuation of their existing situation. When we look at exempted contracts, we see that research and development and employment contracts are out, which are probably their two main elements of expenditure. I should think they would be perfectly comfortable with that.
On that basis, I will not detain the Committee any longer. I beg leave to withdraw Amendment 3.
Amendment 3 withdrawn.
Amendments 4 to 7 not moved.
Clause 1 agreed.
Clause 2: Public contracts
Amendments 8 and 9 not moved.
Clause 2 agreed.
Schedule 1 agreed.
Committee adjourned at 7.50 pm.