Government Procurement Strategy

12.39 pm

(Urgent Question): To ask the Paymaster General and Minister for the Cabinet Office if he will make a statement on the Government procurement strategy.

Every year this country spends around £400 billion of taxpayers’ money on procurement—and, if we are honest, under the current complex system, we do not always spend it as wisely as we could. That is why just before the Easter recess I announced a major package of reforms to the procurement system, on which I am grateful to have the chance to update the House today. Behind these reforms are three principles: first, that procurement should do much more to protect national security and support British businesses; secondly, that it should deliver a fairer economy; and, thirdly, that it should be simpler, fairer, and open doors to small businesses and charities. Let me address those principles in turn.

This Government believe it matters where things are made and who makes them, so we will issue new guidance for all Government Departments to make use of the national security exemptions in the Procurement Act 2023 to direct procurement to serve the national interest. We will start with four sectors critical to our national security: steel, shipbuilding, energy independence and AI. That will give a clear sign that this Labour Government will back British business, and will use both the weight of our procurement budget and the powers in the Procurement Act to do so. We will also take two further steps to back British businesses. First, Government Departments will now be required to confirm whether prime contractors are using UK steel, and if they are not doing so, they will have to explain why. We will also develop a new shipbuilding framework to restrict Government contracts to British firms where this supports our national security interests.

The second principle of these reforms is that procurement should build a fairer economy, and the truth is that for decades, under successive Governments, we have had a policy that essentially adds up to outsourcing by default. Under this Labour Government, the age of outsourcing will end. We will, in line with our manifesto, introduce a public interest test, which will apply to all Government Departments. They will now be required to assess whether a service can be delivered more effectively in-house, and if it cannot, a clear explanation must be published. Departments will also for the first time be required to publish robust insourcing strategies, setting out how, over the medium term, they will build the capacity to make the biggest wave of insourcing in a generation a reality. This marks a step change in how and who our public services are run by and for, and I am proud that this Labour Government are delivering it.

We will also strengthen the role of social value in procurement. Too often, this has become a mere tick-box exercise and a barrier, not an opportunity, for SMEs and start-ups. Working with trade unions, businesses and others, we will create a new definition of social value that will underpin all Government procurement.

The third principle of these reforms is to make the procurement system simpler and fairer. I have heard too many times how the complexity, duplication and endless form-filling of the current system is among the biggest barriers to SMEs and charities, so we will undertake a rapid review of all existing requirements in the procurement system, and we will see which burdens and duplications can be removed. If they are not essential, we will scrap them. We will enforce a “tell us once” principle—

Order.

No, you do not look at the clock. You look at me, and you sit down. Ministers have three minutes for responses to urgent questions. I do not know who may have told you differently; there is something wrong in the advice being given. It is three minutes. I presume you are now going to conclude immediately.

Yes. My apologies, Mr Speaker. I was told it was five minutes, but I completely apologise.

Order. When I stand up, please sit down—do not remain standing at the Dispatch Box. I am sorry that you were told five minutes, but I think that Ministers should know by now how long they get for a statement or a UQ. It is becoming an impossible situation, where Ministers try to change the rules of the House. These are not my rules; they are the rules of the Back Benches. Please adhere to them.

I can only apologise, Mr Speaker.

In conclusion, these reforms will back British businesses and workers, build a fair economy, and simplify and open up our Government procurement system. There is still much to do, but this is a big step forward and I am grateful to have had the chance to set it out to the House today.

Through a change in procurement policy that is more focused on backing British businesses, investing in Britain to help secure thousands of good, unionised jobs, and remaining community-focused, the Government will make sure that local people are reaping the full rewards from this move. I welcome it, and I welcome the Minister’s response to my urgent question. Could he please outline the first steps to deliver this procurement reform, and what it will mean for manufacturers in my constituency and in constituencies around the UK?

My hon. Friend has raised the importance of changing the procurement rules with me a number of times—she is a tremendous champion on this. On next steps, the Cabinet Office is working on new guidance that we will put before the House very shortly—I hope before the summer recess—which will make flesh the commitments I have made today. As I say, it has three big principles behind it: backing British businesses, creating a fairer economy and making the system simpler and fairer for all.

I call the shadow Minister.

I congratulate the hon. Member for Stafford (Leigh Ingham) on securing this urgent question—I know how rare it is for a Government Parliamentary Private Secretary. [Interruption.] She is not any more—I apologise. I welcome the Government’s ambition to modernise public procurement, but ambition, as ever, must be matched by delivery. There are a number of questions that the Minister must answer today.

The Government promised transparency through a new online register of commercial agreements. When precisely will that register be live, and will it be comprehensive from day one? Ministers often speak of backing small business. Will the Minister publish in a single, accessible place every Department’s SME target, its latest outturn and whether it is on or off track? On prompt payment, how many suppliers have actually been excluded from major contracts for failing to meet the required standards? If this strategy is truly about value for money, why have the Government still not resolved the fragmentation, poor-quality frameworks and poor use of data and technology that were identified by the National Audit Office?

On national security, contracting authorities are now required to assess risks not just from prime contractors, but from associated persons and subcontractors. How many procurements have been referred for national security consideration, and how many suppliers have been excluded or challenged as a result? What assurances can the Minister give that public contracts are not still flowing into supply chains with links to hostile states? What assessment has the Minister made of the EU’s emerging “Buy European” policies? Is that not a protectionist barrier by the European Union?

Finally, if social value is now mandatory at 10%, what assessment has been made of the risk that it adds cost and complexity, particularly for SMEs? I know that the House will want clear answers.

I thank the hon. Member for those questions—let me try to answer a few of them.

First, on SMEs and Department spend, as I say, part of the aim of this package is to support SMEs and ensure that they have a greater chance of winning contracts. We did publish the departmental spends the day before recess. I know that there was a lot going on, but we have published them; they are there. They show an ambitious step forward. I believe that around £7 billion of Government contracts will go to SMEs as a result of those changes. I am proud of what we are doing; it is the first time that the Government have done it. We have helped drive that through and have worked hard on that.

The hon. Member asked about “Buy European”. That is not in conflict with any of our international agreements or, obviously, with our negotiations with the EU that my right hon. Friend the Minister for the Cabinet Office is leading on, and we work closely on that. At the heart of this package is a recognition that we need to use our procurement budget within international law and international regulations to do more to support our industries. That is the right thing to do, and I hope that we can get cross-party support.

The hon. Member asked about social value. Again, I think he was implying that we are making this mandatory. It is already mandatory and it is already weighted at 10% within the contracting system. I am not changing that; what I am saying is that I am changing the definition of social value so that it does more to support communities and to ensure that it really works, so there is no change on that.

The hon. Member asked me a couple of specific questions about national security. I will get back to him if that is okay, but in general terms, I hope that we can get cross-party support on this. The Procurement Act 2023 was passed with cross-party support and was a step forward, but this is the next big step in trying to ensure that we do much more with that budget to support Britain.

I call the Chair of the Science, Innovation and Technology Committee.

I applaud the Government’s move to use the £400 billion of public procurement—almost one eighth of British GDP—in the interests of the British people and the British economy. The Science, Innovation and Technology Committee has often heard that a Government contract is worth more than a Government grant to the start-ups and spin-outs that are so important to our economy. Will the Minister confirm that this approach will be joined up with our strategy for sovereign capability, so that we do not find ourselves once again in the position where the Ministry of Defence awards a contract without competition to a large US artificial intelligence company, as happened with Palantir, when there are UK companies that are desperate for that kind of investment?

My hon. Friend brings a huge level of expertise and background experience to the issue. I reassure her that part of the package that I announced before Easter is aimed at helping our sovereign AI industry and our science and technology industries, and boosting start-ups. In the time that I have been doing this job, a lot of the stories that I have heard are about how the procurement rules work fine for companies that have a large procurement department to try to win the contracts, but they are not so good for start-ups or voluntary businesses that are trying to win their way into Government contracts. We should be doing much more to help those companies and, yes, we are joining this up across Government, including through the industrial strategy and the steel strategy that I spoke about earlier.

I call the Liberal Democrat spokesperson.