Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026.

My Lords, this order delivers on the Government’s commitment to build a stronger economy in all parts of the country. It gives local authorities in England the tools they need to support local and UK-based businesses and to strengthen local communities through the power of public procurement.

The order enables local government authorities to reserve public procurement competitions for below-threshold contracts to suppliers based within the UK or their local area. Below-threshold contracts are those valued below the financial thresholds set out in Schedule 1 to the Procurement Act 2023 and which are subject to a much more limited set of rules than contracts valued above the thresholds. Those thresholds are set to align with the UK’s international obligations on public procurement.

These may be lower-value contracts, but they matter enormously. Between February and November 2025 alone, they accounted for over £1 billion of spend and represented almost two-thirds of the contracts awarded by subcentral authorities—I think that is Civil Service-speak for local authorities. Currently, local authorities are prevented from considering supply location when carrying out procurements by Section 17(5)(e) of the Local Government Act 1988. That provision was enacted to prevent politically motivated boycotts of foreign countries through procurement—an essential safeguard that this order fully maintains. The order permits this restriction to be set aside only when authorities reserve competitions for below-threshold contracts to either UK-based businesses or to businesses based in a defined local area. Authorities cannot target specific countries, and political boycotts remain unlawful.

Before bringing forward this legislation, we listened carefully to local authorities. The previous Government consulted on a similar proposal in 2023, which received strong support in principle. However, authorities were clear that the proposed approach then—limiting reservations to a single county or a single London borough—was too restrictive. It was unworkable for combined authorities spanning multiple areas, for councils procuring jointly across boundaries and for parish councils.

This Government have taken a different approach. The order provides the greater flexibility that authorities asked for by allowing them to set the local area as their own area or the entire county or borough within which they are located, or to extend it to include any bordering counties or London boroughs. This matches the reality of how local government operates. Economic geographies do not stop at administrative boundaries.

Authorities can also combine this geographic flexibility with existing powers to reserve contracts to small and medium-sized enterprises and voluntary, community and social enterprises. This means that an authority could reserve a contract to local SMEs or to UK-based social enterprises, maximising flexibility to support their communities in the way that makes the most sense.

My Lords, I will intervene briefly. First, I declare a long-gone interest: I was a county councillor many years ago. I always believed, as did my local authority, that, whatever one did in terms of procurement, the overall aim and need was to obtain best value for money in any contracts of any size, so I have slightly mixed views about this order. On the one hand, as the Minister said, it is very important that we support our native suppliers and contractors as far as is possible when it comes to work, particularly below the threshold. I would like the Minister to clarify that low threshold when she responds.

However, it seems that there are one or two questions here. First, this order would give a local authority the ability to determine a defined local area. Is that within the particular boundaries of the local authority? I see that there is provision here for that to include bordering authorities. Bearing in mind the nature of unitary local government nowadays, that would be an enormously large area. Does this mean either that you can choose to have a very small defined area, such as a particular town or village that contains certain traders who may be able to be part of the procurement, or, more generally, that it would be a wide area? Does the advertisement that will be placed, which is required, have to give reasons why a defined area has been chosen?

My only worry there, in looking back at the history of local government, is that a selection procedure that aims at a defined area within a local authority surely could—I am not saying that it would, but it could—be used politically in certain circumstances: for example, in a political operation where a number of procurements were made available in certain parts of a local authority area that happened to have a particular political complexion. There does not appear to be much of a safeguard against that here, so I would like some reassurance from the Minister on this point.

My Lords, I am grateful for this statutory instrument, which I support and which will be hugely helpful for local taxpayers in the generation of local jobs. I note the comments of the noble Lord, Lord Kirkhope of Harrogate; I look forward to the Minister’s response to all the points made by the noble Lord. I would say just two things. First, we are talking here about procurement contracts below the threshold. Secondly, I believe that best value can include the generation of local jobs as a consequence of that procurement process; there has to be an allowance for that.

I want to ask one specific question of the Minister, which I hope can be replied to now. It touches on a point made by the noble Lord, Lord Kirkhope of Harrogate: the definition of local area. I have not understood it; nor have I understood why there is reference in the Explanatory Notes to the consultation that took place in relation to combined authorities. My immediate reaction when I read this statutory instrument was that I did not understand how combined authorities fitted into this structure. It is quite difficult to see how that would work.

In particular, in Article 3(5)(a), the local area is defined very clearly. It is stated that,

“where there is one relevant authority”—

let us say one council—

“which intends to enter into a relevant contract … the area of that authority”

is the whole of the area of that authority. My understanding of this is that a council cannot subdivide its area; it has to be within its whole area. However, it can also be “the area specified” as

“the area of that authority, or … any of the areas of the counties or London boroughs that border that area”.

I have not understood why the counties and London boroughs are pulled out in this order as being a special case when the metropolitan districts are not in the old metropolitan counties—from my perspective, in the north-east of England, West Yorkshire or South Yorkshire. If one council decides to enter a procurement process, is it forbidden to define its local area as a neighbouring authority or part of one?

My Lords, I declare my interest as a councillor in central Bedfordshire.

We are generally coming to a fairly positive view across the parties on this instrument. It makes a notable change to the long-standing restrictions in Section 17 of the Local Government Act 1988, which were originally designed to prevent local authorities taking account of non-commercial considerations, including location of supplier, when awarding contracts. As the Minister clearly outlined, this order proposes to disapply that restriction in a narrow set of circumstances, allowing local authorities, best-value authorities and parish councils to reserve below-threshold contracts either to suppliers based anywhere in the United Kingdom or within a defined local area.

The intention is clear: to give local authorities greater flexibility regarding their local economies, their local supply chains and, where appropriate, the use of local SMEs and VCSEs. Many of us recognise that that is a positive move for local government on small-scale contracts. However, it would be helpful to get further clarity on some issues. The noble Lords, Lord Kirkhope of Harrogate and Lord Shipley, raised the issue of the definition of boundaries. Is it sub-local? Does it include metropolitan boroughs and so on? I would like assurance and clarity on that, as well as on what level of flexibility there is.

The Government have also indicated that the geographic areas will need to be updated as part of the future legislation, particularly in the light of the English Devolution and Community Empowerment Bill. It would be very helpful to hear more from the Minister about how the Government intend to ensure that this SI can fully take into account any future changes and is, so to speak, future-proofed.

My third point was going to be on ensuring that there were no boycotts against different countries, so I thank the Minister for her assurance that these powers cannot be used to target or exclude suppliers from specific countries.

There is concern around the interaction with existing commercial arrangements. There are a number of situation where councils join a consortium in order to collaborate and achieve better purchasing power; the Kent Commercial Services model and the London Trading Standards contract are two good examples of such frameworks. They deliver economies of scale and avoid duplication. Can the Minister confirm that nothing in this SI will inadvertently undermine such frameworks?

On monitoring and evaluation, the Government have said that they will work with the LGA to raise awareness and support implementation; and that they will continue to monitor these powers. That is welcome, but, if the policy objective is to strengthen local economies, it is reasonable to ask: how will success be measured? Will the Government publish data on the uptake of local reservations? Will there be an assessment of the impact on SMEs, VCSEs and local employment? Will the Government consider expanding or revisiting the policy if the evidence suggests that broader or more flexible tools might be beneficial?

I note also that the consultation conducted under the previous Government found broad support for the policy objective but also criticism that the geographic scope was too narrow. The Government chose not to amend the draft instrument in response. It would be helpful to understand why that view was taken and whether the Minister remains open to revisiting the definition of “local area” in future.

Finally, the Minister mentioned the concept of subcentral authorities. We are in the middle of debating the devolution Bill; I do hope that that does not portend the Government’s new views of local government. Local government is local; it is not subcentral authorities. Can the Minister assure me that she also views it as local authorities?

Although the intention behind the SI is understandable and supported by all parties, the Committee is entitled to seek clarity on its practical implications, on its interaction with wider procurement reform and on the safeguards that accompany it.

My Lords, I am grateful to all noble Lords who have spoken in this debate seeking—quite rightly—some clarification.

I will refer first to the below-threshold limits, because I think that that would put this in a context that might be helpful. The below threshold for local authorities is £207,720 for goods and services and £5.193 million for works; that is the threshold that applies here. I should add that central government has had similar powers to these since December 2020, so we are doing something for local government that central government has had for some time.

The noble Lord, Lord Kirkhope, spoke about best value in procurement. I agree entirely with what the noble Lord, Lord Shipley, said: it is my belief that best value should definitely include the social value of local procurement, which is why the Government were keen to take this step as soon as we could. It brings jobs locally and helps local businesses. That can be very much added into the best value equation for local people.

On the definition of local authorities, there is a flexible definition of what a local authority is. To refer to the questions that have been asked, it is for the local authority to determine what that local area will be. The order has been drafted to take account of changes that will be made by the English Devolution and Community Empowerment Bill regarding local government reorganisation and authorities’ geographic areas of responsibility. Strategic authorities are already covered by the order, and combined authorities and county combined authorities are already listed as best value authorities under Section 1 of the Local Government Act 1999. This order applies to all best value authorities.

Importantly, for strategic authorities, a designation applies to particular combined authorities and combined county authorities; the underlying corporate entities remain the county authority or the county combined authority. When they receive a strategic authority designation, they continue to be best value authorities and, therefore, to be covered by this order—so no amendment to the order will be needed. It is intended that this measure is future-proofed, which will include new local authorities formed as part of the reorganisation process.

I would like to be clear about this, because I have not understood what the Minister said. The order does not say that a metropolitan district council, as a single authority, can join another authority to theirs. In other words, if a metropolitan district council, such as Calderdale, as a single authority wishes to procure a contract, can it invite bids from a neighbouring council which is not a London borough or a county? That is what the Minister just said that they can do, and I think it is not specified in the order. I think we need to be very clear about this, because it is not just about strategic authorities; in my case, the strategic authority is 120 miles long, and that is not a local area.

Councils can procure either singly in an area that they have determined or jointly with an area that is next to them. I am not sure that I can be any clearer in setting the proposal and I am not sure where the confusion is arising.