Procurement Bill [HL]

Committee (6th Day)

If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Clause 30: Excluding suppliers for improper behaviour

Amendment 177

177: Clause 30, page 19, line 24, at end insert— “(aa) failing, in the case of a supplier with two or more enterprises that are resident for tax purposes in two different jurisdictions with a group turnover of more than €750m, to provide a copy of a tax report which meets the requirements of the Global Reporting Initiative Tax Standard;(ab) failing, in the case of a supplier that is currently under investigation for tax offences in the United Kingdom or abroad, or where the company has reached a settlement with a tax authority following an investigation for a tax offence, to disclose details of the investigation;(ac) failing, in the case of a supplier which has a group turnover of less than €750m, to disclose that the supplier—(i) is based in a tax haven, or(ii) is a subsidiary of a person based in a tax haven, or(iii) has a subsidiary based in a tax haven.”Member’s explanatory statement This amendment seeks to ensure that a supplier must be treated as an excluded supplier if it does not: report its economic activities in each country where they operate and the taxes paid in each country; report details of any tax investigations; and report where it is based in a tax haven or is a subsidiary of a person based in a tax haven.

My Lords, I shall speak also to Amendment 180. It seems a long time since we were in Grand Committee debating the Bill: quite a lot of things have happened since. I am sure the Committee would wish me to welcome the noble Baroness, Lady Neville-Rolfe, to her position. I wish her a degree of permanence—at least until the next election. Of course, she still has some amendments in her name to come. I know we may have debated them, but it is her opportunity to re-educate her department and come back with rather more robust responses than she received from the noble Lord, Lord True, although I express my thanks to the noble Lord for his stewardship of the Bill and his willingness to engage in debate with your Lordships on this important legislation.

I move on to my amendment. A few months ago, the Centre for International Corporate Tax Responsibility and Research and TaxWatch published a report on Amazon’s most profitable segment, its cloud computing business, which they argue is increasingly indirectly supported by taxpayers through hundreds of billions of dollars and pounds in government contracts around the world. In the UK, it said that Amazon’s cloud computing business won almost £600 million in government contracts between 2018 and 2021. It also highlighted that in 2020 Amazon signed a master agreement which allows it to treat all UK central government agencies as one client, which will further increase the volume of its UK contracts.

Despite Amazon collecting public money through large and rapidly growing government IT contracts, the tax payments of this company remain opaque. Indeed, a 2021 research report into Amazon’s tax practice shows that only a fraction of the company’s UK sales are accounted for in its UK accounts. Sales in the UK and elsewhere appear to be channelled through subsidiaries in Luxembourg and, although Amazon says that UK revenues recognised in Luxembourg are reported to HMRC, there is no public accountability as Luxembourg accounts do not disclose how much tax, if any, the company is paying in the UK. Amazon’s practices are replicated by many multinational companies, and the aim of my amendment is to press the Government to use the Bill to start to take some action. The Bill offers a chance to ensure an increase in transparency around the tax affairs of potential suppliers of government contracts. It also offers the opportunity to ensure the exclusion of companies that have engaged or are engaging in egregious tax abuse.

My Lords, I rise as a cipher for my noble friend Lord Wallace, who has tabled a number of amendments in this group. He is unable to attend this and the next day in Committee, so I will be deputising for him.

I too welcome the noble Baroness, Lady Neville-Rolfe, to her new role, and congratulate her on getting to complete this Bill, which must be regarded as the plum legislative job available—so I say “well done” to her. During a debate on the economy a couple of weeks ago, she said from the Dispatch Box that she was very keen on “simplification” and cited simplifying procurement as being in her sights—now, here she is. However, before her well-deserved promotion, on the third day in Committee on 11 July, “Back-Bench Lucy” was more strident. She said:

“The more I listen, the more I feel that this Bill in many respects strikes the wrong note. It is overregulatory and calls for a rethink, which I hope the Government will be thinking about.”—[Official Report, 11/7/22; col. GC 359.]

On those grounds, I suggest that she should exercise her new power, withdraw this poorly drafted Bill and come back with one more in keeping with simplification and with her aversion to overregulation.

In the absence of any enthusiasm from the Minister for doing that, I speak to Amendments 306, 307, 308, 320 and 328, tabled by my noble friend Lord Wallace, some of which I have signed; I do not support all of the others. I thank the noble Baroness, Lady Hayman of Ullock, and the noble Lord, Lord Hain, for their support for Amendment 320.

An effective debarment and exclusion regime protects the public purse from rogue actors and drives up corporate government standards. Exclusion and debarment from procurement are potent anti-fraud and anti-corruption tools. The issue of companies with long records of corruption winning public contracts in this country is appalling. Nearly a quarter of local councils experienced fraud or corruption in 2017-18. Fraud costs the public purse up to 5% of government spending overall. I thank Spotlight on Corruption for these numbers.

Amendment 307 includes the failure of commercial organisations to prevent bribery as an offence that is grounds for mandatory exclusion. Section 7 of the Bribery Act contains a failure-to-prevent offence for corporates; it is the primary corporate offence under the Act. While the failure to prevent tax evasion has been included in Clause 30 of the Procurement Bill, a failure-to-prevent-bribery offence has not. This is inconsistent and anomalous, and will result in few companies that engage in bribery facing exclusion from public procurement. Although companies can also be prosecuted under Sections 1, 2 and 6 of the Bribery Act, this is subject to the application of the identification doctrine, an antiquated doctrine that is widely regarded by prosecutors at the CPS and the SFO as unfair, as it makes it hard to prosecute large global companies. The effect of this is that, unless Section 7 of the Bribery Act is included in this Bill, SMEs are more likely to face exclusion from public procurement for bribery offences than large companies. The inclusion of Section 7 in the Bill would also encourage large companies facing investigations for bribery to self-report their wrongdoing to authorities and co-operate with them in order to avoid being excluded. This would help law enforcement bodies to develop more effective enforcement of the Bribery Act.

Amendment 308 is intended to ensure that the full range of criminal offences for money laundering are properly captured for the purpose of exclusion from public procurement. There have been very few, if any, corporate convictions under Sections 327 to 329 of the Proceeds of Crime Act. The recent conviction of NatWest bank for money laundering under the money laundering regulations 2017 shows that criminal offences under these regulations are an important means of holding companies to account for money laundering and failures to prevent it. It is anomalous, therefore, to include money laundering offences under the Proceeds of Crime Act, but not criminal offences under the money laundering regulations.

I move on to Amendments 320 and 328 in the name of my noble friend. Both focus on expanding the discretionary exclusion grounds in Schedule 7 of the Bill to include financial and economic misconduct. It is unthinkable that companies involved in fraud, corruption and other forms of serious misconduct, either in the UK or abroad, should be considered as reliable business partners to bid on, and win, lucrative taxpayer-backed procurement contracts. These amendments are tabled with the intention of filling those gaps in the discretionary debarment provisions of the Bill, so that contracting authorities, including local authorities, have greater powers to exclude unsuitable companies. We must close the door on companies involved in misconduct both here and abroad from continuing to benefit from public contracts.

Amendment 320 is intended to allow relevant Ministers and contracting authorities the power to exclude suppliers from procurement where they have evidence of financial and economic criminal activity, such as fraud, money laundering, bribery or sanctions evasion, but there has not been a conviction by a court. Currently, under the exclusion and debarment provisions in the Bill, contracting authorities are able to consider excluding only those against whom there has been a conviction, or where there has been grave professional misconduct. There is a lack of clarity in the law as to whether grave professional misconduct fully covers the situation where a contracting authority has evidence, or knowledge of, any of the aforementioned financial and economic offences but where there has been no conviction.

The ability of the contracting authorities to act on evidence is critical to protecting the integrity of public procurement. Under the US debarment regime, debarment officials can act on evidence, rather than wait for a conviction. Furthermore, a 2020 government review of fraud and corruption in local government procurement specifically highlighted that the Government should,

“see if more could be done to allow procurers to exclude bidders from the process (with reasonable cause and without the requirement to disclose), for example when there are known concerns with law enforcement that have not yet resulted in a prosecution.”

Ensuring that contracting authorities can exclude companies where there is good evidence of financial and economic crime, particularly where investigations are under way but might take many years to result in enforcement action—as long as it is accompanied by due process and appeal rights for the companies concerned, which the Bill contains—will incentivise good corporate governance by suppliers and connected persons.

Amendment 328 is intended to ensure that serious wrongdoing that forms the basis for a deferred prosecution agreement, and progress made by a supplier in ensuring that such wrongdoing will not occur again, can be properly considered and assessed by contracting authorities when evaluating a supplier’s reliability as a contractor.

These are technical amendments designed to probe how the Government will properly enforce the policing of corrupt and unethical suppliers. We know that it takes years, sometimes decades, for prosecutions to come forward. During that time, a great deal of money can be made—and, indeed, wasted—on suppliers of this kind. I look forward to the Minister’s comments.

Rather awkwardly, I would like to comment on the probing amendments tabled by the noble Baroness, Lady Noakes; I was trying to encourage her to stand up before I did. If she will excuse me, I will say something briefly; I am sure that I will not steal her thunder. I thank her for tabling Amendment 323 as a probing amendment. She is right to question why the Government would be content for public contracts to be awarded in the event of potential competition infringements. A specific example was brought to my attention by my noble friend Lady Brinton. This August, the Health Service Journal reported that a court had found that three clinical commissioning groups in the south-west of England had infringed procurement rules on the reappointment of a contractor preferred by some senior managers. The judge said that they were guilty of “defending the indefensible”, and another company that had bid and failed took them to court to challenge it. This whole idea of when a bid is appropriate or otherwise is an important element; there are other examples. I hope that this acts as an illustration of the problem and that the noble Baroness, Lady Noakes, will set out—no doubt in a better way than I did—how she wants the Government to respond on such issues.

From the point of view of those of us on these Benches, the Bill needs strengthening to prevent competition infringement. Can the Minister please explain why the looser word “considers” has been used in the legislation and what protection it would offer any suspect behaviour in a procurement process?