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 or covered procurement is a reference to a contracting authority carrying out a procurement or covered 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.”Member’s explanatory statement
This new Clause would distinguish between “procurements” and “covered procurements”, the latter relating specifically to public contracts, so that provision in the Bill can be more clearly applied to one or the other, and consolidate certain definitions previously found elsewhere.
My Lords, as we begin Report, I start by thanking noble Lords for their contributions in Committee, and for the lively debate there. For those in the House coming to it fresh today, I say that this is an important Bill which follows two years of hard work and preparation, which I have the honour of taking over from my noble friend Lord True, who now leads this House.
Each year, £300 billion is spent on public procurement and we seek to make it quicker, simpler, more transparent and better able to meet the UK’s needs than the current patchwork of former EU rules, while remaining compliant with our international obligations. There will be a central Cabinet Office online platform to bring in new players, to improve value for money and to accelerate spending with SMEs. There will also be a comprehensive training programme for those involved in all the new rules and conventions—for example, on managing conflicts of interest. It is, however, a very technical Bill, and I am sorry that we had to withdraw a number of government amendments tabled in Committee to allow further discussion. This was largely successful, so we will come first to a number of amendments in my name, most of which were withdrawn on day one in Committee. As we go through, there will be further technical amendments and other amendments to respond to points made in Committee, notably to stimulate economic growth and to reduce burdens on SMEs. I thank noble Lords for their patience with the sheer number of amendments.
Amendment 1 and the amendments consequential on it introduce new technical definitions of “procurement” and “covered procurement”. I know these concepts caused some concern in Committee, so I will try to clarify matters. “Covered procurement” means those procurements that are covered by the vast majority of the provisions in the Bill. They are mostly procurements by contracting authorities, above the relevant thresholds for goods, services and works, which are not exempted from the Bill. These are the procurements which most of us will have had in mind during our deliberations in Committee.
My Lords, I shall speak to my Amendments 3 and 173. I thank the Minister and the noble Lord, Lord True, for responding to my questions, in private meetings but also at previous stages of the Bill, about why the NHS is treated differently from every other part of the public procurement sector covered by the Bill. The problem is that I have not yet heard a clear answer to that; nor, indeed, did those noble Lords who took part in the Health and Care Act during its time here get a clear answer from the Health Minister as to why this was proposed. More recently, in Committee, the Minister said that it was because only clinical services would be covered by these special arrangements for the NHS. I will come in a minute to the reasons for my concerns that that is not the case, but I start by saying very simply that Amendment 3 puts the NHS in the Bill, in the definition of a public body that has to observe the details of regulation under the Bill.
Moving on to the practical problems, the key issue is what is said in the National Health Service Act 2006 and the Health and Care Act 2022, which attempts to amend it. The specific amendment has not been enacted yet, but we can all assume, with the permission of the House, that it is this Bill that is holding that up. The Health and Care Act adds new Section 12ZB to the National Health Service Act, which says:
“Regulations may make provision in relation to the processes to be followed and objectives to be pursued … in the procurement of (a) health care services … and (b) other goods or services”.
The problem is that the new section goes on to say:
“Regulations under subsection (1) must, in relation to the procurement of all health care services … make provision for the purposes of ensuring transparency; ensuring fairness; ensuring that compliance can be verified; managing conflicts of interest”.
My Lords, I rise to support Amendments 3 and 17 tabled by the noble Baroness, Lady Brinton. In so doing, I echo what she said about how this Bill is better than the place we started from. Having spoken at Second Reading and in Committee and attended the meeting that the noble Baroness, Lady Neville-Rolfe, kindly organised so that we could learn more about the intricacies and granular detail of the Bill, I commend the Government for what they are trying to do. Although, I will give some painful examples to the House in support of what the noble Baroness, Lady Brinton, just said, I totally exempt the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord True, with whom I had a number of meetings in the run-up to the presentation of this Bill in the House. They have both been exemplary as Ministers.
The noble Baroness and I have been in correspondence over the weekend about some of the points I am about to raise. The reforms outlined by the Government are based on what I think are laudable principles of public procurement set out in the Green Paper. They are value for money, public good, transparency, integrity, equal treatment and non-discrimination. I urge noble Lords to keep them in mind as I proceed through my remarks.
Ministers have told us that streamlined new procedures will mean better commercial outcomes that deliver more value for money for taxpayers. This amendment would ensure that those public interest principles also extend to the National Health Service, as I believe they should. The NHS should not be regarded as a side issue or of little consequence, as it were. It should be within the same remit. In the year before Covid—2018-19—the DHSC spent around £70 billion on procurement in England, up from £68.3 billion in the previous year. Spending on health is far and away the most significant area of government procurement spending. It is more than three times defence spending. Around £18 billion is spent on medicine and, coming to a point that the noble Baroness made in her remarks a few moments ago, nearly £6 billion per year is spent on hospital consumables, which include gloves and syringes.
The millions and the thousands can multiply very rapidly in this debate. I apologise, but I think you get the point. It is over £20 million in the course of a year—£770,000 each and every single day.
I gave the noble Baroness notice of my intention to ask about this. Who authorised those acquisitions? Who decided that they should stay there? How much has it cost to date to store these items? How much has been budgeted to keep them in store at that cost of £770,000 every day, and for how long will they be stored? How much of the PPE that has been bought has proved to be defective and unusable? I would also like to know, first, how the Government intend to report the money returned to public funds by defaulting PPE suppliers through the actions of the faulty contract PPE recovery unit. Secondly, individual settlements are protected by commercial secrecy, so how will Parliament and the public be notified about money returned to public funds by defaulting PPE suppliers through the actions of the faulty contract PPE recovery unit? Thirdly, how do the Government intend to provide transparency and accountability in relation to money returned to public funds by defaulting PPE suppliers through the actions of the faulty contract PPE recovery unit?
It is clear that the NHS should be subject to far greater scrutiny, transparency and accountability. For all those reasons, I support Amendments 3 and 173 spoken to by the noble Baroness, Lady Brinton, which include the NHS in the definitions of a public authority for the purposes of the Bill.
My Lords, it is a great pleasure to follow the noble Lord, Lord Alton. When he speaks about the frailty of the NHS supply chain—I must declare my past presidency of the Health Care Supply Association—I am sure he is absolutely right to put these penetrating questions to the Minister.
I have two amendments in this group, Amendments 171 and 172, but I also want to speak to Amendments 3 and 173 in the name of the noble Baroness, Lady Brinton. She has rightly pointed to the potential confusion between two pieces of legislation in relation to the National Health Service and the procurement regime that it is to adopt in the future. The difficulty is compounded because, of course, we have not seen the draft regulations in relation to Clause 111, nor have we seen the draft regulations in relation to the amendment made in the Health and Care Act 2022 to the National Health Service Act 2006, after Section 12ZA. The 2022 Act gave huge powers to Ministers to establish their own procurement regime through regulations.
Clearly, there is every potential for confusion as to how these two sets of legislation are to work together, particularly if only NHS clinical services are to be covered by the disapplication in the Bill. That leaves a lot of questions for those working in the health and social care sectors as to how they are to operate the new processes. Given the nature of NHS commissioning and services, there are big questions about what happens if a contract incorporates clinical and non-clinical services. Under which set of regulations is procurement to be undertaken? Large hospital contracts—PFI contracts—often contain a mixture of clinical and non-clinical services, and the terms of the contract can sometimes last for 20 or more years.
Indeed, the more fundamental question is how we define “clinical services”. Some hospitals contract with private sector operators to provide, say, laboratory services the staff of which are employed by the private sector contractor. I would have called those clinical services; they are clearly directly related to clinical outcomes for patients. I am not at all sure how that is going to be covered by the two separate pieces of legislation. Of course, the NHS Confederation, which represents the bodies that operate the health service at the moment, including integrated care systems and NHS trusts, is obviously concerned about the confusion and potential distinction between the two sets of legislation.
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We are in a situation where the 2022 Act was bringing in, as I understand it, a new set of collaborative arrangements, following the legislation from the noble Lord, Lord Lansley, in 2012, which focused more, I believe, on a marketised approach to health. At the local level, integrated care systems are meant to draw together not just the NHS but local authorities to develop common services and to integrate services as much as possible. Again, it is perfectly possible that a service could be clinical, social care or a combination of both, and in many cases it would be desirable to speed up the flow of patients through hospital to give them better provision and support in the community. In my view, that would be a clinical service but some of those services would be applied to social care, and under this provision I assume that social care services are outwith the curtail of this legislation. What is an integrated care system to do if it is attempting to agree a contract which applies to both services? Listening to Health Ministers is exactly what integrated care systems are meant to do.
I do not know when Third Reading is but there needs to be an awful lot of information provided and work done between now and them so that we can fully understand the implications of what is contained in Clause 111. There has been no impact assessment, as I understand it, in relation to the interrelationship between these two pieces of legislation. At the very least, those people working in the health and social care sector need to have some assurance that before this Bill becomes an Act much more information and awareness are made known. In the meantime, the noble Baroness, Lady Brinton, is right to pursue what she is seeking to do in her amendment.
My Lords, I have Amendments 4 and 190 in this group. Some questions have been raised by the Benches opposite about whether I was here for the commencement of the debate. I assure the House that I heard every word of the Minister’s opening remarks from my place and I am not usually regarded as invisible in your Lordships’ House.
Before I get to my amendments, let me say that I have much sympathy with the amendments tabled by the noble Baroness, Lady Brinton. I think we have to stop the culture of exceptionalism for the NHS and bring it within the ordinary rules; other noble Lords have said why that is. We should allow an exception only if there is a very good case for it so I will be listening very carefully to what my noble friend the Minister has to say about that when she concludes this debate.
My amendments each cover a distinct issue. I will start with Amendment 190 because that is the easier of them. Noble Lords may have noticed that my noble friend the Minister has added her name to Amendment 190 and I am grateful for the Government’s support in dealing with a technical issue that I raised in Committee following the eagle-eyed scrutiny of the Bill by Professor Sanchez-Graells of the Centre for Global Law and Innovation at the University of Bristol.
The Bill had defined how to value contracts including VAT when the contracting authority paid for the goods or services that it was procuring but failed to deal with the converse situation when it received money, which can arise under a concession contract. Amendment 190 puts this right and so sums receivable under contracts will be valued including the related value added tax. I look forward to moving this amendment formally in due course.
Amendment 4 is an amendment to government Amendment 2. Amendment 2 has virtually rewritten most of Clause 1 but my amendment would have also been proposed in relation to the text of the Bill as introduced. It is about control and how to define it, which I raised in a couple of amendments in Committee.
My Lords, I have no amendment in this group, but I want to refer to government Amendment 34. I entirely agree with the proposition that the Bill enables public procurement to be put on a better path than it has been in the past. Many of those working in procurement across the public services have welcomed the Bill. As it happens, they also welcome the scrutiny we are giving it, because it is leading to improvements to the Bill. I did not attempt to count the number of government amendments we dealt with in Committee, but they were in the hundreds. In addition to those, I calculate that we have 153 government amendments on Report, so if it takes us a while, it is not our fault. None the less, it is a good job and it is right that we should do it. That is why I raise the following question on government Amendment 34.
My noble friend will recall that these amendments were not moved in Committee because there was some difficulty about what “covered procurement” was relative to “procurement”. At the time, I supported the Government’s amendments, because it seemed right to ensure that the broader scope of the Bill and the regulatory requirements encompassed within it should be applied to larger procurements and not smaller ones. I now support the insertion of “covered” before “procurement” in all the government amendments—except Amendment 34. Why do I single it out? Including “covered” means that procurements which are above the threshold and not exempt are subject to the Bill and the full range of its requirements—see Schedule 1 for the thresholds and Schedule 2 for the exemptions. Clause 2 makes it clear that public contracts are those that are above the threshold and not exempt. Okay, fine: “covered procurement” makes a distinction between those that are exempt and of lesser value and those that are of a higher value and included.
Clause 11 relates to procurement objectives. Procurement objectives are statements, not least by Parliament as well as by the Government, about what those who are engaged in procurement should regard as their responsibility. The essence of Clause 11 is that:
My Lords, I rise briefly having attached my name to Amendment 173 in the names of the noble Baroness, Lady Brinton, and the noble Lord, Lord Scriven. I attempted to attach my name to Amendment 3, but somehow that transferred to government Amendment 2, which I am guessing everyone has already worked out was a mistake—part of the general confusion we have with this Bill. Perhaps it is just, as the noble Lord, Lord Lansley, outlined, that the flood of government amendments has overwhelmed the administration of Report.
The noble Baroness, Lady Brinton, and the noble Lord, Lord Hunt, have already set out the issues very clearly. The noble Lord, Lord Alton, gave us a masterclass, having made himself an absolute expert on the issues of procurement, particularly around Covid. I want to add one extra balancing thought to that. The issues of privatisation and contracts do not apply only to the procurement of materials; they apply to the procurement of services, including the clinical services to which the noble Lord, Lord Hunt, referred. It is important that this does not get lost.
I will refer to a study published in the Lancet public health journal by academics from the University of Oxford in June. It showed that outsourcing since 2012 had been associated with a drop in care quality and higher rates of treatable mortality. This is peer-reviewed research published in a very respected journal that shows that privatisation has had and is having a disastrous effect. To quote the authors of that study:
“Our findings suggest that further privatisation of the NHS might lead to worse population health outcomes.”
I think it would be unrealistic to expect the public to engage with the details of the kind of debate we are having this afternoon, but it is important, and I have no doubt at all that the public is gravely concerned to see that we have maximum transparency. Indeed, I think there is strong public support for reversing the privatisation of the NHS—but, wherever we are letting contracts for the NHS, we must have maximum transparency and clarity about the manner in which that is done.
My Lords, I have a very specific point to raise by way of reassurance. It is clear from the debate so far that these are complex areas that are particularly complicated because of the interaction between this Bill and the previous Health and Social Care Act; I wish my noble friend the Minister well in disentangling that and making it all clear to your Lordships.
My concern is around the provisions as they affect public service mutuals. This programme has always had cross-party support. It began under the Labour Government in the Tony Blair years, specifically in the NHS. It was then taken up enthusiastically by the coalition Government. I led the programme with the support of Liberal Democrat colleagues, in particular the noble Lord, Lord Wallace of Saltaire. This was a programme where, in particular services right across the public sector, groups of public sector workers were able to spin themselves out of the public sector and form themselves into employee-owned and employee-led entities. They then provided that service, whatever it was, to what was in effect the contracting authority under a negotiated contract.
Technically, this is procurement and, in good practice, should be subjected to a competitive tender. Indeed, we had some difficulty with the then EU public procurement regime that made it legally impossible to do this. I was able to negotiate with Commissioner Barnier a change to the EU procurement directives, which enabled a mutual to spin itself out without a competitive process for a relatively limited period before being subjected to a retendering process.
This was a very benign programme. Mutuals that spun themselves out demonstrated almost overnight a dramatic improvement in productivity—something close to 4% annually. More than 100 of them spun out. The largest number came from the health and social care sector. They did not have to do this but nearly all of them—certainly all the ones from the health and social care sector—chose to be a not-for-profit, social enterprise.
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However, the Bill also covers some aspects of procurements which go beyond this, which is why we have a wider definition of “procurement”, meaning any procurement. That allows the Bill to make some limited provision in relation to matters such as below-threshold procurements—for example, in Part 6—and notably to comply with international rules or certain treaties. I understand that the term “covered procurement” may seem unusual, but it is one included in our international procurement agreements, including the GPA—the WTO agreement on government procurement—and familiar to the procurement community.
Amendment 1, and a number of other government amendments, streamline fundamental concepts that are relied on throughout the Bill and will improve the readability and consistency of the legislation. Amendments 2, 5 and 6 recast the definition of “contracting authorities” to ensure that the right bodies are covered. We are committed to a definition that is broadly consistent in effect with both the existing regulatory scheme and with our international commitments under free trade agreements. Feedback from our ongoing dialogue with stakeholders has indicated that the effect of certain wording differences could lead to some bodies being incorrectly brought within, or excluded from, the scope of the rules. I am grateful for these views, particularly those from the Local Government Association, as they will help to ensure correct application. I am also grateful for its constructive approach to the Bill, which represents a big change for its members, and we appreciated its input.
The amended definition removes the reference to
“functions of a public nature”,
as this does not align with the existing definition. It makes clear that the notion of contracting authority oversight can include oversight by more than one authority. Lastly, it ensures that certain bodies that are publicly owned but operate commercially can operate outside the procurement regime.
Amendment 187 ensures that educational establishments are fully and appropriately excluded from the rules on below-threshold contracts, as well as those relating to implied payment terms in public contracts, payment compliance notices and reporting on payments made under public contracts. This mirrors the approach taken in the current procurement rules and ensures that burdens on low-value contracts in the education area are applied in a proportionate fashion. Amendments 98 to 102, 117, 119, 191, 193, 197, 201 and 202 are consequential.
Amendments 24, 25, 26, 27 and 28 provide direction to contracting authorities when a mixed contract involves two or more different elements which could each classify it as a “special regime” contract. We expect that such situations will be rare, but could arise occasionally. Our amendments clarify which regime will apply to their mixed contracts in such circumstances by discouraging unrelated requirements being combined in one procurement. I hope that sentence is clear. More importantly, we must also ensure that the rules concerning mixed contracts are compliant with our international trade agreement obligations.
This group also includes other minor changes, including Amendment 7, which ensures that thresholds are applied properly to frameworks, and Amendment 8, which ensures that frameworks for the future award of exempted contracts only are also exempt. Frameworks involving a mixture of elements covered by both the Bill and the forthcoming healthcare procurement regulations will be subject to the same basic tests as set out in Clauses 4 and 9 on mixed contracts, which determine which rules will apply. This is important to prevent abuse of the exemption provisions; it also includes Amendment 185, which corrects a mistaken reference to a power for Northern Ireland departments, which unfortunately does not exist.
Amendment 170 is a technical adjustment to Clause 111 to make it clear that any regulations made to disapply the Bill to procurements in scope of the forthcoming healthcare procurement regulations can be made whether or not the procurement regulations are yet in force. Finally, Amendments 194, 195 and 196 amend the index of defined expressions in Clause 115.
I thank noble Lords for their patience, and will turn to the amendments tabled by other noble Lords when I have heard from them. I beg to move.
That is a very different bar of compliance than the Government want to see for every other part of the public sector covered by the Bill. At the strategic level, it will be enormously helpful to understand why the Government feel it is appropriate for the NHS not to be included, but my practical problem is that we have relied somewhat on the assurances of Ministers at the Dispatch Box that only clinical services would be caught by the new SIs under the Health and Care Act and the NHS Act 2006. I have just read out the parts that show that is absolutely not the case. In fact, there is a catch-all in “other goods or services”. So, while we spent a little time in Committee trying to discuss where the boundaries are, it seems to me that there are no such boundaries, and that leaves me very greatly concerned about how this will work in practice.
I have tabled Amendment 173 because if Amendment 3 is carried, Clause 111 is not needed. There is also an argument that if, for any reason, Amendment 3 is not carried, Amendment 173 will stand in its own right, but the two are inextricably linked. These two amendments are saying that the NHS should be covered in the Bill. I end by saying to the Minister that, despite the many amendments from noble Lords all around the House, I think everyone agrees that the Bill is better than the procurement arrangements we have had in the past, particularly in attempting to get transparency and accountability. The problem is that the arrangements for the NHS are not visible; they are SIs at the discretion of any Secretary of State for Health, and we have not even seen those in draft yet. I hope the Minister can give me some very clear reassurances or explanations, otherwise I may have to test the opinion of the House later.
During Covid, vast sums were spent on procuring PPE. I have made a point regularly in your Lordships’ House, as other noble Lords have done, particularly from the Opposition Front Bench, about the kind of PPE that we have been buying from overseas, especially from the People’s Republic of China. The House of Commons Library, in a note published earlier this year, said that current estimates of the total cost of Covid to the Government range from about £310 billion to £410 billion, the equivalent of about £4,600 to about £6,100 per person in the United Kingdom. The portion of this spent by the Department of Health was put at £75.3 billion. Gross spending on public sector procurement increased by £53 billion, or 17%, between 2019 and 2021. Most of this increase was due to a £43 billion increase in health spending—a rise of 44%—and it is estimated that contracts for £14.6 billion were awarded for PPE.
I understand the argument that the Government have made on a number of occasions about the urgency of the public health crisis and that many public procurement procedures were expedited. In some cases, those procedures resulted in suppliers being chosen without the contract being put out to tender or otherwise advertised. I hope that part of the purpose of the Bill is that we have better procedures in place should another pandemic occur. Concern about how this was done led to a debate in the Commons on 21 June 2021 on a petition calling for a public inquiry into government contracts granted during Covid-19. Since the Minister will have seen the outrage in the Commons last week about profiteering from unusable PPE and widespread concern about politically connected companies benefiting from government contracts, I hope she will feel able today to respond to specific questions, some of which I asked in your Lordships’ House in January and March this year, during Committee and Report on the Health and Care Bill, to which the noble Baroness, Lady Brinton referred. I refer the House to col. 635 on 1 January and col. 1032 on 3 March.
Even before that, on 13 December 2021, I asked
“whether any … person, or … organisation, will be censured for defaults involving the 47 VIP public contracts for facemasks and surgical gowns; and what steps they have taken in connection with defaults associated with their contract with PPE MedPro.”
I referred the House to a report in the Daily Telegraph which stated:
“Ministers handed almost £150m to Chinese firms with links to alleged human rights abuses in Xinjiang amid a race to PPE after Covid hit.
The Health Department paid £122m to Winner Medical, which uses cotton produced by a supplier that works in the controversial region”.
That is in Xinjiang, where it is said that a million Muslims are incarcerated and where the former Prime Minister, Liz Truss, said that a genocide is under way. It continued:
“Another £19m contract went to pharmaceutical firm China Meheco and £16.5m was paid to Sinopharm, both of which have been linked to labour programmes in the province.”
In Committee I specifically asked about a Guardian report concerning Medpro, and on 19 January I was repeatedly told that details about PPE contracts are “considered commercially sensitive”. I have never been able to understand—this goes right to the heart of the noble Baroness’s amendment—why the Treasury could account for the £4.3 billion lost in fraud under the Covid support scheme but was unable to justify or identify the loss on PPE.
Even worse, I was told, “we have no plans to censure a single individual or organisation”. In January I asked why not, and I ask the same question again today. In January I was told that the Government are seeking to recover moneys paid to PPE Medpro in relation to a contract for the provision of gowns. It would be helpful for the House to know more about the remit of the public inquiry into Covid 19, chaired by my noble and learned friend Lady Hallett, and whether it will deal in detail with procurement under the terms of reference, especially in the sections dedicated to preparedness and our economic response.
Perhaps the noble Baroness could establish whether it will examine the concerns raised by the National Audit Office: first, the potential unequal treatment of suppliers in procurement processes; secondly, poor procurement practice due to procuring at speed—for example, retrospective contract awards, a lack of documentation on key procurement decisions and a lack of documentation on the management of potential conflicts of interest; and thirdly, lack of transparency over what contracts were awarded and how. We must not allow the concerns raised by the National Audit Office to happen all over again, and these amendments help us to do that.
But there are continuing challenges which need a response too. I was shocked to learn that we bought £1 billion-worth of lateral flow tests from the People’s Republic of China and spent around £10 billion of taxpayers’ money in the PRC on over 20 million items of PPE. Some 24.1 billion items have a country of origin recorded as China, including 10.7 billion gloves. This raises a lot of questions about dependency—lessons which you might have thought we had learned after Germany’s experiences with Putin—but it also raises questions about national resilience. Why could things such as this not have been manufactured here? Indeed, companies in this country that tried to get contracts, and which are capable of manufacturing these things, have told me that they could not even get into the competitive system because we suspended it. If nothing else, this begs a lot of questions about why such things could not be made in the UK.
I was also shocked to learn—I repeat this because I thought it almost unbelievable until I saw it revealed in a parliamentary reply in another place—that we have a further 120 million items of PPE that are still in China, and which it is costing taxpayers some £770 million each and every single day to keep there. I repeat: £770,000 each and every day to keep them—
A public authority is defined in the amended Clause 1(2) proposed by Amendment 2 as including a person who is
“subject to public authority oversight”,
which is in turn defined in amended Clause 1(3) as being
“subject to the management or control of … one or more public authorities, or … a board more than half of the members of which are appointed by one or more public authorities.”
Thus, if a board is involved, control is determined by the fact of appointments rather than the capacity to appoint members of the board. That is an unusual concept for those of us steeped in company or tax law.
The Clause 1 approach to control is in contrast to its use in determining whether vertical arrangements exist in order to qualify as an exempted contract under Schedule 2. The Schedule 2 definition has its own problems, which I spoke about in Committee, but its core concept is to use the Companies Act 2006 definition of control, which is based on capacity to control. I believe that the issues with Clause 1 and Schedule 2 were not satisfactorily dealt with when I raised these points in Committee, so I have returned to them today, to highlight that the Bill is not internally coherent in its approach to determining whether organisation A controls organisation B.
My solution is to import the Schedule 2 definition into Clause 1, save for paragraph 2(3) of Schedule 2. I personally think that sub-paragraph (3) is very odd in the context of Schedule 2, but it certainly does not belong to the approach for control in Clause 1. I have no intention of dividing the House on this matter and I am by no means confident of my drafting, but I believe that the Government should look again at the robustness and coherence of the approaches they have taken in the Bill.
“In carrying out a procurement, a contracting authority must have regard to … delivering value for money … maximising public benefit … sharing information”—
so that people can understand the authority’s procurement policies and decisions—and
“acting, and being seen to act, with integrity.”
In my submission, these are not regulatory requirements; they are the basis on which contracting authorities should be behaving. We will come on to debate Clause 11 and will deal with its proposals then. But it seems to me that, however we end up stating in Clause 11 that these are procurement objectives for contracting authorities, they should apply to all contracting authorities and to all their procurements.
Interestingly, the Government resist this on grounds of flexibility. I am not sure in this context what that means: flexibility not to have value for money; flexibility not to act with integrity? But the Government have not disapplied the operation of Clause 12 and the national procurement policy statement. The Government want to have the power to apply the statement to all procurements, so we do not get “covered” in front of procurement in Clause 12(1) but we do get “covered” in relation to procurement in Clause 11. This must be wrong. It must clearly be right that not only the procurement statement but the objectives on which it must be based must apply to all procurements.
So I put it to my noble friend that this is not a technical amendment. There may be many that are technical amendments, but this is a substantive amendment that has an unhappy consequence that it would disapply the procurement objectives to a significant number of the lower-value procurement activities in the public sector. So when we reach government Amendment 34, I invite my noble friend not to move it. I hope that she will at the very least do that on the grounds that this should be revisited before Third Reading.
They brought together four powerful elements. The first was entrepreneurial leadership. The second was an empowered and liberated workforce. The third was commercial discipline, in the sense that they would all talk about themselves as a business even if they were a not-for-profit; that commercial discipline was crucial. The fourth element was the public service ethos. Bringing all that together created a powerful alchemy that delivered improvements in efficiency. Costs were able to be reduced, there was a reduced fee basis through the life of a contract and quality improved.
Staff satisfaction also improved enormously. Whenever I visited these mutuals, I always asked people whether they would go back and work for the NHS, the council, the Government or wherever they had come from. I never heard anyone say anything other than an immediate “No”. When asked why, they would all say something like, “Because now we can do things. We’re freed from bureaucracy. We’re freed from constraints. We can make things happen quickly”.
So my question for my noble friend the Minister, to be answered whenever she is able to do so, is whether she can provide some reassurance that the arrangements in the complex interaction between this excellent Procurement Bill and the Health and Social Care Act will, if the Government wish to accelerate this programme again, allow such arrangements to be negotiated directly between the contracting authority and the emerging spun-out entity without the need to go through a competitive process.