- Considered in Grand Committee
- 4:44 pm
- Moved by
- That the Grand Committee do consider the Public Contracts (Amendment) Regulations 2022.
- My Lords, these regulations, which were laid before the House on 8 November, have two functions. First, they amend the domestic public procurement regulations to ensure that changes in calculation of VAT in the valuation of contracts do not place undue burdens on contracting authorities. Secondly, they will ensure that NHS trusts and NHS foundation trusts are treated consistently for the purpose of applying certain obligations which promote transparency.Public procurement in the UK above certain financial thresholds is currently regulated by the procedures laid down in the Public Contracts Regulations 2015, known as the PCRs. These financial thresholds are set down in the World Trade Organization’s Agreement on Government Procurement, known as the GPA, and are revised at international level every two years to take account of currency fluctuations. Those revisions are subsequently implemented domestically, by amendment of the PCRs, to ensure that the UK complies with its obligations under the GPA. These thresholds for regulated public procurement are not altered by this SI.The PCRs also outline specific, less prescriptive procedures for public procurement carried out below these thresholds in order to facilitate access to public procurement for SMEs. This takes place by requiring opportunities to be advertised on a portal called Contracts Finder and by prohibiting assessments of suitability where they are used to narrow the field, rather than as part of the assessment of bids. Below-threshold regulation also improves transparency by requiring the publication of details of the contract published. The thresholds are currently £10,000 for central government bodies, known as central government authorities, and £25,000 for wider public sector bodies, known as subcentral authorities.
- My Lords, I welcome this opportunity to raise an issue that arose during the passage of the Procurement Bill through the House. I congratulate my noble friend the Minister on introducing the regulations before us, which I support.All I seek is an assurance and confirmation from my noble friend that, with these limits being lower than the limit to which we are subscribed under our independent membership of the GPA, produce from local growers, farmers and agricultural producers will be accepted in preference to those coming from the EU or other countries. Basically, it is about trying to support home-grown food and our farmers as they embark on a more sustainable way of farming.I understand that, because the Procurement Bill is very specific, we are signed up in the same way as we were to the EU’s thresholds when we were part of it and cannot bid for such contracts over $136,000. Can my noble friend commit to the fact that we will be able to encourage our farmers to supply local hospitals, as in this case, but also military defence establishments, schools, prisons and all other public procurement contracts to ensure that we source more of our food for these establishments locally than has previously been the case?
- My Lords, I thank the Minister for presenting this set of regulations in such a clear, concise and understandable way to try to make sense of the existing situation post the situation that she talked about.These Benches support the thrust of and details in the statutory instrument but I want to ask a couple of questions. First, I am somebody who is not an expert in statutory instruments, but the dates on which the SI is to be made and come into force have three asterisks next to them. Is that normal? When is this statutory instrument intended to come into force?The second issue is to do with the thresholds and the use of VAT. Some goods are exempt from VAT while some have a VAT level of 5%. The effect of putting in the statutory instrument the figures of £12,000 and £30,000 will be that some contracts, for example in printing, will by default have a slightly different total value than those with a 20% rate of VAT because they are exempt from VAT. Would it not be more sensible to use the figures of £10,000 and £25,000 and include a provision that the threshold for the contract will be at the rate of VAT for the goods and services being procured, rather than having a blanket rule when some goods and services do not have a VAT rate of 20%?With those questions, as I say, these Benches support the thrust of and reasoning for this statutory instrument.
- This is really just about making a change in order to keep things the same. We certainly agree with the decision about NHS trusts and foundation trusts but I have a question about services or goods that are VAT-exempt and the Government’s thinking on them. There also seems to be a delay in this issue coming about and it being rectified. I wonder whether that may has disadvantaged some businesses, particularly small businesses, over that period.I notice that, when consideration of this instrument was raised in another place, my colleague, Flo Eshalomi, asked specifically why it has taken the Government nearly a year between introducing the new regulatory scheme on 1 January 2021 and attempting to fix this inconsistency. When the Minister responded, he did not answer that at all. I am concerned, as it is troubling that something so straightforward and uncontentious was allowed to drift for so long. What does the Minister make of that? Does she have an assessment of what the impact of that might have been?
- I am grateful to all noble Lords who spoke in this short debate. I will answer the noble Baroness, Lady Chapman, first. I do not have a satisfactory response to her question about why this instrument was not laid sooner. We simply laid it as soon as parliamentary time allowed. I recognise that, as that was almost a year, this is not entirely satisfactory.My noble friend Lady McIntosh asked about farmers. I applaud her commitment to the farming community. I assure her that the principles of non-discrimination still apply to below-threshold contracts. This does not have a bearing on procurement from the farming community, as such. She raised those issues very effectively during the debates on the Procurement Bill; I am sure that they will continue to be discussed as that Bill goes through the other place.The noble Lord, Lord Scriven, asked about exemptions from VAT and about asterisks. I am told that asterisks are typical and that the SI will come into force in line with the articles in it—basically, as soon as it has been signed.On the question about VAT from both the noble Baroness, Lady Chapman, and the noble Lord, Lord Scriven, there are two reasons why we use 20% as standard. It aligns the methodology for estimating contract values for the purpose of applying thresholds with GPA parties, such as Japan and the USA, which are not part of the EU and therefore do not have the EU 13% VAT reduction that was agreed in 1987. Also, when contracting authorities are estimating their contract values, the £10,000 threshold will no longer be reduced to £8,333.33, assuming a 20% VAT rate is applied. That is why we are raising the thresholds to £12,000 and £30,000 respectively: it maintains the lower threshold at £10,000 before 20% VAT is added, taking the value to £12,000; and similarly £25,000, before 20% VAT is added, taking the value to £30,000. We are aware that VAT is not always set at £20,000 but it will not be less than this figure, hence why we assume this rate.
- Motion agreed.