Trade (Australia and New Zealand) Bill

Committee

Clause 1: Power to implement government procurement Chapters

Amendment 1

1: Clause 1, page 1, line 10, leave out subsections (2) and (3) Member's explanatory statement This amendment prevents regulations being made in relation to cases falling outside the scope of procurement Chapters of the FTAs.

My Lords, Amendment 1 would prevent regulations being made in relation to cases falling outside the scope of the procurement chapters of the free trade agreements. The noble Lord, Lord Purvis, will speak to Amendments 6 and 19 in this group.

Amendment 1 would remove subsections (2) and (3) from Clause 1. Clause 1 provides a power for appropriate authorities to make regulations for two purposes. Subsection 1(a) allows an appropriate authority to make regulations for the purpose of implementing the government procurement chapters in the FTAs. Subsection 1(b) allows an appropriate authority to make regulations for the purposes of making other changes for matters arising out of, or related to, the government procurement chapters in the FTAs.

The Explanatory Notes state:

“Clause 1(2) allows the regulations under subsection 1(b) to be made also for cases falling outside the scope of the government procurement Chapters to provide for general application”,

and that

“Clause 1(3) clarifies that a case is outside the scope of a government procurement Chapter if that Chapter does not impose an obligation on the UK in respect of that case, i.e. it is not an obligation owed specifically in the Chapter … The effect of subsection 1(b) read with 1(2) is that certain changes made to domestic law to implement the UK-Australia FTA, i.e. in respect of the rules in the text of the government procurement Chapter … can apply generally and not only to suppliers from Australia. This will ensure procurement regulations remain uniform and coherent by not imposing different or conflicting procurement procedures on contracting authorities for procurements covered by the FTA, and ensure the UK can implement its obligations in the FTA in a way that is consistent with the UK’s other international procurement obligations.”

This explanation makes sense; it is of course important that procurement regulations remain uniform and coherent.

My Lords, I will speak to Amendments 6 and 19 in this group. The questions posed by the noble Lord, Lord Lennie, in moving Amendment 1 are very sensible. I look forward to the Minister’s reply.

According to today’s press, we are now 15 years behind on the commitment that we would reach £1 trillion of trade within a decade. It is now estimated that the target set by the coalition in 2012 will not be achieved until beyond 2035. This highlights the fact that we are starting to see the consequences of the significant non-tariff barriers introduced by this Government over recent years. Therefore, it is vital that mechanisms are as streamlined as possible for procurement and the rest of the trade agreements.

Amendment 6 is designed to probe the discrepancies in threshold levels in the Government’s procurement legislation, currently going through the House of Commons and which has been through scrutiny in the House of Lords. It probes why they are different for those seeking procurement opportunities for Australia as compared with those seeking them here at home. If you are a business seeking to bid for procurement in the UK, you now have to operate under quite a markedly different approach from that if you are looking for procurement opportunities within Australia.

I welcome the Minister’s letter to noble Lords, which he promised at the end of Second Reading and fulfilled. It highlights what we knew: that, factually, there is a difference in the threshold levels. The letter simply states that Australia was not willing to have the same thresholds as us, and so we simply said that we would have its thresholds. What did we get in return? If this is a concession to Australia then surely we got something in return as far as access is concerned.

The report on the agreement from the Australian Parliament’s treaties committee makes for interesting reading, as does our own report from the House of Lords International Agreements Committee. The Australian report is 225 pages long and can be summarised as: “We got a good deal.” Our House of Lords report, which is 36 pages long, can be summarised from our point of view as: “No, we didn’t.”

My Lords, three important issues arise from the limited number of amendments here, and I want to say something about each of them.

I shall start with the last amendment, Amendment 19. The noble Lord, Lord Purvis of Tweed, referred to the debates on the Procurement Bill, in which many of us participated. We are in a situation where the Procurement Bill will in due course repeal this legislation. We can see the timing a little more readily now: all being well, we should complete the passage of this Bill and I hope it might reach Royal Assent if not by the end of February then certainly very early in March.

The Procurement Bill in the other place still has a substantial amount of work to be done, and doubtless it will return here with amendments. That being the case, I suspect it would be rash to assume that it would pass before late May at the earliest, especially since the Session is to run longer. The Procurement Bill brings its provisions into force two months after the Bill itself is enacted, so in my view we could be in July at the earliest, and maybe in August or September, before the relevant provisions and the repeal take effect.

That being the case, there seems to be a perfectly good rationale for this Bill being used to create the necessary regulations. One matter that we did not get quite clear in our previous discussion is that this Bill, once enacted, can be used to make regulations. Those regulations will subsist even though this Act will subsequently be repealed by the Procurement Act, as it will become. So there is a purpose in passing the regulations in the meantime. There is a particular purpose, which I will not trespass into, relating to the relationship with Scottish legislation. The fact that this Bill can be used to make those regulations is particularly helpful.

The noble Lord, Lord Purvis of Tweed, knows that I agree with the proposition that, if an amendment were to be made in this House to this legislation, it would be inappropriate for it to be automatically repealed. However, we secured assurances from my noble friend Lady Neville-Rolfe to the effect that the Government under those circumstances would make whatever changes might be necessary to the Procurement Bill in another place. I am hoping that my noble friend Lord Johnson of Lainston will have a similar briefing and a similar reassurance to give us.

As it happens, I do not think we need to amend this Bill. I do not see the case for it and so far the amendments I have seen probably do not warrant it. If we can pass it unamended, it can reach Royal Assent—the sooner, the better. I do not subscribe to the view that our International Agreements Committee’s report can be characterised quite as the noble Lord, Lord Purvis of Tweed, put it. There are things we know could have been asked for and potentially secured that were not secured. My particular hobby horse, as members of the committee will know, was geographical indications. It seems absurd that we are waiting on the European Union to secure GI protections in Australia and then we might have the benefit of them subsequently.

The structure of the FTA shows that we believe in tariff liberalisation and in the liberalisation of and greater market access for services trade and the mobility of persons. We secured some significant progress on that. The overall benefit relatively to the Australian economy is anticipated to be greater than for our economy. It does not mean we have lost out, just that there are limitations on the access and the market benefits we might secure. With the greatest respect to the noble Lord, Lord Purvis of Tweed, I do not think that Amendment 19 is necessary. I hope that the reassurances will show that.

Amendment 1, which was well explained by the noble Lord, Lord Lennie, gives a power for the regulations to extend beyond the cases in the procurement chapters. From what I understand, changes are called for through these two FTAs which would impact the way in which the UK exercises its procurement activities to other countries.

There are three areas. The first is where there are unknown contract values. I have managed to track this down in the Australia deal. It makes it clear that, where there are unknown contract values, it should be regarded as a covered procurement. Secondly, there are notices relating to procurements. I assume that this is about the structure of electronic notices, but it is not very clear what it relates to. Clearly, there is some updating on electronic notices for procurement in any case. I found substantial references to that in both procurement chapters. The third relates to the termination of awarded contracts. I hope that my noble friend, if he has not got it immediately to hand, will reference where the changes to the termination of awarded contracts are. These are required under one or the other of these two FTAs, which would require us to change our overall procurement practices. I cannot see them in either of the two procurement chapters in the FTAs.

I will respond to the noble Lord, Lord Lennie. Since the Government are very clear on the reasons they might want to go beyond the Australia and New Zealand cases and make the rules non-discriminatory, because they will be the same for other treaty state suppliers in due course, that is a logical extension of the power. Of course, if Ministers were to misuse the power—the implication of the amendment is that they have a power and could misuse it—it is our responsibility to look at statutory instruments presented. If they are a misuse of that power and go beyond what is necessary for the purpose stated, we can pray against them. It is not our job simply to pass them, and we might choose to do that. But I suspect that this is not the Government’s intention, nor should we really be that worried that it will happen. What is proposed in the legislation seems very straightforward.

Amendment 6, tabled by the noble Lord, Lord Purvis of Tweed, is about thresholds. Unlike with the other amendments, now things do get complicated. As far as I can see, the point that the noble Lord did not make is that the thresholds set in a procurement Bill are aligned with the thresholds under the government procurement agreement—a WTO agreement. To that extent, they apply in relation to the entities in the parties to that agreement, which are central government entities. It seems to me that the point about the Australia and New Zealand procurement agreements is that they go beyond what is available to us under the WTO GPA; for example, with Australia in particular, that means regional entities.

I cannot speak for the Australians, but it is clear that they decided that they wanted the availability of procurements in their regional entities to have a higher threshold applied to them, to which we would then have access. Of course, the same thresholds would then apply back to our subcentral entities. I do not really need to judge whether that is reasonable on their part; what is sufficient for these purposes is that that is what they asked for and they get the same benefit in relation to us. We therefore all get a benefit in access to procurements below the federal level in Australia—and, to some limited extent, in New Zealand—for additional entities. It would be, in my view, impossible for us, through the legislation, to seek to impose on Australia or New Zealand thresholds that are different from those that were agreed in the FTA. Indeed, if we were to try to do what the noble Lord, Lord Purvis of Tweed, is suggesting, we would effectively constrain ourselves back to what is available under the WTO general procurement agreement and remove a significant part of the available benefit to us—so I just do not think we can go down that track.

I am very grateful to the noble Lord; as usual, he is extremely perceptive. The point I am seeking to make is that, under the GPA, subcentral and regional bodies are covered. We have existing arrangements under the previous EU rules for subnational bodies, and we currently have subnational special drawing rights with the EU. My question is: what impact will the higher threshold that we have conceded to subregional bodies within Australia have on those businesses? I fear that it means a great deal of complexity, so, for us to say back to the Government that they should be having discussions with Australia to bring the thresholds down, rather than just give up, would make sense for British businesses.

Well, obviously, if we were in the course of further discussions through the Joint Committee arrangements on the free trade agreements to modify the agreements so as to reduce the thresholds, I imagine that there would be some benefit to our businesses—but that is not the position we are in at the moment. I certainly do not see that we can arbitrarily and unilaterally impose different thresholds through our legislation. The Minister will have to confirm if I am correct, but I did not understand it to be the case that the WTO general procurement agreement gives us existing access to entities in Australia’s procurement below the federal level. I stand to be corrected if I am wrong about that, and I have no doubt that the Minister will have the briefing to tell me if I am wrong. For those purposes, I just do not agree with Amendment 1 as moved.