British Industry and Services: Public Procurement

My Lords, on 26 March, the Government announced procurement reforms to protect our national security, boost growth and build a fairer economy. We have now moved from policy direction to delivery. As of last month, government departments can make use of the national security exemption in the Procurement Act 2023, where relevant. We also introduced a public interest test for departments to formally assess whether their services can be delivered more effectively in-house and have requested all government departments to develop insourcing plans.

I thank my noble friend the Minister for that reply, but that memo is not getting through to government departments. Time and again, they are giving preference to firms and workforces from overseas rather than British industry and services. We talk a lot in this House about government as regulator, government as legislator and government as policymaker. Is it not time for the role of government as customer to come forward so that we can re-industrialise Britain, as has been made very clear by the incoming Prime Minister? Can she get through to her department and the Treasury that there is a new sheriff in town, and we want to see a rapid change of direction?

I am awfully fond of my noble friend, and he will remember that, over 25 years ago, I helped to run his “Buy British” campaign for our trade union. This is something that he has campaigned on for a very long time. As the Chancellor said in March, “it matters where things are made and who makes them”, which is why we have changed all these rules. To reassure my noble friend, in the last 12 months we have launched the national security procurement exemption and brought in new rules for local government on lower-threshold procurement to encourage use of a model similar to that in Preston. Government departments now have targets for SME use, ensuring that £7.4 billion of government expenditure will be used with SMEs by 2028, and we have redefined the definition of social value. However, my noble friend is absolutely right: the Government spend £400 billion a year, and we need to make sure we spend it well.

My Lords, I think the noble Lord, Lord Spellar, speaks on behalf of the whole House. The plea he makes is really: can the Government lead by example? Can the Minister explain why the current Secretary of State for Defence recently decided to acquire the precision strike missile, which is an American ballistic missile programme—a course of action which was rejected by previous Defence Secretaries, including John Healey?

The noble Baroness has huge experience in this—and as soon as we talk about defence, I have to declare myself as an honorary captain in the Royal Navy. With regard to individual procurement decisions, she knows as well as me that I would not have been involved in the direct procurement, but I can ensure that the Defence Minister writes to her on it. However, let me be clear about what the defence investment plan means for British jobs. There will be an additional 60,000 British jobs because of the investment that this Government chose to make that the previous Government did not.

My Lords, it is reported today that Lockheed Martin is buying Ultra Maritime, a company which makes important underwater capabilities and should be of personal interest to the Minister. That company was formed when two long-standing, brilliant British defence companies were taken over by Advent, an American private equity company, so it has now completed its journey from being an outstanding British defence company to being part of a very large American prime. Can the Minister say how this fits in with the policy of the Government that she has just described, and what work the Government are doing to look at the acquisition and procurement process over the entire piece to ensure that we have sufficient resilience within it?

The noble and gallant Lord is absolutely right: we need not just sovereign capabilities but sovereign skill capabilities so that we can build what we need, especially in the defence sector—he will not be surprised that I agree with him there. Defence is an area that we are working closely on. It is one of the pathfinder areas for the new procurement strategy that we have announced as part of the exemption from the Procurement Act 2023. A lot of this will have to be about what happens next. I was not aware of that specific case until the noble and gallant Lord raised it, but I will speak to my colleagues.

My Lords, what progress are the Government making in ensuring that procurement processes for key public services do not result in them being dependent upon digital services which could simply be terminated at the decision or whim of a foreign billionaire or Head of State, who may of course not feel inhibited by detailed contractual obligations? They may decide to switch off the service and then let the lawyers just slug it out.

I wonder who the noble Lord is talking about. He will be very aware that we have to operate within a contractual framework; we follow the rules and always will, but he raises an incredibly important point. The way in which we procure all contracts has to be considered in the round. That is why we are changing the social value test to make sure that other factors beyond pure cost are considered as part of any negotiations. But also, as the world changes, we are making sure that appropriate AI tools and others are used not only as part of the contracts but to deliver on the contracts too—they are used by government as well as by our contractors.

My Lords, can the noble Baroness explain how it can possibly be right that Transport for London has bought 500 electric buses from China, when Wrightbus in County Antrim produces wonderful electric buses that go all over the world? How is this supporting British business?

The Department for Transport has recently published its 10-year pipeline for zero-emission buses, covering procurement through to 2035. That will give British manufacturers, including Wrightbus in Antrim, the long-term certainty they need to plan ahead and invest in their workforce, which is key for delivery. In addition, the UK bus manufacturing panel, which is cross-government, recently agreed on a number of mayoral commitments, including a minimum 10% social value rating in all future bus procurement tenders, bringing it in line with the social value policy applicable to central government departments. That should assist Wrightbus.

If the Government’s policy is to prioritise British industry, can the Minister explain why one of the first projects being carried out by Great British Energy is to install, in 100 of our schools, solar panels that are either Chinese-made or include Chinese components, many of which are sourced from Xinjiang province and produced by Uyghur labour?

I welcome the noble Earl’s new commitment—maybe it is not new—to supply chains and to where components come from. Many of these contracts were signed by previous Governments. We have had many discussions, not least with the noble Earl, about the role of Uyghur labour, which is abhorrent and needs to be taken out of the supply chain. However, we need sovereign capability to replace it with. As I said, that includes sovereign skills capability and investment in manufacturing. People need certainty about contracts coming forward; that has to be delivered too.

My Lords, a central tenant of the UK’s national shipbuilding policy is that we have a drumbeat of orders through UK shipyards, recognising that 38p of every pound put in by the taxpayer comes back directly in tax and national insurance. Can my noble friend explain why the Department for Transport is considering offshoring the replacements for Trinity House vessels and the Home Office is considering placing orders in Holland for patrol vessels? Much of that work will not be done in Europe but will be subcontracted to the Far East. Have these departments somehow not got the memo from the Treasury?

My Lords, I am sure that every memo sent by my department will be actively read by every other department. On shipbuilding, the noble Lord is absolutely right—when we were Members of the other place, I sat with the noble Lord through many debates on exactly this issue. On the immediate action that we are taking, we have created the pathfinder sector through the national security exemption in the Procurement Act. The MoD is one of those departments, and we have put a commercial lead in place specifically to look at shipbuilding. I would expect that sector lead to work across government departments to deliver in the way that my noble friend discussed.

My Lords, why is it that, while our SMEs’ share of local government spending has increased to 33%, their share of central government contracts remains flat at just 16%—nowhere near the three-year target. I realise this question may be something of a gift for the Prime Minister in waiting, but perhaps the Minister could comment ahead of the coronation?

I think the noble Lord was here for previous coronations. On SMEs, he is absolutely right. There are many elements of our manifesto that can be delivered only through SME engagement, whether that is on food supply chains—where we have committed to 50% locally-grown produce in public sector food and catering contracts—or more broadly. We are working with SMEs to deliver access. The noble Lord will be aware that, when you have a difference between prime and local contractors, there have to be many ways of accessing government contracts. It may be helpful for the noble Lord to be aware that, of the £400 billion being spent, the Government have set a target for SME use by government of some £7.4 billion, which should be delivered by 2028.