Public Procurement: Support for SMEs

With permission, Mr Speaker, I will answer questions 4, 7, 11, 12, 13, 17 and 20 together—while the rest of the ministerial team go and have a cup of tea. The wide-ranging interest in this topic shows just how much the £400 billion spent on procurement in the public sector matters for growth and for communities across the UK. I was recently in Grimsby, where small businesses are delivering local growth, innovating and providing more than half of local employment. MPs know that SMEs are vital for providing local employment in their communities. Under the previous Government, however, we became overly reliant on large consultants and a small number of big companies. We have too often ended up locked into expensive, poor performing contracts, with companies able to drive up prices in closed markets. That has to change. The new national procurement policy statement asks the public sector to maximise procurement spend with small and medium-sized enterprises, and the Government are leading the way by setting ambitious public targets for Departments on spending on SMEs.

I am glad that I am at the front of this particular queue, Mr Speaker. Right across the country we have amazing, cutting-edge businesses, such as Great Wave AI, a start-up in my constituency that is already helping the Government to take advantage of AI. It wants to grow faster and do more work with Government Departments. What work is the Minister doing to ensure that small British start-ups can play their part in the AI revolution in government, not just mega companies such as Meta, Microsoft and Google?

We have been absolutely clear that there are huge opportunities for AI to support the public sector to better personalise services and save money, but we have to keep up with the speed of innovation in how we buy. I have heard from SMEs specialising in AI and digital transformation that the way we are doing procurement is too slow and too inflexible to keep up with that pace. That is why I am working with the Minister for AI and Digital Government, my hon. Friend the Member for Enfield North (Feryal Clark), to set up a new digital commercial centre for excellence to make sure that that changes, and that we have the best innovation from my hon. Friend’s constituency and across the country in Government.

Last year, Luton airport invested £110 million in local businesses. It knows the value of businesses, particularly small and medium-sized enterprises, in places like Luton. Every weekend, I do a small business Saturday shout-out. What can we do to ensure that small businesses in Luton get a fair crack of the whip when it comes to public sector procurement?

It is brilliant to hear about my hon. Friend’s leadership in supporting small businesses and the work they are doing in her constituency. We are absolutely determined that SMEs should have that fair crack. The new national procurement policy statement asks us to maximise spend with small businesses. It also sets stretching and transparent targets for each Department, which will be brought to the House. We will be held to account for delivering on them.

The targets in the national procurement policy statement for Government Departments to buy from British SMEs are to be strongly welcomed. The benefit will be long term, with broad and essential sources of investment, and we will improve our economy’s domestic resilience. Bus manufacturing is an area that needs domestic resilience, with over 100 jobs recently lost in the Falkirk area because the previous Government failed to support British buses. At the bus expert panel next week, does the Minister expect a general increase in domestic procurement following the updated national procurement policy statement?

As soon as I saw my hon. Friend’s name on the Order Paper, I knew that he would mention buses, because he has never missed an opportunity to raise this critical issue with me. The Government are absolutely committed to supporting the UK’s domestic bus manufacturing industry and ensuring that the procurement system recognises the high standards and quality of UK manufacturers. The new national procurement policy statement aligns with our industrial strategy and pushes us to maximise spend with SMEs. As a result, contracting authorities across the country must now consider how their procurement strategies can support the industrial strategy, including the bus manufacturing strategy.

Recent figures show that hundreds of small businesses have been opening up across Ipswich, and I am proud that we are now ranked in the top 10 of areas in the country where the number of SMEs is growing. However, I am ambitious for my town and want to go further. What steps are the Government taking to ensure that, as part of our skills agenda, young people in towns such as Ipswich have the chance to find skilled, long-term, well-paid employment with SMEs, and, in doing so, boost public procurement and our local economy?

There is so much young talent in Ipswich and in communities across the country, but too many young people are struggling to get on to the employment ladder, and we know the scarring impact that that can have on their lives. We need to ensure that the £400 billion spent on public procurement means something in communities such as Ipswich. We are streamlining how we measure social and economic value so that there is a very clear ask that is linked to our missions, including the opportunity mission, to deliver jobs and skills to young people out of work. We are asking those who win Government contracts to advertise in local jobcentres so that people in Ipswich and communities across the UK can benefit from Government contracts.

In January it was reported that nearly 7,000 construction firms were on the brink of insolvency—that is on top of the 4,000 that folded last year. A major cause of this is payment delays by large contractors. Given that project bank accounts, which protect against payment delays, are used by only some Departments, will the Minister act where the previous Government failed to do so and introduce these accounts across all Departments?

I really welcome this question. It is so important to small businesses that they are paid on time—I have heard time and again that late payments threaten their very existence. The construction playbook states that project bank accounts “should be used unless there are compelling reasons not to.” We are determined to crack down on late payments. We have announced regular spot checks on prompt payments throughout our supply chains, and in the Budget the Chancellor said that the Government will be required to exclude suppliers from bidding for major contracts if they cannot demonstrate that they pay within an average of 45 days. I welcome my hon. Friend’s work on this matter, and I very much enjoyed meeting her to discuss it. I know that she has built a wide coalition, and I hope we can continue to work together on these important issues.

Pathways Care Farm is an amazing charity in Lowestoft that supports people with disabilities, those with mental health issues and ex-offenders to get back on their feet by working with animals and growing food. The charity has excellent outcomes, particularly with helping people to get work-ready and improve their health, but it finds it hard to access opportunities for public contracts, such as social prescribing, because it is so small. Does the Minister agree that organisations in the voluntary, community and social enterprise sectors and charities such as Pathways have an important role to play in providing solutions for the public sector?

I wholeheartedly agree. My hon. Friend the Member for Great Grimsby and Cleethorpes (Melanie Onn) took me to a similar farm in her constituency that had been set up by an ex-prison officer. I have to say that it was one of the most enjoyable visits I have had—it was great for my mental health to feed some alpacas and goats. I have heard powerful stories about how social prescribing has changed lives, from ending chronic loneliness to helping individuals such as a man I met recently, who had found his first stable home in his 50s. The new NPPS specifically asks contracting authorities to maximise spend with voluntary sector organisations, and we will be introducing targets for Government on spend with voluntary sector organisations and social enterprises. The Government have listened to concerns from local authorities and are working to implement changes to allow them to reserve competitions for low-value contracts for local organisations.

Last but not least, Mr Speaker. The mass grouping of these questions on this subject proves the failure of the previous Government to get a grip on this particular issue. Can the Minister reassure me, and SMEs such as WJ Structures and Rothwells Paper in my constituency, that this Government will take steps to simplify the process, thereby keeping the pound local instead of contracts going to multinationals?

I very much welcome these questions— I could happily speak about procurement all day, because it is absolutely critical for delivering the Government’s missions. The Procurement Act 2023 removes some of these challenges, but we need to do more. That is why we are setting ambitious and stretching targets for direct spend on SMEs and have asked officials to review our framework contracts, in particular, to ensure that they are more accessible to SMEs. The challenges raised by businesses in my hon. Friend’s constituency are the same as those I have heard described by SMEs across the country—our procurement is too complex and too slow, and it needs to change. We need to get that £400 billion into real jobs and SMEs in our communities.

I congratulate the Government Whips’ Office—[Laughter.] What discussions have been had with the Crown Commercial Service regarding Romeo Mike 6277 network—RM6277?

I thank the right hon. Gentleman for his question. I look forward to spending another day with him in the Public Authorities (Fraud, Error and Recovery) Bill Committee later. I have regular discussions with the Crown Commercial Service on a range of issues.

Given that public sector procurement accounts for a third of all public sector spending, what steps is the Minister taking to ensure that it is less siloed, more joined up, and as efficient as the private sector?

That is such an important question. We need to deliver value for money in how we do procurement. One change that we made in the new national procurement policy statement is ensuring that contracting authorities procure collaboratively, crack down on some of the excessive costs of private frameworks and ensure that they are transparent. We are using AI to streamline procurement, and have set up a new commercial innovation challenge at the heart of government to ensure buying supports innovation and growth.