Overseas Companies: UK-registered Subsidiaries

Question

14:37:00

Asked by

To ask His Majesty’s Government whether they provide support or advice to companies domiciled overseas who have set up a UK-registered subsidiary through which to bid for public sector work.

My Lords, before answering the noble Lord’s Question, I wish everyone celebrating a happy St Valentine’s day—

Oh!

Wrong day. I wish everyone a happy St Patrick’s day. The Government provide guidance on GOV.UK to companies seeking to engage in public sector work, including those domiciled overseas which establish a UK-registered company. Additionally, the Government encourage open and fair competition in public procurement, and UK-registered subsidiaries of foreign companies are treated in the same manner as domestic businesses.

I am grateful to the Minister for his Answer. I agree that it is essential that transparency is key to all of this, especially in the defence and security sectors, where I am sure the Minister would agree that a level playing field is absolutely necessary. However, are the Government aware that some non-UK enterprises with only a token presence in the UK seek defence and security work here, and that some of those firms are domiciled in foreign states which actively exclude British companies from competing for contracts under that state’s control? What assurances can the Minister give that British contractors are not the victims of such unacceptable commercial discrimination?

I thank the noble Lord for the question. The UK’s international obligations require us to treat suppliers from other countries on an equal footing with UK suppliers in procurements which are covered by trade agreements with those countries and under WTO arrangements. The requirement for fair and open competition is a two-way street, as it gives UK suppliers access to public procurement opportunities overseas, which is worth close to £1.3 trillion. If the noble Lord has a particular case in mind, perhaps he could speak to me, and I will refer it to officials in the department.

My Lords, noble Lords will recall that, when the Covid pandemic broke out, the contract for setting up local testing services was given to two multinational companies, one of which had its headquarters in Miami. Not surprisingly, it put an awful lot of the local testing sites in the wrong places because it had no local knowledge. In awarding public contracts, can the Government be sure that they take issues like that into account? Can they ensure that companies which have most of their work overseas have a proper presence and pay the appropriate level of tax in this country?

The noble Lord is absolutely right. If we have a free trade agreement with a particular country then we have to follow international obligations by allowing foreign companies which have got an office registered in the UK access to public procurement. Obviously, following Covid, the Government are committed to using every means possible to recoup public money lost in pandemic-related fraud and contracts that have not been delivered. The Government are determined to ensure that we go after any contracts that have been committed to under some kind of fraud case. The Government have appointed Tom Hayhoe to be the Covid Counter-Fraud Commissioner, and he will use every lever to go after any such fraudulent contracts.

My Lords, following on from the initial Question, what assistance can Ministers give to British-registered SMEs in procuring public sector contracts?

I thank my noble friend for the question. It is important that SMEs have fair access to public contracts, which drives economic growth and the strength of public supply chain requirements. All central government departments, including executive agencies and departmental bodies, must set a three-year target for direct spend on SMEs from 1 April this year and a two-year target of direct spend for voluntary, community and social enterprises from 1 April 2026, and they have to report this annually. This is good news for SMEs.

My Lords, further to the question raised by the noble Lord, Lord Wallace, as the Minister knows, I have raised on a number of occasions the question of what action is being taken by the Covid Counter-Fraud Commissioner to recover money from those people who defrauded the Government during the Covid epidemic by providing equipment and other supplies that were not used, and particularly those who used the VIP lane. Members of Parliament and Members of this House were involved in that. We need action quickly; what action has been taken?

I thank my noble friend for that question. As I mentioned in my earlier answer, the Government have appointed Tom Hayhoe as the Covid Counter-Fraud Commissioner. He will work across all government departments and will draw on the expertise of the Public Sector Fraud Authority, the Government Commercial Function and the Department for Health and Social Care, and will use every means possible to recoup public money lost in pandemic-related fraud and contracts that have not been delivered. There is evidence to suggest that our standing within international public procurement has been diminished because of what happened during Covid. I assure my noble friend that the Procurement Act 2023 has improved and strengthened public procurement and will prevent all VIP lanes in the future. Section 42 of the Act will ensure that public contracts awarded via direct award will be for only a limited time.

My Lords, on the concerns of the noble Lord, Lord Sharpe, about value, for any country that we have an FTA with, regardless of how restrictive its domestic procurement laws are, we have to afford it full access under our liberalised procurement laws. This is a concern. The Minister said he would be very happy to look at this, and I am glad he would. I had an amendment to the then Procurement Bill under the previous Government to try to prevent this, but it was knocked back by the previous Government. If the Minister has an open mind on how to resolve the Question of the noble Lord, Lord Sharpe, could it include looking again at the amendment I tried to persuade the previous Government to adopt?

What a question. I am afraid I was not in the House when what is now the Procurement Act was going through. Nevertheless, we will bring the noble Lord’s concern to officials in my department.

My Lords, following my noble friend’s Question, does the Minister’s department have a list of countries in which UK companies are not allowed to bid for public procurement projects? What conversations are the Government having with these countries’ Governments?

I thank the noble Lord for that point. The Procurement Act 2023 allows, for the first time ever, the Government to have a list of companies that are debarred from submitting bids for any public contracts. That said, there has always been an exclusion list of companies that have committed fraud or anti-competitive practices. This is done by each individual department. Companies bidding for this will be told that they will not be successful because they are excluded from contracts. We have come a long way from exclusion to debarment, and this list is now in the early stages of being compiled.

My Lords, is the Minister satisfied with the criteria deployed in having companies available to tender for public sector work, bearing in mind the failure of a number of leading companies over a number of years that appear to still be available to tender on the Government’s list?

That was probably before the Procurement Act. Under the Act, companies that have been excluded will not be allowed to bid for any government contracts. Any companies found to be bid rigging will be debarred from bidding for any public contracts. We have come a long way. The Act has just come into force. Let us allow the Act to take its place and ensure that, whoever bids for the contract, they do so with the value for money that the Government are looking for.

My Lords, is the issue of companies domiciled overseas which have set up a UK-registered subsidiary likely to feature in the upcoming potential trade talks with the United States of America? If so, what will the UK Government’s position be?

As I said in my earlier answer, if there is a free trade agreement with a particular country and it is a member of the WTO, we cannot prevent any other companies that are domiciled overseas with a registered company bidding for public contracts. Likewise, we would not want British companies to be debarred from bidding for international contracts, which amount to around £1.3 trillion.

My Lords, why is Fujitsu still being allowed to bid for government contracts when it has made no substantial contribution towards the costs and hardship that it caused as a result of the Horizon scandal?

The noble Lord is trying to tempt me to answer a question that is beyond the scope of this Question. The contract that was awarded to Fujitsu is not a new contract but a continuation of a contract. I do not have the details before me, but I am happy to write to the noble Lord.