The old economic order is gone forever and Britain is missing its chance to adapt
In the doldrums of the Boris Johnson regime, there were always a few bright spots Tory MPS would point to as evidence that something, at least, might get done to improve the state of the country. One of those bright lights was meant to be the Procurement Bill, a long and complicated piece of legislation that promised to overhaul the way the Government buys things, to the tune of £300billion a year.
Well, Mr Johnson may be gone, but the Bill is finally making its way through the Commons, having started in the Lords last spring. The Government has touted it as a post-brexit revolution that would make policy more “commercial”. Labour has decried it for trying “to line the pockets of the well-connected”. The truth is probably closer to the assessment made by the lawyer Nathan Holden at Freeths, who advises local government: “Old wine in new bottles.”
We are moving too slowly. The past two years, if not the trends visible before that, ought to have made it clear: we have allowed ourselves to become too dependent on others. We rely on global markets to supply our energy; we import doctors and nurses from abroad to supply our hospitals; we buy ships from Spain and chips from Taiwan; we cannot build nuclear power plants because we have run down our nuclear industry; we cannot build our own telecoms network or CCTV cameras because we prefer to buy them on the cheap from China; we have lost any chance of controlling the critical minerals needed to modernise our economy; we are too vulnerable to the caprice of others, whether it’s export bans on European vaccines or Chinese PPE.
The Procurement Bill is a halfhearted response. It retains the main procurement principles enshrined by EU law, while adding a few others, such as “integrity” and “public benefit”. It performs some useful administrative clean-ups, like hauling all tenders and regulation into one place so small firms can keep track of them more easily. It makes it easier for government bodies to ban suppliers with poor track records or those involved in dubious activity (like, you know, slavery).
And the Bill shifts priorities slightly: government bodies no longer have to award contracts to the most “economically advantageous tender” – generally interpreted as the cheapest – but can choose “the most advantageous tender”. None of this, however, is radically going to improve the way the state uses its vast spending power.
It’s understandable, of course, that the Government is loath to load up its contracting procedures with unnecessary bells and whistles. In fact, it is trying to go the other way and make it easier to fulfil basic functions. Labour, naturally, would have the state deploy its privileges as a customer to require suppliers to pay higher wages and more tax, save the environment and revive local economies, all while supposedly securing good value for taxpayers.
The minister concerned, Jeremy Quin, had a point when he declared that a Procurement Bill is not the correct tool with which to start meddling in general employment practices. Indeed, if the Government really wanted to make things easier for suppliers, it could stem the tide of ludicrous requirements rippling out of the Equality Act, which is forcing bricklayers to draw up policies on gender inclusion.
It is not beyond the proper scope of procurement, however, to take a hard look at where we get our goods and services from and to conclude that we are simply not resilient enough to foreign threats. The building of domestic supply chains to meet critical needs ought to be an urgent priority and government spending power is one of the biggest levers available to achieve it. Nor is this uncommercial. A well-run company should keep an eye on the reliability of its suppliers out of self-interest, not charity.
All of this feels rather unnatural for a Tory government. That is because we have for a generation enjoyed all the advantages of free trade and globalisation under the relatively benign hegemony of the US. In the decades before Thatcher, domestic industry became synonymous with waste and inefficiency. The priority after Thatcherism was to keep costs down and stop pursuing an unworkable notion of British communitarian economics. The modern Tory party’s identity is built on this foundation.
This economically liberal philosophy has also been built into international institutions whose various treaties and agreements most modern economies subscribe to. The OECD and World Trade Organisation warn against favouring domestic suppliers because such practices introduce economic “distortions”. Yet in defiance of such principles, countries such as the
US, Japan, Germany and France have been protecting their own suppliers for decades.
In a period when the major economies doing so were broadly friendly powers, these practices were tolerable and even had some advantages for the UK. But the biggest industrial power and the biggest protectionist economy in the world is now run by an authoritarian communist regime in Beijing that is hostile to us. This changes everything.
It might be all right to buy plastic toys and clothes and furniture wherever we can get them cheapest. For a chunk of government procurement, it still doesn’t matter too much where the goods come from. Another portion can safely be procured from firms in allied countries, like industrial machinery or security cameras.
But there are other areas where we ought to be encouraging the emergence of strong domestic supply chains, in telecoms, health, energy, data and defence, for example. And there are sectors where procurement policies could be used to update truly moribund industries, such as construction, infrastructure and agriculture. This obviously doesn’t mean buying nothing from abroad, but it does mean giving government bodies the incentive and funding to foster innovation and build the critical capacity we are lacking.
Unfortunately, until the Government is willing to describe the world as it is, with hostile, friendly and neutral spheres, our ability to adapt to the new environment will be limited. What’s needed is a new system of treating domestic, trusted and untrusted jurisdictions differently, with clear objectives in mind for each.
Yet first with its legislation on screening foreign investments and now with the Procurement Bill, the Government has shown a desire to continue in a state of wilful blindness about the new economic facts. This Bill was a chance to use the state’s financial might to reorient our economy. It is another opportunity wasted.
The new Procurement Bill should have helped the UK become more resilient, but instead it is merely old wine in new bottles