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Column 267Procurement Procedures
The Paymaster General (Mr. Peter Brooke) : I beg to move, That this House takes note of European Community Documents Nos. 8803/88 and the Supplementary Explanatory Memorandum submitted by Her Majesty's Treasury on 10th May 1989, 8804/88 and 8805/88 relating to procurement procedures in the water, energy, transport and telecommunications sectors ; and endorses the Government's view that the broad approach of the Commission should be supported but that changes are desirable in the proposed directives to prevent the imposition of unnecessary burdens and constraints.
Mr. Speaker : I must tell the House that I have not been able to select the amendment standing in the name of the hon. Member for Thanet, South (Mr. Aitken) and his hon. Friends. However, those points may be raised if the hon. Members are called during the course of the debate.
Mr. Brooke : We debated proposals for directives on public procurement only recently. Those before us tonight come in the same series, and like the earlier ones form part of the Commission's programme to complete the single market by 1992. The earlier proposals mainly affected Government Departments and local authorities. Those in the motion before the House strike out much more widely, and cover nationalised industries and a number of companies in the private sector. Important issues are at stake, and I am glad that the House is able to consider the proposals at this still relatively early stage in their progress through the Community institutions.
I begin by noting the reasons which have led the Commission to make these proposals, one of which relates to the water, energy and transport sectors and the other to telecommunications. The Commission believes that major savings can be achieved by removing the influence of Governments on procurement in these sectors. It quotes the results of studies which it has undertaken and which show the costs to be as much as £15 billion a year. This is a large amount, even allowing for a considerable margin of error. So because we want to create a single market which is strong and efficient, we should welcome the fact that the Commission has made proposals in these areas.
I note, too, the boldness of what is proposed. In 1971, when the works directive was adopted, it was agreed that the different ways in which the sectors were organised in the various member states made it best not to attempt at that stage to apply Community directives to them. In 1977, when the supplies directive was adopted, the same conclusion was reached. Now we have proposals which together cover purchasing worth several hundreds of billions of pounds a year, and which provide a framework of rules which it is hoped will ensure that undertakings buy competitively and that suppliers have confidence that they will do so.
Because of what is at stake--in terms not only of the savings but of the sheer amount of purchasing and the advanced technology which much of it involves--it is vital that the Community gets the directives right. I am sure that the Commission recognises this. In the last couple of years, it has put a lot of work into developing its proposals. It has spent a considerable amount of time talking to those who might be affected by them. If member states believe
Column 268that there is further to go before we get it right, that is not to belittle the contribution which the Commission has made.
At the core of the Commission's proposals is what is said about the procedures that undertakings should adopt in their purchasing. A considerable effort has been made to ensure that undertakings which need to act commercially have a degree of flexibility. Except in particular circumstances, which are listed, there has to be what is described as a call for competition. But this need not involve an advertisement before each contract is awarded. It is permitted to select participants in a competition from among those who ask for information relating to particular contracts which are mentioned in a so-called periodic indicative notice.
Participants can also be selected from lists of qualified buyers provided that those lists are established following advertisements and on the basis of objective criteria. Unlike Government Departments and local authorities, the undertakings covered by the present proposals would be allowed to choose which of particular types of procedures to use for a particular contract. This means that, besides being able to accept tenders from anyone who responds to an advertisement or inviting firms to tender from those which apply to participate, an undertaking can negotiate the terms of a contract with one or more firms chosen on the basis of a call for competition.
There are problems, none the less, despite the Commission's efforts and I wish to say a few words about the difficulties which the Government see in the Commission's proposals. Then I want to describe ways in which I hope the proposals can be developed.
I will begin with what they cover. The Commission's intention is to cover those areas of activity where there are barriers to competition, and Governments may have a capacity to influence procurement. Since, in the Commission's view, it is impossible to measure these factors, it had to find criteria for determining which undertakings or classes of undertakings should be covered. It has chosen for private sector undertakings the possession of special or exclusive rights granted by the Government. It has chosen as relevant activities the management of a network or the exploitation of a given geographical area. The latter brings in exploration for natural resources and the exploitation of them. In the United Kingdom many of the undertakings that would be covered will be in the private sector and will be responsible to their shareholders for getting value for money in their procurement. In itself that will not let us justify their exclusion from proposals which will be adopted only if other member states believe they are getting broadly equivalent procurement covered in each country. But where there is strong competition the need for applying detailed rules is far from clear, particularly in the case of upstream oil and gas, and the United Kingdom has therefore opposed its coverage by the Commission's proposals. Whichever sectors we may be thinking of, the present proposals contain elements of bureaucracy which the Community would do well to avoid. This is partly a matter of the timetables laid down for the various contract procedures. These are based on those in the new supplies directive which came into force this year. In the industries now involved they could easily lead to costly delays. Then there is the need for undertakings to notify the Commission of activities not covered by the proposals in
Column 269order to obtain exemption. This applies also to purchases intended for selling on to third parties. Purchasers baulk at the information systems they would need to set up and at the possible need to qualify large numbers of potential suppliers. Clearly there has to be a balance with the interests of suppliers, who need to have information in order to compete and time in which to do so. But there are parts of these proposals which cannot be justified on that basis. The proposals require purchasers to base their specifications on European standards where they exist. These standards, once they have been adopted, have to be implemented by national standards bodies as national standards. The Government fully support the development of European standards, which we believe have an important part to play in the development of the single market. We have accepted the principle of making standards mandatory in the supplies and works directives for purchases by Governments and by local authorities, but we cannot so easily do so for purchasers which are commercial undertakings. Many of them have important responsibilities for the safety of their operations, which in the case of the energy industries are among the most hazardous in the world. They need to be able to give due weight to professional judgments.
It is possible that some of the difficulties in this area have arisen from a lack of understanding as to what the proposals mean. We do not know for certain how far defining by reference to a standard prevents a purchaser from going further to describe his own particular requirements. Instead of making standards mandatory, we should encourage the willing acceptance of European standards on a voluntary basis. It is significant that when the Council of Ministers adopted the new approach on standardisation in 1985 its guidelines said quite specifically that standards should retain their voluntary status ; any exceptions should be quite specific and decided on the basis of proven need.
The proposals also include particular constraints with regard to offers originating in major part from countries outside the Community. Purchasers will be required, whenever offers are equivalent, to choose an offer which has at least half its value added within the Community. The proposal goes further and treats offers as equivalent even if the Community offer costs 3 per cent. more. These provisions will not apply to offers of third country origin where the Council so decides on the basis of an agreement between the Community and the Third country concerned. We understand and share the Commission's goal of achieving a wider understanding on procurement in the sectors covered by the proposal. We support the work being done in the GATT to broaden the existing agreement on Government procurement. We want to avoid unnecessary intervention in the operation of commercial undertakings.
Mr. Teddy Taylor (Southend, East) : Will my right hon. Friend say clearly whether the Government support the proposal in article 24 that empowers any purchasing agent throughout the Community to reject contracts from America, Japan, the Middle East or anywhere else, simply on the basis that half the information of goods to be provided comes from outside the Community? Does my right hon. Friend agree that that is simply another example of blind protectionism and of fortress Europe that I
Column 270understood the Conservative party and the Conservative Government to be against? Will he endeavour to get rid of that wretched article and ensure real free trade?
Mr. Brooke : I hoped that my hon. Friend would infer from the tone of my remarks that the Government share his views in seeking to prevent Europe developing as a fortress Europe in the way he suggests. In that respect, we are at one with my hon. Friend.
Mr. Taylor : Will my right hon. Friend endeavour to remove article 24 or will he not? Does the Conservative party believe, or does it not, that article 24 is contrary to everything for which Conservatives stand, and that it should be removed? It is all very well talking about the Government's general intentions, but what are the views of my right hon. Friend and of the Government on article 24?
Mr. Brooke : In my earlier answer, I sought to convey to my hon. Friend that we are at one with him in seeking to prevent protectionism being developed in respect of the puchasing arrangements. Earlier, I alluded to the fact that the Government are opposed to such a proposition.
Mr. Dennis Skinner (Bolsover) : As the right hon. Gentleman will not answer his hon. Friend's specific question, and as he is not just a Minister but Chairman of the Tory party, will he confirm that the Government's anti-Common Market tirades of the past few weeks are nothing short of electioneering until 15 June, that when that date is passed the right hon. Gentleman will not be at one with his hon. Friend the Member for Southend, East (Mr. Taylor), and that the Government are just playing games for about a month?
Mr. Brooke : I am conscious that the hon. Member for Bolsover (Mr. Skinner) is also the chairman of a political party. My understanding is that the hon. Gentleman's party also has difficulty in determining its position on Europe. I understand the hon. Gentleman's views, but I understand also that attack is the best form of defence. The fact remains that, as we all know, there are problems on the Opposition Benches--
Mr. Frank Haynes (Ashfield) rose--
Mr. Brooke : Industry has shown considerable interest, which I believe is because the stakes are so high. The extent to which member states will open up public procurement will be a litmus test of commitment to the single European market. The stakes are high for purchasers, in that they
Column 271face administrative costs that they do not believe to be necessary. Suppliers share that concern but insist that any measures introduced must be enforced effectively. They want a prominent role for the Commission and a complaints system that they can invoke without drawing attention to themselves. Purchasers want any measures that are adopted to sit well with good purchasing practice and not involve unnecessary constraints or introduce new uncertainties. Suppliers need confidence that it is worth their while to try to break into new markets. Both purchasers and suppliers point to the need to be able to build up relations with each other. This can be handled in ways which do not involve discrimination but which the Commission's proposals would obstruct.
Suggestions for improving the proposals have been many and various. We are grateful to all who have provided them. Many of those who have commented have wanted the values above which contracts would be covered to be raised. They have said that thresholds could be found which would make a significant reduction in the number of contracts which are covered--and hence the administrative burden--while still catching a high proportion of the value. On the other hand, some of those who have commented have wanted to keep the thresholds low so that small firms can benefit. Many have said that the system most likely to be effective is one which is in line with business methods. They want the system to call for changes in commercial practices only to the extent that is necessary to show that purchasing is conducted without discrimination.
The CBI, which has played an important role in bringing purchasers and suppliers together to discuss the opening up of procurement, has come out in favour of a system of audit. Others have reached similar conclusions. Such systems offer a means of achieving the Commission's goals by way of adapting firms' own procedures and not imposing new ones on them ; of avoiding unnecessary regulation ; and of providing assurance to suppliers that the objectives of equal opportunity and fair consideration are being achieved.
Other member states, as well as ourselves, have difficulties with the current proposals. We believe that the difficulties are such, and the importance of taking action so great, that it is necessary to develop the line of thinking I have just described to complement that in the proposals put forward by the Commission. The basis of that thinking is that methods can be found of ensuring non-discriminatory purchasing by laying down principles which can be followed instead of detailed rules. The principles would form the basis of independent tests of purchasing procedures which, if satisfactory, would be accepted as enabling an undertaking not to follow the detailed rules. The independence of the tests would be important.
The most basic requirement would be that suppliers throughout the Community should have the same opportunity to be considered for contracts. That means that they must have proper access to qualification procedures. There must be objective criteria for the selection of candidates to tender and for the award of the contract. Single tendering should be avoided wherever possible, and purchasers should try to ensure there are enough participants in a competition to make it genuine.
Column 272Reasonable time limits must be set for potential suppliers or contractors to apply to participate in competitions and to submit actual tenders.
That should not be all. The principles should also cover such points as whether contracts are advertised in large blocks or whether newcomers are given a chance to compete for manageable portions. They should cover the extent to which information is provided to candidates whose applications to bid are not accepted or whose tenders are rejected. They should also include the handling of negotiations in such a way as not to distort competition.
Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak) : Night after night, week after week, just after the 10 o'clock vote we have to discuss Common Market recommendations. Does my right hon. Friend agree that if we are to have sensible debates on these awful matters, it would be better if each week we set aside an entire day for discussing the various EC recommendations? Although the way in which my right hon. Friend read his speech did him great credit, he did not seem to agree with what he was saying any more than the rest of us did. If we are to discuss this rubbish week after week, would it not be a good thing if we had one day in which to discuss what is happening to the country, instead of these measures being shoved in surreptitiously late at night, when we all know that, like death by a thousands cuts, the country is being cut down by one measure after another?
Mr. Brooke : My hon. Friend's question should be addressed to the business managers rather than to me. But as I see the Chairman of the Scrutiny Committee the hon. Member for Newham, South (Mr. Spearing) sitting opposite me, I should stress that a quite separate dialogue takes place between the Chairman of the Scrutiny Committee and me to ensure that appropriate debates are conducted at an opportune moment in the process. I hope that the hon. Gentleman will agree that we are fulfilling that obligation on this occasion.
The principles could also include the extent to which information was made available for the benefit of subcontractors and small firms.
In short, we are talking about a professional code for purchasers. It is likely to need to be supported by guidelines. These would help both those engaged in purchasing and those whose task is to test their observance of the code. Purchasers would be saved from having to observe detailed rules which may or may not fit their particular circumstances. But they would have an interest in demonstrating that the way they conducted their business was in accordance with the kind of principles I have outlined. If they failed to do so, they would have to follow the detailed rules.
There are a number of questions which need to be resolved before the system that I have described could be set going. They include the way in which the principles are formulated and whether they are included in a directive or perhaps in a European standard to which a directive might refer. They concern the method and frequency of testing, and include the possibility that the Commission might institute special checks on the basis of complaints. They include the identity of those who conduct the tests, who in the last case I have mentioned might be engaged by the Commission. There must clearly be a rigorous form of accreditation so that high common standards are applied.
Column 273As well as all this, it will need to be decided how information should be provided to suppliers. One possibility would be for the Official Journal of the European Communities to give publicity to the issue of certificates attesting to satisfactory procedures. This could be done alongside notices informing suppliers of the types of purchases being made. Information could also be given through the Official Journal whenever a qualified audit report or the loss of a certificate triggered a requirement to follow the detailed rules. We see work of this kind as benefiting all who have an interest in procurement. Purchasers should be able to avoid the disruption to their normal purchasing procedures which the current proposals may involve. Suppliers would gain, since they would know that purchasers needed to act responsibly in order to maintain their freedom from regulation. The less the degree of regulation, the greater the economic potential which the single market will release.
I have dealt at some length with these ideas because I believe that they point to how the Community can achieve the objective of open procurement. We are putting them to the Commission with the suggestion that it takes them forward as part of the next stage in developing the present proposals. Other work that must go forward includes that on the detailed provisions of the rules now before us, which we see as being available as an alternative to audit and as applying in cases where audit proves unsatisfactory. Then there is the question of ensuring that there is satisfactory compliance with the rules. The Commission is producing a further proposal on this, with suggestions which we understand will be different from those in the proposal relating to the supplies and works directives which we debated a fortnight ago.
The Internal Market Council has not so far had a detailed discussion of the proposals. Working group discussions took place in December, January and February. The real preparation for the common position has to await the European Parliament's opinion. If this is delivered at the plenary next week, it is expected that the Commission will submit modified proposals in June-July. This will enable the incoming French presidency to work for a common position in, say, November. If this target is achieved, it will be possible to get the directive adopted by June 1990. This was the objective set for works in the excluded sectors when the Internal Market Council agreed a common position on changes to the works directive last autumn. This timetable could be upset if the European Parliament decides next week to send the proposals back into Committee. This could happen as a result of the very large number of amendments understood to be tabled.
The proposals are subject to qualified majority voting, with unanimity required for the Council to amend the proposals against the wish of the Commission. In practice, the Commission may itself amend the proposals if it sees difficulty in getting a qualified majority for them.
We believe that, against this background, our contribution to the debate in the wider Community is timely. We are still at a relatively early stage in the legislative process in the Community so far as the present proposals are concerned. Nevertheless, much has to be done in a relatively short time to ensure that the directives which are adopted are those which produce the fullest benefits.
Column 27410.39 pm
The Opposition feel that--give or take a few points that I shall make later --the motion would have been improved by the addition of the amendment : it would then have commanded our support. The Paymaster General has explained admirably the details of the rules and regulations in the European Community documents and the supplementary explanatory memorandum submitted by Her Majesty's Treasury. I hope that he will forgive me if I do not take up his explanation and argue with him about whether individual details should or should not have been included, and how his Department should proceed in negotiations with the Commission later this year.
The motion asks the House to endorse
"the Government's view that the broad approach of the Commission should be supported".
That surprised me. Judging by what the papers have said over the past two or three days, I thought that nothing was less likely than a Government motion asking the House to support the broad thrust of the Commission's proposals.
An article in today's Guardian having caught my eye, I wondered where the motion could have come from. It certainly could not have come from the hon. Members for Southend, East (Mr. Taylor) and for Thanet, South (Mr. Aitken), both of whom are present. The Guardian describes them as "night watchmen", and indeed they are : every time I have attended a debate on European Community documents late at night, they have been in their places. Could the motion have been tabled by members of the No Turning Back group-- identified by the article as the hon. Member for Southampton, Itchen (Mr. Chope), the Parliamentary Under-Secretary of State for the Environment, the hon. Member for Mitcham and Morden (Mrs. Rumbold), the Minister of State, Department of Education and Science, and the Economic Secretary to the Treasury. Perhaps the Paymaster General can enlighten us. I did not really think that Ministers would put down such a motion, but the article went on to mention yet another group in the Conservative party--the Bruges group-- and I wondered whether members of that group could have persuaded the Government's business managers to put it down. But the only member mentioned was the hon. Member for Stafford (Mr. Cash), and having thought about it I decided that that was not the answer.
Certainly members of the Tory Reform group would not have been allowed to table such a motion. Perhaps it was the Prime Minister, I thought ; but, if history is to be believed, the Prime Minister does not look at such motions very carefully. There is usually a fuss at some stage when she realises that something has been done, says, "I must put a stop to this" and tries to make changes too late. I suspect that the motion has been put down because no one in the Government has paid much attention to it, and it has been tabled by some civil servant who has been allowed to draft it because the matter does not fall neatly into any one Department. The Treasury led and still leads negotiations on amendments to the existing supplies and works directive, and this proposal is basically an extension of that directive, but it is also concerned very much with matters relating to the Department of Trade and Industry. It does not surprise me, therefore, that the Government do
Column 275not seem particularly interested in what the motion contains. Certainly, if some of the Conservative Members who have been quoted in the newspapers had their way, I doubt very much if such a motion would have been tabled at all. Conservative Ministers, ex-Ministers and ex-Prime Ministers are more interested in squabbling among themselves about which way the Common Market is going than in looking after the nitty- gritty of ensuring that, as we are now in the Common Market, the Government look after our interests and ensure that we do not lose by default.
The Prime Minister has declared that battle has been joined over the pace of political and economic change in the European Community. But the right hon. Member for Old Bexley and Sidcup (Mr. Heath) has told her that she is talking absolute rubbish about the advance of a Socialist super-state. That allows other hon. Members to join in. They were in their places a little while ago, but as soon as the Paymaster General stood up, they left. The hon. Member for Luton, North (Mr. Carlisle) said that the right hon. Member for Old Bexley and Sidcup should be put out to grass. The hon. Member for Macclesfield (Mr. Winterton) said that what the right hon. Gentleman had said was beneath contempt. [Hon. Members :-- "Hear, hear."] I hear Conservative Members saying "Hear, hear". Clearly, there is no moderation or sensible argument. I do not know whether my hon. Friend the Member for Bolsover (Mr. Skinner) is right in this matter, but I suspect that there are the seeds of real discontent in the Conservative party at present. I foresee that as soon as the European elections come near, the Government will put a stop to the squabbles in the newspapers. The country is no better for these disagreements, because the Government are squabbling among themselves about the way forward within the European Community.
Mr. Jonathan Aitken (Thanet, South) : May a veteran night watchman, as The Guardian and the hon. Gentleman kindly called me, help with this long, rambling whodunnit? One would think that the hon. Gentleman came from a party that had never known internal argument or squabbling. I remind the hon. Gentleman of the words of Milton : "who ever knew Truth put to the worse, in a free and open encounter?"
In our party, we are studying the phrases in this bran tub of a motion, which says :
"the broad approach of the Commission should be supported but changes are desirable to prevent the imposition of unnecessary burdens".
There is plenty to argue about, so everyone can eventually unite in supporting the motion.
Dr. Marek : I agree with the hon. Gentleman that there is plenty to argue about, but some of us are surprised by the personal nature of some of the comments. The Opposition are no strangers to such arguments, but even we have been surprised by the personal comments. That is the difference between us. I do not believe that the country is being well served as a result of the argument among Conservative Members. While the argument is going on in this country, important decisions are being made in Europe in which we should be involved. We should be negotiating for the benefit of this country. There is no moderation here.
Column 276Like the Prime Minister, when I stand on Westminster bridge, I see the skyline of Parliament. But when I turn round I see the empty shell of county hall, the building that housed the regional strategic local government authority, which was abolished by this Government. One sees the architecture of liberty from Westminster bridge, but with a turn of the head one sees the architecture of a Government who will brook no dissent, suffer no argument and listen to no different points of view. We have to remember that attitude when considering the proposals before us.
Can we really believe that the motion means
"that the broad approach of the Commission should be supported"? I suspect the same will happen to these proposals as has happened to the proposal to introduce tougher health warnings on cigarette packets. The Government allowed the proposal through because one Department did not know what another Department was doing. Lo and behold, the Secretary of State for Health disrupts the efficient working of the Commission--and there is no harm in any bureaucracy or administration that we set up and for which we pay taxes working efficiently-- [Interruption.] This is relevant to our debate on procurement. It is precisely the attitude of the Conservative party to issues in Europe that suggests what it may do on this issue in due course.
The Secretary of State for Health disrupted the efficient working of the Commission by an 11th hour change of mind, no doubt after an argument in some Cabinet committee. The same situation has arisen over the EEC scheme to encourage foreign language teaching in British schools. Proposals were almost ready and had almost been agreed to by the United Kingdom when a sudden turnaround undid a great deal of effort and threw everything into chaos. One should not think that it will end there and that that turmoil will not be repeated with the present proposals for a Communitywide pass for pensioners which would give them an automatic right to concessions that would be offered to retired people throughout the Community-- [Interruption.] It has not gone through in the United Kingdom. The problem that we face is one of inattention and hostility by the Government to many of the attractive measures that are proposed by Brussels--
Mr. Beaumont-Dark : Does the hon. Gentleman agree that last week the hon. Member for Peckham (Ms. Harman), the Opposition spokesman on health, tried to pick things like currants out of a bun, some things that she liked and some that she did not like? Tonight the hon. Gentleman has said that the Opposition like some directives, such as that on smoking, but that they do not like others. Should not the Opposition make up their minds about whether they stand with us, who think that some things are for this Government to decide and are not to be interfered with by the Common Market in Brussels? You cannot have it both ways ; you either stand alongside us in believing in Great Britain or you stand alongside those weary people in Brussels who stand only for Brussels. The Opposition must make up their minds about whether they stand with Britain or with Brussels. I am tired of these debates where too often you stand one day on one leg, one day on another, and on the other day you seem to be suspended in mid-air. Where the hell do you stand?
Dr. Marek : I suspect that every Opposition Member, except perhaps the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) from the Social and Liberal Democratic party, voted against entry into the Common Market 20 years ago, but we now have the good sense--
Dr. Marek : We have the good sense to see that, although we should keep our options open about what may happen in the future, while we are in the Common Market we should do the best that we can to get the best for this country out of the Common Market, which seems something that the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) will not recognise.
The European proposal for language teaching throughout Europe--
Mr. Deputy Speaker : Order. The motion before the House relates to procurement procedures for the water, energy, transport and telecommunications sectors. I do not see how language teaching comes into it.
Dr. Marek : I accept your stricture, Mr. Deputy Speaker. The hon. Member for Selly Oak asked me a question that perhaps I cannot answer about why the Opposition can accept some proposals but not others and he asked about where we stood. In view of your comments, Mr. Deputy Speaker, I shall not seek to go along that road but it is important to note that the Conservative Government have said that a number--I shall not mention them-- of attractive proposals--attractive to most people in the country--will not be applied in the United Kingdom. That is where the Opposition part company with Conservative Members who inhabit the Government Benches late at night for such debates.
Mr. Edward Leigh (Gainsborough and Horncastle) : I appreciate that the new-model Labour party is unwilling to take a stand on any issue for fear of irritating any group of voters, but perhaps the hon. Gentleman could tell us whether the official Labour party supports or opposes the motion. The hon. Gentleman still has not told us.
Dr. Marek : In that case I shall go back. I said at the beginning of my remarks-- [Interruption.] I will not start again, but I shall just quote one sentence. The hon. Gentleman must have been asleep. I said that, with the amendment, the motion was a reasonable one and it would have been accepted by the Opposition.
I do not believe that there is any point in ritualistic denunciation of the Common Market, when proposals have been put forward, which may or may not become directives and which we have a chance of improving. However, the Government do not do their job. They leave the proposals alone, so that they end up being unsuitable
Column 278for this country, and then they complain at the 11th hour that we have been robbed. Frankly, the people of this country are fed up with such an attitude. They wish that the Government would enter into negotiations and get something right for once for this country. The problem that we face is one of inattention or hostility by our Government to many of the attractive measures proposed by Brussels. We also face the same inattention or hostility by our Governmemt to many of the not-so- attractive measures. The problem is that this measure could be made attractive, but it needs detailed examination by the Government, which must be followed by persistent and careful negotiation to ensure that the finished product is right for us in the United Kingdom.
Why, for example, are the standards used in our offshore oil industry not the basis of the relevant part of the proposals? Why are the present discussions in the European Community dominated by the French and the Germans, with very little British input? That criticism can be levied in other areas, too, because it is a general one. Why is so little said about safety? The dangers are clear, but standards will be set that will put our industry at a disadvantage and will involve it in considerable expenditure in order to comply with any eventual directive. Safety standards may be allowed to fall in those of our industries that take a pride in their safety record.
We urge the Government to accept that we are members of the European Community and to take a vital and necessary part in framing the legislation, so that it is good for the European Community and good for the United Kingdom. It is no good creating chaos at the 11th hour. That gets us a bad name, it impedes the work of the Commission and it stops our people receiving benefits from the European Community that could be available.
The proposals clearly need to be adjusted to lessen the bureaucracy and paperwork. We must also be satisfied that covert subsidy by national undertakings and vertically integrated industries will be kept to a minimum. That is especially important where a company or undertaking has exclusive or monopoly rights and, therefore, considerable freedom to choose a tariff for the customer.
Lower standards should not be accepted and more attention needs to be paid to safety. There is a need to get the balance right, because it is not just a question of insisting that the suppliers hold all the aces and not the nationalised undertakings and private companies supplying services to the consumers. The nationalised undertakings and some private companies have a duty to provide a service to the public. They should be able to do so after the proposals are enshrined in the form of a directive.
Column 27911.4 pm
Mr. Quentin Davies (Stamford and Spalding) : We have just been treated to a model of the discursiveness and obfuscation in which the hon. Member for Wrexham (Dr. Marek) specialises. I rise to speak because the subject before the House is far too important for us to permit the essentials to be lost in a fog of muddle or theology. Let me start by trying to situate the importance of the subject in terms of figures. I apologise for not having a copy of the Cecchini report which quotes the figures. The Table Office does not have a copy, so I must quote the figures from memory. They will be fairly exact, but the figures that I committed to memory were in dollars and I shall not risk turning them back into ecus.
Out of a total domestic product in the EC of around $4 trillion at the present time, public procurement of goods and services amounts to more than $600 billion--about 15 per cent. of the Community's total income. Rather more than half that sum--$350 billion or $400 billion--would be suitable for international procurement. At present, only about 5 per cent. of that figure--about $30 billion--is procured by public sector organisations in the European Community outside the frontiers of the nation state in which that public sector institution or purchaser is located.
One sees immediately from those broad figures, which I believe to be approximately correct, what enormous scope there is for increasing competition. We have a competitive vacuum in public procurement in the EC. That is undesirable, dangerous and expensive for us all. The Cecchini report has attempted to estimate exactly what the savings would be if we introduced competition into this currently closed sector. It estimated that the consequences would be a saving of about a half of 1 per cent. of total domestic product in the Community, or approximately $20 billion, or £12 billion or £13 billion at the present rate of exchange--a substantial amount of money.
It might be useful briefly to touch on some of the key sectors, many of which are important for Britain and which have suffered from nationalistic public procurement up to the present time.
I shall take a few examples which will immediately illustrate their great importance for our industry. One is telecommunications. I think that I am right in saying that in neither Britain, nor France nor Germany has a public switching system yet been purchased from a supplier outside those countries. British Telecom has always bought from Plessey or GEC. The Bundespost has always bought from Siemens or SEL or another German supplier, the French from Alcatel, and so forth. They have never gone across their frontiers to procure public switching equipment from a non- national supplier.
There has not been a single case of substantial turbines or generators, or other major equipment for a power station, whether nuclear or conventional, being procured in Britain, France, Germany or Italy outside their own countries. No traction locomotive for a railway system in any of those countries has ever been procured from outside.
Although the nationalistic procurement may not be absolute in other sectors, it has been high. One has only to think of the procurement of hospital equipment or computers and other information technology within the public sector in the different EC countries. This all represents areas of industry which are crucial for
Column 280employment and for the future of technological progress and which have not been exposed to the sort of competition to which they should have been.
As a result, three great costs to our economy have arisen. First, there is the financial cost of having to pay higher prices than we would if there were genuine competition in the procurement of this type of equipment or the associated services. [Hon. Members :-- "How much?"] I am asked how much. I would refer the hon. Members who asked this pertinent question, for which I am grateful, to the estimates in the Cecchini report. They might find it enlightening and enlivening bed-time reading when they leave the House this evening.
Secondly, we incur costs through the loss of impetus to technological progress which result from the absence of competition. Conservative Members certainly recognise that one of the great spurs to technological progress is competition--the supplier's need continuously to seek to improve his product to gain a competitive edge.
Thirdly, we lose because of the absence of the supply side shock, from which industries would otherwise benefit. That is the simple need for both management and the work force to get up a little earlier in the morning, go to bed a little later at night, to take things a little less for granted, to cut their costs, and to improve their products and marketing skills. If we can open important British industries to this new blast of competition, we shall provide them with the sort of supply side shock which has been so effective in other sectors of the economy which have performed so well under the Government that we are pleased and proud to have.