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Grand Committee

Wednesday, 14 January 2015.

Small Business, Enterprise and Employment Bill

Committee (3rd Day)

3.45 pm

Relevant documents:11th and 13th Reports from the Delegated Powers Committee

The Deputy Chairman of Committees (Lord Brougham and Vaux) (Con): My Lords, if there is a Division in the Chamber, the Committee will adjourn as soon as the Bell rings and resume after 10 minutes.

Clause 38: Regulations about procurement

Amendment 35D

Moved by Lord McKenzie of Luton

35D: Clause 38, page 35, line 17, at end insert—

“( ) The Minister for the Cabinet Office or the Secretary of State may by regulations ensure that the provisions detailed in this section will not undermine the impact of the Localism Act 2011 and the Public Services (Social Value) Act 2012 and shall have due regard to—

(a) local authorities’ duty to promote economic growth in their relevant area;

(b) local authorities’ duty to promote skills development in their relevant area;

(c) advertising and procurement tender period appropriate to the size of the business to ensure a secure procurement process;

(d) the potential harm caused to local companies and businesses by the relevant contracting authority’s choice of supplier through the procurement process.”

Lord McKenzie of Luton (Lab): My Lords, I shall speak also to Amendments 35K and 35S. These amend Clause 38, which currently provides for the Secretary of State or the Minister for the Cabinet Office to make regulations imposing duties on contracting authorities in relation to procurement functions. Ministers would have the power to issue guidance, to which contracting authorities must have regard. Contracting authorities for this purpose include Ministers, government departments, devolved Assemblies, fire and rescue authorities, and local authorities of all varieties but do not include an authority whose purpose is mainly devolved functions. Such definitions derive from the 2006 regulations, which implement the previous public sector procurement directive.

The power can be used in a variety of ways to impose obligations relating to supposedly efficient and timely procurement, duties relating to the process by which contracts are entered into, information flows and documentation, as well as the accepting of electronic invoices, the latter in advance of the anticipated e-invoicing standard to be adopted at EU level.

Concern about these provisions has been highlighted by the LGA in particular. The fear is that the powers might be used to centralise procurement and introduce

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a one-size-fits-all approach, impairing councils’ ability to procure strategically and according to local circumstances.

Local government can already claim to be the best-performing part of the public sector when it comes to procurement. It primes suppliers on time, places almost half its business with local SMEs and uses procurement to consider how it can improve the economic, social and environmental well-being of communities. Amendment 35D seeks to ensure that the exercise of the powers in Clause 38 do not undermine, and have due regard to, local authorities’ duty to promote economic growth and skills development in their areas, that advertising and procurement tender periods are appropriate, and that the potential for the harmful local impact of central procurement processes is avoided.

The Government’s approach, I understand, stems from the second report of the noble Lord, Lord Young of Graffham, who I am delighted is with us today. The report, entitled Growing Your Business, was expressed to be a report on growing micro-businesses in particular. It instanced the £230 billion spent on goods and services across the whole public sector and the potential transformational effect that could be had on SMEs and micro-businesses if they could win a share of the market.

The noble Lord recommended that all parts of the public sector agree a set of single-market principles. He seemed to have in his sights pre-qualification questionnaires and what he termed the gold-plating of training and health and safety policies. His common principles included the removal of all PQQ requirements for contracts below the EU threshold, with a single standard PQQ above the threshold, locating all contract opportunities in a single place and standardising all the payment terms. I understand that these changes are being implemented through the 2015 regulations, which are the UK’s transposition of new EU procurement directives and are seemingly not dependent on the provisions in this Bill. Can the Minister clarify whether the transposition regulations can be subject to an imposition under Clause 38?

The Government consulted beyond this in October 2014 and we are blessed with a Cabinet Office policy statement dated 12 January and draft illustrative regulations on similar policy measures, a pre-procurement engagement with suppliers and applying lean sourcing principles. The paper also sets out the government view on a range of other procurement issues to which Clause 38 might apply.

I draw the Minister’s attention to a briefing we had from the LGA about the use of pre-qualification questionnaires. It says that councils sometimes need to use pre-qualification questionnaires in lower-value procurements to deselect suppliers, particularly where a large supply chain exists; for example, in construction or ICT sectors, or where there may be issues of safe- guarding and tendering. A smaller number of suppliers reduces the potential risks for vulnerable people. How does the Minister respond to that concern?

We are wholly supportive of harnessing public sector procurement to create significant business growth opportunities through increase participation for small and medium-sized businesses, but local government

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already has an environment and a procurement framework in place and it is very important that Clause 38 and its potential use does not undermine this. The Local Government Act 1999 places a best value duty on local authorities. In addition, a duty to consider how the services they commission and procure might improve the economic, social and environmental well-being of an area is placed on a range of public bodies by the Public Services (Social Value) Act 2012. Moreover, the LGA has developed a national procurement strategy for local government in England which not only encourages the making of savings but supports local economies.

I refer the Minister to the executive summary of this document and, in particular, references to the importance of including economic, environmental and social value criteria in all contracts. On improving access for SMEs and voluntary, community and social enterprises it says:

“Councils should ensure a wide range of suppliers are encouraged to do business with them through use of portals to advertise tender opportunities. Barriers to doing business with the council removed without compromising due process. SME’s and VCSE’s are encouraged to identify potential ‘partners’ with whom to form consortia to bid for council contracts”.

To what extent is it considered that the existence and operation of Clause 38 will remain entirely consistent with the national framework that the LGA and local councils have developed?

We should be mindful of the current appetite, in different ways across the political parties, for devolution of powers and fiscal responsibility to local authorities. This is supported by provisions in the Localism Act 2011, but I caution that the term “localism” could not reasonably be applied to all its provisions. Some of the provisions in the so-called Localism Act are quite the reverse. This devolution is currently proceeding partly by way of city deals, which we support, and gives increased local control to enable more flexibility to respond to local priorities, particularly skill shortages. As a party, we have proposed more extensive devolution, at the level of £6 billion a year, to cover skills, housing, transport and business support.

Our Amendment 35S provides that nothing in Part 3 should affect the principle of localism and the duty of best value placed on local authorities. As the LGA points out, all the evidence shows—and there is compelling evidence across a wide range of issues—that taking decisions closer to the people affected achieves better results and saves money. The economic benefits of devolving powers to local areas are too big to ignore.

Our amendments seek to ensure that these benefits are not undermined by a centralised procurement policy. Figures supplied by the LGA point out that there is little evidence that measures undertaken by central government—for example, lean procurement processes—have significantly increased spend on SMEs, which is less than 14%, compared with council spend at 49%, unless the Minister can produce some evidence for us. As for reviewing the manner in which pre-procurement market engagement has taken place, can the Minister explain how this proposal is consistent with a localist agenda?

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We would not seek to deny this clause, but we need to be assured that it will not impede the substantial progress that has been made in devolving powers and resources to local authorities and the benefits that flow from this. I beg to move.

Lord Whitty (Lab): My Lords, I have two amendments in this group. I completely endorse what my noble friend has said and will not repeat it at length. However, I think that the Government need to rethink this area.

Clauses 38 and 39 give the Secretary of State substantial new powers to impose new, ill defined duties on how local authorities do their central business. In my view, and as my noble friend has said, this is contrary to the spirit of localism in which this Government came into office; to the successes, such as they are, that have been achieved under the better value regime; and to getting local authorities to take responsibility for their own procurement and ensure that their procurement practices benefit firms within or close to their local authority area, particularly small firms. On local authority procurement, local authorities are much better at ensuring that small companies have a share of the cake, compared with central government, its agencies or large private firms.

My Amendments 35E and 35T exempt authorities that are already under a better value regime from the effect of both clauses. In some ways, it might be tidier to delete these two clauses entirely. They certainly do not seem to enhance local government or play to the localism agenda. When the Government first came in, not only did they bring in the Localism Act, they took some of the more directional requirements out of the previous best value regime, which had been there under the previous Government—quite rightly, in most cases. We need to recognise that there is a demand for decisions to be taken much closer to where they will have an impact, for local authorities to have a wider responsibility for their local economies and, therefore, for the procurement practices and outcomes under local authorities to reflect the needs and the economic structure of their areas.

Some of the provisions in these clauses suggest a uniformity under the regulations, as in Clause 38(5), for example, which would lay down very precisely how local authorities went about their business. The alternative must be for central government, perhaps, to offer within the best value regime or equivalent more substantial guidance to local authorities. The LGA is already providing substantial guidance to local authorities. However, these new clauses suggest a degree of centralisation that local authorities will resent, which will increase the bureaucracy and red tape on local authorities in an already centralised England—the most centralised country in Europe. We are proposing to ensure that one of the main duties of local authorities would, in effect, be run on what, in the olden days, we might have called the Napoleonic method of laying down centrally the way that local and regional government operate.

This is unnecessary. It may well be that a little more guidance from the centre may be helpful, but to lay that down in law and then, in Clause 39, to provide for a new and draconian inspection of how local authorities are carrying out their duties, is well over the top. It is

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also contrary to the way in which the Government came in and to the localism agenda, to which we are all supposed to be committed.

4 pm

Lord Hodgson of Astley Abbotts (Con): My Lords, my Amendment 35X draws attention to the importance of the Localism Act and the Public Services (Social Value) Act by adding a new clause after Clause 39, in part in parallel to some of the remarks made by the noble Lords, Lord McKenzie of Luton and Lord Whitty. I find their arguments not entirely without foundation but I hope they will forgive me if I say that I do not find them especially nuanced to reflect the reality on the ground. I will take a few minutes to explain why I have reached that conclusion and then ask my noble friend to put some flesh on the bones of the philosophy behind what the Government seek to achieve.

My interest in this topic arose from my appointment by the Cabinet Office as the chairman of a task force to look at aspects of government regulation that affect the growth of smaller charities and voluntary groups. The report that we produced, entitled Unshackling Good Neighbours, focused on three things: what stopped people volunteering; what stopped people giving money at an individual level; and what stopped charities and voluntary groups growing. It identified a number of factors about why these groups were inhibited. High among them was the question of commissioning by the Government both at national and local level. I was very pleased to see that this issue had made it into the Bill following further work by my noble friend Lord Young of Graffham, and I referred to the topic in my speech at Second Reading. I was subsequently approached to have discussions with the LGA, which provided me with a draft of Amendment 35X, which I have tabled. I fear that the LGA will not entirely like what I have to say, so I need to put on record my thanks to it.

I understand the point of the noble Lord, Lord Whitty, that the drafting of Clauses 38 and 39 could give rise to concern that the underlying purpose may amount to a land grab by central government. However, I have to say to the Committee that, from my research and my report, all parties at every level have lessons to learn about commissioning, procurement and how to increase local involvement and participation in the communities that they serve. Very often, seemingly perverse decisions by local or national government are not the result of malice aforethought but overly heavy bureaucratic procedures.

Several hundred examples were sent in to us and I would like to touch on three to show the Committee the background to the points I am driving at. The first, from a national point of view, is from a local hospice in Worcestershire that had been providing end-of-life palliative care on a 25-page contract to the local primary care trust. It came to the end of its contract and asked to sign another 25-page contract. It was told that it could not do that any more. The new model contract ran to 130 pages with 111 pages of guidance. When I asked the Department of Health why that was, it was explained that this was a contract for all seasons. You were supposed to take blocks out of it to suit your particular purpose. Of course, the

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PCT had passed on the whole thing and said, “Sort it out yourself”. When this was explained to the Department of Health, one could persuade it to go back to the earlier, simpler model.

At the local level, a London borough sent us a letter saying:

“Voluntary organisations are told we need to move from grant funding to contracting, but too often tenders”,

from local authorities,

“are written with onerous conditions, both in applying and in reporting, for quite small contracts. (I have a 68-page tender we had to complete, together with supporting documents, to provide out-of-school-hours activities for disabled children in one London borough for £10,000)”.

So that amounts to 68 pages for a total contract value of £10,000.

Then again, Solihull SUSTAiN and Colebridge Trust secured a grant for the local authority to deliver a £200,000 project. They were clever enough to secure some pro bono support from a local hotel where they could hold their meetings, as a result of which they were able to make a £600 profit on a £200,000 contract. The local authority spent a great deal of time chasing them to return the £600, which they could have retained or used to build their operation a bit further. So I argue very strongly that there is work to be done in this area and that the challenge is to find the right balance between the one-size-fits-all approach, to which the noble Lord, Lord McKenzie of Luton, referred, which tends to result in overly prescriptive national standards, and local standard setting, which can be equally overprescriptive and in a way that does not necessarily best serve the local community. Behind it all in our research was the risk-averse approach often adopted by many commissioners at local and national level, which disadvantages smaller local charities and voluntary groups.

I recognise the work that the LGA has carried out in establishing a national procurement strategy, to which the noble Lord, Lord McKenzie, referred, but equally I recognise and support the Government’s commitment to localism. I conclude that the best way to find this elusive balance is for the Government to make it clear that these regulations are intended to set standards and yardsticks for good practice, on which local authorities have some flexibility in application. If I may use the “comply or explain” approach, those noble Lords who are familiar with corporate governance will know that those codes lay down standards with which you are expected to comply—and if you cannot comply with them, you have to explain why not. That approach would give the flexibility to avoid the straitjacket of one-size-fits-all and, at the same time, enable egregious behaviour by local authorities to be identified and prevented.

Such statements could be seen to be a little bland, so I should like to put a little flesh on these bones with some examples of the sorts of topics that I hope would be covered by the regulations—my shopping list, so to speak—which would give reassurance to local and national government and to those who will provide the services. The commissioners should work more closely to understand their motivation and the potential value that they can add in their contracts.

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Secondly—I know that the LGA will hate this— the PQQs should be dispensed with. To be honest, the PQQs that I have seen could easily be filled in by the local authority using either Companies House returns, Charity Commission returns, or other local information.

Thirdly, tender documents should be proportionate to the value of the contract being awarded. Too often, as in the example that I have given, very small contracts have very large tender documents attached to them. Commissioners should also think carefully about the number of tenders that they seek, particularly for the small contracts below, say, £50,000 or £100,000. Of course, they have a duty to ensure value for public money, but there can be only one winner. If a commissioner decides that, to avoid controversy, he will accept a large number of tenders, he is inevitably inflicting a degree of economic efficiency and organisational friction on the losers.

The monitoring processes should be fixed for a contract. Too often they are moved in the middle of the contract, which changes the basis for measurement mid-contract and adds an unnecessary strain. The costs of monitoring should also be related to the size of the contract. Last but not least, there needs to be some mechanism for a proper sharing of risk and reward between prime contractors and their subcontractors. Too often the prime contractors take the easy ones and leave the more difficult cases to the sub-contractor.

I appreciate that these are pretty detailed requests, but this is an area where detail matters. The LGA has properly raised concerns about upsetting the balance between local and national government, so an explanation of the philosophical and practical purposes behind these clauses would do much to reassure us. I hope that my noble friend can help on this score.

Lord Young of Graffham (Con): My Lords, I carry the heavy burden of having your Lordships in this Room this afternoon, but I thought it might be worth spending a moment or two on putting the whole picture and where it fits together; otherwise we are in danger of examining the twig and not even the forest.

My responsibility for the past few years has been to encourage small firms—start-up small firms and growth in small firms. Some 18 months ago, I was going round the country inquiring why very few small firms dealt with the public sector. When I was introduced to the dreaded PQQs, I saw that some were 30 or 40 pages long, which small business owners were expected to fill in. I do not exaggerate; they covered areas such as sexism, racism and a whole lot of areas that had very little to do with the work itself. Time after time, I was told by small business people that they would get their tender in, see these documents, put them aside and go on to do something else.

Other problems are dealt with later, such as the fact that the public sector is not the greatest payer in the world and small firms are much more dependent on prompt payment, and the difficulty of finding the opportunities. The invidious part of PQQs is simply that large companies can take them in their stride; they have PQQ departments and people whose job is

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to fill them in all day long. I have no doubt that they have boilerplate answers to all these things. It was about not having a level playing field.

Therefore, what we have done is simple. We abolish PQQs under €200,000 and above that we have a standard PQQ, which will be online, which every firm can fill in. It will resemble a tax return because there will be different sections, depending on the business, so the small firm registers once and the public sector reads it many times. Around the county, I have heard very few complaints, other than from the LGA, about the abolition of PQQs. The measure is designed to give localism its head; it is designed to help local firms get contracts with their local authorities, whereas time after time I have seen them excluded by large companies by the nature of the bureaucracy. We are also mandating payment within 30 days and requiring public authorities to publish the fact that they are doing so.

The essence of all these regulations is about simplifying procurement and getting better value for procurement. From the description I have heard this afternoon, I fail to recognise my own regulations.

4.15 pm

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con): My Lords, I am grateful to the noble Lord, Lord McKenzie, and to the noble Lords, Lord Mendelsohn and Lord Stevenson, for tabling these amendments and giving us the opportunity to debate how these clauses interact with other legislative duties on contracting authorities, which is the nub of this amendment. I also share the noble Lord’s appreciation of the fact that my noble friend Lord Young of Graffham has joined us. I take this opportunity to thank him for all he has done for small firms and for public procurement throughout his distinguished career, and latterly as the Prime Minister’s adviser. My noble friend explained the background but, given the concern expressed by the noble Lord, Lord McKenzie of Luton, perhaps I could add, on the subject of the changes to pre-qualification questionnaires, that these could disadvantage procurements where there are important special requirements. As my noble friend Lord Young explained, we want to remove burdensome PQQs. However, I understand that special requirements can still be built into contract advertisements or the invitation to tender.

For the benefit of the Committee, perhaps I could stand back and try briefly to answer my noble friend Lord Hodgson’s exam question about what we are trying to achieve. I reassure noble Lords that our intentions are focused and more specific than the amendments tabled and the comments made would suggest. While regulations we may make under the Bill should improve standards across the public sector, they will not remove the autonomy of local authorities to run their own processes and take responsibility for procurement decisions. I associate myself with some of the warm words used by the noble Lord, Lord McKenzie, about local authorities. I was glad to hear about the LGA’s work on procurement strategy because I know, from my many dealings with it over the years, that it comes to issues with an innovative and refreshing approach.

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The clauses before us will allow the Government to place some additional obligations on contracting authorities about how they undertake their procurement processes. However, I assure noble Lords that this is not about taking control away from local government procurers, who will remain responsible for securing value for money. Moreover, when making regulations under Clause 38, the Government will ensure that the provisions of other legislation are properly considered and that the regulations do not conflict with them. Frankly, the last thing we would want is to be over- bureaucratic or Napoleonic, in the words of the noble Lord, Lord Whitty. Like my noble friend Lord Hodgson, we would like to see better, simpler documentation that makes contracts more accessible to small business and voluntary organisations. As my noble friend says, we need to bring in standards and yardsticks of good practice, although I am not sure that “comply and explain” would necessarily quite work here.

Turning to Amendment 35D, the Government are committed to both the Localism Act and the Public Services (Social Value) Act. We stand by the principles in those Acts. It is of course important for local authorities to be able to pursue legitimate policies that help suppliers win more business through procurement in support of their local economies. There is, however, a balance to be struck and EU procurement law, which we have implemented in our domestic legislation, places a duty on contracting authorities to ensure that procurements that are above the EU thresholds—essentially, £111,000 in central government and £172,000 outside it—or of cross-border interest, are awarded in a fair, transparent and non-discriminatory way.

To respond to a question that was asked, Clause 38 is not necessary to implement the directive. This is in fact being done under powers in the European Communities Act 1972—I can see that the noble Lord understands that—and we will be bringing forward regulations very shortly. The new Public Contracts Regulations 2015, implementing the EU procurement directive, will make it clear how contracting authorities can achieve policy through procurement in a legitimate way. The regulations will require that the policy to be delivered through procurement is linked to the subject matter of the contract, as well as satisfying the EU principles of fairness, transparency and non-discrimination.

Furthermore, having consulted on the use of the power in Clause 38, we have identified a number of examples on how we might use its regulation-making power. It may help if I mention one or two of those because they might help to meet some of the concerns expressed by the noble Lord, Lord Whitty. One example is of requiring awareness-raising as part of pre-procurement market engagement, which can of course help small businesses; another would be requiring procurement authorities to have due regard to lean procurement principles. This will increase efficiency and reduce timescales. Some of your Lordships will be familiar with these principles, particularly those who have worked in business. I have direct experience of using them on a clothing supply chain exercise to good effect. Of course, it was Dan Jones who did the original pioneering work on lean thinking in the automotive supply chain, which helped our industry to fight back.

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We undertook an open consultation on these proposals and there was support from local government and the Local Government Association. The outcome of the consultation is published on the Cabinet Office website and this includes draft regulations to illustrate how we might use the power. The planned uses are complementary to the forthcoming Public Contracts Regulations that I mentioned. They also complement the existing best value duty created by the Local Government Act 1999, as well as the duties created by the Localism Act 2011 and Public Services (Social Value) Act 2012. We have placed the draft regulations illustrating the use of the power in the Library of the House. The noble Lord has obviously already seen them, but others may not have done.

This is not about centralising procurement. It is about ensuring that high-quality procurement processes are in place across the public sector. We are also looking to establish common standards of good practice, as the noble Lord, Lord Hodgson, was encouraging us to do. The noble Lord, Lord Whitty, suggested that we might be able to deal with this through guidance, but I am afraid that in this area guidance will not be sufficient on its own. The power that we are taking will allow the Government to make targeted changes over time and to place legal obligations on contracting authorities in relation to the procurement functions. I hope that that provides some reassurance and an understanding that this clause will not undermine the localism agenda.

On Amendments 35E and 35T, while we strongly support the aims of best value to make sure that contracting authorities consider overall value, including economic, environmental and social value, when reviewing service provision, we consider that there is scope to improve procurement processes and open up opportunities to smaller businesses. The need to improve procurement processes is supported by findings made by our mystery shopper service, which investigates concerns about procurement throughout the public sector. This service has found that over a third of all its new cases relate to concerns with poor procurement practices by local authorities. Therefore, excluding all local authorities from the scope of the regulation-making power and from the scope of the mystery shopper service would mean that we were not able to help local authorities to improve their procurement practices and investigate mistakes. Nor would we be able to help small business to achieve the share in procurement that we all want them to have.

The additional obligations placed on contracting authorities will be proportionate. We are also clear that they are not intended to take control away from local government procurers, who will remain responsible for securing value for money. Retaining the scope of Clause 39 to include local authorities is necessary to help us to continue to improve procurement practices.

To turn to Amendments 35S and 35X, the Government are, as I said, wholly committed to principles that support development of economic and social issues and which are designed to allow contracting authorities to take account of how their decisions affect local business, the local area, the environment and social value considerations. The amendments are not necessary, as Clauses 38 and 39 do not amend or undermine the Localism Act, the Local Government Act or the Public

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Services (Social Value) Act. The power in Clause 38 cannot be used to amend these Acts or any other primary legislation. While I do not believe that the amendments are required, I am pleased to reassure noble Lords that, when making regulations under Clause 38, the Government will ensure that the provisions of legislation, including these Acts, are properly considered.

Finally, turning to Amendment 35K, I understand the noble Lord’s wish to see contracting authorities report on how they have met their duties under the Public Services (Social Value) Act. However, we do not wish to pre-empt the review of the Act launched in September 2014 and carried out by a panel led by my noble friend Lord Young, which is due to report in the coming weeks. The review is giving detailed scrutiny to the 2012 Act and is considering whether it should be extended and how it might be extended in a way that continues to help small business. The review may make a number of findings and recommendations and obviously it would not be right to second-guess those findings.

I hope that, in the light of these various reassurances, noble Lords will agree not to press their amendments.

Lord McKenzie of Luton: My Lords, I start by thanking the noble Baroness, Lady Neville-Rolfe, for her detailed response. Listening carefully to what she said, I am a bit bemused as to why she feels unable to accept the amendments. There is nothing in them that conflicts with what she has said is the Government’s position. On Amendment 35K, I take the point that if the noble Lord, Lord Young, is in the process of undertaking a review, the wording might pre-empt that. From what the Minister said on timing, I hope that we will have the opportunity to revisit that on Report, as we will have the noble Lord’s report by then.

Can the Minister be more specific on what the problem is with Amendment 35D? If the Government support localism and the Public Services (Social Value) Act 2012, the amendment would simply ensure that due regard is given to the new powers in Clause 38, which are extensive, as my noble friend Lord Whitty said. On the reference to lean principles on procurement, what evidence can the Minister provide that that process has been successful in enhancing SMEs’ share of the public procurement process? That is important and it would be interesting to hear the Minister’s response.

The noble Lord, Lord Young of Graffham, gave us a first-hand exposition of why we have ended up here. My noble friend has further amendments on PQQs, which might be the opportunity to explore that.

Baroness Neville-Rolfe: Perhaps I may say a few things. First, the noble Lord asked why we could not accept the amendments. The difficulty is that we cannot accept amendments without legal effect. I shall think about what he is saying but that seems to be a problem. Secondly, he rightly reminds me that he asked about lean thinking in relation to local government. I do not know the answer today but it is a fair question and we will come back to him.

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Lord McKenzie of Luton: I am grateful for that. In closing, perhaps I should thank my noble friend Lord Whitty for his contribution. We made the same analysis, despite the somewhat different solutions to the problem. There was a very insightful, detailed presentation from the noble Lord, Lord Hodgson, who has the experience of chairing that task force and seeing what is happening in practice. The point is about getting the right balance; it is about making sure that the legislation properly reflects that. Having said that, I beg leave to withdraw the amendment.

Amendment 35D withdrawn.

Amendment 35E not moved.

4.30 pm

Amendment 35F

Moved by Lord Mendelsohn

35F: Clause 38, page 35, line 40, at end insert—

“( ) duties to establish the past payment performance of potential parties to a contract, before contracts are entered into;

( ) duties to ensure contracts entered into include the contractors’ obligations for prompt payment of their suppliers.”

Lord Mendelsohn (Lab): I thank the Minister for her comments at the beginning of the Committee. I think we will have a very constructive debate, as we have done so far, on these issues; there is a great deal of common ground. I feel somewhat optimistic that some of our helpful suggestions might even find a receptive ear. I hope that the Government see this amendment as a useful and timely addition to the Bill. I say “timely” advisedly. Last week, we had the benefit of the National Audit Office report Paying GovernmentSuppliers on Time, which made the case for this amendment.

First, let me acknowledge that this is an area in which the Government can rightly take some credit. The Cabinet Office Minister, Francis Maude, has set out an objective and some initiatives and policies to address the weakness of the position of small businesses in procurement and in how they are treated by larger suppliers. I also acknowledge the very impressive work of the noble Lord, Lord Young, and congratulate him on his recent award in the New Year Honours List.

However, as we can see from the report, it is implementation that is the problem. The Government’s desire to pay promptly has not benefited small businesses sufficiently. The National Audit Office concluded that the attempt to pay increasing numbers of undisputed invoices early was boosting the working capital of only the main contractors and not benefiting small businesses down the chain in the way the policy intended. We therefore want to be very supportive of the Government and suggest that a bit of steel be put into the Bill.

The amendment aims to make sure that the payment performance of potential contractors is known before contracts are entered into, and that contracts entered

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into require companies providing goods and services to public sector contracting authorities to pay their own suppliers promptly. We would like contracting authorities to score the suitability of contractors based on how they pay suppliers in general and to know that not operating in keeping with the contract objectives of government support for small businesses when it provides its cash will affect their ability to contract with the public sector in the future. I would welcome the Minister’s assurance that the Government are doing what they can to address this problem, and that Ministers and their departments will now act swiftly by writing to their main contractors to seek assurances, today and in the short term, that they are adhering to the prompt payment commitment.

The National Audit Office report was disappointing reading for another reason—again, not for the want of willing. The report uncovered continuing and deep problems in the public sector over late payment. A third of small businesses were not paid on time. I do not want to draw a comprehensive conclusion, but what should one draw from the finding in the report that even the most basic and elementary accounting function of logging the date on which a paper invoice is received was not a common standard across the departments reviewed?

We did not feel it appropriate to add an amendment on this at this stage, but I give notice that it is something we intend to do when we return to late payments on Report. In the mean time, I would be grateful if the Minister could at least reassure us by providing some details on the further thoughts her department and the Cabinet Office have on the measurement and reporting of prompt payment performance. What measures and management processes will be put in place to ensure that accounting departments are both trained to deal with this and held to account for their performance? Can the Government provide stronger incentives, even now, to encourage the use of e-invoicing?

I would be happy if the Minister wanted to reply in more detail in writing, but it would be helpful to receive an understanding of the Government’s determination to take further measures to get their intentions, policies and decisions implemented. I beg to move.

Lord Cotter (LD): My Lords, I strongly support the amendment. As the noble Lord, Lord Mendelsohn, said, implementation is vital to put steel into this requirement. We know from our many contacts in the construction industry that many areas of business have a real concern to ensure that people given contracts are monitored. I hope that the Minister will at least take this away to consider it and respond promptly in due course. In particular, I have in my mind a lot of evidence that has come forward from the construction industry to say that people implementing the main contract do not always—frequently do not—pay the small business sector promptly.

I will say no more, because the noble Lord has made these points, but—to be brief and to the point— we must ensure implementation. I hope that the Minister will take this away and assure us that this implementation point will be considered, because I have heard this issue raised time and again over the

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years, as have many colleagues, particularly giving a contract to a main contractor and finding that suppliers to that main contractor do not get payment. Those suppliers are often small businesses, so I welcome the amendment.

Baroness Neville-Rolfe: I thank the noble Lord for this amendment. As we discussed on previous days in Committee, prompt payment is an extremely important agenda and we wish to encourage both contracting authorities and businesses to pay their suppliers on time, so I shall say a little more, as noble Lords requested, about what we are planning to do in this area.

The Government are committed to leading by example on prompt payment. When we consulted on proposals to tackle prompt payment in autumn 2013, there was widespread support across industry and with procurers. This resulted, rightly, in a commitment to legislate. The new public contract regulations, which the Government plan to bring into force shortly, will place a duty on contracting authorities to pay their immediate suppliers in 30 days, and include terms in their contracts to pass these 30-day payment terms all the way down the public sector supply chain.

The regulations were consulted on last autumn and we intend to bring these into force early this year. That should provide reassurance to smaller businesses further down the supply chain that they will be paid expeditiously, and will address some of the findings of the National Audit Office report published last week, to which the noble Lord referred. I was about to cite the same figure that he cited: in a third of cases, public sector clients have taken more than 30 days to settle payment. That is completely unacceptable and that report helps to make the case for these regulations, which I hope will attract cross-party support. Our determination in this area cannot be doubted.

As part of these same public contract regulations, contracting authorities would also be required to publish the number of invoices paid late to their first-tier suppliers on an annual basis to show how they have performed in this area. The Government are committed to developing guidance to ensure that the reporting on late payment is understood and aids transparency.

Our mystery shopper service is strangely named, but it enables SMEs and other suppliers to raise concerns about public sector procurement with the Government and have it investigated. It is a Cabinet Office service and assists in ensuring that the contracting authorities comply with these new measures and will name and shame poor payers through the fortnightly publication of mystery shopper cases on GOV.UK. In future, the service will be able to ensure proactively that the 30-day payment policy is being embedded by carrying out spot checks on contracting authorities.

The noble Lord, Lord Mendelsohn, asked whether the Minister could commit to write to the main suppliers to ensure prompt payment. Yes, we would be happy for the Government to arrange for an appropriate Minister to write to the strategic suppliers about this before the end of the Parliament. We are talking about 100 or so suppliers. Those are the strategic suppliers to whom the noble Lord referred.

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On monitoring and implementation, in view of the time I agree to write to the noble Lord to set out the arrangements. However, we believe that these reforms are the right way to address the prompt payment of suppliers in the public sector supply chain. I know that the position is a little curious—we have met the same issue in other legislation that the noble Lord, Lord Stevenson, and I have debated—to have one set of regulations coming in under EU powers and then a domestic Act, but I am afraid that sometimes that has to be the way that we bring things forward, not least to make them happen in time. I hope that, if the noble Lord takes the two together, he will feel that we are approaching this in a sensible way and feel able to withdraw this amendment.

Lord Mendelsohn: I thank the Minister for that reply. I also thank the noble Lord, Lord Cotter, for his support. I reinforce the point that we both made that while all the measures that we have talked about have our support and we do not oppose this area, we raised the matter to make sure that the policy is strongly and fully implemented. While some of the measures that were outlined concern talking to the first-tier suppliers, the sheer notion of being able to challenge people, hold them to account and ensure that they understand they will never escape questioning on this issue is the power that we are keen for the Government to consider further. We remain strongly supportive of the measure and I beg leave to withdraw the amendment.

Amendment 35F withdrawn.

Amendment 35G

Moved by Lord Mendelsohn

35G: Clause 38, page 36, line 2, at end insert—

“( ) duties to provide details of any costs related to undertaking provisions outlined in paragraph (c)(ii);”

Lord Mendelsohn: My Lords, this group of amendments builds on the good base that already exists in the Bill, and I will set out our thinking behind them.

Small businesses often find public sector procurement processes unfairly opaque. Enabling small businesses to fairly compete and win public sector contracts requires commissioning and pre-procurement planning, as well as structured market engagement. This will require new guidance and skills development at the commissioning/procurement level within public sector organisations.

Experience—in many cases, painful experience—has shown that better commissioning, aligned to outcomes, is at the heart of driving an increase in the participation of small businesses in procurement processes. There is a strong benefit in early market engagement, asking questions of the market before procurement processes are initiated.

Small businesses need to be engaged as part of the commissioning process. Unless and until commissioners understand what localised small businesses can or cannot bring to the table, they will be selling themselves

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short in terms of what their local market can deliver. This early market engagement needs to be fed into the procurement process itself—from the specification through to the rationale for the procurement route taken and all the documentation required to be completed.

Skills in commissioning and procurement need to be addressed. There is an industry in the process itself, which tends to be input driven rather than concentrating on where the value can really be derived—that is, aligning the processes to the outcomes required. Commissioners and procurement officers have little support, training and guidance that will serve to facilitate a material difference in small business uptake. Therefore, the processes will tend to be biased towards larger, established organisations.

Small businesses that have been through the process claim that it is weighted heavily in favour of larger companies, with no consideration given to the fact that smaller enterprises have fewer resources to complete lengthy tendering documents. The smaller the business, the greater the proportion of its time, resources and effort will be required to submit a competitive tender.

Therefore, our amendments seek to provide the capability to government to effectively devise procurement processes, appropriate duties and considerations, as well as measurements and reports, to ensure an increase—more than just levelling the position—in small business success in winning public contracts.

Under Amendment 35G, the Secretary of State may impose duties on contracting authorities to provide details of any costs related to participating in the procurement process, helping to illuminate and navigate a key barrier to small businesses.

Amendment 35H establishes baselines which will be critical to determining the success or otherwise of public sector bodies both in participating in procurement processes and in increasing the awarding of contracts to small businesses. It proposes tracking key performance indicators, asking contracting authorities to report on the number of small businesses participating in the procurement process, the number of contracts, the value of the contracts and the value of subcontracts awarded to small businesses.

Amendment 35J would impose a duty on contracting authorities to deliver fair and equal procurement contracting, as well as a duty to have regard to region, diversity and the value of the contract and subcontract awarded.

Amendment 35P provides that contracting authorities have a duty to publish reports about the amount and proportion of expenditure within procurement undertaken by a contracting authority in relation to small businesses and the area local to the contracting authority, as well as duties to disclose and explain any reasons why specified businesses or companies, or a specified category of business or company, may be excluded from consideration by a contracting authority.

In Amendment 35U, the mystery shopper, when conducting an investigation, must give,

“due consideration to the fair and equal delivery of a procurement contract”,

having regard to region, diversity and the value of the contract and subcontract awarded.

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In short, we are asking public sector bodies to take greater care in designing processes that do not disadvantage small businesses, and we are trying to give them the tools to measure these effectively. They need to consider what are we asking for in procurement processes—the range of checks and balances with respect to the amount of time and cost that they are expecting bidders to invest. Are the questions being asked really relevant to the contract size and type of the contract?

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All those with experience of government would agree that there is a tendency for commissioners and procurement officers to play it safe by choosing an established name and by allowing the larger companies to unfairly inform tender processes, while providing specifications and documentation to prospective customers that are then rehashed within the procurement process. Small businesses are frequently put off by the length, language and style of the tender documentation; it can and should be made more user-friendly.

Thought needs to go into the relevance of the questions being asked to the delivery of the outcomes required. If it is not relevant, why is it always included with no thought to how the market might react, the bidding costs involved and how local small businesses may well be put off from participating in the first place? But the biggest barrier by far for small businesses looking to get public sector work is the amount of bureaucracy involved. The problem is that procurement in the public sector is carried out largely on a one-size-fits all basis, and one size does not fit all.

One area where we disagree with the Government is the idea of abolishing pre-qualification questionnaires. We are not convinced that the research and consultation examined this matter with sufficient consideration. Certainly, detailed discussions that we have had with a number of small businesses have come out with a different view. Largely, we do not believe that it is an either/or argument. Forcing binary options frequently undermines the benefits that could be developed in changing the nature of this. It reminds me of how, in business, sometimes you talk to operational people, who tend to have an approach involving how to find a better way; sometimes, when you examine these matters with finance people, they take a “cut or keep” approach.

We believe that the pre-qualification questionnaire process can be substantially improved. Some 80% to 90% of it should be standard across all bodies, and certainly shorter. Fundamentally, having different PQQs, different formats, different styles of documents and different questions from organisation to organisation has the impact of putting off small businesses from applying and increasing the cost of participation, which has a disproportionate impact on small businesses, which, as the noble Lord, Lord Young, said, do not have the same size of procurement teams and staff readily available to fill in a lot of documentation.

We believe that requiring guidance will be needed on the appropriateness of qualifications and certifications to the tender process, their cost and their relation to the value and the outcome that the organisation seeks to achieve. There are issues ranging from insurance levels, requirements for bonds, health and safety, IIP

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and ISO—the list goes on. That does not mean getting rid of such requirements, but it does and should mean ensuring the appropriateness of the requirement to the contract value and outcome.

I would be grateful if the Minister would do me the kindness of providing in her response any good reasons why these amendments would not be helpful. Is there any part of what I have said that the Government disagree with or would not like to be covered either by Bill, regulation, guidance or practice in future? I beg to move.

Lord Young of Graffham: Perhaps I can assist the noble Lord over some of the difficulties that he sees in this particular clause, in three areas that he raised. First, the mystery shopper—it is a bizarre name, but people understand what it means—has been operated by the Cabinet Office on central government contracts for the past few years. It had a great defect; it was reactive—somebody had to complain—and there were very few small firms in this world that would willingly make a complaint against a big customer. So we have made it proactive, so that the Government will, on a random basis, go and question people. That covers the possibility that any small firm can now complain without having the finger of blame put on them.

Secondly, we have now substantially modified PQQs. For example, there is now a standard PQQ for every contract worth more than €200,000. The small firm or the large firm does it once and the public sector reads it many times.

One element of our reform that we have not referred to this afternoon may well satisfy some of the noble Lord’s concerns. Next month we are launching a site, provisionally titled Contract Finder, that will record on it every public sector contract—worth £250 million a year—whether it be fire, ambulance, education, health, central government or local government. These will be postcoded, so that firms around the country can see what is coming up. More than that, we will expect local authorities, the health service and others to give notice of impending contracts, to enable firms to prepare for them. If a subcontractor sees that a new school is being contemplated in its area, it can go to the contractors that normally do it.

Thirdly, after each contract is won, the results will be placed on the site, so that people can see how near they were to winning. This is the first time in the world that this has been done. It is getting a great deal of interest overseas. It is a substantial undertaking, but its whole purpose is to create a level playing field for small firms and large firms. I hope that, if we see it through as intended, we will be looking at a very different small firms sector in a few years’ time.

Lord Deben (Con): My Lords, I would first like to say how pleased many of us are at the changes that the noble Lord, Lord Young, has just described. They will make a big difference for small firms around the country.

However, there is another part to this on which I hope that the Minister will be able to help. There are reasons to disagree with the specifics put before us, but the noble Lord, Lord Mendelsohn, has made it clear

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that he is seeking a response from the Minister that shows that she understands the real problem that is being adumbrated, which is that small firms often find that they are not competing fairly simply because what is asked of them is a much bigger ask than the same thing asked of a big firm. That is the fundamental issue.

There is a second part to that, which is the reaction of those who place the contracts. I am increasingly worried that, in the public sector, there is a safety culture that means that people would prefer to have a firm whose name they know and which they feel no one can blame them for taking on, even if that firm does not in the end do the job properly. It is much easier if it is a national company with a national name—when you have taken it on, nobody can make the complaints that they might make if you were taking on a smaller firm.

Even if the Minister is not able to accept these aspects, I wonder whether she would help us by saying what the Government intend to do to try to make it easier for the public sector to take on companies that might be less assured because they are smaller and because they have not had a contract of that kind before. Are there not serious institutional ways in which we could make that easier? I have not yet seen any indication that, in their plans, the Government have sought to make it less dangerous for a public servant to take on a firm that has perhaps not previously worked with the public sector or perhaps does not have such a long history of doing so. Where there is a risk involved, I think that it is a risk that the public sector ought increasingly to be willing to take if we are to have entrepreneurial innovation in Britain.

Baroness Neville-Rolfe: My Lords, as the noble Lord, Lord Mendelsohn, said, there is a good deal of common ground here, although we believe that we have most of the powers that we need, either in this Bill or in separate, regulation-making powers. I thank my noble friend Lord Young of Graffham for explaining the mystery shopper so clearly, and how PQQs have changed. I will come on to Contracts Finder in a minute.

On Amendment 35G, we consider that requiring a small business to pay a fee to access a public contract opportunity is a significant barrier to entry and should be stopped. That is why the Government’s intention in the draft Public Contracts Regulations 2015, which I have mentioned several times, is to help ensure that small businesses have free access to contract opportunities in one place. Moreover, the power in Clause 38 can already be used to make regulations to ensure that documents, information and any process involved in bidding for a contract are made available free of charge. The Cabinet Office will assess the impact of the reforms to be introduced through the draft Public Contracts Regulations before deciding whether to use Clause 38 to make regulations about providing free access.

The noble Lord, Lord Mendelsohn, asked how we will ensure that there is early engagement with suppliers and that small businesses are included. This is a very good question. Noble Lords will recall that our draft illustrative regulations demonstrate how the power

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could be used to require authorities to carry out pre-procurement engagement in a way that increases interest in bidding for procurement for SMEs. This could also help to bring in new SMEs and deal with the reputational issues, which was the issue behind my noble friend Lord Deben’s helpful intervention. I recall that, when I was in business, we had a similar wish to encourage new small and local suppliers. We held pre-engagement road shows to talk to the suppliers. Bringing in suppliers that we had not had anything to do with before led to new contracts being let to smaller suppliers outside the mainstream. That is not public sector experience, but it gives me confidence that we should be able to use this pre-engagement process to improve things.

We support the spirit of Amendment 35H and we are already doing more to promote transparency in public procurement. The procurement directive, which was intended to be transposed earlier this year, will require contracting authorities to disclose the number of above EU threshold contracts awarded to small and medium-sized enterprises, based on the EU definition. Contracting authorities will also be required to provide information on the number of bidders for a procurement, as well as reporting on the value of any contracts awarded.

The noble Lord, Lord Mendelsohn, said that too many prime contracts go to large suppliers. I cannot help but agree with that. The new Public Contracts Regulations will require contracting authorities to explain why they have not broken down large requirements into smaller lots. As my noble friend Lord Young, said, there will be a new Contracts Finder website, which will advertise all central government contracts over £10,000 and local government contracts over £25,000 free of charge. As has been said, the site is already attracting international interest and comment. The regulations will also place an obligation on a contracting authority to report, for contracts of £10,000 and above for central government and £25,000 and above for other authorities, on whether the successful bidder is a small or medium-sized enterprise or a member of a voluntary community social enterprise organisation, and on the value of the contract awarded. I think that that is important. Contracting authorities will be required to publish this information on Contracts Finder.

5 pm

Amendment 35J would place additional duties on contracting authorities to give due consideration in delivering fair and equal procurement. This consideration would have regard to factors such as diversity of the contract awarded and the region in which it takes place. Contracting authorities, including local authorities, already take steps to promote legitimate policy of this kind through procurement. When the policy in question is clearly relevant to the subject of the contract, the contracting authority can use a procurement opportunity to deliver it.

The Public Contracts Regulations apply to contracts awarded on EU principles and those principles of transparency, proportionality and equal treatment, of course, have to be observed. Indeed, the regulations will set out expressly to contracting authorities that

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they must treat economic operators equally and without discrimination. The noble Lord’s amendment creates problems because it goes beyond the principle of equal treatment which limits the extent to which local discrimination is permitted under EU law.

Turning to Amendment 35P, the 2014 directive will require, for contracts covered by the directive, contracting authorities to disclose the number of contracts awarded to small and medium-sized enterprises, as I have already said. The Government’s intention is that contracting authorities will also be required to report by publishing information on Contracts Finder. I have already explained what we have planned. On the issue of exclusions, contracting authorities can already exclude suppliers on grounds of certain past behaviour, for example, criminal convictions, including conspiracy, bribery, money laundering or grave professional misconduct. The directive also sets out clear grounds on which a contracting authority must, or might treat a bidder as ineligible. These again include specific criminal convictions as well as exclusions for matters such as grave professional misconduct, bankruptcy or insolvency. Details of these grounds are set out in the supplementary information.

Turning to Clause 39 and Amendment 35U and the mystery shopper, as we have heard, this investigates whether practices are poor or problematic. It is not designed to deliver particular policies for procurement. As I have said, contracting authorities are already able to pursue legitimate policies through procurements when they want to do so and when the policy is relevant to the subject matter of the contract. We keep coming back to these same points, many of them reflected in EU law. We believe that this amendment would require the mystery shopper to divert its focus leading to more complexity, and it would introduce a different purpose when its purpose is to look at whether a contracting policy authority has engaged in poor procurement practice and to take steps to put that right.

I have gone through each of the amendments in turn and I apologise for the length of my reply, but I hope that that has helped the noble Lord to understand why I would like him to withdraw the amendment.

Lord Mendelsohn: I thank the Minister for her comprehensive reply. I sometimes feel that she does not realise that we are trying to be helpful. I also thank the noble Lord, Lord Young, for his comments on mystery shopper. If he can wait until Amendment 35V, we will probably have an interesting discussion on that as well.

I am encouraged by the Contracts Finder website. This service is currently available and has a huge number of suppliers with different costs and different costs supplied to it. The benefit of having a site championed by government would be the ability to have not just the front end, whether on a pc or other device, but what can be done with the back end to make sure there is some consistency. I know that the noble Lord, Lord Young, is a dab hand at technology, having just received an invitation from him to go on a technology visit somewhere. I hope that he has that in mind, and it is not just on the front end but the deeper work on the back end.

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I am very grateful to the noble Lord, Lord Deben; we have agreed on an awful lot during consideration of the Bill. What he said is exactly what our intentions have been throughout with these amendments. The genius of these amendments, if I may say so, was the attempt to try to create not just a process for measurement but a way in which to enforce a duty to consider carefully how the procurement process is designed. Having to report on the diversity of the people in that procurement process assists in the obligation to ensure that the tendering organisation designs a sensible process—one that meets the ability to report that it has gone through the right range of people and is appropriate to the needs of small business.

It sometimes feels rather as if being on the shadow ministerial team is like operating a small business. We have somewhat modest resources and I felt that our amendments were drafted with the finest legal advice that our sparse resources were able to get. I was disappointed to hear that the Government feel that these measures do not meet the test of equal treatment and I would be grateful if they could share with us the legal advice suggesting that. I would consider that another government action in support of small business.

I accept that there is a huge difficulty in all this. Again, I am trying to be very helpful here but the tone of some of the Minister’s response was a lot of after-the-event, post hoc assessments and rationalisation. We are trying to stop the situation being that within the process, it is just too far rigged against small businesses. I have experience of looking at public contracts in a variety of countries and, at times, we put in a series of information hurdles that are impossible to achieve. Occasionally in our processes, even on contracts, we have a “take it or leave it” approach—something that a big organisation can absorb as a risk, while a smaller business cannot.

I urge the Minister to consider carefully what we have tried to design. It is about telling people to have some consistency. Even our provisions about the mystery shopper are about creating a consistency in reporting and operating, and the establishment of a permanent mindset. We should not just design these procurement processes to be risk-averse and end up with the same old suppliers. We should make great effort to open them up as much as possible and design them for that purpose. If she will consider that we will be very grateful but, in the current circumstances, since we wish to be very helpful, I beg leave to withdraw the amendment.

Amendment 35G withdrawn.

Amendments 35H to 35K not moved.

Amendment 35L

Moved by Lord Young of Norwood Green

35L: Clause 38, page 36, line 8, at end insert—

“( ) duties to require an appropriate number of apprenticeships.”

Lord Young of Norwood Green (Lab): My Lords, first, I apologise for not being here for the earlier part of this debate but I was detained at another meeting.

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I want to focus on what I think your Lordships know is one of my abiding interests: how we can create more and better-quality apprenticeships, and ensure that the demand for them is sustained and encouraged in our educational establishments.

I have raised on numerous occasions the question of ensuring that apprenticeships should be a natural part of the process of procurement in public service contracts. In my brief ministerial career, I remember encountering some suggestion that this could not be done for legal reasons. Nevertheless, we proved that it could. If the Minister has not already been to see Crossrail, I extend an invitation to her to go and have a look at what it is doing. It is a first-class example of a company in that, when we engaged in negotiations at an early stage of that contract, we got a commitment that it would recruit up to 400 apprentices. Actually, it has gone beyond that number. What is as interesting as the numbers involved is how it has gone about it. It has encouraged every company in its supply chain to adopt a very positive and constructive attitude towards the creation of apprenticeships. These are of good quality, they cover a wide range of occupations and the gender balance is pretty good. If noble Lords get the opportunity to attend an apprenticeship graduation ceremony, when the apprentices who have done best in their areas are acknowledged, it is something worth doing. That is an example of best practice.

I have tried to ensure that the amendments I am speaking to, from Amendment 35L to Amendment 35W, are coherent in their approach. I shall focus on local employment partnerships. Many public procurement contracts will derive from local authority activities and, after all, since local employment partnerships are a government creation, they ought to contain within their objectives the development of an apprenticeship strategy with appropriate objectives and a consequent annual review. I am interested to hear the ministerial response to this idea. It seems to me that if local employment partnerships are to continue, and I suspect that they probably will, part of their raison d’être ought to be the creation and sustaining of apprenticeships.

Building links with all the educational establishments, be they schools, colleges, university technical colleges or universities, is fundamentally important. Some of these institutions are already doing this, but the record is still very patchy. What are we trying to achieve? I have debated apprenticeships with the Minister a number of times and although the Government are keen to quote the large figure of 2 million, my response to that is not to criticise their ambitions and the work they have done in this area, which includes such things as Trailblazer apprenticeships, but just to get some perspective on it. My perspective is that if we look at the breakdown, many are in the area of adult apprenticeships: I think it is 50%-plus. Our concern should be that we have seen some decline in apprenticeship numbers in the younger age ranges.

That is one area of concern that we are trying to address. Another is that it is still quite a small number of companies that recruit and employ apprentices. The figures vary a bit depending on where you go, but if it hits one in five we are lucky. If we look at the FTSE 100, it is still only about a third. We are trying

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to create a climate in which we encourage more companies to participate. There are opportunities to do that. If we look at best practice, it is interesting that when I went round some universities and talked to them about apprenticeships, the reaction of some was an almost puzzled response. Then you pointed out to them the sorts of occupations concerned and the fact that some significant employers take on apprentices, and the universities realised that they needed to be involved. They also need to be involved, as many of them are, in encouraging entrepreneurship and the creation of small businesses.

5.15 pm

The other thing that concerns us—I have raised this on a number of occasions—is where young people in school sixth forms are being directed to these days. It seems that schools and colleges are still putting vast effort into and concentrating on directing young people towards university. For some, that will be absolutely appropriate, but it is worrying that if you go into schools now and ask students of 16, 17 and 18 whether they have heard any reference to a vocational career or an apprenticeship, you are lucky if you get more than one or two of them with an awareness of that potential. It is not as though the demand is not there. Looking at the predicted number of engineering vacancies or the number of vacancies in the construction industry, there is huge demand there. We have certainly not got very far in encouraging young women into these occupations.

There is an awful lot to be done, and that is why in these amendments I refer to the importance of schools—not just secondary schools but primary schools as well—establishing links with local businesses. Monitoring progress and success at a local level is important. Therefore, Amendment 35N talks about,

“duties relating to the assessment and publication of the extent to which apprenticeships and training opportunities were provided as a result of procurement of contracting authorities”.

I intend to listen intently to the ministerial response on that.

Last but by no means least, Amendment 35W would require that:

“The Minister shall publish an annual report on the apprenticeship recruitment practices of prospective contractors”.

Having both transparency and accountability would be no bad thing. It is the sort of thing that ought to be taken into consideration when the Government are looking at bids for any public contract. They should ask, “What is the track record of this company in relation to training and apprenticeships?”. That is the thinking behind what we see as an important part of encouraging small and medium-sized enterprises not only to participate in contracts but to ensure that they play their part in providing quality training and apprenticeships. I beg to move.

Lord Stoneham of Droxford (LD): I am pleased to follow the noble Lord, Lord Young, as I have done on a number of occasions. This subject emphasises where this Government have built on the foundations laid by the previous Government. It is for the next Government to realise that these things take a long time to come

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through. There will always be things that we want to improve, one being, of course, that we want greater equality of training and apprenticeships for younger people.

I have had some experience both in the construction industry and in regeneration projects where we have linked contracts to training young people. That has been part of the deal and there have been great benefits as a result. However, the noble Lord, Lord Young, has raised the whole capacity issue. If we are seeking to improve skills in construction, manufacturing and engineering, we can help to do that through public contracts, and there is certainly a huge role in this for local employment partnerships.

However, there are things that the Government need to take into account when looking at these amendments. The first is that these deals must be appropriate and non-bureaucratic. We must keep it simple because as we have heard from the noble Lord, Lord Young, we will simply put off the smaller local companies—the locally-based contractors—that are probably in the best place to provide some of these openings. We have to keep it simple. We also have to match the commitment to technical education with academic achievement in our education system. That was the point that the noble Lord, Lord Young, was making. Finally, as we are looking to the next five years, we must particularly look at how we can concentrate more of these apprenticeship deals and opportunities on the young.

Lord Cotter: I do not wish to waste any time in the Committee, but I very much support what my colleague, my noble friend Lord Stoneham, and the noble Lord, Lord Young, just said about encouraging apprenticeships. I know that the Government are doing an awful lot to encourage apprenticeships, particularly in the small business sector, financially and otherwise. I ran a small business for a number of years before coming here and I would have needed a lot of encouragement to take on apprentices. In those days it was not so common.

This does not appertain to this Bill in particular, but there is a great concern about the attitude that colleges and schools have towards careers advice. There are well proven figures to show that people are often not given any option other than university. We need to help small businesses to take on apprentices and engage the colleges. My area has a very good local college that is doing an awful lot in that direction, and I would happily let the Minister know what we are doing in Weston-super-Mare, where I come from. I support what my noble friend and the noble Lord, Lord Young, said about the importance of helping small businesses to take on apprentices.

Lord Hodgson of Astley Abbotts: My Lords, I share the wish of the noble Lord, Lord Young, to encourage vocational education. It is exceptionally important as a means of improving youth employment. However, I am slightly concerned about the route for apprenticeships, He knows far more about this than I do, but when I take part in the Lord Speaker’s outreach programmes and we talk about apprenticeships to sixth formers, too often they feel—and I think they are probably right—that the apprenticeship is a time-based qualification,

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not a performance-based qualification. That is to say that you have to spend a certain amount of time doing a job before you can get a qualification.

That puts off sixth-formers, who think that even if they are good they cannot move through the apprenticeship scheme at the speed at which they acquire the skills. That is something I have often referred to. I would be nervous about trying to put too much weight on apprenticeships. I am keen on youth employment, but apprenticeships are potentially too narrow, particularly given the comments made to me by sixth-formers, which may or may not be entirely accurate.

Baroness Neville-Rolfe: My Lords, I thank the noble Lord for his amendments. I am delighted to see him joining us in the Committee and giving us this opportunity to debate apprenticeships, about which both he and I feel a great passion. I will try not to let that get in the way of objectivity. Apprenticeships are also at the heart of the Government’s drive to equip people with the skills that employers need to grow and compete. It is great to have so much support for apprenticeships in the Committee today. It was interesting to hear about the experience of the noble Lord, Lord Cotter. We need as big a body of support for apprenticeships as we can get, and one needs to encourage people one knows in business and where there are public procurement opportunities to think about apprentices more.

We have already delivered 2 million apprenticeship starts in this Parliament, and there are 20,000 apprentice vacancies around England at any one time. However, I share the noble Lord’s concern about getting enough young apprenticeships. That is one of the reasons why the Government are trialling a new approach to apprenticeships in 2014-15 and 2015-16. He and I have talked about that, and I am involved in work with the electronics industry and the professional services to try to bring forward new thoughts and new numbers. The Government have made the apprenticeship grant available for employers—£1,500 targeted on smaller businesses taking on young apprentices. That ticks two boxes at once.

I also agree with the comments that the noble Lord, Lord Young, made on Crossrail. The work that it has done on apprenticeships has been a model. Like him, I have been under Fenchurch Street station and have seen what it is doing there. It has also been very good about trying to employ smaller suppliers both directly and through subcontractors—and small suppliers outside London.

We want it to become the norm for young people to choose between an apprenticeship and university as alternative routes to a career—an experience that I am familiar with in Germany—and this Government’s reforms lay the groundwork for that. I pay tribute to all that my noble friend Lord Young of Graffham has done.

On Amendment 35L, I have sympathy for the noble Lord’s intentions that a contracting authority should require an appropriate number of apprenticeship opportunities. However, as I am sure he is aware, not every procurement will be an opportunity. Contracting authorities are entitled to deliver legitimate policies through their high-value procurements but, under EU

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law, these must be linked to the subject matter of the contract and the procurement must meet principles such as equal treatment, fairness and transparency. It would, therefore, not be possible to require that every procurement delivered an apprenticeship.

There would also be a danger that requiring the provision of apprenticeships by contracting authorities could pass on costs to bidders and actually deter smaller businesses. If so, this would undermine the purpose of Clause 38, which is to open up procurement opportunities to smaller businesses and remove barriers to their participation. If contacting authorities must require an appropriate number of apprenticeships, assuming that that could be determined—it sounds quite difficult—would that stop smaller suppliers bidding, as they might not have resources available to allow them to meet the expectations and duties of the contracting authority in this regard? I know that that is not a perverse effect that anyone wants but it is one reason why the Government are concerned about that amendment.

On Amendment 35M, I agree with the noble Lord, Lord Stoneham, that there is a huge scope for local enterprise partnerships and schools to work with SMEs to deliver more training and apprenticeships when these organisations bid for public contracts. The new Contracts Finder—to look at this amendment in the light of the previous one—will be helpful in spreading knowledge of opportunities, with details of contracts on the website. However, as with Amendment 35L, we must be careful that any provision for delivering apprenticeships through procurement does not have the unintended consequence of adding to the cost of public procurement for contracting authorities and bidders. We encourage schools, LEPs and other public bodies to work with SMEs on apprenticeships, but we are not convinced that they should be under a legal duty to do so.

Finally, Amendments 35N and 35W relate to assessing and reporting on the extent to which apprenticeships form part of public procurement. Again, I have sympathy with the noble Lord’s intention, but I fear that these amendments could again risk passing a burden down the supply chain to smaller businesses. Only by asking them to report on this could we determine the number of apprenticeships and recruitment practices involved. It is precisely that sort of red tape that we seek to cut in this Bill. While I agree that transparency, reporting and reviews are helpful in this sphere of apprenticeships, we need to be careful to balance that with the reporting burdens that it would place on small businesses. Again, I am sure that that is not the noble Lord’s intention, but it could be a perverse effect of legislating in the way proposed.

I hope that the noble Lord feels reassured, understands that we share a similar objective on apprenticeships, and will understand why we feel that we cannot accept the amendments. I ask him to withdraw Amendment 35L.

5.30 pm

Lord Young of Norwood Green: I thank the Minister for her response and all those who have participated in this debate. To address some of the points that were made, it certainly is not our intention to put off

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smaller companies in any way. I am always puzzled by how we think that training and apprenticeships are to take place: is it always the responsibility of some other company? My experience tells me that, when you finally succeed in encouraging the smaller and medium-sized enterprises to employ and recruit apprentices, the feedback is very positive indeed, on both sides. The deterrent is usually that those enterprises have not done them previously or that they are worried about the administration costs et cetera. We are fully aware of that. If we are trying to create a climate in which we increase the number of companies participating, we have to start somewhere. Is this amendment an unreasonable proposition? We do not believe that it is, which is why I quoted the example of Crossrail; I could have quoted the Olympic model as well, which was another success story. There were no legal barriers in those examples.

The noble Lord, Lord Hodgson, said that his experience was that young people are put off apprenticeships because they see them as time-based qualifications. I am puzzled if they are put off. The example I usually give—I will give it again—is of BT. I forget what the current figure is, but it is probably about 500 apprenticeships and 25,000 applications. I do not think that that sounds like young people being put off because they see it as a time-based qualification. Anyway, apprenticeships these days are not as long as the seven-year type of thing that they used to be; they are shorter and more honed. They have a lot of attraction for young people, who look down the more conventional academic route and see the costs of that against the ability not only to earn while they learn but to impress their employer with their enthusiasm and capability. We know that the demand is there on both sides. We need more people to go into industries such as manufacturing, construction and science.

I do not believe that anything we are suggesting would increase the amount of red tape. How it is done is important. It should accompany what the Government are doing; we see it as an intrinsic part of developing better participation. Of course, we need to see what the track record is. Surely we should be able to ask ourselves why some local employment partnerships and local authorities are so much better than others at encouraging the creation and development of apprenticeships. We will be able to do that only by collecting some statistics. I do not see that as a huge burden going back to small businesses. After all, some of this information is being collected anyway. Therefore, I really was not convinced by the ministerial response to that.

As we are currently in Grand Committee, I will withdraw the amendment but with a view to possibly returning to this issue at some stage. I thank the Minister for her response and beg leave to withdraw the amendment.

Amendment 35L withdrawn.

Amendments 35M to 35P not moved.

Amendment 35Q

Moved by Lord Mendelsohn

35Q: Clause 38, page 36, line 11, leave out “may” and insert “shall”

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Lord Mendelsohn: My Lords, I shall speak also to Amendment 35R. I will be mercifully brief on this group. In trying to express our support for the Government, saying less may be more.

The Bill says that the Minister,

“may issue guidance relating to regulations under this section”.

Proposing a change from “may” to “shall” enables us to debate the wider issue of guidance relating to small businesses and public procurement, and what should be included in the guidance.

Amendment 35R is in keeping with the recommendation from the Delegated Powers and Regulatory Reform Committee that regulations about procurement be subject to the affirmative procedure. We agree that in these matters delegation is appropriate as the powers are so wide and there is great potential for significant consequences, both negatively and positively. We also agree that on procurement matters in general it is entirely sensible to make regulations under Clause 38 subject to the affirmative procedure. The approach of not just this Committee and this House but the other place suggests that there is a great deal to be gained through the positive engagement of both Houses. I beg to move.

Viscount Eccles (Con): My Lords, it is the very width of the potential of these two enabling clauses that worries me. In a way, bringing in “shall” in the amendment and accepting the recommendation that the resolution procedure should be affirmative gives Parliament a certain leverage to debate whatever the Government are intending to do. However, I am reminded that sometimes when people put up very sensible amendments Ministers do very well in arguing that they are not necessary. They say that things are all right as they are and that the matter is already being dealt with. We have heard a certain amount of that this afternoon.

I have been listening to this debate—I hope, carefully—thinking about the comments on existing legislation, thinking about all that is going on in this area in a period of financial stringency, when you would expect a lot to be going on, listening to my noble friend Lord Young, for example, and thinking about my noble friend on the Front Bench and the impending transposition of European directives on the subject. We have had a very interesting debate but I ask whether the case for these two enabling clauses has really been made. Is it not perhaps true that there is not an impelling need for them? Many good things are going on.

Therefore, my challenge to my noble friend is the question: what is the reality of the added value that will accrue from these enabling clauses, always remembering that enabling legislation is inherently not very satisfactory? I think that I revert to the position adopted very early in the afternoon by the noble Lord, Lord Whitty, who is no longer in his place. He said that he was not entirely sure that these two clauses were necessary. However, I will read the draft regulations with great care. I am sorry that I did not realise that they were already available a few days before this debate. That is remiss of me. I will read them very carefully, and it may well be that before Report I will conclude that there is some added value, although at the moment I have my doubts.

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Baroness Neville-Rolfe: My Lords, I am grateful to the noble Lords for their amendments. I shall start by commenting on the wisdom of my noble friend Lord Eccles, who often causes us to pause in our legislative discussions. I am not sure whether he was present when we started this afternoon and I took the Committee through the rationale and explained how we plan to use the regulations. I am glad that he is planning to look at the draft regulations and I would be very happy to discuss them further with him if need be. The clause will provide the Government with the powers to make regulations that help small businesses bid for public sector contract opportunities that are currently worth £230 billion per annum. That is at the heart of our problem: as many noble Lords have asked this afternoon, how do we get the share of that cake up for small business? That is our common wish.

As for these amendments, I want to reassure the noble Lord that the Government are considering carefully the recommendation of the Delegated Powers and Regulatory Reform Committee, but we also need to consider the implications for timely delivery. The Government are not yet convinced that it is necessary for the affirmative procedure to be used every time the power in this clause is used. Regulations about procurement have in the past been made under the negative procedure and some of the matters dealt with in regulations in this area are very technical and need to be adjusted over time.

Taking an example, the illustrative regulations we have recently published list a number of practical steps that could be taken; for example, on pre-procurement marketing. It may be necessary in the future to amend that list to describe new recommended forms of pre-market engagement. Is the affirmative procedure necessary or appropriate for every such change? Similarly, as the recently published Cabinet Office policy statement makes clear, regulations could be used in the future to prescribe minimum and maximum timescales. Would a modest change to one of those require the affirmative procedure?

We are actively considering these issues and what we can do to increase the level of parliamentary scrutiny attaching to this clause, which is the purpose of this amendment. One option would be to have an affirmative resolution on the first occasion to set the strategy for the regulations, and negative thereafter. It would be good to understand how noble Lords feel about that.

Turning to Amendment 35Q, as we have debated in relation to previous provisions, the use of “may” instead of “shall” is standard practice in relation to drafting of this sort. Our intention is to issue guidance about the regulations and to publish it in a way that makes it accessible to contracting authorities and suppliers. I can reassure the Committee that, if the Government consider that guidance would help contracting authorities or others to understand the regulations, we are committed to issuing it. We will also implement—I think that this is called for, from the conversations we have had today—an extensive communications strategy prior to the implementation of the regulations in order to ensure that key messages are understood and embedded. That will appear on GOV.UK and be very accessible.

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I hope that, in the circumstances, the noble Lord will agree to withdraw these amendments and, clearly, I would be interested to discuss the issue of parliamentary scrutiny.

Lord Mendelsohn: My Lords, I thank the noble Viscount, Lord Eccles, for his observations and I apologise if I was not clear. The issue here, as was pointed out by the Delegated Powers and Regulatory Reform Committee, is that there are no limits in the Bill on the kinds of duties relating to the exercise or procurement functions that can be imposed and it does not derogate the generality of that power. So there is a question about the breadth of that power and that is why there is great benefit in debating these things.

The committee, whose view we share, was also unconvinced by the arguments of the Government. If there is an issue about some of the technical aspects as described to the committee—the economic circumstances or elements where speed is of the essence—we would be more convinced if the Government were able to give more detail on the circumstances in which those would be applied. Given everything, it does not sound particularly compelling and we are in deep sympathy with the Delegated Powers and Regulatory Reform Committee on that. In the circumstances, since it may be possible for the Minister to write to give us more details, I will use this opportunity to beg leave to withdraw the amendment.

Amendment 35Q withdrawn.

Amendments 35R and 35S not moved.

Clause 38 agreed.

5.45 pm

Clause 39: Investigation of procurement functions

Amendments 35T and 35U not moved.

Amendment 35V

Moved by Lord Mendelsohn

35V: Clause 39, page 37, line 19, at end insert—

“(9) A Minister, in carrying out the functions outlined in this section, shall publish details of the investigation including the—

(a) focus of the investigation,

(b) findings of the investigation,

(c) evidence considered.

(10) Evidence classed as commercially confidential is excluded from the provisions of subsection (9).”

Lord Mendelsohn: This is a probing amendment, which seeks to ask the Government to set out more clearly how this clause will improve the current position and is intended to operate. This is indeed an amendment which covers the mystery shopper. In February 2011, the Cabinet Office supplier feedback service was extended to allow small businesses to ask about procurement processes when they were unsuccessful or felt that the

14 Jan 2015 : Column GC210

procedures or systems, or how they were being treated, were unfair. This was later renamed the mystery shopper scheme, which I have enjoyed reading about.

Looking through the document headed Mystery Shopper Publication Table October to December 2014, I came across a fascinating story about the UK Shared Business Services. The description says that:

“A Mystery Shopper raised concerns about a procurement by UK Shared Business Services … for ‘the Small Business Campaign’. The supplier read in a media article that they had been unsuccessful prior to receiving any response from”,

those services. The response from the investigation by the mystery shopper service said:

“We investigated this case and UKSBS have confirmed that unfortunately information was made publically available prior to the official notification letters being sent”.

Its conclusion was that the United Kingdom’s Shared Business Services,

“are looking into their internal processes to ensure that this situation does not re occur (including ensuring training is put in place for users of the procurement process)”.

I have never seen a leak more extensively reported in a government document and I found it very amusing. However, we commend the mystery shopper, which performs an exceptionally valuable service and shows tremendous potential for development. One of the things which we commend is that it is evolving and not a static instrument. It has some direct attention and modifications come as a result of that.

I would like to probe what is in the Bill. Clause 39 provides the Minister for the Cabinet Office and the Secretary of State with a power to investigate the exercise by a contracting authority of relevant functions relating to public procurement. This essentially puts the existing mystery shopper service on a statutory footing. On the face of it, it seems strange that the clause makes provision for the Minister to carry out the investigations and does not allocate any powers to the Minister to delegate. I am sure that there are some very interesting drafting answers in the Minister’s file. How is this intended to operate? I am sure that while a number of Ministers could fit in the time to spearhead public procurement investigations, some may have less time and, possibly, not even have the skills.

The main purpose is to move an informal process and the Explanatory Notes state that the Bill,

“will make contracting authorities legally obliged to provide information on request”.

I would be grateful if the Minister could provide us with further details on this problem. I think that I have read through all the published mystery shopper documents and none has stated this to be a problem, so I wonder why it has emerged as one of the foundations in the Explanatory Notes. I would guess there have been some difficulties and I would be grateful if the Minister could tell us what they have been and whether particular departments, agencies or authorities have been at fault.

The Explanatory Notes state:

“Ministers and Government departments will continue to comply with the current Mystery Shopper scheme as a matter of interdepartmental co-operation”.

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Does this mean that there will be an exclusion when they look into each other’s departments and, therefore, this will be done without the statutory obligation to provide information in a timely fashion?

As this seems to relate to matters about how the investigations are conducted, our amendment seems eminently sensible. It simply asks for more transparency around the investigation process and asks for details to be published including the focus, findings and evidence of the investigation. Naturally, an exception is made for commercially confidential information and is a means to probe the entire clause and some of the details that we think are missing about how these investigations will be carried out in an effective and timely manner.

Finally, in Amendment 35V, we consider the exercise of Ministers’ time to be so valuable and their insights to be so useful that we suggest that details of the investigation should be published including the focus, findings and evidence considered. Commercially confidential evidence is, naturally, excluded from this. I beg to move.

Lord Popat (Con): I am pleased that the noble Lord, Lord Mendelsohn, welcomes the mystery shopper service. It plays a very important role, and I am glad for his support for publishing the results of investigations in the interests of transparency. I am sure that noble Lords will be reassured to know that the Crown Commercial Service already regularly publishes results of these investigations. Our published results normally cover the focus of the investigations, the findings and, critically, the action agreed by the contracting authority to rectify the issues found. We also highlight where a contracting authority has refused to accept our recommendations.

Publication of results is an important feature of the service, as it enables the Government to highlight poor practice and the advice given to rectify it, from which other authorities can learn. It also provides a way of naming and shaming public bodies which do not accept recommendations. When appropriate, it can also be used to name large suppliers who do not pay their small business subcontractors promptly in public sector supply chains. In addition, annual reports are published which highlight key themes and advice, including the results of proactive public procurement spot checks. These findings have concluded that there remain issues relating to excessive qualification requirements being demanded by authorities in assessing financial strength, poor use of pre-qualification questionnaires and poor payment practices. These publications are broadcast by Twitter and potentially reach up to 4 million people.

Publishing more information does not fit with our aim of publishing brief, user-friendly reports, appropriate to the issue being investigated. Also, very often the documents we look at, such as tender documents and pre-qualification questionnaires, are already publicly available on authorities’ websites. Increasingly, this type of information will be available through links from Contracts Finder. Additionally, a key element of mystery shopper is its agility. The team can act speedily to raise concerns and resolve issues. It would be wasteful to bog them down by obliging them to publish the

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evidence considered and to discuss with authorities whether certain documents or information are commercially sensitive.

The proposed amendment would restrict the Minister to publishing specific details of each case. As the clause stands, the Minister can continue to publish reports of investigations in a flexible and user-friendly way, while respecting commercial confidentiality.

The noble Lord, Lord Mendelsohn, also asked how often authorities failed to comply with a mystery shopper investigation. In the last six months alone there have been 15 instances during investigations of referrals and spot checks where we have been unable to obtain any responses or get hold of documents. These new powers would have helped us get answers in all of these cases. Co-operation between departments is no reassurance to the public. Ministers are not to be legally bound by mystery shopper powers, just like other authorities.

The point of the clause is to enable the Minister for the Cabinet Office operating through the mystery shopper service to enforce demands for information and assistance for the courts. It would not be feasible or realistic for the Minister to bring legal proceedings against another Minister or government department. I hope that I have explained to my noble friend—the noble Lord—why we feel this amendment is not feasible. I will be happy to write to him. I hope that he will withdraw the amendment if he has found my explanation reasonably acceptable.

Lord Mendelsohn: My Lords, I am grateful to the Minister for describing me as his friend—perhaps mistakenly. I hope that my charm offensive has at least achieved some results in this Grand Committee.

I am also grateful for his explanation and for the clarification. I wish to stress that we believe that the scheme—the initiative—is good and we are pleased to see added strength given to it. I am also very pleased to see the noble Lord, Lord Young of Graffham, nodding vociferously in the background as this is something on his radar and I am sure will continue to be a lever that he will pull and push with great force to try to ensure that it is delivering for small business.

I have one observation on the mystery shopper issue. I noted that the Crown Commercial Service always responds quickly to these measures on the outcome of a case and recommendations. I hope that that sense of speed will be carried across government to make sure of that. In light of the Minister giving more detail in writing so that our support can be further enhanced, I beg leave to withdraw the amendment.

Amendment 35V withdrawn.

Amendment 35W not moved.

Clause 39 agreed.

Amendment 35X not moved.

Clause 71 agreed.

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Clause 72: Exemption from requirement to register as early years provider

Amendment 35AA

Moved by Baroness Jones of Whitchurch

35AA: Clause 72, page 53, line 6, at end insert—

“(7) The Secretary of State shall make arrangements for a review of the impact and appropriateness of the reduction of the age threshold for childcare provision in a school setting in terms of—

(a) contribution to child development,

(b) suitability of facilities and accommodation, and

(c) maintenance of child protection standards.

(8) The Secretary of State shall lay a report of the findings of the review mentioned in subsection (7) before each House of Parliament within 18 months of section 64 coming into force.”

Baroness Jones of Whitchurch (Lab): My Lords, this amendment seeks to explore in more detail with the Government their plans to extend childcare provision for two year-olds going into schools. Clearly, we all support the principle of increasing childcare places for two year-olds but we would like more reassurance on the practicalities and appropriateness of very young children being cared for on school premises.

First, is this practical? The Government’s Childcare and Early Years Providers Survey shows that more than 90% of two year-olds who receive 15 hours of free early years funding are provided for by the private, voluntary or independent sectors. When this issue was debated in the Commons, the Minister confirmed that, although it was estimated that, by the end of the academic year, around 80,000 two year-olds would benefit from the expansion of free childcare, it was not known how many of these additional places would be in schools rather than the private or voluntary sector. Meanwhile, we know the truth that there is a massive squeeze on primary school places because of expanded school rolls, so space is at an absolute premium. Indeed, recent reports show that there is a 10% shortfall in available places for the upcoming primary intake, and the number of infants in classes of more than 30 increased by 200% since the last election. It is hard to imagine that the Government’s proposals are going to make a big difference to the number of two year-olds able to be accommodated in schools.

6 pm

The second aspect of this is whether a school is the most appropriate place for nurturing two year-olds. When we discussed this issue last week during the debate on the importance of early years intervention, we all agreed that high-quality care with well trained staff was essential to boost a child’s development. We also identified that parental involvement was important in supporting the child’s growth. The ideal provision for very young children, particularly disadvantaged ones, would be an environment that encourages parents to be involved, to share the learning and to take this practice home with them. But can we be reassured that parents would be welcomed into the school facilities? Can we be reassured that the childcare will be age appropriate and not modelled on an extension of

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three and four year-old nursery provision, which is more based on structured learning? Can we be reassured that schools will have the training and the experience to protect these very young, vulnerable children from being bullied and intimidated by older children? Schools can be exciting and exhilarating places to learn, but they can also be very scary. Can we be assured that these very young children will be protected from the noisy, daunting parts of school life?

I have seen some very good examples of schools providing good-quality crèche and nursery facilities and, when it is done well, there can be great advantages. But these schools have the space to provide separate entrances, separate staffing and a separate ethos. That is what is needed to make this initiative a success. So I hope that the Minister will give some indication of how many extra places he envisages will be created by these changes, whether there is sufficient good-quality accommodation available for these extra children and what further advice his department will give to schools to ensure that all the proper safeguards are in place. I beg to move.

The Parliamentary Under-Secretary of State for Schools (Lord Nash) (Con): My Lords, I thank the noble Baroness, Lady Jones, for her amendment in relation to Clause 72 and I am delighted to be able to speak about this measure, which will reduce the bureaucratic burden on schools.

Amendment 35AA would lead to a review of the impact and appropriateness of the changes resulting from Clause 72. The intention, as I read it, is that it would be an additional safety net. While I understand these concerns, I would like to reassure the noble Baroness that some 300 schools are already providing high-quality education for two year-olds. We believe that the evidence is clear that primaries running nurseries employ higher-quality staff and it is clear that that results in better outcomes for pupils. It results in better transition for pupils and enables the primary schools to get to know the parents at a younger stage in the child’s development. High-quality checks and balances are already in place. We therefore believe this amendment is unnecessary.

Like any other provider of early years childcare, schools must adhere to the standards set out in the EYFS framework. This is the case for schools that already accept two year-olds and will continue to be the case once the clause comes into force. The framework clearly sets out requirements and standards for learning and development, safety and well-being of children and the appropriateness of accommodation—all the issues, in fact, that this amendment seeks to cover. We have seen how this is working in practice. We ran a demonstration project with 50 schools that take two year-olds. That showed how schools, just like nurseries, carefully manage their provision for two year-olds alongside other nursery-age children—for example, having separate parental access arrangements, accommodation and play areas. What these schools have shown is that some mixing of two year-olds with three and four year-olds has benefits to both year groups, as long as it is managed appropriately. This provision is not forcing schools to do this. There are no targets for the numbers, but we want to make it

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bureaucratically easier. Schools are already held to account by Ofsted for delivering age-appropriate, EYFS-compliant provision.

As I said, schools are, in fact, already doing a very good job. Of the 294 schools that were accepting funded two year-olds in January 2014, 81% were rated good or outstanding by Ofsted, as of August 2014. That is the same figure for primary schools overall and compares well with other early years providers, 80% of which were rated good or outstanding.

Clause 72 will not introduce something new. Rather, it will just remove the bureaucratic burden of separate registration for two year-olds while keeping the rigour of Ofsted inspections—holding schools to account against the same standards as they currently are. Since Ofsted’s recent introduction of a separate early years judgment for schools, the ability of a school to provide quality early education will be assessed very clearly against these standards with a discrete judgment and wording. This is why we believe that we already have the systems in place to continue to ensure high-quality provision and the safety and well-being of children, including two year-olds, in schools, without the need for this separate review.

I hope that the noble Baroness has found my explanation reassuring and, on this basis, will withdraw her amendment.

Baroness Jones of Whitchurch: My Lords, I thank the Minister for his response. We understand the advantages of removing the bureaucratic burden of having to register separately. We were trying to extend the debate beyond that into some of the other consequences of it. From listening to what the noble Lord has said, he is really implying that, although that bureaucratic burden might well be reduced, they are therefore not expecting a huge expansion of these places, which was my challenge to him. How many extra school places are to be created by this measure? It might reduce the bureaucracy, but it is not going to facilitate a great swathe of extra places. Given that, my challenge to him was that all of the available spaces were being used by the expanded need to fill primary school places.

I understand the need for the initial reduction. We think this situation needs to be kept under control and under review, but I think that will be an ongoing process. At the moment, I am very happy to withdraw the amendment.

Amendment 35AA withdrawn.

Clause 72 agreed.

Clause 73 agreed.

Amendment 35Y

Moved by Baroness Jones of Whitchurch

35Y: After Clause 73, insert the following new Clause—

“Staff to child ratios: Ofsted-registered non-domestic childminder

(1) This section applies to Ofsted-registered, non-domestic childcare settings.

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(2) For children aged under two—

(a) the ratio of staff to children must be no less than one to three;

(b) at least one member of staff must hold a full and relevant level 3 qualification, and must be suitably experienced in working with children under two;

(c) at least half of all other members of staff must hold a full and relevant level 2 qualification;

(d) at least half of all members of staff must have received training in care for babies; and

(e) where there is a dedicated area solely for children under two years old, the member of staff in charge of that area must, in the judgement of their employer, have suitable experience of working with children under two years old.

(3) For children between the ages of two and three—

(a) the ratio of staff to children must be no less than one to four;

(b) at least one member of staff must hold a full and relevant level 3 qualification; and

(c) at least half of all other members of staff must hold a full and relevant level 2 qualification.

(4) Where there is registered early years provision, which operates between 8 am and 4 pm, and a member of staff with Qualified Teacher Status, Early Years Professional Status or other full and relevant level 6 qualification is working directly with the children, for children aged three and over—

(a) the ratio of staff to children must be no less than one to 13; and

(b) at least one other member of staff must hold a full and relevant level 3 qualification.

(5) Where there is registered early years provision, which operates outside the hours of 8 am and 4 pm, and between the hours of 8 am and 4 pm where a member of staff with Qualified Teacher Status, Early Years Professional Status or other full and relevant level 6 qualification is not working directly with the children, for children aged three and over—

(a) the ratio of staff to children must be no less than one to eight;

(b) at least one member of staff must hold a full and relevant level 3 qualification; and

(c) at least half of all other staff must hold a full and relevant level 2 qualification.

(6) In independent schools where—

(a) a member of staff with Qualified Teacher Status, Early Years Professional Status or other full and relevant level 6 qualification;

(b) an instructor; or

(c) a suitably qualified overseas-trained teacher is working directly with the children, for children aged three and over—

(i) for classes where the majority of children will reach the age of five or older within the school year, the ratio of staff to children must be no less than one to 30;

(ii) for all other early years classes the ratio of staff to children must be no less than one to 13; and

(iii) at least one other member of staff must hold a full and relevant level 3 qualification.

(7) In independent schools where there is—

(a) no member of staff with Qualified Teacher Status, Early Years Professional Status or other full and relevant level 6 qualification;

(b) no instructor; or

(c) no suitably qualified overseas-trained teacher, working directly with the children, for children aged three and over—

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(i) the ratio of staff to children in early years classes must be no less than one to eight;

(ii) at least one member of staff must hold a full and relevant level 3 qualification; and

(iii) at least half of all other members of staff must hold a full and relevant level 2 qualification.

(8) In maintained nursery schools and nursery classes in maintained schools (except reception classes)—

(a) the ratio of staff to children must be no less than one to 13;

(b) at least one member of staff must be a school teacher as defined by section 122(3) of the Education Act 2002 (power to prescribe pay and conditions) and Schedule 2 to the Education (School Teachers’ Qualifications) (England) Regulations 2003 (qualified teacher status requirements); and

(c) at least one other member of staff must hold a full and relevant level 3 qualification.

(9) The Secretary of State may make provision in statutory guidance to—

(a) define qualifications as “full and relevant”; and

(b) define “suitable experience” for those working with children under two.

(10) If HM Chief Inspector of Education, Children’s Services and Skills is concerned about the quality of provision or the safety and wellbeing of children in a setting, he may impose different ratios.”

Baroness Jones of Whitchurch: My Lords, Amendments 35Y and 35Z place in the Bill the current permitted staff:child ratios for childminders and nurseries. We believe that these amendments are necessary because of this Government’s public statements and attempts in the past to increase the ratios. This would be all too easy, as the current ratios are in regulations that can be changed by the Secretary of State. We are therefore keen to provide the necessary reassurance and guarantees to parents and professionals alike that the current ratios are safeguarded.

When it was proposed to change the ratios there was a massive outcry from across the sector. It was felt that this move would compromise quality and put children’s lives at risk. As a result, the Government backed down, but there is a real concern that, in a drive to increase the supply of early years places, the Government might revisit their original plan. We believe that the current ratios have stood the test of time in balancing the quality of provision with the costs to providers and, therefore, parents. We are all concerned about the rising cost of childcare in this country, which continues to be a barrier to parents returning to work and a major source of family poverty. The Government’s proposals to offer 15 hours of free childcare and our own proposals to expand free childcare for three and four year-olds from 15 to 25 hours per week for working parents are beginning to address the cost of childcare. However, it is crucial that, in the bid to expand childcare provision, quality is maintained and improved.

Professor Nutbrown, who advised the Government on early years provision, has made it clear that she would not support an increase in the ratios. She quite rightly made it clear that good-quality provision is directly related to the qualifications and training of the staff involved, as well as their capacity to relate to the children on an individual basis. This is crucial to

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the well-being and development of young children. Our proposals would ensure that a single childminder could care for up to six children aged eight, including a maximum of one baby under 12 months and another two children under the age of five. By anyone’s imagination, that would be quite a workload and it would be a challenge to provide appropriate care across the age groups. For nurseries, there would be one member of staff for every three children under two, one member of staff for every four children aged two or three, and one member of staff for every eight children over the age of three. We would also set out in regulations the minimum qualifications for these staff members. Again, these ratios as they stand sound fairly challenging.

These ratios are not just necessary to support the crucial period of early years development, with all the complexities that we were debating in the Chamber last week; they are also necessary to provide safeguarding and protection for vulnerable children. We are all saddened when we hear of unnecessary deaths when children are in the care of others. It can happen in an instant—one child wanders off or puts something in their mouth without being observed. Nursery staff already work under considerable pressure, and we should not be tempted to add to it. We believe that it is necessary to protect the current ratios and that putting them in primary legislation will provide the guarantee that, if any changes are proposed in the future, they will be subject to full parliamentary scrutiny and debate. I beg to move.

Lord Nash: My Lords, I thank the noble Baroness for her Amendments 35Y and 35Z relating to staff:child ratios.

The provisions in the Bill are about opening up new business opportunities for childminders by allowing them to work on non-domestic premises for up to half their time. This will be welcomed by both childminders and parents. For example, small rural schools may welcome the additional flexibility of bringing in a childminder to run a small after-school club, providing a new and valuable service for working parents. We are not trying to change the fundamental nature of childminding; we are simply giving childminders more flexibility in how they operate their business.

The Government consider it right that all registered early years childminders should meet the same early years foundation stage framework requirements around child development, welfare and well-being, including ratio and qualification requirements , whether they are working on domestic or non-domestic premises. The safety of children is paramount. The English childcare system has some of the highest adult:child ratio requirements in the world. I can tell the noble Baroness that we have no plans to amend the ratios. We think that the current ratio for childminders of 1:6 is right and this is already set out in the early years foundation stage statutory framework, made under powers in the Childcare Act 2006.

These amendments seek to enshrine those ratios and minimum qualifications in primary legislation. The Government consider secondary legislation to be the right place for this. Other ratios, relating to welfare

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requirements, are also set in secondary legislation and this allows the flexibility to respond to changing circumstances if necessary.

On the matter of defining qualifications and “suitable experience” for those working with children under two, I assure the noble Baroness that existing regulation-making powers already allow terms such as “full and relevant” and “suitable experience” to be defined. There is no need for further legislation on this matter.

The Government are committed to ensuring that childcare places remain of the highest quality, as these have lasting benefits for children. We believe that continuing to ensure that childminders and other providers of childcare meet standards set out in the early years foundation stage is the best way of doing this. I hope that the noble Baroness has been reassured by my response and will be content to withdraw her amendment.

Baroness Jones of Whitchurch: My Lords, I am grateful to the noble Lord for his response. He said that there were no plans to amend the ratios at the moment and I am sure that that is the case. However, we were doing some future planning, thinking about what might happen in the future, and trying to ensure that there were further guarantees going forward.

The Minister talked about the advantage of the provision being in secondary legislation as allowing more flexibility in changing circumstances in future. That is precisely our concern—that in future, if there is a need for changing circumstances of the kind that I addressed in my opening remarks, such as the need to increase places at short notice for three year-olds or four year-olds, this would be exactly the sort of measure that the Government might bring back into play, given that they have considered it in the past. We believe that there is still merit in having this in primary legislation, if only because, if there were any suggestions of change being necessary, it would enable proper parliamentary scrutiny to take place so that it could not be done simply by the Secretary of State. This may be an issue to which we return. For the time being, I beg leave to withdraw the amendment.

Amendment 35Y withdrawn.

Amendment 35Z not moved.

6.15 pm

Clause 74: Registration of childcare: premises

Amendment 35AB

Moved by Baroness Jones of Whitchurch

35AB: Clause 74, page 54, line 8, at end insert—

“(2) In section 118 of the Education and Inspections Act 2006 (functions of the Chief Inspector), after subsection (1)(d) insert—

“(e) the quality and appropriateness of the facilities and premises used by registered providers of early years childcare.””

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Baroness Jones of Whitchurch: My Lords, this amendment follows on from our earlier amendment on the proposed expansion of childcare places in schools. At its heart is a desire to ensure that all premises where childcare is provided are of an appropriate standard. We remain concerned that the proposed changes allow large childcare providers to register an appropriate facility in one place and an inappropriate facility elsewhere. This might come to light only when an Ofsted inspection takes place, but it might also be missed by Ofsted, as it would not have an obligation to visit every site. Our amendment would give the Chief Inspector of Schools a wider duty to set down the quality and range of facilities for early years providers that would be judged appropriate.

While we understand the desire to reduce regulation on business, we also feel that it is crucial that the quality of childcare facilities is not compromised. I am sure that the Minister would agree that children’s safety should be paramount, but there remains a danger that the registration of multiple sites could lead to fewer individual inspections. When this was discussed in the Commons, the Minister, Matthew Hancock, made it clear that Ofsted would use its discretion on which premises to inspect, using a risk-based model. But however you look at this, it seems to be leading to fewer individual inspections. We are concerned that standards, rather than improving, will, in fact, go down. Our amendment to require Ofsted to lay down some minimum standards goes some way to addressing this problem. I hope that the Minister can agree that this is a sensible way forward and leaves in place sensible safeguards.

Lord Nash: My Lords, I thank the noble Baronesses, Lady Jones and Lady King, for their amendment in relation to Clause 74, and I am delighted to be able to speak about this measure, which will reduce the bureaucratic and administrative burden on childcare providers.

The amendment would place an additional and specific duty on Her Majesty’s chief inspector to keep the Secretary of State for Education informed about the quality and appropriateness of the facilities and premises used by registered providers of early years childcare. The statutory framework for the early years foundation stage is mandatory for all early years providers, including childminders, and already provides for the safety and suitability of premises, environment and equipment. The EYFS is clear that providers must ensure that their premises, including overall floor space and outdoor spaces, are fit for purpose and suitable for the age of the children cared for, and the activities provided, on the premises. Furthermore, the EYFS is clear that providers must comply with the requirements of health and safety legislation, including fire safety and hygiene. Ofsted already inspects all early years providers against the requirements of the EYFS and will continue to do so.

To ensure the safety of children, childcare providers will still be required to obtain approval from Ofsted before they can operate from new or additional settings. Furthermore, Ofsted will continue to inspect all Ofsted-registered early years settings and carry out sample inspections of later years settings, as it does now.

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However, on adding additional premises to an existing registration, Ofsted can use a risk-based approach to decide whether they need to visit all premises before an Ofsted-registered provider can operate from them. For example, where an outstanding provider is acquiring existing childcare premises which are already registered as an early years setting, Ofsted may decide it is not necessary to visit those premises again until the next inspection.

More generally, if Ofsted receives a complaint or has concerns about the quality and appropriateness of the facilities and premises of any of the settings which it regulates, it has the power to take immediate action and can inspect, investigate and suspend settings where necessary. Section 118 of the Education and Inspections Act 2006, which sets out the functions of the chief inspector, including functions relating to early years provision, already places a duty on the chief inspector to inform the Secretary of State of matters connected with activities within his remit, including quality and standards.

Furthermore, if requested to do so by the Secretary of State, the chief inspector must provide the Secretary of State with information or advice on such matters relating to activities within the chief inspector’s remit as specified in the request. The chief inspector can also give advice on any matter within his remit, including advice relating to a particular establishment, institution or agency. Section 118 is wider ranging than early years functions and it would not be appropriate, therefore, to include such a specific or prescriptive measure about early years premises and facilities. However, as part of his annual report, the chief inspector can also include information on the quality and appropriateness of the facilities and premises where he considers it appropriate to do so.

For these reasons, I do not believe there is a case for placing an additional or specific duty on the chief inspector. I hope that the noble Lady has found my explanation reassuring and, on this basis, will withdraw the amendment.

Baroness Jones of Whitchurch: I thank the Minister for that response. I was with him when he started because I thought he said that what is in our amendment already happens, in which case I would have been very pleased to withdraw it. However, as he went on he began to say that, although this was something that was within the chief inspector’s potential functions, it was not something that was required. I would be grateful if he would clarify what exactly, at the current time, the chief inspector’s responsibilities are. I am not going to argue about whether we have put the amendment in the right place—we may well have put it in the wrong place—but is it part of his current functions to advise on the quality and appropriateness of the facilities and premises used by registered providers? If it is, I will be happy to withdraw the amendment.

Lord Nash: I hope that I can clarify the situation. We are talking about adding additional premises to an existing provider. Of course, these might be premises that have already been used for such provision, or it

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will be pretty obvious—Ofsted can tell from the information it has—that a provider will be suitable because it is of a very high quality and Ofsted does not need to visit them. Obviously, if it is a new provider or premises which have never previously been used for the purpose, I suspect that Ofsted would want to visit them.

Baroness Jones of Whitchurch: I can see that this might be something that takes a longer discussion, which we may have outside this Room. I was not arguing with what the Minister said, I was just asking whether the more general duty was already on the shoulders of the chief inspector. I am not sure that he clarified that, but I am very happy to have this discussion elsewhere.

Lord Nash: The answer to the question is, yes.

Baroness Jones of Whitchurch: In that case, I am very happy to withdraw the amendment.

Amendment 35AB withdrawn.

Clause 74 agreed.

Amendment 35AC

Moved by Baroness Jones of Whitchurch

35AC: After Clause 74, insert the following new Clause—

“Information sharing for contacting new families

(1) NHS trusts should make arrangements to share with local authorities’ records of live births to parents resident in their area, to be used by the local authority for the purposes of identifying and contacting new families through children’s centres and any other early years outreach services it may operate.

(2) The Secretary of State must, within a period of six months of the passing of this Act, bring forward regulations placing consequential requirements on trusts and local authorities in exercising their duty under subsection (1) including, but not limited to—

(a) the format of arrangements made;

(b) the safeguarding of information;

(c) the circumstances in which it would not be appropriate for a trust to provide information to local authorities;

(d) the regularity of data transfers;

(e) timescales within which a local authority must contact new families made known to it; and

(f) any further requirements the Secretary of State deems necessary.”

Baroness Jones of Whitchurch: My Lords, one of the lessons we are taking from the increasing body of evidence on early years intervention is that you have to start early. Traditionally, it has been seen that preschool and nursery care was key, but we now understand much more about the situation. The way a child’s brain develops and its physical and emotional development begins to be shaped from the moment of birth and there is a crucial window between the ages of nought and three where development sets up a child for life.

This is why the previous Government set up the Sure Start programme. The aim was to provide a one-stop shop for families and young children to

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access support and services. But, of course, the key to getting new young parents through the door is to make contact with them and encourage their participation. That is why we proposed in the Children and Families Bill that greater opportunities to register births at children’s centres would provide an excellent way to make the first introductions.

Our amendment concerns one aspect of data sharing: sharing information about live births. The amendment would require NHS trusts to share with local authorities details of live births to parents resident in their areas. We believe that this is an important requirement to provide greater safeguards for vulnerable babies as well as ensuring that local authorities can plan and provide appropriate family services in their areas. They need accurate information on the number of live births as well as the individual details to ensure that the services are targeted effectively. This would also enable children’s centres to improve their outreach work with new families who have not been in contact with them. Arguably, these are the families who are hardest to reach and most in need of support.

I understand that the national picture on this remains patchy. Some health trusts are willing to share this information while others have concerns about confidentiality. We need to address this reluctance to share this crucial information and our amendment provides the impetus to do this.

Obviously, it would be necessary to provide more detailed advice about the amount of detail to be provided and the legitimate uses to which it can be put, and it would clearly be necessary to ensure that the information did not fall into the wrong hands. However, this is a challenge about data sharing that the Government face in numerous aspects of their work. It has been overcome elsewhere and it can be overcome here. So I hope that the Minister can agree to take our amendment on board, recognising the great advantages for child safety and child development that would flow from it.

Also, when we raised these issues during the Children and Families Bill, it was reported that the department was already considering how best to improve this situation. The Minister subsequently wrote to update us on the work of Jean Gross’s task-and-finish group, which was exploring how to overcome these barriers. However, despite welcoming her report, it is not clear whether anything has really changed. There still appears to be reluctance on the part of health trusts and local authorities to facilitate this exchange of information. I would like to ask the Minister for an update from the department on its follow-up to the Gross report and what evidence it has of anything changing on the ground. Otherwise, I hope that he can support our amendment. I beg to move.

Lord Nash: My Lords, I am sympathetic to the aims of these amendments. It is essential that health services and councils collaborate effectively and share information to do that. But we do not think it is necessary to put new requirements in primary legislation. There are no legal impediments to NHS trusts sharing live birth data with local authorities. They are not confidential data. Birth registration data are already publicly available,

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and local areas should and are using partnership agreements or protocols to make data sharing as effective as possible.

The statuary guidance for Sure Start children’s centres is clear that health services and local authorities should share live birth data with children’s centres regularly. Children’s centres are successfully reaching out to those families most in need, with 90% of eligible families registered. But we are not complacent. We will continue to encourage NHS trusts and local authorities to review and consider their local protocols and practice on sharing information. The Government’s response in November 2013 welcomed the Jean Gross group report on information sharing in the foundation years and our strategic partner, 4Children, is disseminating best practice information. Since we debated similar matters during the passage of the Children and Families Act 2014, we have also commissioned the Royal College of Paediatrics and Child Health to develop training materials to support health professionals and early years practitioners with information sharing. I hope that this explanation reassures the noble Baroness and that, on that basis, she will withdraw her amendment.

6.30 pm

Baroness Jones of Whitchurch: My Lords, I thank the Minister for his response. As he said, there is no legal impediment. That is true; indeed, in some areas this data-sharing is already happening. However, the very fact that the department needed a task-and-finish group to look at how this could be boosted is a sign that all is not right in this regard. When the Minister opened his comments, he said that he had some sympathy with our amendment. All it is trying to do is to boost the activity that ought to take place and, as he rightly said, is already enabled to take place within the legislation. It is not happening to the degree that we would like at the moment. Dissemination of good practice is obviously to be welcomed but it appears that there is more to be done on this issue, which feels as if it needs a kick-start. That is really what we were attempting to do in our amendment. I am not intending to pursue it at this stage but there is probably more still that the Government could be doing to encourage live data sharing, on the basis that we have discussed. I look forward to hearing further details of what is being done and the increase that is therefore taking place at a local level of this activity. I beg leave to withdraw the amendment.

Amendment 35AC withdrawn.

Amendment 35AD

Moved by Baroness Jones of Whitchurch

35AD: After Clause 74, insert the following new Clause—

“Proposals relating to three and four year olds

The Chancellor of the Exchequer shall within three months of the passing of this Act lay a report before the House of Commons setting out—

(a) an assessment of the benefits of top-up payments to people responsible for a child or children aged three to four years since the Childcare Payments Act 2014 came into force; and

(b) an assessment of those benefits in addition to the likely benefits of funding 25 hours per week free childcare for working persons responsible for a child or children aged three and four.”

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Baroness Jones of Whitchurch: My Lords, Amendment 35AD has been tabled in my name and that of my noble friend Lady King of Bow. This amendment requires the Chancellor to assess the benefits of top-up payments to those with parental responsibility for three and four year-olds. It then requires the Chancellor to compare the likely benefit to those same families of Labour’s policy of funding 25 hours per week of free childcare. Figures from the House of Commons Library show that Labour’s policy will benefit an estimated 436,000 three and four year-olds. In hard cash terms, this means a benefit of more than £2,500 per family who qualify, in addition to top-up payments.

The purpose of the amendment, then, is to get the Treasury to carry out a review of the likely benefits to these families. After all, at a time when incomes of hard-working families are being remorselessly squeezed, do the Government not owe it to those families with three and four year-olds to consider which policies will help them most? Labour’s policy is a fully costed spending commitment, which will be paid for by an increase in the bank levy. We will also introduce a primary childcare guarantee to help parents manage the logistical nightmare of before and after-school care. Again, this is in addition to the provisions made by the Bill.

One of the purposes of this amendment is to highlight the varying benefits to parents of different approaches to childcare provision. The Government’s approach, as the Minister will be very well aware, is demand-led. This means that subsidies such as the Government’s tax-free childcare, where cash support goes to parents and then on to the childcare providers, often leads to those providers simply artificially inflating childcare prices. Instead, the alternative approach of our party is modelled on supply-led government funding for childcare. For example, this would include measures such as extending free entitlement, where support goes directly to childcare providers. This approach has been supported by think tanks such as the Institute for Public Policy Research and the Resolution Foundation. Both these organisations presented evidence, based on international examples, that supply-led models are far more effective at supporting hard-pressed parents than demand-led subsidies.

If the Government will not think again immediately on this issue but are genuine about the interests of hard-pressed working families, they will surely back this amendment to conduct a Treasury review and ensure that we can all share in the facts of the situation. I beg to move.

Lord Nash: My Lords, I am grateful to the noble Baronesses, Lady Jones and Lady King, for their amendment and for the opportunity to debate the important matter of the Childcare Payments Act. As noble Lords will be aware, this Act introduces the tax-free childcare scheme announced by the Chancellor of the Exchequer in his 2013 Budget. Once it is in place, the Government will meet 20% of eligible working families’ childcare costs up to an annual maximum of £2,000 for each child. That is the equivalent of basic-rate tax relief on childcare costs of up to £10,000 per child.

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I am aware of the Labour Party’s policy to increase the 15 hours of childcare to 25 hours. The noble Baroness said that this is fully costed and will be paid for by the bank levy. That is interesting, as that would make it the 12th time that the Labour Party has spent this money and therefore it would be totally unfunded. It has also costed the increase at £800 million. However, we believe that it would cost £1.6 billion, and that is on the basis that this extra increase in demand would not put prices up, which providers tell us it would. Indeed, they say that they would struggle to provide these places. We have increased the number of places by 100,000, which is a remarkable achievement, but we do not think that it would be right to put this pressure on the system at this time. It is a question of balance between parental care and childcare.

The amendment concerns the impact of the Act within the context of the Government’s wider track record. It would require the Chancellor of the Exchequer to review its effectiveness and publish his conclusions. The 2014 Act received Royal Assent on 17 December and we now move to the important phase of implementation. I understand the noble Baroness’s desire to debate this matter here, given that the Act was a money Bill with little opportunity for such debate, and I hope that I will be able to reassure her in relation to the amendment.

Amendment 35AD would require the Chancellor of the Exchequer to publish, within three months of the passing of this Bill, an assessment of the benefits of the scheme under the Childcare Payments Act to parents of three and four year-old children. It would also require those benefits to be assessed in addition to the likely benefits of funding 25 hours of free childcare.

This Government fully understand the importance of high-quality early education for this age group. That is why we funded an increase from 12.5 to 15 hours a week of early education for three and four year-olds. However, it is important to recognise that the cost of childcare is not just an issue for children under five but also an issue for school-age children. For many working families, the high costs of childcare make this one of the largest parts of the household budget. This Government believe that there is a powerful case for improving access to childcare throughout childhood to ensure that parents are supported to work if they choose to do so.

The introduction of the new scheme provided for in the Childcare Payments Act for children up to the age of 12 will build upon the £5 billion per year that the Government already spend on early education and childcare. It will help many more parents to meet these costs, including those such as the self-employed, who cannot access support under the employer-supported childcare scheme which it will in time replace.

The Government have already made a commitment to review the impact of the new scheme two years after its full implementation. This was set out clearly in the impact assessment published last year. The scheme will become available only from the autumn of this year, and it is important to allow time for the measures to properly bed in before conducting a review. Therefore, no purpose would be served in carrying out a review so soon.

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I hope that the noble Baroness will be reassured that the intention of her amendment is already being met without the need for further legislation. On that basis, I ask her to withdraw it.

Baroness Jones of Whitchurch: I thank the noble Lord for his comments. Interestingly, the Institute for Fiscal Studies says that, of all the parties, our costings are the only ones that have been carefully and cautiously costed. Therefore, I think that we can dismiss the noble Lord’s rather wild, or alternative, calculations. As we know, the Government’s discredited calculations were widely commented on at the time they made them public, so I do not think that there is any credibility in that particular argument.

I welcome the fact that the noble Lord has said that there needs to be a review. We were interested in a review earlier than that two-year cut-off point, as he knows. This issue is crucial and it may well be that two years is too long to let the situation drag on. It is particularly crucial because, as he will again know, a lot of the private nurseries are refusing to take part in the Government’s free childcare offer. It was publicised quite recently by the National Day Nurseries Association that one in seven of England’s 18,000 nurseries are refusing to take part. There is a supply-side problem. On the Government’s figures 41,000 children eligible for the free scheme are yet to find a place.

We are all in favour of increasing childcare and we all have our different models for doing that. We believe that ours is more cost-effective and would be more effective than those proposed by the Government. Anything that invests in childcare is obviously to be welcomed, but, as I say, I believe that our scheme is better costed and would be more helpful to hardworking families in the longer term. I take note of the fact that there will be a review. We would have liked a review earlier, but I am sure that in the mean time there will be lots of public debate about this issue. If there is not an official review we will continue to tease out the issues that arise from the alternative policies. I therefore withdraw the amendment.

Amendment 35AD withdrawn.

Amendment 35AE

Moved by Baroness Jones of Whitchurch

35AE: After Clause 74, insert the following new Clause—

“Review of impact on childcare costs

The Chancellor of the Exchequer shall, three months after the passing of this Act, and every three years thereafter, review the impact of measures on the cost of childcare with particular reference to—

(a) the effectiveness of the Childcare Payments Act 2014 on making childcare more affordable;

(b) the average cost of childcare for parents in work, including the impact of other changes to the tax and benefits system and with reference to the trends in childcare costs since 2010; and

(c) the impact of supply-led measures on the cost of childcare.”

Baroness Jones of Whitchurch: My Lords, I rise to speak to Amendment 35AE, tabled in my name and that of my noble friend Lady King of Bow. This

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amendment requires the Government to go further than review the benefits to families of the fully funded proposals set out by Labour for parents of three and four year-olds. This amendment requires the Chancellor to review the impact of childcare costs in the round.

Neutral observers might be forgiven for thinking the Government do not recognise the current crisis facing working parents with children. The figures, which have been widely quoted, are quite shocking. Since this Government came to power, real wages have stagnated or fallen, yet childcare costs have increased. They have increased by a staggering degree, spiralling by 30% since this Government came to power—five times faster than wages. There has been a childcare crunch. The number of early years childcare places available has fallen by 42,000 across England and vital support for childcare costs have been slashed, with some families losing up to £1,500 per year.

Our analysis of the latest figures from the independent Institute for Fiscal Studies, along with analysis by the House of Commons Library, shows that working families have been hardest hit by this Government’s tax and benefit changes, even taking account of the rise in the personal allowance. For example, a family with both parents in work will be more than £2,000 per year worse off by the time of the next election. Of course, these changes are in addition to the impact of the unprecedented fall in living standards in recent years, where wages have fallen in real terms, leaving working people a further £1,600 a year worse off on average since 2010.

On this side of the Committee, we think it is unacceptable that some of the most vulnerable families face this childcare crunch, hit with reduced support, fewer places and soaring costs. We believe the very least that the Government can do is to agree to this amendment, which simply requires the Treasury to review the impact of childcare costs, including the average cost of childcare for parents in work, taking into account the other changes to the tax and benefits systems. I beg to move.

Lord Nash: My Lords, I am grateful to the noble Baronesses, Lady Jones and Lady King, for Amendment 35AE, which is a companion to Amendment 35AD, which we have just considered. I thank the noble Baroness for her economics lesson but I will not take lessons from the Opposition on financial management, given the appalling state they left the public finances in when they left office nearly five years ago.

Amendment 35AE would require the Government to publish a triennial review of the impact of the Childcare Payments Act on the cost of childcare. I share the concern of the noble Baroness about the impact that high childcare costs have on working families, and for that reason the Government are making significant reforms to support the childcare sector to increase the supply of places. These are designed to ensure that any increase in demand for childcare will be matched by increased supply rather than increased costs. The latest figures show that there are around 100,000 more childcare places than in 2009. This is a remarkable achievement by the Government. In addition, we are making start-up grants of up to £2 million available to help people to

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set up new childcare businesses and to make up to 32,000 good and outstanding childminders automatically eligible for early education funding.

6.45 pm