Thursday 13 April 2017 / 7:44 AM 2017 Press Archive / The Latest from Labour

Labour will use £200 billion government purchasing power to upgrade our economy

Corbyn: We will use the £200bn government spends in
the private sector and powers taken back from Brussels to upgrade our economy
and create good jobs

Speaking at Wabtec train maintenance
company in Doncaster this afternoon, Jeremy Corbyn will pledge that the
next Labour government will use the enormous £200 billion national and local
government spends in the private sector to upgrade our economy, create good
local jobs and reduce inequality.

This will include requiring best practice from
firms government does business with on:

paying tax

workers’ rights

equal opportunities 

environmental protection

training and apprenticeships

paying suppliers on time, and

boardroom excess, by moving to a 20-1 limit on the
gap between the lowest and highest paid.

He will also announce how Labour would use powers
repatriated from Brussels after Brexit to create high quality local jobs,
develop new industries and support good domestic businesses – large and
small. This would mean allowing public bodies to support local jobs and
businesses with local employment and content requirements.

Jeremy Corbyn will also call on the government
to consider extending the rights of local authorities in left-behind areas to
require local suppliers and jobs in public contracts, in relation to World
Trade Organisation procurement rules, as has happened in the US.

Jeremy Corbyn, Leader of the Labour Party, speaking
at the event, will say:

“For years we’ve been told that there’s
nothing that can stop the race to the bottom in the jobs market that is making
people’s lives harder and holding back our economy. 

“Well, today I say, Britain doesn’t have to be so
meek, and settle for things getting worse and more insecure for so many. We can
make the change we need if we understand the power we already have – and
how we can better use it.

“National and local government spends £200 billion
per year in the private sector. That’s an incredible purchasing power, which we
can use to support the good companies and improve the behaviour of the bad ones
that undercut with unfair practices.

“Under the next Labour government, Britain will
subsidise bad corporate behaviour no longer. Our business partners should have
the same values we as a country hold: enterprise, fairness, high-quality
service and doing right by everyone.

“And while Brexit presents many challenges to
Britain, it can give us more powers to encourage best practices and support new
and existing businesses and industries in Britain. 

“While the Conservatives seem intent on using
Brexit to turn us into a low-wage tax haven, Labour will use every power
possible to upgrade our economy so we can all lead richer lives.”


Notes to editors:

1.  Require all companies bidding for a
government contract to meet the following:

a)      Give full trade union recognition
for their workforce and comply with collective bargaining agreements

b)      Move towards a ratio of 20-1
between the lowest and highest paid, matching the target in the public
sector, over a transitional period

c)      Pay their suppliers the full
amount owed within 30 days

d)      Maintain high environmental
standards in relation to energy use, emissions and waste disposal, while taking
appropriate measures to aid the transition to a low carbon economy

e)      Provide training and
apprenticeship opportunities proportionate to firm size

f)       Full tax compliance

g)      Adopt best practices in equal


This is all
possible within existing EU rules, provided it’s done on a non-discriminatory
basis. In particular:

The 2014 EU Directive expressly requires Member
States to take into account the widest possible range of social and
environmental considerations, as well as price, when buying goods and services
for the public sector.

In UK law, the Public Services (Social Value) Act
2012 requires authorities that are engaging in certain procurement exercises
for services, to consider first how the proposed procurement might improve the
economic, social and environmental well-being of their area, and how these
improvements might be secured. The Act applies to England, and to Wales to a
limited extent.

2.       For government contracts that fall outside the WTO Government Procurement Agreement
(GPA), we would introduce local jobs and content requirements to allow public
bodies to use local pounds on local jobs and businesses.

Currently, both EU and the WTO Government Procurement
Agreement (which the UK is a member of in virtue of being in the EU) require
that public procurement contracts above certain thresholds be opened up to
potential suppliers from other countries. These thresholds are £5,446,950
for construction contracts, £141,621 for central government contracts for goods
and services, and £217,878 for subcentral government contracts for goods and

The thresholds for central government entities are
130,000 Special Drawing Rights (SDRs) for goods and services, and 5m SDR for
construction; UK central government bodies that are covered by the GPA are
listed here (at
the bottom of the document). The thresholds for sub-central government entities
are 200,000 SDR for goods and services, and 5m SDR for construction; these
include county council and city council procurement bodies, as well as local
schools, fire authorities, NHS procurement etc. Calculations above are made on
the basis of a 1SDR = £1.09 exchange rate.

Below these thresholds, much procurement is opened
to suppliers in other EU member states because of principles that are part of
the Treaty on the Functioning of the European Union. Leaving the EU should
therefore create scope for additional flexibility for public authorities to
require the use of local or regional suppliers after Brexit below these
thresholds. That would allow procurement contracts
below GPA thresholds to contain local jobs and content requirements, directing
public money back into local economies.

“As regards
below-threshold procurement, the practical importance of covering this may
depend on the extent to which regional or local discrimination is prohibited
internally in the UK, since this kind of discrimination may provide the
greatest barrier to market access.”  Source: Sue Arrowsmith, Consequences
of Brexit in the area of the public procurement
April 2017

2012 the UK had 96.8 billion of public procurement contracts
above threshold.  Of these contracts, €74.4 billion (or 77%) were
covered by the GPA and €22.4 billion (or 23%) were not.  Since 2012 there
the GPA has been revised and EU procurement directives have been updated. In
2015, the UK spent €127.56 billion on above threshold public procurement. 
This is roughly a third to a half of all procurement spending, implying that at
least half falls under thresholds.

These figures are
indicative figures only. They are provided by the House of Commons library with
the following notes:

2012 figures are from WTO Committee on Government Procurement, STATISTICS
, June 2016 – UK annex (annex 29), Total

2015 figure is from European Commission, Public
Procurement Indicators 2015
, December 2016 – this
figure is based on the value of tenders published in the EU TED (OJEU)
database, including for utilities and defence. Tenders must be published in the
database if they are over threshold.  The database – and therefore the
statistics – do include some tenders that are under the threshold – about 8% of
UK tenders are under the lowest of the thresholds.

There are a couple of ways to calculate total public procurement
spend and these affect the calculation of the proportion of all spending that
is above threshold – figures from the Whole of Government Accounts give a lower
total (and a higher proportion) as they exclude public sector purchases from
the public sector itself.


3.       Labour
is calling on the Government to do an impact assessment of the level and extent
of coverage of the GPA on “left behind” local authorities

The UK is currently subject to the GPA as a member
of the EU, but not in its own right – the government is apparently “considering
the UK’s position” as to whether it will seek to remain
a member after Brexit.

While the USA is signed up to the GPA, there is
significant variation in the level of coverage across different states. Only 37
of the 50 states are included in the GPA, and, among those that are, the GPA
has extensive coverage over public spending by the states of, for example,
Washington and California and much more limited coverage in Mississippi and

The USA and Canada also have higher thresholds for
sub-national contracts for goods and services than the UK currently does within
the EU.

355,000 SDR compared to 200,000
SDR for EU countries, see

Given the restrictions imposed by the GPA on local
authorities, Labour is calling for an impact assessment of different levels of
GPA coverage on local authorities in the UK and of the thresholds to which they
are currently signed up. 


In 2014/15, UK public sector procurement was worth
£191.7 billion. Of this, £68.9 billion was local government procurement and
£115.5 billion was central government (including NHS) procurement. Note that
these figures do not include public sector procurement from other parts of
the public sector.  Source: House of Commons Library.