Covid-19, Brexit and a reconfiguration of public spend

This article originally appeared in the Local Government Chronicle

The context around public expenditure is changing dramatically. With the continued impact of Covid-19 and with the UK no longer subject to European procurement law both opportunities and sticking points are cast into sharp relief. Will the government continue with a system that seems to advance “cronyism” and wealth extraction, or will new process and legislation be used to promote the idea that the public pound must always be used wisely and well – flowing through our economy in the pursuit of social, economic and ecological justice?

Over the course of the last year, the government has published a raft of procurement policy notices, both in response to the impact of the Covid-19 pandemic and the UK’s exit from the European Union. These notices apply to local authorities, NHS bodies and the wider public sector.

There are warm words here, including guidance and mechanisms to make it easier for new entrants such as small businesses and the voluntary, community and social enterprise sector to compete and win public contracts.

This flurry of procurement advice has culminated in the recent publication of a new green paper which focuses on transforming public procurement, post Brexit, with a view to addressing the challenges of economic growth, helping communities recover from Covid-19 and tackling the climate emergency.

But whilst the direction of travel here is positive, CLES believes that the proposals are a mere reinforcement of the social value and procurement process we already have. As such, they fail to address the scale of the challenges we now face.

“the public values that should ground all public expenditure activity have been eroded”

Over the last four decades, the public values that should ground all public expenditure activity have been eroded – values of decency, public interest, democracy and the common good. The spending of public money has become commercialised and many of our public services have been outsourced to the private sector.

In this context, wages have stagnated, terms and conditions have been eroded and taxpayers have been left to pick up the bill when companies collapse. In services such as adult social care, years of outsourcing have created a system where billionaires and private equity barons extract profits from our care home services. And most recently, with the onset of Covid-19, we’ve seen rampant “cronyism” where public contracts have been awarded to favoured suppliers, despite the fact that many have no experience in the field.

“we have to question whether the new permissions and warm encouragements will do any better”

The Social Value Act, 2012, has softened some of the sharpest edges of the erosion of public values described above. In the main, though, it does little if anything to tackle the problems of commercialisation and the extraction of wealth from the public purse. Given how far we’ve fallen over the last 40 years we have to question whether the new permissions and warm encouragements will do any better.

For CLES, the government’s new public procurement proposals and any future legislation need to be much more strident. Key to this will be primary legislation to guarantee a system of social licensing: to in effect mandate the delivery of positive social, economic and environmental outcomes as part of any contracting arrangement with a public sector body.

“procurement must be viewed within the context of a wider local public expenditure strategy”

Furthermore, at a local level we also need a renewed progressive intent from politicians and local policy makers. This should include more insourcing and a more enlightened approach to commissioning. More fundamentally though, in these highly challenging times procurement must be viewed within the context of a wider local public expenditure strategy, which seeks to maximise social, economic and environmental benefits in order to truly build back better.

The application of procurement needs to be harnessed as a key lever of local economic development. With economic contraction currently in train, it is important that local authorities and anchor institutions examine areas and sectors where they are not buying locally and realise the potential of their spend to catalyse business growth, enable a just transition and drive innovation.

“the pathway to resilience and prosperity for all”

Here, then, the economic power of local public sector expenditure must be targeted towards the development of progressive markets for goods and services, unleashing a new wave of co-operatives, community businesses, social enterprises and municipal forms of ownership. This is where energy and vim should be focused. This is the pathway to resilience and prosperity for all.

Both Covid-19 and the climate emergency expose in different ways the underlying dysfunctions in our national and local economies: commercialisation, wealth extraction and an addiction to fossil-fuelled economic growth. If we want a green recovery worthy of the name, this will require confronting these underlying dysfunctions once and for all.