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Corbyn & Labour – Using Public Procurement To Achieve Political and Social Goals

We started writing this article a few days ago, before the election announcement … it is perhaps even more relevant now!

So, our challenge for today is this. How do we start an article “Jeremy Corbyn made a speech recently” and retain our readers beyond that first sentence?

For our non-UK readers, Corbyn leads the Labour Party, which should be the main opposition party to the ruling Conservatives but under his stewardship has sunk in the opinion polls and is getting to the point where its actual survival is at risk. He is an old school socialist, of the sort we don’t see very often even in the Labour Party these days. Beyond that, there have been suggestions that on top of this political philosophy not appealing to many voters, there are issues with his basic intellect, leadership skills and judgement.

But in his speech – and this has been re-inforced by John McDonnell, his right hand man, since then – he made some interesting comments and proposals around public procurement. Before he spoke, a Labour spokesperson said the party “would introduce local jobs and content requirements to allow public bodies to use local pounds on local jobs and businesses.” (Quotes here are from Business Insider website).

They added: “Leaving the EU [should] create scope for additional flexibility for public authorities to require the use of local or regional suppliers after Brexit …”

One of the Labour ideas is to use public procurement to reduce inequality, by putting in some “cap” (20:1 has been suggested) on the ratio of the Chief Executive’s salary to that of the lowest paid employee for firms bidding for government contracts. But someone pointed out that might just lead to firms outsourcing all their lower paid jobs, so the Labour intellectuals have an answer to that too.

“A Labour source told Business Insider that the policy would include all sub-contractors in an attempt to prevent companies from outsourcing lower paid roles to get around the cap”.

OK, this is where it gets deeply, deeply silly and unrealistic. We do share the view that inequality is a concerning factor and trend in the western world today. But public procurement is not the way to address this – it just cannot work. Think of all the firms who supply the public sector, almost every firm of any size except retailers. So will this limit apply to technology firms, from Google to IBM? The banks, the big lawyers and consultants, media firms, defence contractors …

Many firms would just walk away from public sector business.Others will find some way of fiddling the CEO’s earnings. And anyway, who is going to monitor this – it is hard enough to do this for direct suppliers, but trying to do it for sub-contractors too? We’ll need to double the size of every public procurement department.

We also have a problem around another idea – that only companies which give full recognition to trade unions will be granted public procurement contracts. We don’t think that would be legal under EU regulations – it is hard to see it is a “social value” factor directly associated with the contract, although we would like to see the expert view from Messrs Sanchez Graells and Telles on this issue. And from a personal point of view, of all the organisations I know well, the one that treated its workers (at every level) the best, paid well over the odds, and was generally a great place to work for everyone was non-unionised Mars.

According to the reports, under Corbyn’s proposed new rules companies would need to demonstrate that they:

  1. Give full trade union recognition for their workforce and comply with collective bargaining agreements
  2. Move towards a ratio of 20-1 between the lowest and highest paid, matching the target in the public sector, over a transitional period
  3. Pay their suppliers the full amount owed within 30 days
  4. 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
  5. Provide training and apprenticeship opportunities proportionate to firm size
  6. Full tax compliance
  7. Adopt best practices in equal opportunities

Now some of those are easy to support, such as full tax compliance, but again the devil is in the detail, and there is no mention of the cost of implementation. But this more interventionist stance towards business still has plenty of weasel words and vagueness – what does “move towards” mean, for example? Last year, my salary ratio was 100 to 1, this year it is 99 to 1. So is my firm “moving towards” 20-1?

Anyway, we look forward to the Labour manifesto and we will no doubt have more then on their plans for power.

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