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Debate in Westminster Hall 2.30-4.00, 15.3.16: Local Government – Ethical Procurement

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Below is a report with extracts [ <> ]

In a 90-minute debate in Westminster Hall, chaired by Gary Streeter, MPs debated the Motion: That this House has considered local government and ethical procurement. The Motion was moved by Richard Burden.

– Richard Burden: << As chair of the Britain-Palestine all-party parliamentary group, I take a close interest in the situation in the middle east. However, this debate is not primarily about whether any of us takes this view or that view on how to bring peace there; I sought today’s debate to hold Ministers to account and to require them to be clear about what their policy announcements mean and do not mean. This debate is also about the ability of those who are responsible in public institutions to exercise the judgments that they are appointed to exercise within the law when they make decisions. That could be in respect of how local authorities are accountable to their electorates for making decisions or of the ability of pensions trustees to make judgments in line with their fiduciary duties. I welcome the Minister here today to answer questions about the procurement policy note issued by the Cabinet Office on 17 February entitled “Putting a stop to public procurement boycotts” and about the proposed changes to the rules governing the local government pension scheme’s investments—for which I understand the Cabinet Office is also responsible, for some reason. I look to the Minister to answer what he will be asked clearly and without ambiguity. That is always important, but it is even more important on these matters because the Minister for the Cabinet Office and Paymaster General, the right hon. Member for West Suffolk (Matthew Hancock), has volunteered very little about them to the House. That is in stark contrast to the amount of publicity he has sought to generate for his proposals outside the House. For where this all starts, we need to go back to the Conservative party conference last October. A press release was issued in which the right hon. Member for West Suffolk was quoted. It was headlined “Government to stop ‘divisive’ town hall boycotts and sanctions” and said that action was going to be taken against the “growing spread of militant divestment campaigns against UK defence and Israeli firms.” However, that press release also contained a note to editors, as press releases often do, that suggested that a large number of the local authorities and public institutions that were apparently due to be targeted by the new rules had not resolved to divest from companies on the grounds that they were Israeli or of any other nationality. They had made or were in the course of making procurement or investment decisions on the basis of the behaviour of companies, irrespective of their nationality. In fact, the behaviour most frequently mentioned in the press release was financial involvement with illegal settlements in the west bank, about which local authorities and others were concerned. > >

With supportive interventions from Labour colleagues Jo Cox, Imran Hussain, Andy Slaughter, Stephen Pound, Helen Goodman and Stephen Timms, RB exposes ambiguities and inconsistencies in the procurement policy as well as its incompatibility with the advice on the FCO-sponsored UK Trade & Investment website:

<< It is worth quoting directly from that Foreign Office advice, which is there to this day. It says: “Settlements are illegal under international law, constitute an obstacle to peace” and “threaten” the “two-state solution”. It goes on: “There are therefore clear risks related to economic and financial activities in the settlements, and”—as my hon. Friend just said— “we do not encourage or offer support to such activity. Financial transactions, investments, purchases, procurements as well as other economic activities (including in services like tourism) in Israeli settlements or benefiting Israeli settlements, entail legal and economic risks stemming from the fact that the Israeli settlements, according to international law, are built on occupied land and are not recognised as a legitimate part of Israel’s territory.” > >

RB rebuts Conservative MP Chloe Smith’s intervention as to whether this is worth the parliamentary time, and finally outlines the Six Questions he wants the Minister to answer at the end of the debate.

After this the Chair announced that MPs would have four minutes each for their speeches

– Chloe Smith: Argues that local government’s duty is to get “value for money” and it could be unlawful for them to take “foreign policy” decisions:
< < Having policy made in town halls can damage foreign relations, to the detriment of Britain’s national and international security. > > She takes just one intervention, from Tristram Hunt.

– Clive Betts: Argues that decisions on use of pension funds must take wider impacts into consideration:
< < During the 1980s, some local authorities sought to sever links with firms that traded with South Africa. I think local authorities were right then and I think there is a lot of shame on the Conservative Benches about the action that the then Conservative Government took in defence of the apartheid regime.There is a story about what happened. Shell took Leicester city council to court because it said that by refusing to allow it to compete for a tender, the council was losing out on a potentially cheaper contract. Shell won in court. Sheffield city council decided not to put Shell on the tender list for a contract because of its dealings with South Africa and justified that because it had wider responsibilities for good race relations and to take account of the views of its citizens. Shell did not take Sheffield city council to court because it was recognised that it had behaved legally in taking those views into account. The Secretary of State has said that the actions of councils have caused community division. The Minister must say precisely what examples he has of that division. The Government have a responsibility not just for race relations but, under the Equality Act 2010, for equality impact assessments and public sector equality. The Act requires public authorities to have regard to a number of equality considerations affecting race, and also religion. The House of Commons Library has produced a good note, which says: “A Minister must assess the risk and extent of any adverse impact and the ways in which such risk may be eliminated before the adoption of a proposed policy and not merely as a ‘rearguard action’”. Have the Government done that? Where is the equality impact assessment? Do local authorities not have a duty to have regard to the effect on equality in their area in terms of both race and religion when considering whether to buy goods from the illegal Israeli settlements? Can the Minister explain what he thinks the effect will be on race relations in my constituency, which has a large number of people of Muslim faith from a background of Pakistan, Bangladesh, Yemen, Somalia and Somaliland? What would be the impact on them if they saw their council tax being used to buy goods from the illegal Israeli settlements? How could that possibly be good for community relations? That is where the division is in this argument and the Minister must come clean about the Government’s objectives, how they assessed them and whether they think local authorities have the wider responsibility that I contend they have.>>

– Matthew Offord (Conservative): In an angry speech, taking no interventions, argues that in reality this debate is just a thinly disguised attempt to demonise Israel, BDS rejects the 2-s-s, rejects the Jewish state, and has an anti-Semitic foundation:
< > He says BDS harms Palestinian workers, refers to closure of SodaStream’s factory; says BDS is not supported by the PA or Mahmoud Abbas and concludes: << What Labour and the Scottish National party failed to achieve in the general election—a majority or coalition Government to decide foreign policy—we will not let them seek to achieve at local level. Such policy is made in this House. There is no place for that in town halls, whose duties are simply to deliver local services and not to make foreign policy.>>

Andy Slaughter’s Point of Order was rejected by the Chair.

– John McNally (SNP): Supported by SNP colleague Roger Mullin’s intervention, he says no economic decisions can be devoid of ethical impact:
< < The Government are quite breathtaking in their contradictions. The Chancellor of the Exchequer has stated that he wants to start northern powerhouses; he wants to give local people more say in what is happening in their local communities. Yet he is telling them, “Sorry, you’re not going to get a say in what your pension funds do.” That is an absolute shambles of a policy, and it sounds to me as if he just made it up as he went along—for what reason, I would love to know…. The Government want to introduce powerhouses in the north of England to give people more powers, but now they are introducing this policy. I want to hear an answer on that.>> He says the Scottish Government take a much more considered approach.

– Justin Madders (Labour): Asks the Minister why the change in policy was announced in front of the media in another country rather than in Parliament where proper scrutiny could have followed:
< >

Supportive intervention from Tristram Hunt.

– Andy Slaughter (Labour): <> He concludes: << I will make just three points. First, there is a conflict between the established and well drafted Foreign and Commonwealth Office advice, which has been quoted extensively—it is very clear in its advice to businesses not to get involved in settlement trade—and the obscurity, lack of clarity and, indeed, disingenuous nature of the procurement policy note, which does not appear to say very much but hints at a great deal, mentioning things such as community cohesion and other matters of that kind, and also favouring national suppliers. Secondly, there does not appear to be in that note—I hope the Minister will clarify this—any breach of the World Trade Organisation or European Union guidance, because there is no discrimination based on nationality, contrary to some of the almost hysterical things that we have heard today. The specific issue being dealt with in this debate and that the Minister is being asked about—it was the one dealt with in the answer to my question—relates to the Occupied Palestinian Territories. We all know that the occupation is unlawful under international law and that they are not recognised by the UK and many other countries as part of Israel.This issue should not be conflated with BDS. Different people have different views on BDS. The fact that we have labelling guidance, which the Government have maintained, allows people to make individual choices. Some may argue that it is open to public bodies or others to make such choices if they want to, or for Members of Parliament to make statements in relation to such matters, but that is a different matter from illegal settlements. Illegal settlements should not be traded with, and if local authorities wish to make such a decision, that should be open. Let us remember what we are talking about here: theft of land, occupation, colonisation, and the arbitrary detention of many thousands of Palestinians. Those are crimes in international law as great as anything that happened in South Africa. They are not happening within one country; they are happening in somebody else’s country. That is the reason why action needs to be taken, and it is perfectly reasonable that it is done in this way.>>

– Robert Jenrick (Conservative): Says he was present when Matthew Hancock made the announcement and can contradict those assertions that human rights issues were not raised by British Ministers assure MPs that points were raised at that meeting and continues:
<< I think that BDS is unlikely to further the peace process. I personally believe that settlements are extremely unhelpful. I support the British Government’s policy in objecting to them and trying to use any opportunity, such as that meeting with the Israeli Prime Minister, to try to change minds and to further that argument, but I do not think the BDS movement is at all likely to further that argument. In fact, it is likely to be totally counterproductive. My second point builds on one from another hon. Member, which was in respect of community cohesion. That is a consideration for us as Members of Parliament. Indeed, if I were on a local council, I would like to bear that in mind, but it is worth recognising that the BDS movement has an impact on community cohesion, which is a negative one for many, particularly Israelis living in the United Kingdom and the Jewish community. Not everybody, clearly—that would be an outrageous oversimplification—but a number of those involved in the BDS movement are linked to intolerance and to anti-Semitic behaviour, and they make life extremely unpleasant for Jewish people living in our communities. I checked on Twitter a few minutes before walking into this debate. One only has to type in “BDS” to see some very unpleasant tweets, including one that actually asked whether the Minister for the Cabinet Office and Paymaster General, my right hon. Friend the Member for West Suffolk (Matthew Hancock), was a Jew himself. It said, “Is Hancock an Ashkenazi name, because he would come up with a policy like this?” Such behaviour is totally intolerable and whatever side we on in this debate, we should recognise that and condemn it.>>

– Simon Danczuk (Independent): <>

– Naz Shah (Labour): << Only this week a constituent came to see me about divesting from the West Yorkshire pension fund. I will take that up on behalf of my constituent, and it is only fair that councils make their decisions ethically. If we are to have a nanny state that tells councils where they can and cannot invest, where will the line be drawn for procurement? I am disheartened, because Conservative Members are trying to skew the debate and turn it into an anti-Israel debate. BDS is about upholding international law. Nobody in the House is saying we should boycott Israel; what we are saying is that councils and people should have a legitimate right to make decisions on procurement. I will not be on the wrong side of history in this House. It was a shameful patch in our history when this House voted against sanctions on South Africa. That is not how I want to go down in history. I feel that we are moving towards governing in the shadows, with people making bigger and bigger decisions without bringing them to the House and without due democratic process. A smaller and smaller group of people is making decisions that affect bigger and bigger issues. That is surely not acceptable to the House. To raise the matter of international law again, in 2004 the International Court of Justice ruled that all states have an obligation not to provide aid to Israeli violations of international law. The question is international law, not boycotts. I feel very disheartened that Conservative Members are trying to stifle debate by bringing up the issue of anti-Semitism, and that narrative is playing out while we are trying to have an honest conversation. That is all it is about. In local procurement, should we not go green or buy fair trade? We need to stop what is happening at some point, and here is where it must stop. We cannot endorse the change, and we cannot carry on with it. I certainly will not vote for it.>>

– Martyn Day (SNP): << Thankfully, the latest procurement policy note not does not directly apply to Scotland, where procurement is devolved and the Scottish Government lead on related procurement regulations……. The Scottish Government strongly discourage trade and investment with illegal settlements. Such decisions must be taken in compliance with procurement legislation. For a company to be excluded from competition, it has to have been convicted of a specific offence or committed an act of grave misconduct in the course of its business. One view, supported by the Scottish Government, is that where a company exploits assets in illegal Israeli settlements in occupied Palestine, it may be guilty of grave professional misconduct, and it may therefore be permissible to exclude it from a procurement process. It must never be forgotten when engaging in such considerations that local government is always answerable to the interests and wishes of its local communities and electorates. I know from my own mailbag that many local residents in Linlithgow and East Falkirk feel very strongly about this issue. There is a general presumption that decisions taken in their interest should be ethical where possible, and there is particular outrage that the UK Government appear to favour promoting goods from the illegal Israeli settlements. I genuinely fear that if the UK Government’s proposals effectively force local councils and other public bodies to invest unethically in areas such as the Israeli occupation or arms companies, where local opinion would have directed them otherwise, we will be at risk of serious democratic failings. Rather than attacking local democracy, the Government should take steps to support it. An approach akin to that being taken in Scotland would be good, but at the very least a full clarification from Ministers regarding the recent guidance is essential.>>

– Richard Burgon (Labour): << I wish to say something about divided communities, after our recent delegation to the illegally occupied territories of Palestine. The experience that we had in the west bank clarified why some councils might want to take some action on illegal settlements. The policies pursued by the Government of Israel in allowing illegal settlements to flourish are a physical and political barrier to peace and a two-state solution. I want to draw my brief remarks to a conclusion by asking the Minister whether he has been to the west bank and seen the Israeli settlements. Does he agree with UK Government policy that settlements are illegal under international law? Does he see any contradiction in the local authority devolution agenda when they are freeing up policy on business rates while freezing powers on pension investment and procurement decisions? Government regulations threaten councils with “severe penalties” if they fail to reflect foreign policy, but why is it so wrong to impose a ban or boycott with respect to settlements that the Government deem to be illegal? >> After a supportive intervention from Labour colleague Peter Dowd he concludes:
<< These proposals are a step too far. Britain has a clear position on settlements: they are illegal under international law, constitute an obstacle to peace and threaten to make a two-state solution impossible. This is about democracy, and the proposals are an affront to democracy, choice and local power, and the comments of the hon. Member for Hendon (Dr Offord) are an absolute disgrace.>>

Supportive intervention from Peter Dowd.

– Tommy Sheppard (winding up for the SNP): << We need to ask ourselves a question: is it the role of public agencies in the UK to assist in that illegal process or is it right and proper that they should do something about it? I think it is entirely proper that they should do something about it. The advice of the Scottish Government is consistent with that of the Foreign and Commonwealth Office, in saying that there is a general presumption against trade and investment in illegal settlements and telling local councils that they should make a decision on individual matters of procurement according to procurement legislation and take into account the circumstances that apply, but reminding them that when it comes to the term “gross misconduct”, which colleagues have mentioned, it is entirely right and proper to regard the support for an international illegal operation as gross misconduct. Looking at some of these contracts, people should be advised that they need to understand whether the contract will be secure—whether the agency or company with which they are contracting has the legal right to sign the contract, and to use the resources and occupy the lands and premises that they say they do. If a local authority is being prudent and making a careful judgment about that, it is acting in the interests of the people who elected it, and that is right and proper.>>
He concludes: << I do think that it is time, following this discussion, that we sought a debate in the main Chamber and devoted rather more time not just to this issue, but to the underlying aspects behind it. It is incumbent on us to do that because the overriding impression that I brought back from my recent trip to the west bank was one of desperation and despair among people who really feel that the world has given up on them. We need to show them that we have not.>>

– Jonathan Ashworth (Labour) (winding up for the non-SNP Opposition): Agrees that this should be debated in the Main Chamber. Following interventions from Conservative MPs he says:
<< When the Minister for the Cabinet Office and Paymaster General announced the policy at the Conservative party conference, he said that it would “prevent…playground politics undermining our international security.” Yet, as my hon. Friend the Member for Birmingham, Northfield highlighted, in the briefings, the editors’ notes and the suggestions to the newspapers, and so on, councils such as Leicester City Council and Tower Hamlets Borough Council were being highlighted. Those councils were not making decisions about Israel as a nation; they were responding to the illegal settlements in the occupied west bank. It was not about the nation of Israel; it was about illegal settlements, which the Government recognise and accept are illegal settlements. When the Paymaster General says that this is “playground politics” and that he is taking the decision in order not to undermine international security, why, as Members have said, does guidance on the FCO website talk of the risks of trade with the illegal settlements? The guidance discourages such trade, as the hon. Member for Edinburgh East said. What discussions has the Minister for the Cabinet Office had with the relevant Foreign Office Ministers on this matter? If he really believes that this is undermining international security, how does he sleep at night when he sees that guidance on the FCO’s website? As the hon. Members for Falkirk (John Mc Nally) and for Edinburgh East, our colleagues from north of the border, told us, the Scottish Government, in procurement notices of last year, or two years ago, “strongly discourages trade and investment from illegal settlements”. Is the Minister for the Cabinet Office saying that the Scottish Government are undermining international security? Is that really the view of the Paymaster General? Is this not about democracy at local level, as various Opposition colleagues have said, including my hon. Friends the Members for Ellesmere Port and Neston (Justin Madders) and for Leeds East (Richard Burgon)? Is it not ironic that all this comes from the Government who talk of and celebrate localism and from a Prime Minister who told us: “When one-size-fits-all solutions are dispensed from the centre, it’s not surprising they…fail local communities”? In 2009, the Prime Minister told us that “We’re going to trust local authorities”. How are these decisions trusting of local authorities? Is it not right that local councils should make such decisions and be accountable to the people who elect them? Leicester City Council, the area I represent, made its decisions in 2014—the Government always quote Leicester City Council in the newspapers—and the councillors who put those decisions to the council chamber stood for election in 2015. They were re-elected with people knowing about those decisions on trade with illegal settlements in the west bank, not trade with Israel.>>

In an intervention Mark Durkan (SDLP) asks: << The Government seem to be saying that it is completely out of order for local government to have any regard to ethical or valid policy considerations when it comes to procurement or supply. Yet when we passed the Modern Slavery Bill in the last Parliament, this House improved the Bill and the Government, against their first position, accepted the need to include responsibility for supply chains and procurement in the Bill. How can we legislate for that in the private sector and then abolish it for local government?>>

– John Penrose (Parliamentary Secretary, Cabinet Office): Challenged right at the outset by Conservative MP Alan Duncan to say whether the proposed
procurement rules permit a local authority to adopt a policy against investment in, or purchase from, settlements, he says that it depends:
<< The point is that although we are clear that the settlements themselves are absolutely illegal—I am happy to clarify the Government’s foreign policy— that does not necessarily mean that activities undertaken by firms that happen to be based there are themselves automatically illegal. A separate, case-by-case decision must be made about whether each potential supplier satisfies the rules.>> The rest of his speech was no more clear-cut.

After further interventions from Clive Betts and Imran Hussain, the Minister concluded:
<< Local authorities have significant flexibilities and can exercise pretty wide discretion within the rules—I hope that I am answering my right hon. Friend’s question—but the rules themselves are clearly necessary to protect them by ensuring that they do not take actions that could land them and us in court. Nobody wants to waste public money on costly court cases. I am running out of time, so I will stop to allow the hon. Member for Birmingham, Northfield time to respond, but I emphasise that on foreign policy, we have clearly not changed our approach to the Palestinian occupied territories or to settlements around the pre-1967 boundaries of Israel. With that, although there are many other things that I would have liked the opportunity to address, I want to leave the hon. Gentleman a chance to respond. I will sit down and leave the floor to him.>>

– Richard Burden: << I always thought that public procurement notes were meant to clarify procurement rules, but the Minister has just demonstrated the art of muddying them through his explanation of this procurement note. He said that the note is not Israel-specific; it just happens that the Minister for the Cabinet Office announced it in a Conservative party conference press release that was almost entirely devoted to the situation in the middle east, and then announced the public procurement note itself in Israel. If settlements are illegal, I fail to see how trade with those settlements and co-operation with businesses involved in aiding and abetting illegality is not itself illegal. That is what the Foreign Office advice to business is about. I know that the Minister has had a problem today; for some time now, we have been trying to work out which Minister would reply to this debate. I get the impression that this is a parcel that has been passed from pillar to post. [John Penrose is heard to say: We are a flexible team.] Eminently flexible—with flexible rules as well, by the sound of it. My six questions have not been answered to my satisfaction, nor have the questions asked by other hon. Members. I ask the Minister to answer in writing.>>

[Remarks: It was noticeable that while eight opposition MPs declared their entries in the register of Members’ Interests, non of the Conservative MPs did] END