WMCA Industrial Strategy Consultation

Priorities

Use social value commissioning and procurement to support great jobs, local employment and skills initiatives, apprenticeships, equalities and other social and environmental criteria.

Use both insourcing and commissioning and procurement to help deliver world class public services and shape key parts of the local foundational economy.

Promote local economic growth through using procurement to support local business, voluntary organisations and other enterprises. Ensure that the WMCA and local authorities work closely with LEPs to target funding through City Deals, Local Growth Fund and the forthcoming Shared Prosperity Fund in a way that supports the creation of great jobs and high quality employment standards in line with local industrial strategy objectives.

Key Issues and evidence

Effective industrial strategy needs the support of smart and dynamic state at a national, regional and local level.
This may be through:

• growing and shaping economies through levers such as commissioning, procurement, planning and regulation
• influencing businesses and other stakeholders through soft powers and the advocacy role of local political leaders
• addressing market failure.

In their report The New Municipalism, APSE shows how “councils have the capacity to intervene in local economics, to deliver social change and contribute to the building of sustainable communities … councils can pro-actively intervene in local markets in ways that reduce uncertainties and risks, while setting out with communities strategic visions or signposts for future development in local markets”.

This might take the form of addressing market failure. For example, there are now over 150 local authority housing companies set up to plug the gap in housing provision created by the failure of the private sector to build sufficient affordable housing. Birmingham Municipal Housing Trust works with contractors to directly build housing and has delivered twice the number of new homes originally anticipated, becoming the largest homebuilder in Birmingham with 25 per cent of the market.

Through their purchasing power, councils and other anchor institutions in the region, including NHS providers and HE institutions, have significant leverage to both grow and shape local economies.

The government’s industrial strategy green paper described how public procurement can be used strategically to support key sectors, technology and innovation, stating that “the public sector spends around £268bn per year, equivalent to 14 per cent of GDP. Used strategically, government procurement can encourage innovation, competition, and investment in skills. US agencies and initiatives like the Defense Advanced Research Projects Agency (DARPA) and the Small Business Innovation Research programme have shown how strategic procurement can drive innovation and the creation of new technology businesses”.

Procurement can also be used to direct public money into local communities, to grow local enterprises and supporting the foundational economy, ensuring that public spending maximises impact in the local community. Many are now familiar with the model of community wealth building employed by local authorities like Preston, where a strategic approach to public spending by the local authority and other partner organisations has led to a significant increase in investment in the local economy. Six local institutions in Preston signed up to a community wealth building project that saw spending in Preston increase from £38m in 2013 to £111m in 2017. And while it is reasonable to question the displacement effects of this strategy in neighbouring areas, it is important to note that spending by Preston Council with enterprises based in Lancashire rose from £292m to £486m in the same period.

Through the use of social value clauses, public procurement can also help shape local economies, promoting fair pay, good jobs, skills and other social and environmental criteria that benefit local communities.

From the introduction of Best Value procurement in the late 90s, through to the Public Services (Social Value) Act, public procurement legislation in Wales and Scotland and the latest iteration of the EC Procurement Directives through the Public Contracts Regulations 2015, there have been several attempts to reboot public procurement and move towards strategies that seek to enhance a broader a set of social value objectives. In 2017, the Crown Commercial Service published new guidance on placing social value at the heart of public procurement, requiring “buyers of public sector services to consider whether there are related social, economic or environmental benefits that can be delivered through the contract”

However, as research by Social Enterprise UK demonstrates, uptake is patchy and inconsistent. They found that only 24 per cent of local authorities have a social value policy, about a third of all councils routinely consider social value in their procurement and commissioning and that where councils score social value when scrutinising tenders, the score is typically between 5 and 10 per cent of the overall points awarded.

However, there is good practice. In Greater Manchester, the Mayor is about to launch an Employment Charter with a view to securing employer commitment to a range of quality employment standards. Initiatives such as Unison’s ‘Ethical Care Charter’ and Children England and the TUC’s ‘Declaration of Inter-dependence’ have provided ways of codifying good social value practice through voluntary agreements that can be adopted by councils.

Evidence shows 14 that their application can have a positive impact on employment standards and value for money. And local authorities, including Cambridge, Brighton, Lewisham, York and Manchester have used contracts to increase uptake in the real living wage.

Furthermore, governments in Wales and Scotland have used a combination of legislation and voluntary codes to push social value procurement more effectively than Westminster. The Code of Practice for Ethical Employment launched in March 2017, developed in partnership with unions and public service employers, places an expectation on all public sector organisations, businesses and third sector organisations in receipt of public sector funding to sign up to a code of practice that promotes decent jobs, a living wage and protects against blacklisting and other forms of exploitation. The Procurement Reform (Scotland) Act 2014 goes much further than the Public Contracts Regulations enforced in England and Wales, requiring all public bodies to have a procurement strategy in place that supports community benefits, the living wage and the economic, social and environmental well-being of the local area.

Lessons could be learned from the Welsh Government, which has highlighted the potential of procurement policy in its programme for government, ‘Taking Wales Forward’. This programme will run from 2016 until 2021. The Welsh Government will pilot a ‘Better Jobs, Closer to Home’ project, designed to create employment and training hubs in areas of high economic deprivation. The Wales TUC campaigned specifically for such a project. The Welsh Government has also pledged to continue to improve procurement policy, including community benefits.

We would welcome a more dynamic approach from political leaders at a national and local level, including through the WMCA, to achieve a fundamental change in the way social value is promoted through public procurement in order to protect and promote decent employment standards and broader economic and social objectives, including spreading good practice from devolved administrations in Scotland and Wales.

Proposals

The WMCA and other local political leaders should work with commissioners and decision makers across the public sector – including the health service and local government – to promote, implement and monitor a more dynamic approach to social value procurement in support of great jobs and inclusive growth, including best practice from devolved governments in Wales and Scotland.

This should include the use of voluntary agreements and charters, including employment charters, in order to promote high quality service, decent employment standards and protect against exploitation of the outsourced workforce and supply chain.

The WMCA and other local political leaders should work with other anchor institutions in the region to coordinate strategic procurement spending in support of the local economy.

The creation of great jobs and the promotion of high quality employment standards should form a core part of the local industrial strategy and, as such, should be a key measurable outcome through the financial support co-ordinated by combined authorities, local authorities 15 and LEPs through City Deals, the Local Growth Fund and the forthcoming Shared Prosperity Fund.

Additional Submission

The UCU union has provided detailed comments on the draft industrial strategy with particular regard to inclusive growth. The comments are so detailed that they have been reproduced in Appendix 1 and we urge the WMCA to give due regard to the comments provided by UCU.