Net zero rules in public contracts ‘costing taxpayers money’

Andy Burnham has been urged to scrap “self-defeating” rules that require public contractors to meet requirements such as showing they are striving for net zero. So-called social value rules force businesses competing for government work to show how they will address various issues such as net zero, workplace equality and boosting community cohesion – even if they are unrelated to the contract itself. For example, companies competing for the Army’s Land Rover replacement contract have been asked to show they are meeting net zero targets , while developers building mini nuclear reactors were asked to demonstrate how they would provide jobs for asylum seekers.

A new report published on Monday by think tank Re:State said these measures were “distractions” that waste taxpayer money. It said the rules unnecessarily pushed up procurement costs and should be abolished. The think tank is also critical of Mr Burnham’s decision to scrap social value requirements on contracts worth less than £1m while increasing them for those worth £5m and above, arguing it will “exacerbate the problem”. Joe Hill, the author of the Re:State report, said: “Social value measures may sound like a good idea in theory, but they are self-defeating in practice.

“Companies have to sign up to onerous commitments to be able to contract with the Government, often to deliver social policy outcomes they are badly placed to help with and could never be held to account for. “In return, the public sector has to pay more for contracts and risks picking a worse company to deliver them because they told a better story about their wider social value than they did about being a high-quality supplier. “At a time when the public finances are under strain, we should scrap social value.”

The Government claims that social value rules “ensure suppliers deliver the good quality jobs, skills, and opportunities needed by our communities and those in most need, and drive up growth and productivity across the country”. A spokesman for the Cabinet Office, which oversees procurement rules, said on Friday: “The public rightly expects government spending to focus on supporting British industries and communities. “That’s why we have focused social value on supporting British jobs and training, ensuring good growth in every postcode.”

But Re:State said the current approach was an inefficient and “poorly evidenced” way to achieve the state’s objectives, adding that the current approach had become “heavily bureaucratised and preoccupied with compliance, too often at the expense of outcomes”. The requirements were also a natural barrier to small businesses and greater competition, it said, as many companies lacked the resources to produce tenders that explained their social-value commitments at length.

This gives an advantage to bigger rivals who can afford expensive lobbyists. The think tank’s report argues that a new procurement policy should be implemented that focusses strictly on value for money and removes social-value requirements altogether. Mr Burnham vowed to tackle “box ticking” in government contracts, only to increase the requirements. Louise Haigh, the First Secretary of State and Mr Burnham’s de facto deputy, last month scrapped social value requirements for contracts worth less than £1m but kept the rules for those worth up to £5m and doubled the weight of social value from 10pc to 20pc of the selection criteria.

Ms Haigh claimed the overhaul would “ensure the £90bn that is spent each year through government contracts supports British jobs, skills and people in every postcode”.