Effective defence procurement

I was in Westminster this week at the launch of a paper on defence procurement I wrote for the Prospect trade union. 

The launch included interesting contributions from the Shadow Minster for Defence Procurement, Chris Evans MP, Andrew Kinniburgh (Made in UK) and Prospect’s Bob King. Chris welcomed the report and stressed the importance of a new approach to procurement based on the mutual respect of all the procurement parties. He pledged that a future Labour Government would prioritise sovereign capacity in defence procurement, recognising the sector's importance to local communities. Andrew focused on the role of SMEs in moving away from the increasing reliance on defence imports. Finally, Bob King emphasised the role of Prospect members in delivering for UK defence.

My report starts by looking at the UK defence strategy, or more accurately; it's far too many strategies. The UK Government has published and recently refreshed an Integrated Review, but in my experience, many strategies can lead to confusion. Particularly when they cover more than one department. In fairness, defence strategies often date quickly, and the war in Ukraine has turned much of the 'Global Britain' rhetoric on its head. We are back to war in Europe with tanks, infantry and artillery.

The chatter about a 3% of GDP defence budget has quickly dissolved thanks to Truss economics. 2.5% is now a target ‘when conditions allow', which is unlikely anytime soon. However, as a new analysis shows, Britain still has the biggest defence budget in Europe at a time when just about everyone outside Africa is spending at Cold War levels. 

The UK defence industry supports around 260,000 mostly quality jobs and is a big exporter. These jobs are spread across the regions and nations of the UK, including Scotland. This has a vital economic spin-off, what the Dunne Report called a 'Prosperity premium'. However, there are challenges, with skill shortages and a shortfall in research and development. A staggering fact is that Amazon spends more on R&D than the worldwide defence industry.

Defence procurement, not just in the UK, needs a better record of delivering outcomes. The recent Public Accounts Committee report is brutal. 13 formal reviews in 35 years tell their own story. But, in fairness, purchasing defence equipment is unlike buying cornflakes and paper clips. Military equipment is developed over a long timescale, during which ministers and even governments come and go, domestic priorities change, and external threat assessments are varied. Larger projects often require international collaboration, which brings additional challenges. The MoD also needs help recruiting and retaining staff with the requisite skills to manage often overcomplicated processes.

I also looked at international procurement practices. There has been a noticeable worldwide shift to local production or offset arrangements. The UK has the most open market, while the EU, NATO and countries like Türkiye and India have explicit strategies to support their defence industries. I explain why they do this and why the UK should follow suit.

The report's core describes the current defence procurement regulations and my recommendations for a new approach. This is an explicit UK by default strategy linked to an industrial strategy, with workforce planning and social value at its core. Social Value measures the direct, indirect and induced impact of procurement. Around one-third of defence spending returns to the Treasury, so it makes no sense to recognise this in bid evaluation. This comes through various taxes and public and private sector pay. Procurement should also support public policy considerations, including the real living wage, employment standards, and ending tax dodging. I propose a mix of regulation and guidance to achieve this. Guidance is more flexible but doesn't necessarily deliver the necessary cultural change.

My report concludes:

“Without a thriving defence industry, the UK puts at risk its freedom to act in defence of the country’s interests at home and abroad. And the armed forces risk losing their technological advantage over actual and potential enemies. Achieving these aims requires a commitment to sustain and strengthen national defence design, manufacturing and support capabilities in a partnership between the MoD and industry. The UK by default.”

Procurement failures

The UK Government is mired in a series of procurement scandals that go way beyond poor practice. While not on the nearly on the same scale, all is not well in Scotland either. In recent months I have completed a couple of projects that examine specific procurement programmes. Similar issues cropped up in both projects, which reflect some long-standing lessons that organisations have failed to learn.

 

Barely a day goes by without UK Government procurement stories being reported in the media. Some examples include:

 

·      Sourcing PPE from factories in China where hundreds of North Korean women have been secretly working in conditions of modern slavery. They have no days off and the North Korean state seizes 70% of their wages. It also breaches UN sanctions.

·      PPE contracts involved a £253m deal with Ayanda Capital, a London-based investment firm whose senior adviser was Andrew Mills. At the time, Mills was also an adviser to the Board of Trade. The government paid Ayanda £155m for face masks with ear loops, which could not be used by the NHS.

·      A Spanish businessman was paid more than £21m in taxpayers’ money to act as a middleman in the sale of personal protective equipment to the UK government by a Florida-based jewellery designer.

·      A contract, without a tender, paid £550,000 to the policy consultancy firm Public First for polling and focus groups. No formal contract was put in place until 5 June. The NAO found, “no documentation on the consideration of conflicts of interest, no recorded process for choosing the supplier, and no specific justification for using emergency procurement.”

·      The Ministry of Housing, Communities and Local Government (MHCLG) awarded a £600,000 research grant to a consortium whose members include a fire testing specialist whose research has been funded by Kingspan, the company that made some of the combustible foam used in Grenfell. As well as a fire engineer who has publicly opposed outright bans on combustible materials.

 

A National Audit Office (NAO) investigation into pandemic procurement concluded that normal standards of transparency were waived as departments awarded 8,600 contracts worth £18bn to tackle COVID-19. Deals worth £10.5bn were granted without competitive tender and companies recommended by MPs, peers and advisers were given priority. As the chart below shows, 58% of contracts value was awarded directly to a supplier. Even allowing for the urgency, this is well below the standards taxpayers have a right to expect from public procurement. An issue which is now the subject of a legal challenge from the Good Law Project.

In a recent report for Prospect, I highlighted a number of poor procurement practices in the plan to centralise Highlands and Islands Air Traffic Control. In that report, I listed a range of IT procurement failures in Scotland. One of those failures was Disclosure Scotland, which is continuing to spend millions of pounds to manually deal with disclosure applications more than a year after an IT system £44 million over budget went live. The Scottish Government has also had issues with PPE procurement. The alteration of use-by dates on vital PPE equipment has raised concerns that the Scottish Government is short-changing key workers by providing out-of-date equipment. 

Procurement is important because the spend generates around £10bn of economic activity for Scotland. However, too little of this spending is linked to creating jobs in Scotland, with only 100,000 jobs supported. SME’s have also long complained that they get a disproportionate amount of this spending, and the latest procurement report shows that SME’s get around 1% of total procurement spending. As Richard Leonard MSP recently said, “The SNP Government have handed billions of pounds of public money over to contracts, with little job creation and SME support in return".  

 

I was closely involved in the development of the Procurement Reform (S) Act 2014, which attempted to use procurement as an important lever to deliver broader government objectives, including employment standards and sustainability. Progress has been made in delivering the real Living Wage in contracts, ironically one of the most contested features of the legislation. Outwith this improvement, the latest annual report is full of process and ambition, but limited hard evidence that real progress has been made.

Public procurement properly managed is an essential lever for devolved administrations to deliver their policy priorities. UK Government's pandemic procurement has been a shambles, and in Scotland, the scorecard remains at ‘could do better’. 

Air Traffic Control in the Highlands and Islands.

The public procurement of cutting edge technology is risky at the best of times. For a small public sector airport company to embark on such a programme during a pandemic, which is devastating the airline industry, is very risky.

Highlands and Islands Airports Limited (HIAL) are planning to radically change their Air Traffic Management System (ATMS), removing Air Traffic Control operations from several airports in the Highlands and Islands and centralising them in Inverness. Instead of having air traffic controllers on-site, they will be based in Inverness relying on communications technology to manage aeroplane movements.

I was commissioned by the trade union Prospect to undertake a procurement analysis of the proposal, which they have recently published. 

In this report, I draw attention to the many technology procurement failures in Scotland and the lessons that should be learned. These include sufficient capacity and capability, early stakeholder engagement, over-reliance on suppliers, avoiding optimism bias and cost creep. These are all identifiable concerns in the ATMS programme. 

While there is significant interest worldwide in the use of Remote Towers to deliver air traffic control services, there is limited practical experience using multiple Remote Towers in the way proposed here. A range of concerns have been identified with the operation of Remote Towers including, the breakdown of data transmission systems, cyber-security, weather assessment, impact on human performance and managing the need for ratings for more than one tower in a single shift.

While the proposal will cost more, it will shift employment from fragile island communities, something that was supposed to be addressed by the Islands (S) Act. The programme will take at least £18m of economic benefit from island economies – a proportionate loss to the Glasgow economy would equate to the loss of some 800 jobs. HIAL has only recently appointed consultants to draft an islands assessment, a process which should be undertaken before decisions are made.

All the island local authorities oppose the ATMS programme. As they put it, “HIAL are putting their own priorities and dogma way above the needs of their customers and partners. Taxpayers money is being spent on a needless vanity project. It is utterly unacceptable in this day and age for a publicly funded body to behave in this high handed way’.

The ATMS programme was developed before the COVID-19 pandemic, which has had a massive impact on air travel with a 97% reduction in flights and an estimated £20 billion in lost revenue. Industry analysts all agree that a global recovery in air travel will take many years, if at all given behaviour changes. At the very least, such a significant difference in the operating environment needs to be the subject of a full, transparent, programme review. The Scottish Government should be rethinking their support for the project.

Using procurement to tackle the tax dodgers

The tax dodging activities of companies has come under a lot of scrutiny, but we could do more to tackle this abuse in Scotland with existing powers. Companies who want to bid for taxpayer funded contracts should pay all their taxes.

 

The recent focus has been on Google, following a deal with HMRC to pay £130m in back taxes and bear a greater tax burden in future. This constitutes a 3% tax rate, something small and medium size business across Scotland can only dream of. As Richard Murphy of Tax research put it: “George Osborne is not getting the deal the UK tax payer will be expecting. It is a special rate of tax that would not be available to anyone else.”

 

Even the EU has been shocked over the methods used by multinationals minimise their tax liabilities in Europe. We have had the Luxleaks revelations, media exposure of how hundreds of global companies including Pepsi, Ikea and FedEx had secured secret sweetheart tax deals with Luxembourg, allowing them to save billions of euros in taxes. Before that it was transfer pricing and investment loopholes that allow big companies to pay less tax.

 

This abuse also has an impact on global poverty. Just 62 billionaires own the same wealth as half the world’s population – that's 3.6 billion people. This extreme inequality is being fuelled by a global network of tax dodging. Poor countries are losing at least $170 billion a year to tax havens – money that is desperately needed for vital services like healthcare and education.

 

We don’t tend to think of Scotland when tax havens are discussed. However, as the Sunday Herald recently reported, Scotland is being advertised as a tax haven across Eastern Europe. As one advert proclaims; "Having registered a company in Scotland, by using offshore rules, you do not need to carry out any audits and, furthermore, there is no requirement to provide financial reports."

 

The number of limited partnerships in Scotland has more than doubled from just over 6,000 to nearly 15,000 since 2009. We now have more of these firms than England and Wales put together.

 

Scottish Labour raised questions about this last summer after an international investigation into the alleged fraud of three Moldovan banks uncovered that some of the companies used were in Scotland. Labour's Jackie Baillie said: "It is extraordinary that Scotland is being described as an offshore tax zone. Somebody should be looking long and hard at how to close this loophole."

 

The Scottish Government has urged Westminster to simplify the UK tax system and abandon what it claims is; “the unnecessary complexity which creates opportunities for tax avoidance through countless exemptions, reliefs, deductions and allowances”. The House of Commons Treasury Committee has launched an investigation, with the Chair making similar observations about complexity.

 

Nicola Sturgeon has described tax dodging as “obscene, immoral and downright wrong”. In response to a question on Amazon from Liberal Democrat leader Willie Rennie she said: “All companies should pay the tax that they are due to pay. The Scottish Government, with the limited tax responsibilities that we have, takes tax avoidance very seriously.”

 

The Scottish Government’s tax avoidance measure used by Revenue Scotland is better than the UK approach. However, the same cannot be said of procurement. The public sector spends some £11bn each year in the private sector and this should be used as part of stronger efforts to tackle tax dodging and tax avoidance. It is entirely wrong that companies seeking to avoid paying their fair share of tax should be awarded public contracts.

 

The Public Contracts (Scotland) Regulations 2015 were considered by the Infrastructure and Capital Investment Committee last week. UNISON’s briefing to MSPs questioned why the Scottish Government is not using powers that it has for mandatory, rather than discretionary, exclusion of companies that have not met their tax obligations and /or breached environmental, social and labour laws, and to exclude companies involved in aggressive tax avoidance? If we had these provisions in place, Anglian Water, or almost any of the privatised UK water companies, would be highly unlikely to have even bid for the public sector water contract.

 

Dave Stewart MSP highlighted this to the committee last week, he said: “there is a big gap in that there is no reference to or substantial action on tax dodging. I support the moves by Christian Aid, the Scottish Trades Union Congress, Unison and others to restrict from Government procurement companies that avoid paying tax.”

 

We have demonstrated how this can be done (including a 2014 proposed amendment to the Procurement Bill). It has been argued that it is too complex for procurement managers. The solution is to require companies to sign up to the Fair Tax Mark. A Scottish firm, SSE was the first company to do so.

 

Given the Scottish Government’s rhetoric on tax dodging and the practical steps in the Revenue Scotland and Tax Powers Act, I am at a loss to understand why they are not taking action on procurement. Local and regional authorities across Europe are taking a stronger line than Scotland.

 

The bottom line should be – companies who take the taxpayers pound, should pay their taxes in full.

 

 

Using public procurement for a fairer Scotland

More than £10bn of Scottish taxpayers cash goes on buying goods and services in the private sector. This procurement activity could do much more to deliver the Scottish Government and other public bodies policy aims.

Last year the Scottish Parliament passed the Procurement Reform Act and the EU passed a new Procurement Directive. These provide a framework for a new approach to procurement, but need to be transposed into regulations and guidance to make it work on the ground. Procurement is a devolved matter and it has has to be said that the Scottish Government is making a much better fist of implementation than their UK counterparts. However, progress is slow and the approach is still too cautious and risk adverse.

A key objective for trade unions has been extending the Scottish Living Wage through procurement. The Scottish Government has a good record on supporting the living wage, but procurement has always been the weak point. We had expected the Procurement Reform Act statutory guidance on the living wage to be in place by now. However, this has been delayed. As an interim measure a Scottish Procurement Policy Note, 'Evaluating employment practices and workforce matters, including living wage, in public contracts' has been published. While this is not as good as statutory guidance and has some omissions, it does explain how public bodies can legally ensure the living wage and other employment matters are included in contracts.

In local authorities in particular, legal and procurement advice has persisted with the erroneous position that the living wage and other workforce matters cannot be included in contracts. This policy note is helpful in challenging that advice and includes a practical case study piloted by the Scottish Government and model specifications.

The Local Government in Scotland Act introduced provisions, known as s52 guidance, that is supposed to end the Two Tier workforce, ensuring that council contractors pay the same wages and offer similar terms and conditions to directly employed staff. New evidence that councils are ignoring the requirements of s52 comes in The Third Annual Report Scottish Local Government Benchmarking Framework. They report an 8% increase in privatised social care services and this, "has contributed to reduced costs through lower salary and pension costs". There could not be a clearer admission of unlawful procurement in an official report. On many occasions the STUC and individual unions have raised with ministers the need to promote and enforce these provisions. Sadly, little has happened and again it is not even mentioned in the new advice note.

The Scottish Government has also published a consultation on the transposition of the latest EU Procurement Directive into Scottish procurement regulations. There are a number of options available to ministers and we will be pressing for a much more radical approach in line with the 'Ten Asks' we promoted with a network of civil society partners during the Procurement Reform Act's legislative journey.

A good example is tax dodging. As I explained in the Sunday Herald, the consultation paper is weak on this point and the Scottish Government could do much more. For example, by adopting the Fair Tax Mark. A Scottish company, SSE was the first company to sign up to this. Similar initiatives could make a real difference in promoting stronger environmental action, development goals and fair trade.

It isn't possible to specify everything we would want explicitly in procurement regulations. However, it is possible to change contractor behaviour by spelling out the standards we expect from organisations who take the public pound. That can be a powerful force in promoting the fairer Scotland most of us want to achieve.

 

Making public procurement work for all

If you want to chase the public pound in Scotland, you need to adopt our values. That means paying your taxes, respecting our environment and treating your workforce fairly.

Today, I was speaking at a meeting on procurement at UNISON's annual conference in Brighton. Many outside and even inside Scotland see us as a public service monolith - if only! True, we do have a slightly larger public sector workforce and certainly limited marketisation of public services. However, nearly a third Scottish Budget (£10bn) is spent in the private or voluntary sector. So procurement and how we manage it, is important to UNISON members and the wider community. Ensuring that we don't just buy things, but that we extract maximum community benefit from the public pound.

Procurement law is devolved to Scotland, but we are still in EU (for now!) whose Directives govern much of the process around procurement. The Scottish Government decided to legislate on this issue through the Procurement Reform Bill. This was intended as a largely business friendly technical Bill, reforming the procurement process. In fact, it was largely cosmetic, as many of the reforms could have been implemented through existing secondary legislation powers.

UNISON and others saw an opportunity with this Bill to promote a different agenda. We built a huge civil society coalition (with a combined membership of over three million members) around 10 asks on the Bill. Through our campaigns and lobbying we achieved significant improvements, but not all we would have wanted, to the Bill. These include:

• Blacklisting. Stopping companies involved in the persecution of union activists from getting public contracts unless they make restitution to those affected.
  
• Tax dodging. Introducing an anti-avoidance rule, stronger than in UK legislation.
  
• People centred procurement. Using new EU exemptions and thresholds to exempt health and care and allow evaluation of employment standards. Tackling issues like zero hours contracts.
  
• Scottish Living Wage. This is already applied in the public sector and through procurement we can spread the benefits to our members in the community sector and the wider economy. We would have liked a mandatory requirement, but at least we now have legal procedure to allow public bodies to contract on that basis. No more dodgy legal excuses. Public bodies can now include the living wage in their procurement policy, evaluate bids against that policy and confirm in the contract. This will then become an enforceable performance clause.
  
• Greater emphasis on cutting carbon emissions, environmental standards and promoting fair trade.
  

There is more work to be done on statutory guidance to firm up on the outline in this primary legislation. In addition, we have to implement the new EU directive in Scottish legislation.

EU procurement rules are all too often used as a straightjacket or excuse for inaction. As a lawyer who has worked inside government, I am always telling ministers and councillors that they ask the wrong legal questions. Don't ask what is the legal position, but rather how can I achieve my policy objective with the least risk.

The importance of the new legal framework for procurement in Scotland is the message it sends to bidders. If you want the public pound in Scotland you have to pay your taxes, respect our environment and treat your workers fairly.

Law and frameworks are important, but it only creates an opportunity to do better. We have to organise to make the most of that opportunity. That means developing the procurement expertise of staff and activists, lobby locally, support branches and challenge poor practice at every stage of process.

If we do that, we can use procurement to deliver important benefits for our members and the wider community.

 

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Progress on the Scottish Living Wage and procurement

Progress with spreading the benefits of the Scottish Living Wage depends on a robust approach to public sector procurement.

The Procurement Reform Bill reaches its final stage in the Scottish Parliament next week and one of the most contentious issues has been the exclusion of the Scottish Living Wage. Labour's James Kelly MSP, who also led a separate debate on this issue, makes the case well in his recent Scotland on Sunday article. He is supported by a large civil society coalition who campaigned on this and other procurement issues.

In fairness to the Scottish Government, no one doubts their commitment to the Scottish Living Wage. Scotland leads the way in the UK with the implementation of the living wage across almost all the public sector. They have also funded an accreditation project that aims to encourage more private sector employers to adopt the living wage. The gap is procurement and this is largely due to the muddle and confusion over EU law.

The muddle is largely of their own making because they sent a very unwise letter seeking clarification from the EU Commission in 2012 that formed the basis for the current guidance. Daft letters tend to elicit daft answers and that is what they got. We had a perfectly straightforward statement from the Commission in 2009 setting out the way the living wage could be applied in procurement. That approach is supported by the counsel opinion we provided to the Committee considering the Bill. Only last week the EU Commission repeated their position, when they corrected another unwise speech from the First Minister blaming the EU for the problem.

Despite all this, I am pleased to say that we are now making some very real progress. The Deputy First Minister has tabled amendments to the Bill that does introduce the living wage for the first time. This approach gives public bodies legal clarity and a way of introducing the living wage into procurement. They will now be able to include the living wage in their procurement strategies in a way that will make it clear to contractors that, for relevant procurements, they will evaluate bids taking their employment policies including the living wage into account. That will then be included in the contract and can be enforced through contract performance.

This will be set out in more detail in the statutory guidance that public bodies 'must' take into account in relevant procurements. We have been given a very clear assurance from the DFM that the guidance will be robust, actively enforced and we will be involved in its drafting.

This is important because past experience has not always been positive in this regard. In particular, we already have the Local Government in Scotland Act s52 guidance that was supposed to end the two tier workforce. However, that has been poorly followed by many authorities. The irony is that if authorities properly applied s52 then the living wage would already be mandatory in public procurement. That's because the guidance covers not only new outsourcing, but also to a change of provider. As councils pay the living wage that should be specified in the contract now to avoid a two tier workforce.

Of course we still believe that the Scottish Government could go further and make the Scottish Living Wage mandatory. The legal basis is clear and the grounds for legal challenge minimal, not to mention unlikely for the reasons I set out to the Committee. But governments are cautious beasts when it comes to legislation and the DFM has promised to pursue the issue further with the EU Commission. Verbally this time!

The absence of a mandatory provision means that public bodies might not make the necessary changes to their procurement policies. The main issue here is cost and the key area is social care contracts. This is being addressed in other forums and progress on this issue is the next big step forward. We believe the costs are not massive and in any case the current arrangements are indefensible, as UNISON Scotland's 'Time to Care' report shows.

So not everything we would want, but very real progress and potential light at the end of this very long tunnel. The Scottish Living Wage makes a big contribution towards tackling in-work poverty and promoting sustained economic growth. Using Scotland's substantial public procurement spend will be a big step forward.

 

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Self-directed care - reality doesn't always match the rhetoric

Self-directed care is right in principle, but does not always match with the reality of care provision in Scotland today. The rhetoric of choice and control is often used as cover for a deteriorating service.

The Self-Directed Care (Scotland) Act comes into force today and requires local authorities to offer personal payments if requested. I was interviewed by the BBC today on the impact this legislation will have on care in Scotland.

This approach works well for some service users, but can be an unnecessary burden for others. We should therefore be careful not to turn this into another one-size fits all approach to social care. UNISON signed a joint statement as far back as 2006 with the Scottish Personal Assistant Employer Network supporting direct payments while recognising that this approach should not be used a cover for cuts. However, by 2012 it was becoming clearer that assessments were focused on making savings rather than delivering better care. We illustrated these concerns with case studies in our report, ‘Personalisation in Scotland – The Facts’.

Today, cuts in budget provision means that the individual service user often has a smaller budget to buy equivalent services. This has contributed to the ‘race to the bottom’ in home care as highlighted in UNISON Scotland’s recent ‘Time to Care’ report. Staff, often paid little more than the minimum wage, on zero-hours contracts, with little training, are literally running about trying to provide the same service.

Many service users don’t understand or want the responsibilities of being an employer. As a consequence the service is being privatised with agencies providing the staff rather than the envisaged genuine personalised service. With budget cuts service users are being forced to choose a cut price ‘personalised’ service that is short on quality.

Self-directed support is leading to cuts in collective provision, such as day centres. This leads to greater social isolation that we know has a damaging impact on health. Social isolation is associated with a higher risk of death in older people regardless of whether they consider themselves lonely. A study of 6,500 UK men and women aged over 52 found that being isolated from family and friends was linked with a 26% higher death risk over seven years. Our home care members report that they are often the only living person some elderly people see in days. All the more reason to allow more time to care.

There is also no legislative requirement that a personal employer checks for Protection of Vulnerable Groups Scheme membership. Our discussions with home care staff indicated that many would be reluctant to raise care abuse concerns, particularly when they are employed on zero-hour contracts. Given the disparate nature of this service it is difficult for councils and regulators to check on the quality of care in the same way as they do in residential settings.

Overall, self-directed care is still right in principle and works well for some groups of service user. However, it isn’t suitable for everyone and has some big downsides, particularly when budgets are under financial strain.

Zero-hours contracts - bad for workers, services and the economy

The growing use of zero-hours contracts (ZHC) is primarily a conduit for the exploitation of working people.  The growth in casual employment is contributing to the growth in in-work poverty, damaging public services and the economy.

Today, I was giving evidence at the Westminster Scottish Affairs Committee inquiry into zero-hours contracts. My evidence was largely based on our experience of the growing use of these contracts in the care sector. 

There is no recognised definition of zero-hours contracts and considerable confusion amongst workers and employers as to their legal status, as the recent CIPD survey shows. Equally, the data on how widely they are used is incomplete and the ONS is currently looking at how they can make the data more reliable. Estimates vary, but it likely to apply to at least one million workers in the UK, possibly just under 100,000 in Scotland.

In the social care sector our survey indicated around 10% of our members are on ZHC, but this is likely to be an underestimate as we have more members in council employment where ZHC are less prevalent. The SSSC workforce data says 21% are not on permanent contract, so the figure could be as high as 20,000 care workers in Scotland. Scottish Universities are another big user of ZHC with 18,500 atypical workers, more than the 16,700 permanent teaching staff.

The main issue for workers is the lack of employment rights that give legal force to basic fairness, and grant employees redress where those rights are breached. They also deny stable employment that is vital to day-to-day life such as getting a mortgage, paying the bills, and reducing the reliance on the benefits system. Employers claim the flexibility ZHC bring is good for them and workers. While this may be the case for some workers on ZHC, it is not the norm. For most it is simple exploitation. A particular problem is the requirement, stated or implied, of exclusivity even when the employer is not paying them. Even in feudal times there was a duty of mutual obligation!

But it's not only workers who lose out in the growing use of ZHC. The creation of uncertain employment means that workers are less willing to question dangerous safety practices involving themselves and others. Even more worrying in the care sector, they are less likely to report care abuse. With the growing use of personalisation, care workers tell us that they wouldn't be thanked by their employer for raising these issues. ZHC workers are also likely to be less well trained. The combination of poor employment practice means higher turnover and a loss of continuity of care.

The economy also loses because the lack of stable employment impacts on economic demand. An ILO study shows that economies with high levels of self employment are also low per capita GDP states. The growth of self employment in the UK is a feature of underemployment, not entrepreneurial zeal. 

So what's the solution?  While an outright ban might be appropriate in some areas, in practice employers would just find another way of exploiting staff. Another solution is to tightly regulate the practice to remove abuses and then agree appropriate contract provisions for each sector.

The regulations should start with a legal definition of a ZHC as a contract that fails to specify guaranteed hours; or that specifies guaranteed hours but the worker is expected to be available for work longer, sometimes called short hours or nominal working hours. There should be a right to a written notice of hours upon commencement of work and a right to equal treatment compared to fixed term and regular working hours staff, together with normal remedies for detriment when exercising statutory rights. To address exploitation there should be a right to request fixed and regular hours every six months and a right to be offered a contract after 12 weeks of continuous employment. Exclusivity clauses should be prohibited.

These are all matters that could be regulated by Westminster, although the current UK Government consultation is unlikely to go much further than an employer led code of practice. As much use as a chocolate tea cosy in addressing abuse. The Scottish Government could take action directly as an employer and also through procurement. Public bodies could do the same.

Zero-hours contracts are bad for workers, bad for the services they deliver and bad for the economy. Time for concerted action at all levels of government.

Extracting more from public procurement

£11bn of public spending in scotland could do so much more than the timid Procurement Reform Bill envisages.

I was giving evidence today in the Scottish Parliament to the Infrastructure Committee on the Procurement Reform Bill. UNISON is supporting '10 Asks' from a broad based coalition of civil society organisations who believe we can get much greater community benefit from public procurement.

My focus was on raising employment standards by making the Scottish Living Wage a requirement  in contracts, so that we can spread the benefits into the private sector. In addition, contracts should end the forced use of zero or nominal hour contracts and strengthen training requirements.

I used care procurement as my real world example because it's a national disgrace. Low wages have turned the sector into the new retail, with many staff leaving as soon as they can get another job. Continuity of care is being abandoned in a race to the bottom. The use of zero hour contracts is having a similar workplace impact to blacklisting. Staff are less likely to report safety issues or even care abuse, because they worry that they will not be offered work after raising inconvenient issues with their managers. Far too many staff are also sent out to deal with complex care needs after only a few days training at best. Our elderly friends and relatives deserve better than this.

The Scottish Government has taken positive action to support the Scottish Living Wage, but they are hiding behind a misleading EU Commission letter on procurement. I set out in some detail why it is legal to make the living wage a contract performance clause with reference to counsel opinion. It is simply absurd to worry about a challenge under the Posted Workers Directive for low paid jobs. I suspect the Scottish Government is more concerned about the cost than tackling this issue.

Other weaknesses in the Bill include only partial action on tax dodging. Firms who take the public pound should pay taxes like the rest of us. This means aggressive tax avoidance as well as tax evasion. 

If the Procurement Reform Bill is to be anything more than a largely irrelevant housekeeping exercise, these are some of the issues the Committee will need to address. 

You can view the full evidence session on BBC Scotland Democracy Live.

Action on blacklisting

Today is the National Day of Action against Blacklisting. The practice of Blacklisting by construction and other employers has resulted in ordinary union members losing their livelihoods for standing up for their workmates basic rights, especially health and safety.

The unions most affected have run an excellent campaign against blacklisting and they have been helped by the Westminster Scottish Affairs Committee's investigation. As the committee's interim report states:

"we wish to make it absolutely clear that we believe, on the evidence that we have seen so far, that the process of blacklisting by a secret and unaccountable process was and is morally indefensible and that those firms and individuals involved in operating the system should have known this."

We know a lot about blacklisting in the construction industry because the information came to light as a result of an investigation by the Information Commissioner. The Scottish Affairs Committee report describes the actions of companies in detail. What we do not know is if this type of illegal activity is being undertaken today and in other industries involving UNISON members.

The striking point about blacklisting is that it involves firms that are household names such as Balfour Beatty, Skanska and McAlpine. They are also firms that make £millions every year at the taxpayers expense, through public contracts. That's why the campaign has focused on tackling blacklisting through public procurement.

Today, the Scottish Government has released new rules on procurement that we hope will address this issue. I was involved with other colleagues in drafting them and the Scottish Government deserves credit for taking serious action.

The key points are as follows:

• any company which engages in or has engaged in the blacklisting of employees or potential employees should be considered to have committed an act of grave misconduct in the course of its business and should be excluded from bidding for a public contract unless it can demonstrate that it has taken appropriate remedial steps;
• we have included three new questions in the standard Pre-Qualification Questionnaire (sPQQ) which requires suppliers to disclose if they have breached relevant legislation;
• we have also included a new contract clause in our standard terms and conditions which provides for termination of the contract if a supplier is found to have breached relevant legislation during the course of that contract; and
• this guidance applies to all public sector contracts regardless of value, although for lower value contracts pre-qualification procedures are unlikely to apply.

The definition of blacklisting is wider than just the Blacklisting Regulations. It includes any discrimination against union members in recruitment, a scope that is more likely to encompass actions taken against UNISON members.

The Procurement Reform (Scotland) Bill, currently progressing through the Scottish Parliament will be an opportunity to give these rules statutory force. However, the important point is that it sends out a very clear message to companies that if they get involved in blacklisting or other discrimination against union members, they will be excluded from government contracts.

Another encouraging point is that parliamentarians at Westminster and Holyrood both contributed to this outcome. Now that is progress!

 

Using public procurement to help create a fairer Scotland

Nearly £11bn of public money is spent each year in Scotland buying goods and services. That’s a lot of purchasing power. Government and public bodies should be using this power as an opportunity to help create a fairer Scotland.

Today, I am at the SNP conference and our fringe meeting is on procurement. As the First Minister put it; “The Procurement Reform Bill has the potential to make a difference to many lives. It will provide new powers to tackle companies that do not comply with their legal obligations, including blacklisting and employment law.”

That’s fine as far as it goes, but procurement can do much more than ensure legal obligations are complied with – that should be taken as read. UNISON has joined a broad coalition of civil society organisations (STUC, SCCS, SCVO and others) who have identified ten priorities for the Bill.

Let’s take the procurement of social care as just one example. Over £400m is spent by councils alone on home care in Scotland, mostly in the private and voluntary sector. Increasing demand for services and declining local authority budgets means these services are being squeezed. The consequences are little short of a national disgrace. Home care workers, often paid little above the National Minimum Wage, employed on zero or nominal hour contracts are literally running around our communities trying to look after some of the most vulnerable members of society.

Much has been written about the 15 minute care visit. However, as one care worker said to me recently, “15minutes - that’s a luxury!” They describe a typical day as constantly trying to catch up from too many visits with inadequate travelling time, that some are not even paid for. The only way to finish the day is to cut corners in what are already inadequate care packages. The days when staff could spend some quality time with clients, looking beyond basic care needs, have long gone. Added to this is the growth of personalisation. While fine in principle, in practice it is leading to the loss of socialisation, with day centre closures leaving people isolated in their own homes.

This is no way to treat elderly people. We should specify, through procurement, decent employment standards, including the Scottish Living Wage, with no zero-hours contracts and proper training programmes. The aim should be to develop a workforce that delivers continuity of care, not workers who are desperate to find another job. Person centered procurement recognises that procuring pens, pencils and paper should be an entirely different process to buying people services such as social care.  The race to the cheapest is rarely the best approach and especially when we are procuring services for the most vulnerable in our communities.

Better employment standards not only drive up the quality of service, but are also good for the economy. Paying the Scottish Living Wage means the taxpayer is not subsidising bad employers through the benefit system. Workers with decent wages and secure contracts will have the confidence to buy goods and services that create sustainable economic growth. Studies show that firms that pay the living wage have lower absenteeism, greater commitment and continuity of the workforce. This is how to really, ‘make work pay’.

Procurement should be used as part of stronger efforts to tackle tax dodging and tax avoidance, both at home and in developing countries.  This could bring in much-needed billions of pounds for the public purse. It is entirely wrong that companies seeking to avoid paying their fair share of tax should be awarded public contracts.

The same applies to fair trade. Ethical and responsible trading policies have the potential to transform lives around the world. The opportunity to sell products for a fair price and to work in safe and decent conditions could help millions work their way out of poverty. The Procurement Bill should help Scotland cement its status as a Fair Trade Nation and to lead the way in ethical procurement.

Scotland has some of the most challenging climate change targets in the world and the legislation includes a duty upon all public bodies to contribute to meeting these emissions targets. Those companies supplying the public sector should be able to show that they are contributing to a more sustainable Scotland. They can do this by publishing an annual assessment of their carbon emissions and providing information on the carbon emissions attributable to the whole life of goods and services supplied.

Public procurement, particularly at a time of financial constraints, has the potential to do much more than just deliver goods and services. If we place sustainable and ethical considerations at the heart of the procurement process, it could promote positive social outcomes for us all.