Report of the Head of Integrated Commissioning and Procurement and the Strategic Lead – Commissioning.

This report provides an update on the Council’s ethical procurement and fair tax assessments in procurement and development decision-making.

The committee received a report of the Head of Integrated Commissioning and Procurement and the Strategic Lead – Commissioning which provided an update on the Council’s ethical procurement and fair tax assessments in procurement and development decision-making.

Key points and themes within the report included:

• The purpose and objectives of the Council’s Ethical Procurement Policy;
• New national procurement regulations were expected to take effect from October 2024;
• Under current procurement legislation, local authorities are unable to exclude companies from supply chains on the grounds of tax practices unless they have been prosecuted and convicted of a specific offence;
• The advantages and drawbacks of the Council signing up to the Fair Tax Charter; and
• The suggested approach to progressing the Fair Tax agenda. 

Key points and queries that arose from the committee’s discussions included:

• Whether Fair Tax was classed as a non-commercial matter, which would allow a supplier to challenge a decision to award a contract;
• How regulations prohibiting local authorities from excluding companies from supply chains on the grounds of tax practices unless they have been prosecuted and convicted of a specific offence impacted current due diligence practices; and
• What powers public sector organisations had to exclude companies from supply chains on the grounds of poor reputation, citing the cladding crisis as an example.

The Executive Member for Finance and Resources stated that the Council’s Ethical Procurement Policy had been in place for over 10 years and that the government’s new procurement regulations were expected to be announced in July 2023 and implemented in October 2024. He stated that the Ethical Procurement Policy went as far as it could within the current legislation and highlighted how the Council was a Living Wage accredited authority and had signed up to several charters, including Unison’s Ethical Care Charter and the Unite Construction Charter. He explained that the Council was focussing on the Fair Tax agenda and due diligence work was currently being undertaken on all Joint Ventures that the Council had entered into, following engagement with the Fair Tax Foundation. He also explained that the Council was exploring the possibility of embedding Fair Tax principles when reviewing procurement processes and that the Labour Group was considering submitting a motion to Full Council that would reinforce the commitment to the Fair Tax agenda.

In response to members’ queries, the Strategic Lead – Commissioning stated that Fair Tax was generally a non-commercial consideration but that tax compliance with UK law could be used as grounds to exclude a company from the supply chain. He also explained that there was a standard questionnaire used across the public sector which was set by the government and included questions around tax compliance.

It was acknowledged that ultimate ownership of a company could be challenging to ascertain but this was included in the questionnaire.

The Strategic Lead – Commissioning explained that the standard questionnaire provided more scope to disregard tenders where there have been previous breaches of the law and the new procurement regulations would give more scope to exclude suppliers on ethical grounds and past performance than the current provisions allowed.

Members were advised that reputational issues were classed as non-commercial matters but that the Social Value Policy assisted the Council to work with suppliers who shared similar values and ethics. The Strategic Lead – Commissioning stated that discussions could be held outside of the meeting if members had specific concerns.

Decision:

That the report be noted.