14 January 2004

Speech by the Chief Secretary to the Treasury, Paul Boateng MP, at the Migration Policy Group Seminar on Procurement and Supplier Diversity

Encouraging supplier diversity is a concern of this Government, a personal concern of mine, and a priority for all progressive governments.

It is a twin agenda. It is about creating a socially cohesive Europe, but it is also about maximizing effectiveness, value for money and competitiveness. As such, it is an agenda that makes both social and economic sense. By promoting diversity in procurement we can promote the double goals of social cohesion and value for money.

The action taken by the US and the UK puts us at the forefront of tackling these issues. But it is also important to make progress on this in Europe. And let me make it clear that these diversity issues are being discussed at bi-lateral meetings I have attended in other European countries – including those with a business presence. This is because they are increasingly understood as making good business sense.

They are also becoming recognised as an important element of creating a modern, multi-cultural, multi-racial Europe. Here in the UK, to underpin this vision, we have put in place the most advanced anti-discrimination legislation in Europe, with the Race Relations Amendment Act as its centrepiece. The focus must now be on implementing that legislation….and on making a difference on the ground and in our organizations and our communities.

All of us in the Treasury regard tackling barriers to opportunity as a crucial part of mainstream economic policymaking. Alongside the moral imperative to eliminate discrimination and spread opportunity more widely, we know that it makes economic sense to enable all individuals to fulfill their full potential.

This commitment has led us to introduce innovative solutions to help women, ethnic minorities and disabled people into work through our jobcentres and the New Deal.

And we have recognised that we need to do more to provide assistance to entrepreneurs from minority groups.

We now have a specific objective to increase the number of women-owned businesses from the current 12 to 14 per cent to between 18 and 20 per cent by 2006.

And we are working to make enterprise and self-employment more accessible to people from ethnic minorities, including through the Phoenix Fund and Community Investment Tax Relief.

We’re doing this because the Chancellor, myself, and Patricia Hewitt are all well aware of the good evidence base that demonstrates this unlocks entrepreneurial spirit and raises productivity. In the United States, I have seen a map that actually plots productivity in states and cities against their levels of pluralism, tolerance and cultural diversity. It clearly demonstrated a very strong correlation.

So we can all agree that the importance of this work should not be underestimated. However, today, I particularly want to emphasize the role the government has to play as a customer.

Naturally the Government has a duty to ensure it does not discriminate against any kind of supplier…Indeed, how can we work to create a more cohesive and inclusive society based on opportunity for all, if we are exclusive in our own business dealings?

However we are also convinced that increasing the involvement of small and minority businesses in public procurement will bring both economic and social benefits to our country. By ensuring that the market place for Government contracts is accessible and open to the widest possible range of suppliers, diversity can drive up competition, innovation and productivity and bring better value for money. This is of direct benefit to the Government – and indeed to all citizens and taxpayers.

So what can we do to create an environment that encourages diversity in public procurement?

In the first place, Government needs to become a better customer in a general sense. In other words:

We need to reduce the bureaucracy and red tape involved in public procurement;
We need to increase competition;
We need to work towards improving long-term capacity planning and
We need to encourage the take-up of online procurement.

Many of the measures introduced in our Pre-Budget Report last month will help us to do this. These include improving communication between the public sector and industry – a measure that was identified as particularly important in an Office of Government Commerce report published last month. We will also be taking steps to harness innovation within the public procurement process – as laid out in the DTI’s recent Report on Innovation.

But it also means becoming a better customer specifically for small and minority businesses. And for this, we need to be proactive. A recent review conducted by the Better Regulation Task Force and the Small Business Council has made it clear that many small businesses are at a disadvantage in public sector procurement. They do not always know about the opportunities available, and they can be deterred by the complexity and the cost of the bidding process.

In their report published in May 2003, the British Regulation Task Force and the Small Business Council laid down a series of measures to help level the playing field for all SMEs.

These measures are being put into practice by two pilot projects – one in the West Midlands and one in Haringey. These pilots seek to open up access to the government marketplace to smaller businesses and businesses run by ethnic minorities and women.

Both of the pilots will run until Spring 2005, however an initial evaluation of the pilots will start shortly – at which point we will begin to consider a national rollout of the agreed measures. I am determined not to wait for a result which is increasingly obvious. We need to get on with it!

You’ve already heard from Liz in detail about the Haringey project – so I will not go into detail about the pilots themselves. However, I want to highlight them as an example of our willingness to adopt a wider – and more creative – approach to working with the private sector.

I must also emphasize that the Government has been well supported in its work on procurement diversity.

Earlier this year, I attended the Commission of Racial Equality’s launch of 2 new procurement guides. As is right, these guides do not call for quotas, targets or any sort of preferential treatment – they merely underscore the need to give minority businesses a fair chance to compete.

One of the issues covered in the guidance, is the extent to which race equality obligations impact on the selection of suppliers. The guidance explains how barriers to the participation of SMEs and Ethnic Minority Businesses in procurement competitions can be removed. These practical solutions are an extremely valuable contribution….

…As is today’s seminar. I have been delighted to be able to attend – not least because the UK Government is keen to promote this agenda both here and abroad. Indeed, our Office of Government Commerce has already begun to work with EU counterparts in identifying the further steps that could be taken at a European level.

We need to build on the good efforts here in Britain to ensure that what we help to create in Europe enables us to take these issues forward. The opportunity created this year by a new EU commission is one we must seize in order to push this agenda forward.

I am sure that today will prove to be a useful forum for discussing these issues in the wider European context – and for sharing good practice. I look forward to hearing the outcome of your discussions.

Thank you.