Hundreds of millions ‘leaking out’ of Scotland
Labour have announced a shake-up of their candidate selection system. Picture: PA
HUNDREDS of millions of pounds are “leaking out” of the Scottish economy, with contracts for major building and infrastructure projects being handed to firms outside Scotland, a new report has claimed.
Scottish businesses are being “locked out” of the contracts for major projects in the country’s public sector, with the dice “loaded” in favour of big corporations.
The stark warning is made today in the first report from the Jimmy Reid Foundation – a think-tank launched in memory of the former trade union leader.
The report – Using Our Buying Power to Benefit Scotland – by leading economists Jim and Margaret Cuthbert, said that “too much” of the £9 billion spent each year on procurement projects was allowed to leave the Scottish economy, with a “harmful” effect on jobs and business north of the Border.
Among the examples cited in the report were publicly-owned Scottish Water handing out the work for the bulk of its £500 million annual investment programme to a consortium of French, English and Californian firms.
Scotland’s £50m annual budget for waste containers was also highlighted in the report – just one of the 16 contracts it involved was awarded to a company north of the Border. Another 14 were handed to English companies, while one went to an Irish firm.
A deal worth up to £22m to supply Scotland’s library books saw contracts going to six wholesalers based in either England or Northern Ireland, with just one Scottish firm – a dedicated bookseller – involved in the procurement process.
Jimmy Reid Foundation director Robin McAlpine said the report’s evidence “should come as a bit of a shock”, as he called on the Scottish Government to back the recommendations of the study, such as splitting contracts into small blocks to make it easier for smaller firms to win contracts.
Meanwhile, former Labour First Minister Henry McLeish said the report showed the need to “think again” about the way public money was spent on building projects, while former SNP enterprise minister Jim Mather also welcomed the findings.
The 31-page report said that public- sector contracts “are still being designed in the interests of big business”, mainly located outside Scotland, with the country’s large small and medium-sized business sector largely squeezed out of the bidding process.
It went on to say Scotland had a “much more restricted view” on European Union law over the awarding of contracts than other nations, which meant Scottish firms were more likely to be disadvantaged.
The report comes days after it emerged that a Scottish steelworks may have lost out to China and Europe on a contract for the new Forth bridge.
Scottish Labour leader Johann Lamont seized on the findings to call for a shake-up in the rules over the awarding of contracts for infrastructure projects.
Ms Lamont said: “The current controversy over the Forth road bridge is just one – enormous – illustration of how government has failed steelworkers here in Scotland.
“We need to change whatever rules prevent the public sector using its purchasing power for the public good.”
The report called for the bidding process for contracts to be “designed in a way that gives Scottish businesses the best chance of winning them”
The report said: “Hundreds of millions of pounds currently ‘leaking out’ of the Scottish economy could be retained, a potentially massive sustained investment.
“Contracts are still being designed in the interests of big business, making it hard for Scotland’s small and medium-sized companies.
“Procurement policies have been developed with little or no regard to economic or social development in Scotland.”
The report went on to claim that the current rules over procurement “load the dice in favour of big corporations, often at the expense of small businesses but also regularly at the expense of the wider public interest”.
It said: “The Scottish public sector spends more than £9bn per year on procurement. Too much of this money is allowed to leave the Scottish economy, with the cost to jobs and the business base this implies.
“Meanwhile, the money which does remain in our economy is almost wholly detached from wider economic development policies.”
Mr McAlpine also said Scottish ministers should look for “exemptions” from EU rules to give firms in Scotland an advantage in bidding for contracts.
He said: “We are spending over £9bn of public money, but instead of using it to boost social and economic development, we’re actually doing harm to the Scottish economy.
“We have to break the relationship between big corporations and procurement policy.
“Of course big business is an important supplier to the public sector, but it is using its influence to shut out Scottish businesses and to push aside the wider public interest.
“A narrow-sighted vision of what procurement is for and what it can achieve has set us off down the wrong track.
“We treated vast sums of public money as if we were just buying our messages and all that mattered was the bill. The result is that no-one can even tell us how much of our money stays in the Scottish economy.”
The report was published as Alex Neil, Scotland’s infrastructure and capital investment secretary, promised a review of procurement for public sector projects to look at increasing contract opportunities for firms north of the Border.
He said: “I believe the time is right to commission a root-and-branch review of construction procurement across the public sector, with a view to tackling industry concerns and ensuring that procurement practices deliver best value for Scotland’s economy.
“We have already announced our intention to introduce a Sustainable Procurement Bill during the life of this parliament and that the bill will seek to ensure that major public contracts deliver training and employment opportunities through the inclusion of community benefit clauses.
“Having listened to business concerns about procurement, I can announce that the bill will also seek to ensure that all public bodies in Scotland adopt transparent, streamlined and standardised procurement processes that are friendly to Scottish businesses.
“We will work up detailed proposals for the review and I will make a further announcement on this shortly.”
Former First Minister Mr McLeish praised the report for setting out “practical actions” to benefit Scotland’s economy and create jobs.
He said: “I welcome this first report from the Reid Foundation. When the foundation was launched, I said that we need to have some thinking in Scotland that questions whether the relationship between the public sector and big business was always delivering the best outcomes for the public.
“This report is a great example of how asking questions which don’t always get asked creates clear, practical actions which can benefit Scottish society and the Scottish economy.
“I hope that everyone will look at this serious piece of work and think again about some of the ways in which we are spending public money.”
Mr Mather said that the findings would help “improve outcomes” in the procurement process for Scotland’s public sector.
He said: “Jim and Margaret Cuthbert are to be congratulated on the rigour and clarity that they have brought to the subject of public procurement in Scotland.”
Andy Willox, Scottish Policy Convenor of the Federation of Small Businesses, also praised the report as making a “good contribution” to promoting smaller firms in Scotland.
He said: “The FSB’s right behind any moves to use the Scottish public sector’s buying power to benefit our local economies and we’ve been expressing our dissatisfaction about the aggregation agenda for some time.
“While we may not agree with every element of this report, we believe that it makes a good contribution to a debate Scotland needs to have.”
The report’s authors Jim and Margaret Cuthbert said: “The report is intended to be a constructive and evidence based critique of current procurement practices in Scotland.”
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Comments
There are 148 comments to this article
Page 1 of 10
Il Penseroso
Tuesday, February 7, 2012 at 03:55 PMJacqueline Hyde#145, 146 (a relative of Mr Hyde?). Just keep supporting Johann, Ruthy Girl (?) and Wee Willie! With opposition like that Alex Salmond won't be losing any sleep or confidence in his ability to wipe the floor with that lot! Being mauled by dead sheep is a more appropriate analogy! Hope you look back on your efforts today.
Niddrieman
Tuesday, February 7, 2012 at 01:43 PMDoesn't the Edinburgh tram fiasco demonstrate what is wrong with public procurement in Scotland, which is there is a lack of ability amongst public servants to manage the process effectively?
Jacqueline Hyde
Tuesday, February 7, 2012 at 10:15 AM#130 Jolly - Of course she could talk like that in an independent Scotland. It's only under Jackboot Salmond's strange brand of pseudo-independence that there might be reprisals.
Jacqueline Hyde
Tuesday, February 7, 2012 at 10:12 AMIt isn't leaking ouit of Scotland, it's cascading. The SNP (or the Alex Salmond for First Minister Party as it more accurately calls itself) Government has not only awarded virtually every public contract to non-Scottish firms but has played the ultimate anti-Scottish-business card - it commissioned it's own report on how much (or little) direct economic benefit Scottish communities derive from Scottish public spending but, in line with it's obvious lack of faith in anything Scottish, commissioned the report from an English consultancy group. If Salmond and his wee pals are so unable to entrust anything to Scottish companies, why on earth are they promoting independence (albeit their own peculiar and very restricted brand)?
Ayrshireguy
Tuesday, February 7, 2012 at 08:28 AMthink I'll suethe scotsman for this picture..... she scares the hell out of my kids
george toot toot
Tuesday, February 7, 2012 at 08:23 AMAn independant Scotland would have to leave the European Union in order to "prefer" Scottish companies.
Jimmy Fae the West
Tuesday, February 7, 2012 at 12:21 AMComment removed by moderator
NO To Scottish Independence
Monday, February 6, 2012 at 11:08 PMComment removed by moderator
Phil C
Monday, February 6, 2012 at 10:48 PMComment removed by moderator
Danielrober2
Monday, February 6, 2012 at 10:10 PMComment removed by moderator
Russell M
Monday, February 6, 2012 at 09:21 PMFor the power brokers in London things are going according to plan. Years of fickle government policies has bred a level of distrust and paranoia which makes running a business in Scotland difficult at best. And because the public sector is such a large part of our economy business leaders cringe every time there is the chance of political policy change. By the time of the referendum on independence we just might be in the same poor economic shape as after the Darien scheme the end of the 17th Century.
Libra Personified
Monday, February 6, 2012 at 08:47 PMPhoto caption: Also sprach the blonde bombscare on another night of the DeCameron.
Libra Personified
Monday, February 6, 2012 at 08:40 PMFirst, they take away your ability, then they sneer at your inability.
Phil C
Monday, February 6, 2012 at 08:40 PM#80 Trenchchat - The only slight problem with your argument is that 100% of the Scotsman's 'SNP accused', SNP 'figures don't add up', etc stories are fiction from highly dubious sources at best, but as a norm they can be taken as pure horse manure from the Labour backside. ...............................................................................But #122 Danielrober 2 gets the prize for funniest comment of the thread,,," It is good to see a potential First Minister (Lamont!!)"....Ha ha ha ha ha ha ha... With folk like him around, maybe I should be crying.
Libra Personified
Monday, February 6, 2012 at 08:35 PMHow many Scottish companies are eligible to be on the tendering list? How many Scottish companies are on it? Can we have access to it?
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