Levelling up through government outsourcing

By Rt Hon Justine Greening

As we begin to emerge out of the peak of the COVID-19 public health crisis, it’s increasingly clear that we’re becoming engulfed in a growing economic one too. The use of the word “unprecedented” is routine to talk about the issues - and in this non-normal world it’s no surprise that we now need to think of new solutions.

We’ve seen some short term economic measures from the Government to help us through the crisis - from the immediate response of the furlough scheme, to the Kickstarter Jobs programme, and amendments to stamp duty - but it’s time to go beyond the more traditional interventions of simple tax and spend and big Government programmes.

It’s now time for a more sophisticated and holistic debate about how the Government can shift the dial in a systematic way for the long-term.

Many great proposals have been made, from fast-tracking renewable energy plans, to adopting a ‘build, build, build’ mentality, but there is one open goal that isn’t receiving enough attention.

Government has strong leverage in one more area where it can really make an impact - and that’s using its outsourcing more effectively to level up Britain.

Procurement is not the most exciting word to an outside world but the Government spends hundreds of billions of pounds a year on services delivered by external suppliers, and so it has relationships with businesses which it has leverage to demand more from.

The role of external suppliers in delivering services to the public and to Government has expanded significantly over the past 40 years, and has almost doubled over the last decade.

But that spend has power in itself beyond simply what it buys. This is also hundreds of billions of pounds for Government to demand business acts as a force for good in and of itself and in the delivery of these services.

The act of outsourcing delivery services based solely on price doesn't lead to the best quality outcomes.

It is time for a renewed conversation about this. A conversation that goes beyond the Social Value Act 2012, brought into law now almost a decade ago at a time when expectations of business in key ESG areas were in a very different place. Our sense of what is collectively possible and expected has risen since and research by the Social Mobility Pledge suggested that people see a wider role for business - when asked 74% said they believed that ‘business has a role to play in helping communities during a recession’.

So the Government shouldn’t just be looking at the price of outsourcing, but associated social impact too.

Making socially responsible decisions is an essential facet of running a successful modern business. Reputation and profit will increasingly rise and fall on the basis of  the decisions that businesses make and the way they choose to operate.

This should be more than just a ‘good thing to do,’ it should become an expectation of outcomes and impact. We have already seen some outsourcing of infrastructure projects looking at local economic impacts and apprenticeships created. Both Crossrail and the Thames Tideway show how much of a wider impact that investment can create beyond the benefits of the infrastructure itself.

But the real opportunity is that it becomes the norm for all Government procurement across the board. And that we develop a wider concept of social value, seeing it go well beyond the numbers of apprenticeships to whether companies have a wider strategy and approach in place to deliver on the ESG agenda.

Sustainability is about taking care of people and the planet and it’s about a sustained approach on sustainability by having that ethos of a company as a force for good being at the heart of a business’s DNA. The work we are doing through the Social Mobility Pledge is helping businesses to do just that - bring purpose alive and contribute to levelling up Britain.

Many companies with the Social Mobility Pledge already embody the ESG agenda within their core business model, such as Compass Group, who have placed ‘social value’ at the heart of how they operate.

It’s perfectly possible for Government procurement to start to score and include this criteria much more overtly. Government should use its own spending as a force for broader good too. Such an approach would not only match rhetoric with concrete action, but also send a powerful signal to a wider business community about Government intent to deliver on the levelling up agenda, and partner with businesses that prioritise this common agenda.

There’s an argument this all takes too long as it only works for new procurement. But for contracts already in place, Government can still set out expectations for businesses that will want to do their best if they are to be viewed credibly in a future procurement process. There's no reason not to be ambitious.

Universities  also outsource approximately £10 billion worth of services every year, which also presents an opportunity to widen the scope of the levelling up through procurement agenda, and for other institutions that outsource to adopt a more robust and sophisticated approach to requesting the delivery of social value from providers.

Levelling up requires partnership between government, business, universities, and communities - all have a role to play in what will need to be a national effort. But more than most, Government can set fresh standards, norms and expectations.

And it can use its wider power and influence to shift the dial more broadly. Politicians might be used to thinking up grand strategy but levelling up is a practical economic challenge as well as a social one.

Enlisting the power of more companies as a coalition of the willing to spread opportunity more fairly is what the Social Mobility Pledge campaign has been all about - businesses showing their leadership on an agenda of equality of opportunity that has never mattered more in a COVID-19 world where opportunity gaps get ever wider.

It’s about a race to the top and by Government adopting levelling up procurement rules, it can fire a very practical starter gun to drive change on the ground.