The Joseph Rowntree Foundation today published a useful report on tackling poverty through public procurement. The ideas, building on the methodology created back in 2002 for including social and community benefits in public procurement. are practical and sensible. With public procurement as a percentage of GDP barely declining at all during or since the recession, the impact of taking up these recommendations could be significant. Public procurement has already been affected in London and elsewhere by the Living Wage campaign. Building commitments to local training and employment into contracts and enabling smaller tender 'lots' to give smaller local enterprises a chance of successful bidding could create maximum value for the taxpayer by reducing welfare dependency and keeping the financial fruits of procurement within communities.
Could public procurement make a difference at the other end of the scale, by depressing the excessive salaries and day rates of some contractors? Imagine if, say, a council's invitation to tender stipulated that no person in any proposed budget could be paid more than a certain daily rate - say, between £700 and £1,000 per day? My guess is that this will seem like a high cap to many, but low to those larger companies whose livelihoods depend on public procurement. Some educational consultants I know wouldn't work for less than £1,200 a day, so it's not only the obvious high-charging suspects such as the 'big five' consultancy firms who might be affected by such an approach. Like various celebrities' reactions to the reintroduction of 50p tax rate, these highly paid experts might threaten to take their expertise elsewhere, but I'd suggest we call their collective bluff.
Unlike the JRF report, whose ideas are designed to comply with UK and EU procurement rules, I have no idea about the legalities of such an approach, and there may well be unintended negative outcomes that my non-economist liberal arts brain won't have thought of. However, if local and national governments are serious about wage restraint at the top end of the pay scale, public procurement could be very useful lever to pull.
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