Could the money that public bodies spend for goods and services be better spent to support local firms and social enterprises?

This was the question posed by Hazel Blears MP, a guest speaker last Thursday evening at the North West Sustainable Business Quarterly meeting, a pro bono initiative by M4C with support from Bruntwood.

She explained her interest in the voluntary and community sector, and her 25 years as an elected representative, always with a focus on places like Ordsall in Salford, UK. Her recent example was working with the senior management of Morrisons so that 82% of the jobs in their new store in Ordsall were gained by residents nearby. The other guest speaker was Norman Pickavance, previously the Morrisons Group HR Director, who also spoke about the Create social enterprise group he is involved with.

Hazel Blears stated that the public sector could use public procurement to match such private sector initiatives in boosting local employment and tackling disadvantage.

Public procurement in the UK is governed by EU law. This law is intended to protect the single market by ensuring that public bodies do not discriminate by favouring local firms at the expense of firms in other EU countries. There are very strict requirements and large penalties. Some commentators have claimed that this legal background has made public authorities very nervous about specifying local benefits when awarding contracts.

To be fair, the textbook example in procurement and local benefits is to remind the officials that, while it is illegal to say that the winning company must have a local office, it is perfectly legal to say that the winning company must open a local office to deliver the contracted service.

Therefore local benefits can be specified, provided that it is possible for competent firms in that field to equally comply regardless of which country they come from.

The UK government has also looked to improve public procurement, but mostly to benefit for-profit small and medium enterprises (SMEs) rather than not-for-profit social enterprises. Examples include Lord Young’s recommendations in May 2013 to favour SMEs more in Growing Your Business, and the recent recommendations in NHS procurement (but mostly to save money).

I suspect the more mundane factor is that officials worry that specifying local benefits will push up the cost of the contract, maybe beyond the budget available, because bidders tend to cost local benefits as an added extra.

There is some interesting work around Whole Place Community Budgets, following on from other initiatives such as Total Place, where the aim is to look at all the public money in a community and ask, in the round, could this be spent better? For example, if the school did these extra classes would it save money for the police? If the library did this extra course would it save money for the hospital? Greater Manchester has a pilot programme for working with complex families.

The difficulty is that some agencies will happily let others spend their money to the greater local good, but when it is their turn to ‘buy a round in’, all of a sudden their wallet or purse cannot be found. Cracking that nut will see local benefits figure more strongly in public procurement, because of the wider savings overall, as well as the greater good.

Links:

http://nwsbq.m4c-sustainability.co.uk/

http://www.hazelblears.co.uk/news/morrisons-local-employment-pledge-welcomed

http://communitybudgets.org.uk/wp-content/uploads/2013/03/Guide-to-Whole-Place-Community-Budgets.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/226835/procurement_development_programme_for_NHS.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/198165/growing-your-business-lord-young.pdf

I believe that the international connectivity of HS2 has the potential to play a highly effective role in the regeneration of the communities in the vicinity of stations and in the wider city regions. A through train from Manchester city centre could arrive in Paris city centre in about three hours, faster than aviation door to door. The location choices of international companies and investors would shift to our advantage, as well as for our tourism, sport and cultural sectors. Offices of international governance could also be attracted. We saw exactly the same modal switch by passengers from air to rail between Manchester and London after the WCML investment, for the same reason.

I fully support the case for HS2 and agree that it is at least as much about increasing capacity as it is about speed.

However, I have been studying HS1 since 2008 and in particular the UK policy failure in the 1990s to deliver HS1 connectivity beyond London. This was not a failure of capital resources, in that two fleets of specially adapted trains were paid for, bespoke designed and built to run on ‘classic’ UK rail such as the West Coast Main Line (110 mph) as well as on HS1 (full speed). The daytime train fleet is still being run by SNCF but wholly within France, and the overnight sleeper train fleet is being run in Canada.

Instead, in my opinion, the policy failure was around not engaging with all the necessary partners at an early stage. This led to certain assumptions being made around border and immigration controls being operated in transit, allowing for a multitude of station stops, whereas policy decisions elsewhere within Government were firmly settled on control points being prior to boarding, including overseas. This remains an issue, for example in Deutsche Bahn’s ambition for Frankfurt – London. The revenue costs of HS1 ‘North of London’ also received less attention at the time than the capital costs.

The one point I would emphasise from these details is that international connectivity must be a design requirement as well as a policy ambition from the outset.

So, for example, it should be understood that HS1 as a technology was essentially built as a French ligne á grande vitesse to be compatible with the first leg of the wider network overseas. Therefore, if HS2 is to ‘fit’ with HS1 then early decisions need to be made on the fundamental technology in order for British firms, and SME supply chains, to gear up to meet the requirements of eventual procurements on a level playing field with others. In my experience, frankly, the UK rail industry has a stubborn tendency to produce sub-optimal ‘solutions’ (such as running Pendolinos at 125 mph instead of 140 mph) despite all the policy efforts and investments made. The point to be watched for with HS2 is that an international connectivity of a sort will be provided, but so degraded as to be in unattractive to investors and customers.

In terms of unlocking investment, and in learning from international experience of driving growth from major infrastructure investments, therefore, it may well be worth introducing strong competitive tension into the UK rail infrastructure sector by not ruling out the option of co-investment by SNCF, DB or others, alongside strong supporting measures for city region SME supply chains, apprenticeships and skills development, and alongside structuring the contracts so that the client maintains choice and control throughout the build phase.

Today’s Financial Times (21 August 2013) runs with a front page lead story from “sources inside HM Treasury” claiming that the high speed rail project will eventually cost £73 billion. The rest of the media are running with it, being a slow news day in August which can be padded out with archive guff.

Initial responses, apart from the glee of anti-HS2 groups, are comments that HMT have applied contingency costing rules which do not apply to any other major infrastructure projects.

If so, there is irony of the anti-HS2 groups tweeting their delight at a rising cost based on contingencies in more tunnelling to appease anti-groups.

But there is also the shadowy “pro-car anti-rail” lobby and the Institute of Economic Affairs seems to have become their spokesperson. The report below gives a good analysis of the IEA lobby. It’s the same argument and business forces that designed Los Angeles, anti rail and pro car.

Link
www.out-law.com/en/articles/2013/august/changes-to-hs2-plans-to-appease-project-opponents-could-almost-double-costs-says-think-tank

It is good news that the UK government plans “to consider curbing the building of so-called ‘rabbit hutch’ homes in England”, reportedly by re-introducing internal space standards for new homes.

Of course, one way to do this would be to volunteer to lead the way whenever new social housing is being built. The tried and tested Parker Morris space standards would be a great place to start.

Window sizes should also be looked at.

A BBC Radio 4 interview on 20 August 2013 09:00 BST gave a good insight into how we humans need strong daylight to regulate our body clock, including many ‘visually blind’ people who can detect daylight cycles without vision. This synchronisation has strong health benefits. Too many house builders try to save a few pennies by using small window frames, building dismal cells rather than bright, airy rooms. Triple glazed windows will let the light flood in without winter heat losses.

Links:
http://www.bbc.co.uk/news/business-23770320
and
BBC Radio 4, The Life Scientific. Interview with Prof Russell Foster, zoologist, on circadian rhythms.
http://www.bbc.co.uk/programmes/b038c5qj

weburbanist.com/2012/09/04/abandoned-walmart-is-now-americas-largest-library

London is a world city, and for centuries has had a cost of living differential. However, unsustainable rising property prices and ever-increasing levels of income inequality are beginning the change the very fabric of the city.

“Dr Rowland Atkinson, an urban studies expert at York University, says it is no longer fanciful to equate London with Paris, with the poor banished to distant suburbs, or subsisting in the centre.”

http://www.theguardian.com/uk-news/2013/aug/02/london-inequality-house-prices

There is a way out of this problem, but it requires a belief in rebalancing public and private rights. For public rights and the public good to become strong social forces again, there needs to be a limit to private rights, and especially to private property rights. In practice this means a strong programme of building social housing, taking on nimbyism and anti-Keynsian vested interests, and a town planning system that has been given back its teeth and muscle.

This is not just a ‘London issue’. A disfunctional, unequal, unsustainable London is bad for the UK in many ways.

For example, the scale of public money in transport infrastructure spending in and around London bleeds billions away from the rest of the UK, to prop up a system where working people commute two hours each way because they cannot afford to live closer, passing empty homes which are ‘investments’ for rich people around the world. Close down the North East and build another CrossRail? We need to insist on buying and building social housing at the scale of genuine social impact, even in Westminster.

“At present we are in danger of the worst of all; a revival of house prices fed by easier credit and housing shortage, making them still less affordable to the ordinary first time buyer; a growing private rented sector sucking in housing benefit which is in turn being reduced, cutting off low income tenants, and growing pressure on the remaining social housing stock which has been declining irredeemably in recent decades.

This week the BBC reports that the European Parliament has mostly agreed the EU budget for the seven years of 2014 to 2020 at €960 billion. Agreement rests on an extra €11 billion for 2013 being delivered.

The media headline is that the EU budget for the coming period is lower than it was for the period just ending. However, the EU budget can now roll forward its underspends, which I believe will lead to an increase in spending in the years ahead. Previously each country (member state) received the EU underspend as an end-of-year bonus or refund, and so some at least were incentivised to drag their feet in letting EU programmes get on and spend. But now, effectively, the brakes are off (perhaps a hasty statement in EU budget terms!)

For the North West of England, the allocations of this budget for the EU Structural Funds have been announced in the media as follows, at current exchange rates:

Cheshire & Warrington £122m
Cumbria £78m
Greater Manchester £356m
Lancashire £228m
Liverpool City Region £190m.

Many of the LEPs (local economic partnerships) have stated that they wish to run their own programme teams and systems during this next budgetary period, which some say would be similar to the Action Plan Partnerships arrangements in previous years. LEPs will also have control over various UK economic and regeneration funds, which could be used in part as matching funding if desired locally.

Prediction: by year 2020 all UK households will be supplied with circuit breakers to be fitted to the plugs of our fridges, freezers etc. Whenever the national voltage drops below 230v the breakers will cut out. New appliances will have the breakers inbuilt.

We now have a 25% chance of electricity blackouts in the UK each year, especially between 16h00 and 20h00 (4pm and 8pm) in the winter months. The UK government has rejected suggestions of extending variable supply contracts from heavy industry to other large consumers such a retail stores.

Behind this vulnerability has been effectively a “dash for coal” by the generating companies because coal has become so cheap on the world market. However, even though the industry’s carbon allowances are now becoming exhausted, the race remains on who can gain the most in the time that is left, and not on collective planning for the future.

It is a bit like a students’ party, when someone says “hey guys, we’re running out of beer” and everyone just refills their own glass faster; rather than anyone organising and buying or making more. The regulator (ie the adult at the party) has no real power when compared with the companies (ie the intoxicated kids). There is more money to be made in the energy market from being selfish than from being prudent.

Worse, the efforts to reduce demand in the domestic sector were being pinned on the government’s Green Deal, however reports this week show it has failed to take hold, with only four completed households nationally to date. The government response has been that this is due to teething problems with the computer software, and that many households have replaced their boilers off-scheme after an assessment.

We know we have to balance supply and demand to avoid blackouts. Most of us also know that supply is chaotic and that demand is continuing to rise, not least because of the energy demands of consumer electronics. Something has to give, hence my prediction above. To be announced by the new UK government in 2015, blaming the previous government for not “getting a grip”.

Second prediction: retail chiller cabinets will be put on variable supply contracts, but the lights and tills will not.

Link:
http://m.guardian.co.uk/environment/2013/jun/28/does-uk-face-electricity-blackouts

The twenty-first century will see a change around the world as landscapes become increasingly used to capture energy. The main driver will be price. When subsidies for animal grain feed become unsustainable, the cost of meat production will become uncompetitive when compared with the capture of energy.

We see some of this already with wind farms and increasingly in solar PV (photo voltaic cells) in the USA as well as the UK.

This range will grow, especially in warmer countries, where we may see thermal capture being used to manufacture transportable fuels to be sold to cities around the world. If the transport issues can be sorted this may include the manufacturing and export of hydrogen fuels.

The world’s landscape has changed before: the reduction in tree cover by early humans, through to the enclosure of common land into agricultural production. This century will see the next phase of landscape transformation worldwide.