The UK Autumn Budget 2024 is upon us, with a lot of speculation about what changes it will bring, some of which will have a direct (and indirect) impact on procurement. To start with, Chancellor Rachel Reeves has already warned the country that there will be some ‘tough decisions’ as the new budget will have to plug a £22 billion “black hole” in public finances courtesy of the Conservatives.
The thing is, you need money to plug a financial hole and the only way to generate the funds needed is to cut spending and increase taxes. For citizens that includes changes to capital gains tax, inheritance tax, pension tax relief, and fuel duty.
Businesses can also expect changes, but we’ll focus on those that affect public sector procurement.
UK Budget 2024, Government Spending, And Procurement Policies
The government spent £388 billion on procurement from private sector enterprises and charities in the 2022/23 financial year. That’s a fair chunk of change, but the current problem with that kind of spending is a lack of accountability.
This is one reason the Procurement Act 2023 emphasises transparency and accountability in its procurement reforms. According to the Institute for Government, even public sector buyers don’t know how much is spent on procuring goods and services. It gets worse because it isn’t even sure what it’s buying and who it’s buying from.
It doesn’t help that suppliers who perform poorly get away with it. This is largely due to a tangled mess of red tape that is unclear about the consequences and penalties that should be imposed when there is an obvious lack of compliance with public procurement policy.
The Act is the government’s chance to right these wrongs – when it finally comes into effect. It was supposed to ‘go live’ on the 28th of October 2024, but it has been pushed back to the 24th of February 2025.
The reason given is that the Labour government wants more time to work on a revised “bold and ambitious” National Procurement Policy Statement (NPPS) that will detail strategic priorities in the public procurement policy framework.
The general consensus is that this is a good move because it gives public sector organisations more time to prepare for the procurement reforms coming to the UK.
How Does This Affect Contracting Authorities?
There’s no doubt that the new regime will bring some major changes, so the extra time to prepare public procurement strategies is a boon for many public sector bodies.
Given some of the challenges presented by the new budget, extra prep time is more than just a boon, it’s a lifesaver.
For instance, Chancellor Reeves is stopping non-essential consultancy spending, which will save an estimated £550 million in 2024/25, with a leap up to £680 million in 2025/26. Public bodies will have to seriously rethink their consultancy needs and save their tenders for essential services.
What Are Contracting Authorities Buying?
We said above that some contracting authorities don’t have data that details the goods and services, or works supplied, and sometimes they don’t even have data on the suppliers themselves.
It’s important to use the tools for transparency and accountability provided by online tendering services like Delta eSourcing’s platform, to get accurate data that can be used to make more informed decisions when it comes to awarding public contracts.
Focusing on the suppliers that provide clear value while delivering goods and services that have been specifically defined can save the public sector an enormous amount of money, which can be used to help plug that £22 billion black hole.
What Are Government Departments Getting?
It’s good to know how the budget is being divvied up among government departments, especially key priority areas: Education, Health, Housing, and Local Government.
Education
The Department for Education is getting a pretty sizeable increase of 19%, which puts the total budget at £6.7 billion, £1.4 billion of which is allocated to rebuild more than 500 schools.
The rest of the budget looks like this:
- £2.3 billion to hire more teachers
- £2.1 billion for maintenance
- A £1 billion increase in funding for special educational needs
- Another £300 million for higher education
Healthcare
The NHS can look forward to a 10-year plan that targets productivity growth. In the meantime, the budget for day-to-day spending is getting a £22.6 billion boost, while the capital budget is going up by £3.1 billion. Some funds in the capital budget have already been designated. There’s £1 billion for repairs and upgrades and £1.5 billion for new beds and testing capacity.
Housing
The budget allocates £5 billion to housing investment in the coming financial year, a chunk of which will go towards building additional affordable housing. To achieve this, “hundreds of new planning officers” will be hired.
Local Government
Local government departments will get £1.3 billion to boost grant funding, £600 million of which is allocated to social care.
Here’s a peek at three more priority areas.
- Energy: £3.4 billion for the warm houses plan – great for reducing bills and working towards net zero.
- Defence: £2.9 billion increase in military spending.
- Public spending: A 1.5% increase in real spending on government departments, which goes up to 1.7% when capital spending is included.
No More Slaps On The Wrists
It’s time to get serious about poorly performing suppliers. One of the primary recommendations is that staff who monitor supplier performance are properly trained to assess the quality of services. The idea is for contract managers to become specialists who can spot problem suppliers and mete out appropriate penalties. Even excluding or debarring them from procurement procedures if necessary.
This is particularly important because, currently, dodgy suppliers are still being paid, despite their poor performance. This is an obvious waste of taxpayers’ money which could be better spent on suppliers who provide cost-effective value.
To get the ball rolling, it’s been suggested that the Cabinet Office conduct formal revenues into the most commonly used suppliers and begin separating the roses from the thorns. This opens up public contract opportunities for new suppliers in the procurement market.
It’s important to note that accountability is a two-way street. Contracting authorities must also operate transparently and be held accountable for their actions. One of the ways in which this can happen, according to the Institute, is for the Treasury to make accounting officers responsible for procurement data.
It’s a buck stops here situation because accounting officers must be able to answer for poor quality data that led to poor decisions and resulted in unnecessary (wasted) expense.
Siding With The Little Fella
The Procurement Act 2023 is committed to making public sector procurement SME-friendly. Small businesses and charities have been marginalised in the past, but the future is theirs for the taking – almost.
One of the criticisms of the Act is that, in some cases, instead of making the procurement process easier for small and medium-sized enterprises, the regulations can actually be more complex. The Institute believes that the new Labour government should review procurement policies and controls put in place by the Conservative Party.
This is something the new NPPS can tackle, provided Labour goes ahead with its bold and ambitious revision of the Statement. Aligning the NPPS with Labour’s vision of the financial future will go a long way towards the proper allocation of procurement funds and stick a plug in that gaping black hole.
A Related Matter
The budget’s industrial strategy emphasises the importance of Net Zero goals, particularly in:
- Advanced manufacturing
- Clean energy industries
- Creative industries
- Defence
- Digital technologies
- Financial services
- Life sciences
- Professional and business services
This is relevant for procurement because contracting authorities will prioritise suppliers who can get them closer to their net zero goals. Suppliers will have to get more creative and innovative to deliver greener solutions, particularly when it comes to providing social value in their bid proposals.
Delta eSourcing Lends A Helping Hand
The next few years are going to be interesting ones for public procurement. The market has always been fluid, but with a new government pulling the strings and the Procurement Act just four months away, it could take a while for businesses new to the scene to find their feet.
Delta eSourcing provides buyers and suppliers with a sophisticated eTendering portal that simplifies the procurement process for all stakeholders. But, Delta is more than just a platform for government contracts.
We have decades of experience in the sector which has enabled us to create an array of tools and resources in our Delta Engagement Zone. You’ll find virtually everything you need to know about operating in public procurement and navigating new procurement processes and if you want to reach out for a human helping hand, our expert staff are on hand to answer all of your questions.
Find out more about our services and how we can provide guidance to help you through the transition to the new Procurement Act by booking a free demo or contacting us through any of our channels and we’ll get back to you.
