Priority Suppliers Scheme (Hansard, 29 November 1994)

§ Miss Widdecombe

The Government were forced to abolish the priority suppliers scheme because it was638W incompatible with EC law. The European Commission has confirmed that the PSS was illegal and could not be continued. The Government undertook to discuss the matter with the European Commission and to reintroduce a scheme if that was possible.

In the discussions with the European Commission the Government have sought to establish whether any preferential purchase arrangements for Remploy and other sheltered workshops can be operated within the law.

We have just concluded our talks with the Commission. A new scheme can be introduced but it has to be different from the PSS in two ways. First, to conform with treaty requirements, access to the scheme has to be extended beyond British suppliers to comparable ones in every country of the European Union and the European economic area. "Comparability" will be defined by reference to eligibility criteria which broadly reflect our own criteria for funding supported workshops. Those include requirements that the organisation be a non-profit-distributing body; at least 50 per cent. of its work force must be severely disabled employees engaged in work which makes a genuine contribution to the organisations's business; and employees must be paid the same or closely equivalent wages as non-disabled employees doing the same or similar work. To enable workshops in all member states—which satisfy these criteria—to register their interest, an announcement will be made annually in the EC Official Journal.

The second change is that the scheme will have to be confined to contracts below the relevant threshold above which the EC directives—93/36/EEC and 92/50/EEC—and the general agreement on tariffs and trade Government procurement agreement apply. Those thresholds are currently £96,403 for Government supplies contracts and £149,728 for some textiles products purchased by the Ministry of Defence.

The new arrangement, which will be known as the special contracts arrangement, will like its predecessor help eligible supported workshops for severely disabled people to compete for business with United Kingdom Government Departments and their agencies: it will be administered by the Employment Service, which will circulate to Departments and their agencies details of the organisations registered under the scheme, and their products. When awarding contracts covered by this scheme, Departments will be expected to award a contract to an eligible contractor if its tender provides the same value for money as the best rival tender, and provided all other tender requirements are acceptable. Where a tender was unacceptable on price alone there would, as under the previous scheme, be an opportunity to submit a revised tender for part or all of a contract.

Although we believe that the special contracts arrangement will be of some benefit, there remains the more fundamental problem of increasing competitive pressure, particularly in the textiles and clothing trade, from low cost producers beyond the EC. We shall continue to work with Remploy and other supported employers as they adapt to meet the challenges of the changing business environment.

The fact that we needed to end the PSS has never put in question the Government's commitment to make payment to Remploy or similar bodies to compensate them for the extra cost of employing disabled people. That is a principle to which we remain committed. The sum of more than £140 million that the Government make 639W available for the supported employment programme has never been in doubt.