Merton calls for law change to let councils reject state-backed firms

Leader of Merton Council Mark Allison has urged ministers to change council procurement laws which risk allowing state-backed Russian firms like Gazprom back into the UK public sector unchallenged.

Under current legislation in the Local Government Act, councils are banned from taking into account a range of non-commercial considerations when awarding contracts – specifically the location or origin of a bidder, and any political or sectarian affiliations.

Under these rules, councils must award the work to any bidder who can meet the expectations of the contract.

Cllr Allison has appealed to the Rt Hon Michael Gove, Secretary of State for Levelling Up, Housing & Communities, to use his powers under the act to make urgent changes to the law, ensuring councils are not obliged to re-award contracts to such companies in the future.

Cllr Allison said: “I can’t see a point in the foreseeable future when we will want to accept publicly-funded contracts with any companies associated with Putin and the brutal invasion of Ukraine, nor do I think our residents would want us to.

“But under the current rules, there is no opportunity for councils to reject a contract based on concerns about moral or social issues, nor state affiliations; it’s specifically prohibited.

“Changing this would empower councils to ensure companies that are not aligned to the UK’s interests at times like this can’t simply walk back in the door at the next procurement.”

Letter to Michael Gove, Secretary of State for Housing, communities and Local Government

Dear Mr Gove,

Last week our Council, in solidarity with the people of Ukraine and in support of Government sanctions against Russian state-backed firms, announced our intention to cancel our contract with Gazprom Ltd for the supply of gas to public buildings our part of London, including schools, libraries, civic buildings and leisure centres.

Its parent company is a key contributor to the Russian economy, and the energy sector there has well-known links to the Putin regime, which is responsible for the illegal invasion of Ukraine and for the war crimes that are taking place there.

I am sure you would agree that it is immoral for British public sector bodies, such as councils, schools, hospitals and so on, to provide financial support to that regime. I also anticipate you will want to do all that you can to ensure that the local authorities over which you personally have such a big responsibility do not assist financially with the outrages taking place in Ukraine.

I am therefore writing to you to ask for your urgent assistance.

In our efforts to withdraw financial support to Putin’s regime we have faced a significant challenge through the procurement rules for local government; rules which risk allowing state-backed Russian companies back into the UK public purse in the future unchallenged.

Section 17 of the Local Government Act 1988 currently bans councils from taking into account “non-commercial considerations” when awarding contracts – effectively tying authorities to whichever bidder can best meet the council’s terms.

Under sections 17(5)(e) we are required to disregard the country or territory of origin or places of business of potential contractors, and under section 17(5)(f) we are required to disregard their political, industrial or sectarian affiliations.

Section 19, however, gives the Secretary of State the power to make amendments to these provisions, and I would you to take urgent steps to do so to remove any doubt that there be as to Councils’ ability to end contracts with Gazprom in the way in which the Secretary of State has today urged the NHS to do.

Yours Sincerely,
Mark Allison