Cabinet Office boss John Manzoni admitted to the Public Accounts Committee that more than 60 per cent of the government’s overall spending with SMEs is subcontracted through larger firms first.
Nigel Mills, Conservative MP for Amber Valley in Derbyshire and PAC member was not particularly impressed and said that when the government promised that we would give a lot more work to small and medium-sized businesses, I have a feeling that people probably thought that we meant that we would give it directly to them so that they would be contracting with the government.
“Whereas in actual fact, most of this work – probably something like 60 per cent of it – is through a prime contractor that feeds the work on. I sense that a lot of small businesses aren’t happy that some of the public sector pay for the work they do is creamed off by a prime contractor that then inflicts some other rather unfair terms on them. Do you actually think that it is a success when 60 per cent of the work that we give to SMEs is through somebody else first?”
However Manzoni said he thinks the figure is “fine” although he thought that the government had a lot more to do.
“We did business with 26,000 small and medium-sized enterprises last year, and we have worked with 85,000 different companies since we started counting in 2011, and I don’t think it is feasible for central government to interact individually with that number at that level – there are 5.5 million of them in this country.”
He said that there was a natural supply chain, and the government has to encourage its supply chain not to hold cash and pay at the last minute, and all those sorts of things.
“We have to work very hard on that, but I don’t think that a picture where we contract directly with all those small and medium-sized enterprises is a reasonable picture to paint.”