Public procurement rules will be changed so that businesses bidding for government contracts are judged on their commitment to job creation and skills.
Suppliers will be assessed on their commitment to back British jobs, skills and opportunities, specifically targeting support for young people not in education, employment or training (NEETs), care leavers and individuals with long-term health conditions.
This will replace the current model, which considers economic, social and environmental value including: promoting innovation; fair working conditions; the wellbeing of the workforce; protection of the environment; habitat creation; energy efficiency; and combating climate change.
The rules will apply to central government procurements, with implementation taking effect from 1 January 2027 following detailed technical guidance this autumn.
To ensure companies honour their pledges, for major contracts, government departments will allocate a key performance indicator and make annual progress reports available publicly. Suppliers’ performance will be measured against their commitments.
Under the changes, the score for bringing benefits to the local community will be raised from 10% to 20% for contracts worth £5m or more.
The threshold for when these rules come in has been raised to contracts of more than £1m, so they don’t typically apply to the work smaller firms and local social enterprises are bidding for.
Bidders will be able to get extra credit for creating local jobs that pay above the legal minimum and treat workers properly, as well as helping to plug local skills gaps by offering training such as 45 days of work experience.
First secretary of state Louise Haigh said: “Every pound of taxpayer money should be spent in a way that benefits local communities – creating good jobs and giving young people the skills they need for the future.
“For too long, securing government contracts has been a tick box exercise that fails to deliver the positive change that people feel in their pocket and see in the places they live.
“We are doing things differently. These new rules will ensure the £90bn that is spent each year through government contracts supports British jobs, skills and people in every postcode.”
Civil service union Prospect has backed the decision.
The union’s general secretary Mike Clancy said: “UK government contracts should support good unionised jobs in the UK, and this is a welcome step towards that aim.”
The decision to scrap environmental requirements has, however, drawn criticism from green campaign groups which have argued environmental protections and job creation are mutually beneficial aims.