New powers for councils in England to give lower value contracts to local and UK suppliers come into force today.

Local authorities, as well as police and fire authorities, will now be able to reserve bidding for below threshold contracts to local suppliers.

This could see more than £1bn of local government contracts held for local and UK businesses.

The Ministry of Housing, Communities and Local Government says the new powers are being given by disapplying a section of the 1988 Local Government Act in certain circumstances ‘while maintaining the core principles of fair competitions and value for money’ when awarding contracts.

‘We’re changing the rules that have held back councils from investing in local businesses that are the lifeblood of local economies,’ said Cabinet Office parliamentary secretary Chris Ward.

Local government minister Alison McGovern added that the move ‘will mean more money going to firms that know their areas best and can invest in the communities they serve’.

Local Government Association public service reform and innovation committee chair, Cllr Dan Swords, has welcomed the change, saying that ‘councils have a key role in driving local growth and these changes will give them greater freedoms to buy local, keeping more of what they spend in their local communities’.

He added: ‘Local suppliers, SMEs and voluntary and community organisations will all benefit from councils being able to reserve below-threshold contracts for them, creating jobs and increasing supply chain resilience, to help meet our shared ambition with Government to boost inclusive local and national economic growth.’

In February the Government published a new National Procurement Policy Statement, which set out an expectation that public bodies would ‘provide wider social and economic value’ when awarding contracts.