The procurement intentions and targets of government are fatally flawed as, without a change in law and European treaty obligations, the deliberate favouring of Small and Medium sized Enterprises is not lawful. As a result, the government cannot make any commitment to procure any proportion of its requirements from that or any other sector.

This has been underlined by the Enterprise Trust, a think tank for industry with specific interests in government procurement policy as it effects SMEs.

Last week, the Trust pointed out to Frances Maude, the Minister for the Cabinet Office, the flaws in the government's stated procurement objectives and today The Trust has published a new report into the 40 year old success story of the American model for procurement from small business. This would be illegal throughout the European Union.

According to The Trust, government cannot discriminate by setting aside any proportion of its procurement spend in favour of any sector. This is despite Coalition promises that a quarter of all government procurement should be through SMEs, a target that can only be achieved by setting aside a proportion of its procurement spend.

Blocking this objective are the laws against discrimination against any one commercial or industrial sector as laid down in law by treaty obligations between the European Union and the World Trade Organisation. The Trust points out that such laws are unnecessary as competitive economies such as those of the United States, Japan and South Korea are not signed up to them.

In a letter to Frances Maude, Enterprise Trust Chairman William Poeton pointed out that until a legal challenge to the WTO is mounted, no government can alter procurement policies. This allows markets to be effectively controlled by dominant firms.

The Trust believes that a challenge to the WTO would find favour with the business community throughout Europe and that a "Set Aside for Competition" policy based on the American model should drive billions of pounds and millions of jobs into the economy.

The Trust also believes that an Ombudsman should be appointed to guard the interests of the SME sector. and a general reclassification of SMEs should be started as soon as possible.