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Session 2007 - 08
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Public Bill Committee Debates

Draft Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2007

The Committee consisted of the following Members:

Chairman: Mr. Martin Caton
Baron, Mr. John (Billericay) (Con)
Burgon, Colin (Elmet) (Lab)
Burt, Lorely (Solihull) (LD)
Byers, Mr. Stephen (North Tyneside) (Lab)
Curry, Mr. David (Skipton and Ripon) (Con)
Ennis, Jeff (Barnsley, East and Mexborough) (Lab)
Evans, Mr. Nigel (Ribble Valley) (Con)
Flello, Mr. Robert (Stoke-on-Trent, South) (Lab)
Hayes, Mr. John (South Holland and The Deepings) (Con)
Henderson, Mr. Doug (Newcastle upon Tyne, North) (Lab)
McFadden, Mr. Pat (Minister for Employment Relations and Postal Affairs)
McGovern, Mr. Jim (Dundee, West) (Lab)
Michael, Alun (Cardiff, South and Penarth) (Lab/Co-op)
Öpik, Lembit (Montgomeryshire) (LD)
Prisk, Mr. Mark (Hertford and Stortford) (Con)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Trickett, Jon (Hemsworth) (Lab)
Eliot Wilson, Committee Clerk
† attended the Committee

Second Delegated Legislation Committee

Monday 10 December 2007

[Mr. Martin Caton in the Chair]

Draft Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2007

4.30 pm
The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I beg to move,
That the Committee has considered the draft Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2007.
I am delighted to be conducting this debate under your chairmanship, Mr. Caton. These amendment regulations are rooted in a consultation document issued in February by what was then the Department of Trade and Industry. Their purpose is to address the bad practices that affect the most vulnerable agency workers by focusing action on those agencies that mistreat workers and avoiding placing unnecessary burdens on the majority of agencies that act responsibly and comply with the law. It is in the interests of the majority of reputable employers who treat their staff fairly that they are not undercut by the disreputable minority who do not do so.
The regulations deal with employment agencies and those who work for them. However, I emphasise at the outset that not all agency workers are vulnerable; for many it is a flexible form of work that they can fit around their family and other commitments. The Government are committed to providing extra protection for those workers who, for a variety of factors, may be more at risk of being denied their employment rights than fellow workers in other circumstances and who may be less able to protect themselves.
The measures in the draft regulations are intended to address key abuses suffered by such vulnerable agency workers. They make three main changes to the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2003.
Colin Burgon (Elmet) (Lab): I understand that there are about 1.3 million agency workers in the United Kingdom. How many will be affected beneficially by the proposal?
Mr. McFadden: It will be a minority of agency workers, because only a minority are subject to the kinds of abuses addressed by the regulations. As I said, many agency workers choose such work because of the flexibility that it offers. We want to ensure that people who are being mistreated have a proper means of redress, which we seek to do through the regulations in three main ways.
Mr. John Hayes (South Holland and The Deepings) (Con): In order to determine that point, it would be useful to know exactly how many employment agencies are currently operating. Does the Minister have that data, which would help members of the Committee to consider the matter more fully?
Mr. McFadden: I cannot give the hon. Gentleman an exact figure, but thousands of employment agencies operate in the United Kingdom. Up to 6 per cent. of the labour market are not employed in permanent work, although not all will be agency workers; some who are directly employed will be on temporary contracts. I hope that that gives the hon. Gentleman some idea of the scale of agency work in the labour market.
Mr. Mark Prisk (Hertford and Stortford) (Con): Although it is disappointing that the Minister cannot give a specific number of agencies, I return to the excellent point made by the hon. Member for Elmet about the number of people affected by the measure and by the consultation. It would help if the Minister could give the Committee a percentage, or proportion, of the work force. For example, is it 5 per cent. or 49 per cent.?
Mr. McFadden: It is a minority; I will not put a percentage on those who are mistreated. Obviously, we know about them if they come forward, but we cannot say accurately how many are mistreated unless people report it. Most agency workers are treated properly by their employers but instances have been raised with us and if the hon. Gentleman will allow me to talk about the situations we are trying to deal with, it may help the Committee.
The first main change gives agency workers a clear right to withdraw from accommodation, transport, or other services provided by an agency, without suffering any detriment. Failure, on the part of an agency, to provide an agency worker with written notice of the right to withdraw from those services will become a criminal offence. That would be enforced by the Employment Agency Standards Inspectorate, which is part of the Department for Business, Enterprise and Regulatory Reform.
Colin Burgon: In reference to how the notice of living accommodation affects people: the Minister says that 10 working days are needed. Does that effectively mean that an agency worker would have to live in unsatisfactory conditions before they could change those circumstances? Should we not be looking at people having to opt in rather than opt out, at this stage?
Mr. McFadden: As I will say later, sometimes the provision of accommodation with employment can be a good match that suits people. However, we do not want people to be forced into such an arrangement, if it proves to be unsatisfactory. We want to give people a right to withdraw on a period of legitimate notice, so that they do not have to be forced against their will. It is important that, if an agency worker is using such services, they do so on the basis of their free will.
While many of the services that agencies provide are of benefit to their workers, that is not always the case. For example, accommodation could consist of space in an overcrowded house, perhaps at a rent higher than the market rate, or transport could cost far more than could be obtained with normal transport fares on the open market.
While it is already an offence to make an offer of a job conditional on an agency worker paying for other services, such as transport or accommodation, we now propose to go a step further in strengthening the provision, by giving agency workers a right of withdrawal without suffering any detriment. That way, they will not be tied to services provided as part of the job that do not represent reasonable value for money. That is important.
As I have said, accommodation with a job can be a logical match in some circumstances, but we believe that there should be choice over the matter and that workers should not be tied into such an arrangement against their will. Those rights will be backed by additional resources for enforcement.
It has been suggested to the Government that there are not enough inspectors working for the Employment Agency Standards Inspectorate and that their number should be increased. My right hon. Friend, the Secretary of State for Business, Enterprise and Regulatory Reform responded to those representations with a pledge to double the number of such inspectors. In addition, subject to parliamentary approval of the forthcoming Employment Bill, we intend that the inspectorate will gain tougher powers to investigate agencies, and that the potential penalty for breaking the law with regard to agency workers will be raised to an unlimited fine. So, there is a package of new rights for agency workers, and extra resources and powers for their enforcement.
Mr. Prisk: I think that I am right in saying that there are currently 12 regionally based inspectors—the Minister is nodding—they include three managers and four helpline staff; I think that there were five 3 years ago, but the number seems to have fallen. Will the Minister confirm whether the inspectors or the total number of staff will double? Will it be 24 or 38?
Mr. McFadden: It is double the number of inspectors.
The second major change concerns the taking of fees from would-be entertainers and models for including their details in publications such as casting websites and model books.
The Government are committed to addressing a practice where unscrupulous individuals invite people, who are often young and want to break into those industries, to attend casting sessions and then engage in hard-sell tactics to persuade them to pay what are often quite high fees for the provision of services and the promise of work. Those who wish to enter that world are often young and inexperienced and their families might be unsure of what they are getting into. That lack of experience can sometimes be cynically exploited by people who will tell young people what they want to hear. At a casting session, they might tell young people that their look or their talent is just what the industry is looking for. Trusting people can be caught up in the atmosphere of such moments and be persuaded to part with their hard-earned cash. Often, the reality is quite different.
Jon Trickett (Hemsworth) (Lab): I welcome this move forward. I was contacted in October by a constituent who said that he paid £125 for his daughter to join a modelling agency called Stand Out in Leicestershire. The money was paid and the father and daughter never heard another thing about it. Can the Minister confirm that such abuses of young people’s hopes will be stopped by this development?
Mr. McFadden: That is the sort of situation that we are trying to address with the legislation. Sometimes young people and families who want to back their young son or daughter can be persuaded. The hon. Gentleman mentioned the sum of £125, which is reasonably typical in these situations. The reality of these industries is very different. The modelling, entertainment and acting industries are very difficult to break into. Only a small number of people will succeed, compared to the number who wish to do so.
The regulations will introduce the safeguard of a seven day cooling-off period for contracts that will include a worker’s details in a publication or a website. To make that effective, it will be a common offence for an agency to take a fee from an individual during that seven day cooling-off period. We are extending the protection of a cooling-off period to all contracts that will include an individual’s details in a publication or website.
Legitimate companies do not indulge in such hard-sell tactics but some companies do. This proposal is intended to address those hard-sell tactics so that the legitimate agency is not disadvantaged, while there is some protection for the young person who is subject to this kind of treatment by the rogue agency. Some of the publications that carry publicity for young people are legitimate and are a long-standing part of the entertainment industry. A blanket ban could adversely affect legitimate publications that offer a legitimate service that can help young actors and models to get work. We want to stop young people and their families from paying money under the immediate pressure of a casting session and not put at risk legitimate services that might help them in some circumstances in the entertainment industry.
Mr. Hayes: The Minister is making a seductive case for the protection of young people in the circumstances that he describes. Presumably, the regulations will be enforced by the Employment Agency Standards Inspectorate. Will the Minister confirm that the inspectorate has a rolling programme for inspecting all agencies? It is essential that it does so in order to identify and deal with the outrageous circumstances that he describes.
Mr. McFadden: The balance of the inspectorate’s work is split, with roughly two thirds being reactive work, responding to complaints of abuses by agencies and companies—it is important that such reports are followed up—and one third being proactive work, where it inspects and seeks out problems rather than waiting for them to be reported.
Colin Burgon: Generally speaking, that is a minimalist programme for addressing what is a huge issue in this country. The item that deals with regulation 5 is a deregulatory matter, as the Minister has said. I might have got this wrong, but is he saying that an agency worker who works for up to five days will have no written contractual relationship and might well have only a verbal agreement? Does he understand that the power relations between an agency and its workers are such that it is possible that an agency worker who arrives to claim what we regard as rightfully theirs might be denied it because the assignment was just a verbal agreement? Where do we go with that? What is the language to be used—obviously many agency workers are European—and how will that information be disseminated?
Mr. McFadden: It is intended to address the situation where someone, such as a supply teacher or someone engaged in a particular form of regular work, already knows the going rates. Currently, if such a person’s assignment is for only a day or two, they often receive the written particulars after that assignment, and under the defined circumstances, that is fewer than five days. My hon. Friend referred to regulation 5 and, if he reads it in its entirety, he will see that we have made a provision that would stop an agency breaking a longer assignment into chunks of five days. Therefore, assignments of up to five days will apply in very specific circumstances. That will benefit agencies and sectors in which short assignments are typical.
By making the information requirements for short assignments, depending on the agencies having already supplied the basic information in terms and conditions, we seek to ensure that the rights of agency workers, to which my hon. Friend the Member for Elmet has referred, continue to be protected. As I have said, there is provision in the regulations to prevent the repetition of short contracts as a means of avoiding the provision of information.
In addition to the measures in the amending regulations, we are pursuing some non-regulatory measures which relate to the dissemination of information to alert potential migrant workers to their rights—an important issue to which my hon. Friend the Member for Elmet has referred—and other regulations that cover driver agencies. I would like to tell the Committee a little about those.
It has rightly been pointed out that one of the points of vulnerability in the labour market concerns migrant workers who might not know their rights and might be exploited. Often, EU workers who are legally entitled to work in the UK can be lured by the promise of high-sounding wages into taking out overseas loans in the belief that they will be easy to repay. Since those loans are taken out when the workers are overseas, there is little that the Government can do about that situation, as damage has already been done by the time the worker arrives.
However, I would like to assure the Committee that we work with other member states to try to tackle such problems. For example, we have printed and distributed material in several European countries—Poland, Lithuania and Portugal—that outlines the rights at work available to all legal employees in the UK. Of course, those rights are available to UK workers, but we distribute and publicise material in those countries to ensure that people know what their core employment rights are before they come to the UK. We are currently revising those publications to ensure that they are kept up to date.
Mention was made of agencies that employ drivers. We need to be sure that those who run agencies are aware that if they encourage drivers to work excessive hours and that that results in a fatal accident, they will be liable to prosecution for manslaughter as well as for being in breach of agency legislation. We will also ensure that we disseminate guidance to agencies that employ drivers, so that they know of their legal obligations.
These are practical measures that address some of the key abuses that involve vulnerable agency workers. They were consulted on in a document published in February. These regulations are based on the responses to that consultation. I believe that they are an important step forward in offering protection, both in amending the law and in providing new resources. On that note, I commend the regulations to the Committee.
4.50 pm
Mr. Prisk: May I, like the Minister, welcome you to the Chair, Mr. Caton, to maintain our deliberation in an orderly fashion?
I thank the Minister not only for his remarks but for responding to some of the important points that have been raised on both sides of the Committee. He concluded his remarks by talking about the Protecting Vulnerable Agency Workers consultation paper, which, as he said, was published in February. It is, of course, the basis upon which this statutory instrument is founded. The results of that consultation were published just a couple of weeks ago. Indeed, they were published almost simultaneously with both the Government’s response to the consultation and the statutory instrument. Why was that? It leads to the problem that there is almost no time for consideration or external scrutiny of the measures involved.
Equally, the findings that we have in this particular consultation document are presented in a form that, frankly, prevents anyone from understanding the views of those who were consulted. For example, we are told that there were 66 responses from key stakeholders, but we are not told who they are. Thus, for example, where a concern is mentioned, we do not know in the document whether it is mentioned by an individual or by an equity that represents 37,000 people on a particular measure.
That anonymity is made worse by the fact that the responses are not spelled out, but are summarised or drawn together in a way that seems most peculiar. For example, the document says:
“23 responses were received to the proposal on clarifying costs for a publication covered by an agency”.
It goes on to say:
“Of which 16 objected, leaving only seven in agreement.”
From that, it is impossible to know the true outcome of the consultation. Were the seven who were in agreement the principlal representative organisations or seven unhappy souls? Were the objections of substance, or were they minor? Indeed, were they the same objections? This document does not answer those questions. Therefore, it weakens our ability as legislators to do our job, which is to scrutinise the nature and views of those affected by this measure in order to judge whether it is beneficial or otherwise.
Can the Minister tell us whether this shortened publication timetable was intentional, or was it just an error? Can he explain why the findings have been anonymised and is he confident that they meet the standards set by the codes on consultation for Ministers? He used to be a Cabinet Office Minister, so he will be aware that there is a clear code about how these consultations should be conducted. It would be helpful if he could clarify that matter.
The statutory instrument has 10 specific regulations within it, of varying significance. I do not intend to discuss all of them at great length, but I can say that a number of them are well intentioned, have merit and we strongly support them. However, I want to ask several questions and, in particular, I would like to debate regulation 7, which deals with the issue of up-front fees.
Regulation 3 allows a work-seeker to withdraw in writing from additional agency services without being unfairly penalised, as the Minister mentioned in his remarks. The measure envisages a written notice period of five days for all services, except for accommodation, which would have a written notice period of 10 days. Although I think that there are some wrinkles there that need to be ironed out, on balance the measure seems to be sensible and it will provide some greater protection to agency workers. Equally, I have received no representations from the industry that this measure would somehow create an undue administrative burden. Therefore, the measures, particularly with regard to regulation 7, deserve our support.
Regulation 4 seeks to amend the original regulation 13, which is in the 2003 law. An agency or employment business would have to provide the work-seeker with a statement alerting him or her of the “right to cancel” or “withdraw” from additional services. Again, I must say that, having examined the evidence on both sides—not just the rather inadequate consultation document, but evidence from beyond that—this measure would make employees’ rights more transparent. It is therefore to be welcomed.
Regulation 5 will amend the original regulation 21. This measure seeks to simplify the information requirements for short-term contracts of five working days or less. I used to be a freelancer before I left the real world and went into politics so I am aware of the issues relating to short-term contracts. Under the measure before us only basic information would be required. As the Minister has suggested, that will ease the burden on business. For short-term contracts this will be a practical solution.
Regulations 6, 8, 9 and 10 are self-explanatory. In most cases they seek to correct or improve the existing law. Regulation 7 seeks to tackle what the Minister has described as a persistent defrauding of aspiring actors and models by bogus recruitment agencies. Very often these are, as we have heard, young hopefuls who are getting ripped off by as much as £100 or perhaps £200 a time. It is a practice that preys on people’s hopes, dreams and ambitions. It is legal because of a loophole in the 2003 conduct regulations which we are trying to amend today.
What usually happens—the Minister alluded to this—is that an advertisement is placed in a local paper inviting people to a local hotel. The hon. Member for Elmet gave an example of that. They are then promised a full photographic session and told that they will be registered and referred to an entirely new agency with all the prospects that that offers. I have an example from Sussex in September 2006. Interestingly the advertisement starts by saying that it is looking for children aged one to 12 and teenagers aged 13 to 17. They are also looking for adults, but they come third in the list. Children and teenagers are the priority for these bogus agencies.
As the mother of two teenage daughters who were caught out by such an advertisement told me, the agencies then deliberately play up the chances to get people to sign on. Having signed on, they often end up with only a cheap Polaroid photograph and the promise of a referral for which they have to wait weeks, if not months. If a second agency does call, it is rare that actual work is forthcoming. The Stage did an excellent survey of this. It found that 75 per cent. of all the people who get caught up in this process have received no work whatsoever after 12 months. All too often if one looks carefully, one finds that the second agency to which the individual is meant to be referred mysteriously has the same address as the first agency. We can all work out what is going on there.
As the Minister pointed out, the rogues are a minority part of the agency business. There are many excellent agencies out there doing a super business in the industry and good for them. But the rogues are unscrupulously ripping off thousands of people every year and it is a scam that should be stopped. Regulation 7 is the result of quite a long battle to get Ministers to act. In a press release on 27 November 2003, the Minister’s predecessor but one, or two, the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Bradford, South (Mr. Sutcliffe), promised measures that would result in
“agencies placing actors, models and extras no longer being allowed to charge upfront fees before they find them work.”
That was a clear promise, but no such change took place. Complaints started to increase. According to my most recent figure—the Minister may be able to update this—342 complaints were made in 2005-06.
Conservative Members and others pressed Ministers again. In May 2006 that same Minister told the House that he was very concerned. He said:
“We are determined to stamp it out, and I shall be taking action.”—[Official Report, 4 May 2006; Vol. 445, c. 1084.]
The complaints still kept coming. The employment agency standards inspectorate took little or no action.
It would be helpful if the Minister told us how many complaints that organisation, which is responsible to him, received, and how many prosecutions were then pursued.
The question for us today is whether the proposal before us will do what the Government originally promised, which is to stamp out the practice in question. Regulation 7 would amend the original regulation by providing, as the Minister said, a seven-day cooling-off period for payment after a casting session, and would entitle a work-seeker to back out of any contract signed, without penalty. Let us be clear: the provision will not stop a rogue agency continuing to draw in hopefuls through advertising or getting them to sign on the same day; nor will it stop them taking a post-dated cheque or an imprint of a credit or debit card, payable after the seven days. The Minister shakes his head, but whatever the Department’s press release says, the provision is clear. It states that
“no fee permitted under this paragraph shall be payable by the work-seeker”
within the seven days; so an imprint could be taken, and I suspect that that will happen. Post-dated cheques could be taken, and I suspect that they will be. I hope that the Minister will clarify the matter.
We have been presented with a well-intentioned and, on the surface, reasonable suggestion that the provisions will improve things. However, they will not prevent the scam from occurring in the first place, or address the central problem, which I alluded to earlier, that it is often weeks, or sometimes months after the original event, that people realise that no work is forthcoming. [Interruption.] Despite the obvious positive reaction to the situation that is beyond my control, Mr. Caton, the reaction to the Government’s proposals has been very negative—almost as negative as I am feeling towards the fire alarm system at the moment.
The first negative reaction was from an Equity spokesman. Its leading spokesman, I think, said that he was “absolutely livid”. Mr. Spencer MacDonald, the principal representative of the Broadcasting Entertainment Cinematograph and Theatre Union, said:
“We are deeply disappointed because we have been hammering away at the Department of Trade and Industry for a number of years and we thought they were slowly coming around and understanding the problems being experienced by our members. They have not come up with the goods really—they have not delivered anywhere near what we wanted.”
The Opposition agree: we are equally disappointed.
In June, 128 Members of this House, including 40 members of the Minister’s party, signed my early-day motion calling on the Government to close the loophole. I am grateful to the six other members of the Committee who signed that early-day motion. Sadly, the proposal before us fails to meet the demands set out in that motion, or the demands of the people concerned. Why have the Government chosen to ignore the views of Equity and BECTU on the issue? Does the Minister agree that, instead of a short cooling-of period, there should be a ban on up-front fees in this sector, as there is in almost every other business sector? Why have the Government turned their face against that?
Further, will the Minister explain why he rejected the eminently sensible suggestion of Equity and BECTU that a distinction should be made between directories and online information services on the one hand, and genuine entertainment employment agents on the other hand? Such a distinction would allow agents to develop the continuing relationship with artists that they need, and to charge the fee in relation to work sought—not up front. The publication side—the Minister is right to say that there are good, legitimate players in that field—would then be clearly distinguished from the genuine process of agency. That is important. The Minister spoke about not setting up a blanket ban, but he had an opportunity to distinguish between the two functions. Equity and BECTU suggested that, and I suggest it now.
The rules of the House require that if we want to oppose the relevant provision in the statutory instrument we must vote against the whole measure. We do not want to do that, for the other regulations merit support. However, I emphasise that regulation 7 is wholly inadequate, and Opposition Members—as well as, I suspect, Labour Members—do not want to support it. It is a great shame that Ministers have chosen to bury the proposal in such a way.
For at least four years Ministers have recognised that there is a problem, but they have failed to act. When complaints have been made, their officials have failed to prosecute. When they have brought forward legislative tinkering and changes, those have been slow to be forthcoming and inadequate to the task. The result is that thousands of people have been ripped off over those four years while Ministers have dithered and their officials have failed to prosecute. I hope that the Minister can explain why he is happy for this con to continue. I do not believe that that is his wish, but it is the net effect of what we are being presented with today.
5.5 pm
Jon Trickett: May I, too, welcome you to the Chair, Mr. Caton? It is the first time that I have spoken under your chairmanship. I think that the proposal in front of us is a significant step forward and certainly merits voting for if there is a Division. However, in some ways it is a modest proposal, and I want to press the Minister to see whether we can elicit explanation of some of its contents, and whether he is prepared to take further steps as he places some of these matters under review.
My first point refers to research done by Queen Mary college of the university of London. It looked carefully at the sector, and said that it was “dominated” by employment of migrant workers, especially those from Poland and Lithuania, and from Africa, particularly Ghana. Do we have statistics on the number of migrant workers, or the proportion of migrant workers who are employed in that way? That is a general point on which I would like to elicit further information.
I turn now to some of the details of the regulation. Taking them in no particular order, I shall speak, first, about the charges that are levied, some of which I have referred to. The most common of those might be accommodation. Agency workers are paid a gross salary, but then receive the net only, because deductions are made for accommodation. Paragraph 2.3 of the explanatory notes—I am sure that you will have noticed this, Mr. Caton, as I have no doubt that you pay great attention to everything relevant to Committees that you chair—refers to workers having the right to opt out of services for which they are charged. The legislation appears to be framed in such a way that it is for the employee—often a vulnerable person—to opt out of a service that the agency provides, often in a coercive way. Can the Minister explain why it was decided to frame the legislation in that way, so that the worker has to opt out, rather than opt in to services? That would reduce the possibility for the employer to use coercive measures against the employee.
In the same paragraph, it is stated that for services other than accommodation, the employee has to give five working days’ notice to the agency, and for accommodation, 10 working days, before they can exercise the opt-out. How were those periods of five and 10 days respectively arrived at? Is it not possible to speculate that the agency might find ways of terminating the employment of the individual concerned? Although it would be illegal for an employer to say, “I’m no longer employing you because you’ve exercised your opt-out,” I wonder whether they might use other excuses to remove a person from work.
As I said, the proposals are a significant but modest step forward, and I would be interested to hear the Minister’s comments on both those situations, which seem to leave power with the agency, rather than the employee. If we are trying to echo our phrase, “fairness, not favours” in dealing with both sides of industry, the balance still seems to favour the agencies, whose activities have been extremely unscrupulous.
I want now to move on to the deregulatory measure that the Minister announced. I do not suppose that a single Member of Parliament or citizen of the country wants unnecessary regulations, and we have decided to deregulate agency employment contracts of five days or less, but what were the trade union movement’s views of that deregulatory proposal? I understand that the Minister has received letters saying that it would be a backward step, and the TUC, too, has said so following a survey of agency workers that it commissioned from YouGov. Workers who were surveyed said that after they had begun work—albeit on very short contracts sometimes—the employer would suddenly change the conditions because they had simply been verbal. Some people said that their rates of pay were lowered after their job had started. Others said things such as:
“They paid me less than they said I was going to get paid.”
One teacher said:
“After a demanding day in a class of five year olds, my payment was £20 less than had been agreed”
verbally. Those are just some examples of the quotations elicited by YouGov. Deregulation is all well and good, provided that the people we are dealing with are totally scrupulous, but that is not a characteristic of the employers we are discussing.
I did not fully understand the Minister’s comments about chains of five-day contracts. It is perfectly possible to envisage such chains as a way of avoiding the obligations that would fall on an agency under the regulations after five days. It is possible to envisage a worker being offered a chain of several five-day contracts—although probably not for ever—each of which would avoid the regulations.
The final issue on which I want to press the Minister a little harder is up-front fees, and, again, I echo some of the points made in the previous speech. We are talking not about a ban on such activities—it is hard to envisage how the Government could totally eliminate them—but about a simple cooling-off period, in which the agency requests a sum and the prospective worker is given a short period in which to consider whether to pay it. The proposal is a step forward, although it is not hugely robust, given that the desperation to become models or to work in the theatre, cinema or TV is great among many young men and women who chase celebrity—after all, we live in a celebrity culture. If a firm is unscrupulous enough to take money and not provide services now, it is hard to imagine how a four or five-day cooling-off period will prevent such activities in the future. Will the Minister at least agree to review the provision in six months or a year to see whether the practices emerging are still reflected in Members’ postbags?
As all those comments show, I have great concerns, as I am sure many hon. Members do, about the way in which unscrupulous employers are using agency labour, and the way in which migrant labour is being used to drive down wages and conditions in our country by means of a loophole that is called agency labour. Many of us have pestered the Government for some time to introduce regulations and it would be very small-minded not to acknowledge that the Minister is beginning to tackle this vastly important issue. However, these are modest proposals. I hope that the Minister will at least say that he will continue to keep them under review and will produce further, perhaps slightly more robust, measures in due course.
5.16 pm
The agency sector is a very vibrant part of our economy. It is growing and is a key element in the labour market. It is a route into employment: 36 per cent. of people working for agencies were previously economically inactive. It also provides great flexibility to business. One third of businesses use agency workers for short-term cover for vacant positions, 29 per cent. because of the increase in demand for workers, and 21 per cent. to cover staff absence.
I know that there has been quite a bit of controversy about agency workers. Earlier this month, the proposed EU rules on agency workers—the agency workers directive—were finally kicked into the long grass by EU Ministers. I think that that is to be welcomed because those rules confused the definition of agency workers with that of professional contractors and potentially could have destroyed the flexible working market for workers who are happy to dip in and out of work.
Colin Burgon: May I be absolutely clear that the spokesperson for the Liberal Democrats welcomes the developments that took place in Europe this week and that she would contest the point made by the TUC general secretary, who lamented the lack of progress as very disappointing? He said:
“There is real anger among unions...that the UK Government played the pivotal role in blocking progress...on this modest measure to improve workplace justice.”
Could we have it on the record that the hon. Lady, on behalf of the Liberal Democrats, actively supports what happened this week?
Lorely Burt: I am grateful for the intervention. What is really important about the proposed agency workers directive is that it would have restricted the freedom of professional contractors because of the confusion over what is a worker. Also, one of the great competitive advantages that we have in this country is the flexibility of our working market. However, I will go on to talk about vulnerable workers and ways in which we should be thinking about protection for them.
While we are talking about vulnerable workers, there is nothing in these measures for home workers, and home workers can be agency workers too. Home workers are perhaps the most vulnerable group of all. What steps are the Government taking to ensure greater protection for home workers?
Trade unions are absolutely right to be concerned about vulnerable workers, but in the main the answer lies in enforcing existing rules. For example, with the current number of inspectors, an employer has a chance of being inspected under minimum wage rules about once every 278 years. It is welcome news from the Minister that the number of inspectors will be doubled, but the chance will still be about once every 150 years. It is incumbent on the Government to consider the quality of enforcement, particularly in relation to vulnerable people. The minimum wage is one stalwart among the minimums to which everybody in this country is entitled.
Trade unions want agency workers to be treated the same as workers in the companies that employ them, but the problem is that contracts are between the agency and the worker. Agency workers have employment rights, but those relate to the agency. Otherwise, a situation could arise in which agency workers’ conditions changed every time they changed employment. They could even be less favourable than those of others working alongside.
The number of hours worked by agency drivers is a great worry because of the potential for accidents. We are told that excessive hours can happen for two reasons. One is that drivers may work for multiple agencies without telling them. If such people pay tax and we have their tax records, why do we not know that they are working for multiple agencies? Is it beyond the wit of HMRC and other Government agencies to speak to each other?
Mr. Prisk: They lost the discs.
Lorely Burt: The hon. Gentleman says from a sedentary position that they lost the discs. I would not wish to be rude or poke fun at the Government, of course.
Drivers and agencies can also collude—we are talking about rogue agencies. Will issuing a guidance note saying that agencies that flout the law and knowingly allow drivers to work beyond their hours will face criminal prosecutions make them cower with fear and instantly comply? Again, enforcement and the certainty of detection are the key to making a difference.
I move to charges for services and the provision of loans. There has been a lot of discussion about the provision to withdraw with five days’ notice. It is fair only if workers know about it. I am particularly concerned about migrant workers, who work in very poor conditions. Because of charges, such workers can end up owing gangmasters money. If the Government want to improve information to migrant workers, they must reach those workers. A tremendous amount of exploitation takes place. I was listening this morning to a story on the radio about workers being sold by one gangmaster to another. It is a hugely worrying area of exploitation. To think that that is happening in the United Kingdom at the moment is appalling.
With regard to the provision of loans, we understand that that is a matter for law in the home country, but it can result in extortion. Does the Minister have any comments to make on how extortionate loan rates could be discovered and dealt with? For example, what about having a penalty of revoking a licence if extortionate loan rates were charged? Would the Government be able to take any action on that issue?
More importantly, the question is what is reasonable? The fee of £125 was mentioned earlier. I know that it is very difficult to mention a specific amount, but surely there must be some sort of industry norm, above which it would be deemed that a charge is unreasonable. Will the result of this measure not be that the unscrupulous companies will carry on just as they did before? They can charge fees for distribution and production, so the fee that they would have charged up-front could be remarkably similar to the fee that they will charge for production and circulation. The seven day cooling-off period is welcome. The comment was made earlier that it is quite a normal thing in many industries, including in any usual financial transactions. The Government have failed to tackle the problem. The cooling-off period is welcome, but up-front fees have not been banished. The lack of clarity in what is reasonable will not be enormously helpful in the enforcement of the regulations.
In conclusion, this instrument was described by the hon. Member for Elmet as a minimalist measure to tackle a huge problem. It is welcome because it will, in some measure, protect vulnerable workers. However, I hope that it will be agreed that there are still huge areas of exploitation. I respectfully suggest that the answer lies with enforcement. While doubling the number of inspectors might be a small help, given the scale of the problem that we are seeking to enforce with existing legislation and these new additions, it is really a drop in the ocean. The certainty of detection is directly related to the degree of compliance.
5.29 pm
Mr. Hayes: It is a great privilege to sit on a Committee enlightened by your benevolent and sagacious chairmanship, Mr. Caton. I follow the hon. Member for Solihull on the subject of the conditions of vulnerable workers with a certain sense of irony, given that the last time her party was in government, it still had leading members who permitted the putting of boys up chimneys.
More precisely on the regulations—I promised someone who inquired about the likely length of the debate that I would be pithy and entertaining—I shall offer five short but, hopefully, scintillating minutes. The regulations amend provisions governing the conduct of private recruitment companies and establish a framework of minimal standards for their clients, both agency and hirers, as we have heard. They are established under the Employment Agencies Act 1973 and, as I mentioned, they are enforced by the EAS.
As I hinted when I intervened on the Minister, two alarming facts emerge. First, the EAS does not inspect all agencies. Indeed, its inspections are reactive, as the Minister confirmed, and sporadic. Given the changes that the Minister tells us are vital, that seems odd, because if the regulations are as important as we have been given to believe during contributions from hon. Members on both sides of the Committee, some rolling programme of inspections would be both necessary and, I would expect, essential.
Secondly, we do not know how many agencies there are, as the hon. Member for Solihull inferred. When questioned today, the Minister gave an indication of how many, but a written answer states:
“There is no reliable data on the number of employment agencies currently operating in Great Britain”.—[Official Report, 12 July 2004; Vol. 423, c. 905W.]
Given that lack of reliable data on the number of agencies, where they are and who operates them, how can the EAS carry out its work effectively? Given the concerns expressed on both sides of the Committee about some of the circumstances that are causing real hardship to agency workers, I believe that greater scrutiny of agencies is necessary.
Jon Trickett: I am delighted to hear that—it sounds like I have an ally on the Opposition Benches. Is the hon. Gentleman making a public expenditure commitment on behalf of the Conservative party? If so, how much is he proposing to spend on enforcement?
Mr. Hayes: It is a rare privilege for me to speak from the Back Benches on a Committee on Delegated Legislation. Even in such circumstances, I would not wish to make any commitments that either contradict the line offered with such eloquence from the Conservative Front Bench by my hon. Friend the Member for Hertford and Stortford, or the prevailing instruction to those who serve the interests of the Opposition not to do what the hon. Gentleman is encouraging me to do.
As my hon. Friend said, there is widespread disappointment about the nature of the Government’s reaction to what was eloquently described by the hon. Gentleman and others as a serious matter and a real problem. The proposals before us, although welcome in part, are not universally sound and the consultation process was insufficient, as my hon. Friend made clear. The Government are not reacting with sufficient care or concern to the situation by which they are confronted. The Minister must be embarrassed by some of the speeches made in the Committee—they have not been partisan; rather, they have been genuine expressions of widespread fear of what is happening to vulnerable people in our constituencies. I include my own constituency, where there are many agency workers. There is a long history of part-time seasonal itinerant workers in areas with a strong horticultural interest, including in my constituency. As a result, there are many migrant and agency workers. It is not a new phenomenon, but the situation has changed.
In recent years, large numbers of people, principally from central and eastern Europe, have come to my constituency to work, and there are profound, if not universal, concerns about the circumstances in which they do so. Farmers and food industry representatives each do their best to ensure that people’s working conditions are adequate, but there are employers who are exceptions to that—my hon. Friend described them as rogues. Such people are particularly prevalent among gangmasters and agencies that provide labour. It is not always easy for a small pack house or a farmer who has short-term need for an employee to scrutinise the agent who provided the labour with the diligence that they would wish. The need might be urgent, so that it must be satisfied very quickly. The way in which agencies recruit and deal with the people they provide as urgently needed, part-time workers is therefore critical. I could add my own horror stories to the stories that we have already heard about conditions that prevail as a result of such rogues. They are the exception rather than the rule, but they are a significant exception.
The regulations deal particularly with housing, which is a matter that is often used as a vehicle for expectation. If someone is both employed and housed by the same organisation, they might never escape that organisation’s clutches. Transport might be provided on the basis of entirely unreasonable deductions from wages. That is another area of concern, as is quality of accommodation. The same organisations might make loans that must be paid back at exorbitant interest rates, or indeed that people cannot pay back at all, so that they feel bound to the agent. Such practices are common. They are an open secret—the dark secret of the modern economy. They must be dealt with, because, at their worst, they amount to a modern slavery. I make no apologies for saying so.
I entirely endorse the views of my hon. Friend the Member for Hertford and Stortford and of others that the matter requires urgent, considered and serious attention from the Government. It is not enough to have tinkered with existing arrangements; in many cases, the arrangements must be radically changed. My hon. Friend has made a particular issue of the circumstances surrounding the excellent early-day motion on which he took the lead and which, as he said, attracted so many signatures. The motion, as we know, concerned the entertainment and modelling industry, to which young people are often prey in the circumstances that he described. I shall not repeat his arguments but I fully endorse them. There are loopholes that are being exploited and, like my hon. Friend, I am not satisfied that the amended regulations will deal with them. There are dozens of cases of bogus agencies having scammed £180, £200 or more from aspirant models or actors. As the Minister acknowledged, young people are vulnerable in that area. The problem should be addressed with appropriate severity and alacrity.
I said that I would take only five minutes, so I shall draw my remarks to a conclusion. [Interruption.] If I have taken longer, that was only because I did not wish to deprive Committee members of any of the important points that I had to make, because I could see that they were lapping them up with an enthusiasm rarely seen in Delegated Legislation Committees.
Given all that has been said in the Committee, I wonder if the Minister might take back some of the comments in his speech and reformulate certain parts of his proposed response to the problems that we have discussed. As my hon. Friend said, there are certainly one or two particular aspects of the regulations that are inadequate to their intended purpose. As he also said, there might be many steps in the right direction, so it would be wrong to oppose them. Nevertheless, the tone of my hon. Friend’s leadership on this matter, which I have, albeit inadequately, tried to support, and the comments from the Minister’s hon. Friends will oblige him to think seriously about whether the Government have got this right.
5.40 pm
Mr. McFadden: I thank hon. Members on both sides of the Committee for the points that they have made. The debate has shown that we, as Members of Parliament, take this matter seriously, as agency workers are a small but important part of the overall labour market.
I begin my summing-up by answering one of the questions of my hon. Friend the Member for Hemsworth. He asked if the proposal is the last word on the subject—that is, is it all that the Government propose. It is not the last word; I referred earlier to the Employment Bill, which was published on Friday, and which concerns other areas of vulnerable work. That Bill will, of course, be subject to the normal procedures as it goes through Parliament. I also chair a vulnerable worker enforcement forum, which, by coincidence, met this morning. It includes representatives from the Recruitment and Employment Confederation, which represents the agencies, from the trade unions, from large and small businesses and, importantly, from the Government agencies responsible for enforcing various employment rights. That body meets roughly monthly—perhaps every month to six weeks—and has explored a number of different aspects of this problem. Therefore, the answer to my hon. Friend’s question about whether the regulations before us are all that is happening on the matter is no, but I shall deal with some of the specifics.
The hon. Member for Hertford and Stortford referred to the consultation and he was right to say that we originally said that we would try to publish a response by July. We did not meet that deadline, partly because we wanted to analyse the responses properly and because there were issues that we did not want to deal with just on the basis of written responses. Officials met stakeholders to discuss one or two points more fully. The response has therefore come later than we originally wished but I hope that that reflects our efforts to get things right for the longer term.
The hon. Gentleman also asked if our response had followed the Cabinet Office guidelines. We did not meet the July deadline, but I have no reason to think that we did not meet the Cabinet Office guidelines in respect of the way in which the consultation was conducted.
The hon. Gentleman asked a number of questions about the seven-day cooling off period. We did not want to jeopardise legitimate publications such as The Stage, Spotlight and others, which have been around for a long time and play a legitimate and valuable role in the industry. We wanted to tackle the hard-sell tactic of inviting people to attend a casting session and trying to take money off them on the day itself, often on the promise of finding work or making bogus pledges that the young person has a great chance of success. The cooling-off period will have a significant impact by allowing people to think about things before taking a particular route. That is not to say that the payment of a fee for inclusion in a legitimate publication is always wrong. The hon. Member for Hertford and Stortford might disagree with our judgment on that matter, but that was the process by which we came to the conclusion that a seven-day cooling off period was the right way to proceed.
Mr. Prisk: The Minister’s clarification of that point is helpful. He is quite right: it is not that seven days will not be helpful. The difficulty, however, is that it does not address the central problem: someone can encourage a young person to sign a contract, and can take a post-dated cheque, which the Minister has not ruled out, or an imprint of a debit or credit card. Therefore, the onus remains with the individual. That approach does not deal with the central point, which is the hope of work—on which all the arrangements are founded—which comes only weeks or months later. The seven days will never deal with that issue. Why does the Minister choose not to take on board the sensible Equity and BECTU proposals? I have a one-and-a-half page proposal that was submitted in February; why have the Government rejected it?
Mr. McFadden: All representations were considered; but in the matter of distinguishing between agencies and publications there was, in our view, a question as to whether that could easily be done in such a way as to prevent disreputable agencies from producing publications of little value, and abusing the distinction. The hon. Gentleman said that the promise of work is always further down the line, but that need not mean that inclusion in a publication can never be a legitimate activity in the process of finding work. For some agencies that will be the case; for others it will not. We wanted to use the cooling-off period to give people time to think, without putting in jeopardy the legitimate promotion activity that is carried out by some very long-established publications. I was looking at one such publication today, which has existed for 80 years and performs a legitimate role in the industry.
Mr. Prisk: Will the Minister give way on that point?
Mr. McFadden: If the hon. Gentleman will forgive me, I should like to move on and turn to some of the other issues that were raised.
My hon. Friend the Member for Hemsworth asked about figures on agency workers. As the hon. Member for Solihull said, there is a wide variety of estimates, and research on the number of agency workers goes back some years—that is why the Department has recently commissioned more. It is an increasingly prominent area in political debate, and we should do more research. We have estimates ranging from 600,000 to well over 1 million, and it is important to obtain more accurate figures.
Lorely Burt: Is there not a requirement for registration, in some accessible place, so that the Government can obtain the figures without too much difficulty?
A couple of hon. Members—I think that my hon. Friend the Member for Hemsworth was one of them—raised the issue of five-day contracts. Perhaps I can point him to the relevant provision, which from memory is, I think, regulation 5, and specifically to new paragraph (5) that it inserts into regulation 21 in the 2003 regulations: that inhibits the artificial breaking-down of a longer contract into periods of five days. That would prevent the kind of occurrences that my hon. Friend was worried about. I stress that the five-day issue arises when someone has already been informed of the terms and conditions of their employment. It is a matter of the repetition of information, over and again, in relation to contracts that last only a few days.
My hon. Friend also raised the question of accommodation, and the issue of an opt-in rather than an opt-out. That is important, and perhaps clarification is needed. No agency worker can be forced to take any service. The opt-out happens only after someone has already agreed to take up accommodation as part of the contract. It cannot be forced on them in the first place.
Jon Trickett: If an employer says to someone who is hungry in Poland, “You can come to the UK and have a job, but you have to take my accommodation,” strictly speaking, the vulnerable worker can refuse to have the job offer tied to the accommodation, but de facto it is difficult to imagine such a person declining that offer.
Mr. McFadden: My hon. Friend is right; strictly speaking, that can happen. I should not say that it happens often, but it is sometimes a legitimate matching. There may be good reason for it. For instance, in agricultural work, an offer of accommodation can be of help to the agency worker. We should not put ourselves into the position of thinking that the provision of accommodation with a job is always exploitative. The important thing—this is what the regulations seek to achieve—is that employees enter into such an arrangement with free will, and are not forced to accept it. The regulations give them the chance to withdraw.
My hon. Friend the Member for Hemsworth asked about periods of notice—of five days, 10 days and so on. When dealing with accommodation, we take the view that 10 working days is a reasonable period of notice; it would be fair to the agency worker and to the agency providing the accommodation. It is not an exact science, but we believe that 10 days is reasonable. The hon. Member for Solihull, too, spoke of numbers. As I said, we need more research.
The hon. Lady also raised the matter of resources, as did the hon. Member for South Holland and The Deepings. The question is how the Employment Agency Standards Inspectorate should deploy its resources. It is an important matter. I am interested in particular in the hon. Gentleman’s view, reflected to some extent by the hon. Lady, that the inspectorate should try to visit all the agencies. We have been trying to move away from that.
I do not want to be overly party political, but the Conservative party is usually the first to criticise the over-regulation of legitimate businesses, and to say that there are too many inspections of businesses that have no reason to be inspected. Since the Hampton report of 2005, we have tried to move to a regulation and inspection regime that focuses what will always be limited resources. Yes, we are in the process of doubling the number of inspectors, and earlier this year we increased resources for HMRC, which enforces the minimum wage, a subject mentioned by the hon. Member for Solihull.
We have increased resources. I have no doubt that people will argue for more but we increased them on two counts earlier this year. It is important that resources are used in the most effective way. Responding to reports of real abuse and focusing on businesses that have a track record of contravention of the law with regard to the minimum wage or other abuses is a valuable use of those resources. Indeed, I would argue that it is more valuable than working through an inspection process for every business in the country.
Mr. Prisk: I have a list of 45 complaints about up-front fees, in relation to which the Minister talks about enforcement. From the regulatory impact assessment, I understand that 342 complaints have been made in that sector. Again, may I ask the Minister how many prosecutions there have been?
Mr. McFadden: There has been one prosecution. Others may happen, but I cannot predict them. Every relevant complaint is followed up by the Employment Agency Standards Inspectorate. They are not ignored. If they have not been followed up, there is a reason—perhaps problems with proof or other reasons that mean that prosecutions cannot be followed through. Complaints are followed up; that is what the inspectorate is there to do.
The hon. Member for South Holland and The Deepings spoke of horror stories. If there are horror stories, it is important that they are reported to the relevant standards inspectorate—or, in cases involving the minimum wage, to HMRC. If the hon. Gentleman has evidence, I ask him to encourage use of the helpline and to get those subject to mistreatment to come forward. It is important that the regulations and laws passed by Parliament are properly enforced.
Mr. Hayes: As my hon. Friend said, there have been more than 340 complaints. The evidence has been presented to the House in all kinds of forms by trade unions and other organisations over a period of years. It represents the most startling evidence imaginable of exploitation. I simply refer the Minister to the Library research paper on the Gangmaster (Licensing) Bill, which paints a grim picture. The evidence is out there. There is no lack of evidence; there is a lack of effectiveness in how that evidence is acted upon.
Mr. McFadden: I am not sure that I accept that there is a lack of effectiveness in how things are enforced. To take minimum wage enforcement as an example, there are thousands of cases in which people are paid arrears every year. That does not mean that a prosecution results, but that action short of a prosecution is taken to put the problem right. That is also the case sometimes for the Employment Agency Standards Inspectorate. Prosecution occurs when action short of a prosecution is not possible to put the problem right.
Again, in terms of the general principles of inspection and regulation, I hope that the hon. Gentleman would agree that the first recourse should be to get the employer to put the problem right, and that prosecution should only come, perhaps, in the most serious cases, in which a determined effort has been made not to implement the law.
Alun Michael (Cardiff, South and Penarth) (Lab/Co-op): Will my hon. Friend remind the hon. Member for South Holland and The Deepings that the whole point of the gangmaster legislation was to create a situation that protected those who do a proper job, and to create a kind of anti-social behaviour order that would ensure that people who provide a service within the industry are able to do so effectively, rather than creating a great bureaucracy that produces little?
Mr. McFadden: My right hon. Friend is absolutely right. The purpose of any regulatory regime should be to focus efforts on those areas where there is good reason to believe that the law has been broken, and to allow the majority of good businesses to get on with their work—although I am not sure that that view is necessarily shared by Opposition Members, having listened to the debate.
I hope that I have been able to deal with most of the points raised. I believe that the regulations are a significant step forward. They are continued evidence of our determination as a Government to ensure that the laws passed by Parliament are properly enforced and that the Government respond when abuses and new instances of abuse in the labour market are reported. We want the United Kingdom to be a decent place to work. The regulations are a step towards ensuring that that is the case and I commend them to the Committee.
Question put and agreed to.
That the Committee has considered the draft Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2007.
Committee rose at three minutes to Six o’clock.

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