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House of Commons

Friday 7 March 2008

The House met at half-past Nine o’clock


The First Deputy Chairman of Ways and Means took the Chair as Deputy Speaker, pursuant to the Standing Order.

Point of Order

9.33 am

Mr. John Randall (Uxbridge) (Con): On a point of order, Madam Deputy Speaker. As I was coming to the House this morning, I was listening to the “Today” programme, as is my wont, and I heard that the Secretary of State for Children, Schools and Families was announcing outside the House a very important new policy on A-levels and supplementary matters. He even thought that Mr. John Humphrys would need at least an hour to have them explained to him. When I came to the House, I looked in vain at the written statements on the Order Paper and found no such written statement on the matter.

Only yesterday, during business questions, as reported at column 1915 of the Official Report, the Leader of the House said that, if there was a change of policy, it would require a statement in the House. This is a change of policy. I wonder whether you have had any representations from either the Secretary of State or, indeed, the Leader of the House to explain why this gross discourtesy has taken place.

Madam Deputy Speaker (Sylvia Heal): I have not been advised that any Minister wishes to make such a statement to the House, but I have no doubt that Mr. Speaker will look into the matter raised by the hon. Gentleman.

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Andrew Miller (Ellesmere Port and Neston) (Lab): I beg to move, That the House do sit in private.

Question put forthwith, pursuant to Standing Order No. 163 (motions to sit in private):—

The House proceeded to a Division.

Madam Deputy Speaker: I ask the Serjeant at Arms to investigate the delay in the No Lobby.

The House having divided: Ayes 0, Noes 38.
Division No. 121]
[9.34 am


Tellers for the Ayes:

Andrew Miller and
Jim Dowd

Benton, Mr. Joe
Blunt, Mr. Crispin
Brown, rh Mr. Nicholas
Burt, Lorely
Campbell, Mr. Alan
Chope, Mr. Christopher
Davies, Philip
Djanogly, Mr. Jonathan
Duddridge, James
Ellwood, Mr. Tobias
Evans, Mr. Nigel
Field, Mr. Mark
Fitzpatrick, Jim
Gardiner, Barry
Garnier, Mr. Edward
George, rh Mr. Bruce
Goodman, Helen
Heppell, Mr. John
Herbert, Nick
Hollobone, Mr. Philip
Hughes, rh Beverley
Khan, Mr. Sadiq
Kidney, Mr. David
Kirkbride, Miss Julie
Lewis, Mr. Ivan
Mackay, rh Mr. Andrew
McCabe, Steve
McFadden, Mr. Pat
McGovern, Mr. Jim
McIsaac, Shona
Moffat, Anne
Munn, Meg
O'Brien, Mr. Mike
Osborne, Mr. George
Rammell, Bill
Randall, Mr. John
Skinner, Mr. Dennis
Yeo, Mr. Tim
Tellers for the Noes:

Tony Lloyd and
Mr. Tom Clarke
Question accordingly negatived.
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Orders of the Day

Private Equity (Transfer of Undertakings and Protection of Employment) Bill

Order for Second Reading read.

9.50 am

Mr. John Heppell (Nottingham, East) (Lab): I beg to move, That the Bill be now read a Second time.

A couple of months ago, when I first embarked on this process, I was fairly clear that I knew very little about private equity takeovers or the Transfer of Undertakings (Protection of Employment) Regulations 1981; now, however, having spent a few months going through it all, I am certain that I know very little about them. I found most of the language, and most of the drafting of the Bill, very confusing. I need notes on the explanatory notes. It is a lot more complex than I believed it would be. I therefore approached it not as any kind of expert, but in a common-sense way by looking at the problem and, without going into the legalistic jargon, trying to understand how ordinary people would see it.

This all started because I thought that I had identified an anomaly in the law, and I still think so. When a company is taken over, TUPE applies, which means not only that the workers have protection but that the business has protection. People forget this, but TUPE is not just about the protection of workers’ rights; it is also intended to ensure that there is proper competition, so it protects business as well as workers. Under a normal takeover, business and employees are allowed that protection, but when it is done through a transfer of equity—a transfer of shares that gives a controlling interest—for some reason they are not allowed the same protection. It seemed to me that there was an easy way around that—all I needed was a very simple Bill that would allow the TUPE rules to apply to people in those circumstances.

James Duddridge (Rochford and Southend, East) (Con): The hon. Gentleman’s modesty is admirable, but he is bringing to this House a Bill that asks us to change legislation. Private equity is quite a complicated beast, and it means different things to different people. Can he say from the outset which definition of private equity he is using? I do not see one in his Bill; nor do I see a common understanding of what private equity is in the marketplace.

Mr. Heppell: I do not want to get bogged down in the legal niceties of these things. Let me freely admit from the beginning that, because of the time that I had to get the Bill drafted and published, I have made mistakes. I want to explain the issue in detail first, but I will come to the hon. Gentleman’s point later on.

Initially I went to people and said, “Why can’t we do this?”, and the answer I got was fairly straightforward: “When you have a share transfer you don’t have a change of ownership, and so it’s not necessary. We don’t do TUPE in those circumstances.” One of the people who has been helping me to put the Bill together—I will not mention his name, because it might embarrass him, but for the sake of debate we will
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call him Jack Dromey—said to me: “But why not?”, and that has stayed with me ever since. Whenever people say, “We don’t do that”, my response is, “Why not?” If it is a good idea to apply the same rules to these people, why do we not do it?

When I have spoken to people about this, it has been very much a case of shifting sands, as the arguments as to “Why not?” have changed. Two reasons for not making the change were put forward: first, that it was not necessary because people were already protected under other legislation; and secondly, that it would be burdensome for business. I thought, “Those are both good reasons, but hold on a minute—you can’t have both of them, because one cancels out the other.” If the workers have these protections and all the rights that they enjoy under TUPE anyway, and there is no problem with that, how is it burdensome to ask that that be written in law and carried out? The two arguments did not balance, and I still do not accept them.

The principle that I have started to understand is that when there is a private equity takeover or a transfer of shares that gives a controlling interest, that means, by its very nature, that the workers in those undertakings will be faced with significant change in which they will not have the same protection as they would under another kind of transfer. Their terms and conditions are not subject to the same protection, and their rights to consultation are not the same. We have to move towards dealing with that.

Tony Lloyd (Manchester, Central) (Lab): My hon. Friend is making an interesting point. One of the great disadvantages of TUPE, where it applies, is the fact that there is enormous uncertainty for the work force during the period of the takeover, or the change of equity owner in the circumstances that he describes. What does he make of the report in this morning’s Financial Times that the CBI says that one of the reasons for not making this change is that it would increase uncertainty for companies? Would it not in fact give them greater certainty?

Mr. Heppell: That is true; I agree with my hon. Friend. People forget that a lot of the drive to make it clear where TUPE should apply has come not from trade unions or employees but from business—that has been evident from the time of the acquired rights directive right up until the latest negotiations in 2006. Business itself was saying, “Let us be clear as to where TUPE should apply”, because it knows that it cannot have competitive fairness if someone can undercut it by short-changing their staff on terms and conditions, salaries and so on. Doing something about this would create a situation where there is less uncertainty. I tried to make that point over and again. TUPE should not be seen as a burden; it is a benefit both to employer and employee.

Mr. Nigel Evans (Ribble Valley) (Con): My point follows on from the question asked by the hon. Member for Manchester, Central (Tony Lloyd) about the CBI. In the other place, we have one of the Ministers of all the talents, Lord Digby Jones, who used to be the top cheese in the CBI. When the hon.
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Member for Nottingham, East (Mr. Heppell) was devising his Bill, did he consult Lord Jones to find out his views about it?

Mr. Heppell: No, I did not, but I consulted other people. I have not simply sat down with trade union colleagues and devised a Bill. We have had discussions. This is a good moment to pay tribute to my hon. Friend the Minister for Employment Relations and Postal Affairs, his Department and his officials, who have been willing to listen to me and advise me about the Bill. I pay tribute to them for the chance to have that dialogue. There is a problem and, at last, people are identifying that there is a problem.

I know that there are technical difficulties in the Bill. I was trying to say before that my original intention was to give the workers in question no more rights than any others. It was not a case of giving them something special; I just wanted them to have the same as everyone else. The trade unions and others have said to me, “Why don’t you use this opportunity to strengthen TUPE and give people more rights?” My response has been, “That is not what the Bill is about.” I am trying to give existing rights, which are enjoyed by some workers, to other workers. If some workers enjoy rights that certain others do not, there is an anomaly. There is something wrong there, and there has to be a way of putting it right.

Mr. David Kidney (Stafford) (Lab): I am following my hon. Friend’s speech with interest. On the point he just made, do we not stand on the brink of a new wave of sovereign wealth funds introducing new owners to businesses and new employers into this country? Would it not be wrong if, faced with the decision of how to invest in this country, they said, “If we buy the company, we must consult and give information to the employees, who are protected from unfair dismissal, but if we buy the shares, they won’t have those protections”? Is that not his point?

Mr. Heppell: That is exactly the point. Anyone using common sense can see that that is the case. I have talked to lots of lawyers, and gone round in circuitous arguments, but to me the matter is straightforward. All companies should have the same protections, as should all workers. It is a question of fairness and of balance, and that is what I want to achieve. As I was about to explain to the hon. Member for Ribble Valley (Mr. Evans), I have not just discussed matters with the Department, but I thank the Minister for the time and effort that he has put into talking to me about the Bill.

I also thank the British Private Equity and Venture Capital Association, the BVCA. I have met people there; the meetings were confidential, so I will not divulge what was said, but some of the things that they told me were very helpful. In fact, they identified straight away one area where I had gone beyond TUPE, and was bringing in something new. I had not realised initially that there was something concerning an injunction in my Bill. I would want to take that out; I do not want any extra rights for the people in question. I want existing rights to apply to all workers—not something new, but something that already exists.

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Philip Davies (Shipley) (Con): The hon. Gentleman mentioned that he met the BVCA, and said that his discussions were confidential. Will he confirm that, even given the changes he wants to make, it is still opposed to his Bill?

Mr. Heppell: The message I got from the BVCA was that it would leave the working on the matter to the CBI. My suspicion is that it will follow the CBI’s position, which at present is to oppose my Bill. I hope to change the Bill in Committee so that it can attract a bigger consensus. I am not ruling anything out. All I want to do is find the right mechanism, or vehicle, to take further an issue that should be dealt with.

Mr. Christopher Chope (Christchurch) (Con): Surely the first point is to discuss to whom the Bill applies. The long title of the Bill refers to “private equity companies”. Normally, we know what we are talking about when legislating, because it is defined in the Bill, but the phrase “private equity companies” is not defined in this Bill. We have not even passed the first hurdle: knowing to which group of companies the legislation would apply.

Mr. Heppell: I agree with the hon. Gentleman completely. The problem is that I had to put a long title to the Bill when I started. Initially, I thought that the Bill would deal just with private equity companies, but I realised that the issue went beyond those companies. I tried to take out the title and put in something new, but as the hon. Gentleman knows, I cannot do that until I get into Committee. I wanted to change the title to the “Transfer of Equity (Protection of Employment) Bill”, but because I had set out the title already, I could not change it. There are other things that I want to change, but I cannot change any of them until I get into Committee.

I am a realist; I recognise that I need to change the Bill significantly enough in Committee to satisfy the Minister, the Department and a section of the business community. I do not think that I am going to convince everybody. Some people are against any form of regulation—I am not going to convince them. However, there are people in the industry who are involved with such takeovers who will back legislation along these lines. I say again, this Bill is not an attack on private equity. I want to make that really clear. I have had help from people in the industry, who have told me what is wrong with my Bill.

Mr. Evans: During the Division earlier, the Minister said to me, “Are you here every Friday?” I could have asked the same question of him, because he is in his usual place. Of all the discussions that the hon. Member for Nottingham, East has had with people—he said that he has spoken to civil servants in the Department—I assume that they include speaking to the Minister. Can he say whether the Government are supporting the Bill?

Mr. Heppell: I think that I had better leave that to the Minister. I am sure that I am being so persuasive that his mind is changing at this very moment. I am convinced that he will come on board.

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Paul Farrelly (Newcastle-under-Lyme) (Lab): I congratulate my hon. Friend on introducing this Bill. Generous as he has been to private equity, in stressing that his Bill is not an attack on it, does he agree that a lot of myths have grown about private equity—its glamour, and the allegation that it is a source of employment in the City? In some circles, there is even the idea of a Faustian pact that allows such companies to keep their tax advantages. The vast majority of economic studies show, however, that most mergers and takeovers fail because a lot are prompted by motives of management aggrandisement and by private equity partner greed. Does he therefore agree that mergers and takeovers that take such a short-term view, and that undermine investment and the loyalty and skills of work forces, are not helpful to British industry?

Mr. Heppell: That is what I was trying to say. I do not want to make judgments. I have examples of private equity takeovers that were bad—bad for the work force, and badly handled. People in the work force have been left in the dark with no idea what is happening until their redundancy notice dropped through the letterbox. That sort of thing should not happen. However, I could give lots of good examples, where, to be honest, if a private equity company had not taken over a business, it would have gone bust, and workers would have ended up on the dole. There is a wide range of takeovers; some are good and some are bad.

Indeed, private equity companies recognise that. Only last year, they brought in their own code of practice, setting out the things that should properly be done, such as consulting the new work force and protecting people’s terms and conditions. They have that voluntary code, but I want it to be made law. Voluntary codes are great for all of those who are prepared to stick by the rules, but they do not work for those who are not prepared to do that. I want to put some power behind the voluntary code that the industry has devised.

I do not want to put an end to private equity or private equity takeovers. That is the not the purpose of the Bill. All I want is for people to recognise that private equity takeovers exist. They are a real thing, but people act as if they do not exist—that, somehow, private equity takeovers are imaginary and the rules do not apply to them.

Mr. Chope: The hon. Gentleman cannot even tell the House what a private equity takeover is. That is the problem, is it not?

Mr. Heppell: I think that there is a definition in the explanatory notes to the Bill, so I will ensure that the hon. Gentleman has a copy. However, the definition is not of “private equity”—as I said, I wanted to change the title altogether—so I recognise what he says. It is difficult for him and others to make a judgment except about what is in the Bill. I am trying to talk about what my intentions were, rather than the impression that I might be giving the hon. Gentleman from the Bill.

I have lost my train of thought again.

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