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7 Mar 2008 : Column 2034

Philip Davies: To help the hon. Gentleman get his train of thought back, his Bill says that it would apply to “substantial” share ownership. However, a 1 per cent. holding in BP, for example, might be considered substantial because of the sums involved, whereas a 1 per cent. holding in a small firm might be tiny, so could he say what “substantial shareholdings” means?

Mr. Heppell: It means a controlling shareholding, where someone takes control of a company. It is not too difficult to spot when that is happening, and people know about it. Again, there is a definition in my explanatory notes, but it is in lawyers’ words. I cannot pretend that I even understand it. It is the old thing—I am talking about things that I know, but which I do not have the legalistic jargon to go through. However, people know when something is happening. Let us be clear: we know what is happening when there is a takeover.

Certainly the workers know—or rather, the workers do not know, and that is the real problem. Why should workers not have a right to know what is going on when there is a takeover? The first of the three distinct things in the Bill is a requirement to consult and inform employee representatives. What is wrong with that? The Department will tell me, “Well, they have a right to consultation anyway—that’s covered by other legislation.” That is not quite accurate, however. The workers have a right to consultation when a certain percentage of them ask for it, but really, that happens after the event. TUPE gives people an automatic right for that happen. If that right is automatic under TUPE, why should it not be automatic under the takeovers that I am talking about, too?

The next thing that the Bill would do is give protection to workers’ contracts of employment and their employment rights, where they are employed in an undertaking or business immediately before control is transferred. That would include trade union recognition.

Lorely Burt (Solihull) (LD): I am a little confused, because as I understand it, all the rights to which the hon. Gentleman is referring are automatically conveyed on the employees of a company that is subject to a share takeover by virtue of existing legislation. I am struggling to understand the need for additional legislation when all those rights still apply.

Mr. Heppell: It is because the situation for workers is different when there is a transfer. When a company is taken over, we are talking about not just the contract being broken, but the transfer itself. Workers would still have rights, but they would not have the same rights as under TUPE. There are differences.

People are wrong: when somebody takes over a company, for example, TUPE does not mean that workers cannot be dismissed or made redundant. They can be made redundant. There is nothing stopping that, but that has to be shown not to be an arbitrary decision as a result of a takeover. It has to be shown—I forget exactly—that there are economic, technical or operational reasons. The same would apply under the Bill. Again, I am not talking about something draconian; I am talking about things that happen now, under TUPE. I want the same things to apply.

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Mr. Jonathan Djanogly (Huntingdon) (Con): Surely the same statutory provisions would apply in respect of any redundancy programme put in place after a share acquisition.

Mr. Heppell: I have lost the point on that.

Mr. Djanogly: The point is that the existing law provides no less protection for workers made redundant after a share sale.

Mr. Heppell: No, it does not. The reality is that Joe or Josephine on the shop floor knows that they are being taken over. Let us be right about this: when private equity companies take over a company, it is because they have a plan to change things. They might be coming in with new investment, but they will want to change how the company is run. A takeover has significant consequences for the work force. When that transfer does not take place, people do not face those consequences.

Mr. Djanogly: I am sorry, but how can the hon. Gentleman assume that there will be considerable consequences for the employees following a takeover? There might be, but there might not be.

Mr. Heppell: How can I be sure that there will be any changes under any takeover? Of course, I cannot be sure. All I can say is that I have eyes in my head and ears stuck on the side of my head, and all my experience of takeovers shows me that in every instance there are significant consequences for those who are employed in those companies. We do not have to be geniuses to recognise that.

Tony Lloyd: Except in relation to the beauty of my hon. Friend’s ears, the point is quite trivial. If there is to be no change, the new operator informing the employees of that will impose no cost on the company, so what is the problem?

Mr. Heppell: That is the argument that I started with. We cannot have it both ways. If someone says, “They’re already protected and these things are all going to happen automatically anyway, so there’ll be no difference for the employee”, there is no great problem with the legislation, so how can it be burdensome and problematic? We cannot have it both ways.

Mr. Chope: Would the legislation have applied in the case of the takeover of Northern Rock? In supplementing that question, may I tell the hon. Gentleman that I have just been into the Vote Office to inquire as to the whereabouts of the explanatory notes to which he referred in answer to my last intervention, but explanatory notes there were none.

Mr. Heppell: I apologise to the hon. Gentleman; I have not made them available. I will try to get a copy to him before the debate has finished. I have not put the explanatory notes in the Vote Office. Again, that is because these things happen with a great deal of haste and because it is not always that easy to get things published in time, but I will get a copy to him before the end of this debate.

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Mr. Chope: And Northern Rock?

Mr. Heppell: To be honest, I am no great expert on Northern Rock and I am not really sure.

Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): It was a hypothetical question.

Mr. Heppell: I do not mind hypothetical questions. What I would say is that I am sure that if the legislation applied, Her Majesty’s Government would comply in full and ensure that people were informed about the rights of the work force. I do not think that that would be a problem.

Mr. Kidney: First, the existing regulations would apply to Northern Rock, because there is a transfer of ownership from the private owner to the Government through nationalisation. On the more general question about the point of the proposals and whether the existing regulations would apply, about which two hon. Members have asked my hon. Friend in interventions, I refer him and them to Library research paper No. 23, which says:

However, it continues:

That is the point of my hon. Friend’s Bill.

Mr. Heppell: I agree completely. I think that those Members were arguing that legislation other than TUPE would apply and give people protection. I agree that there is other such legislation; it does not, however, give the same protection as TUPE does. That is the point. Why should one set of workers’ protection be inferior to that of another set of workers in a very similar situation—not exactly the same, but very similar?

Lorely Burt: I thank the hon. Gentleman for giving way; he is being patient. He is saying that the TUPE regulations are not to be altered in any way, shape or form. From briefings that I have received from the CBI, I understand that it believes that the regulations are indeed changed and that all such business—whether a share takeover or the transfer of a business to another owner—would be disadvantaged. That is one of the CBI’s core problems. For example, a potential injunction is allowed to be taken out pending a share sale, and the CBI fears that that could delay and disadvantage any acquisition or merger about to take place. Will the hon. Gentleman confirm or deny that?

Mr. Heppell: The hon. Lady has made a valid point, and it was something that I said earlier. I am not trying to blame the people who helped me to draft the Bill, but the difficulty is that it is hard to keep track of how these things are going down. My original intention and stated position was to try to ensure that people had TUPE and nothing more.

As I said earlier, that other issue was identified in discussions that I have had. Hon. Members have my undertaking, given on the Floor of the House, that a provision leading to rights beyond those given by TUPE would certainly be removed in Committee. My
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intention will be to try to apply TUPE and nothing else—I want no extra rights for people and no burdens. It is no use to me or anyone else if unnecessary burdens are put on business. I recognise that there has to be a balance; I just think that it is tipped slightly the wrong way in respect of these particular takeovers.

Mr. Evans: I accept that the hon. Gentleman does not want to do anything that will hit business in this country and that his Bill is well intentioned. Of course, the most dangerous legislation is well intended but passed without consideration of unintended consequences. What does the hon. Gentleman believe the unintended consequences of his Bill could be? We want equal rights for workers, but we operate in a global world. Do our European Union neighbours, the United States of America, Australia and Canada have legislation similar to what he is trying to pass through the House today?

Mr. Heppell: I am not aware of the legislation in every country, but I know that some countries’ legislation is somewhat stronger than mine. I would not want to go down that route. I want a light finger and a light touch in this legislation; that is why I want only TUPE to be applied. The arguments would be terrible. What about ordinary takeovers? When businesses carry out a takeover, do they say, “Oh my God—we could not manage this because of TUPE”? No, they do not, because when the rules are applied properly, people do only the things that they should be doing. The Walker guidelines for private equity companies show the things that companies should be doing. I am saying that that needs some backing in law.

Mr. Dennis Skinner (Bolsover) (Lab): When we discussed the TUPE ideas many years ago, when there was a Tory Government and there were all sorts of privatisations and so on, there is no doubt that the net result was that most workers felt that they at least had a say in what happened when a takeover took place. However, there is no doubt that now there is a gap in the market. Since the private equity people have come in, there has been danger.

Perhaps the most startling example of what I mean was one of the early ones. Private equity people moved into the Automobile Association and changed its whole dynamic. That resulted not only in a third of workers losing their jobs, but in the organisation becoming more of a franchise than it had been hitherto. That is a startling example. There is no doubt at all that a gap is growing in the market. That is why my hon. Friend is right to introduce this Bill—on a Friday; usually such Bills are discussed and Governments do not take action. But one thing is certain: the Government have to step in at some point.

Mr. Heppell: I agree with my hon. Friend. I am a realist about these things; I recognise that if my Bill gets to Committee, it will be difficult for it to come out if I have not managed to satisfy the Government and others that it is a suitable vehicle. If I were a betting man, and I am not, I would put odds on my Bill probably not surviving. However, I predict that in the next two or three years the Government will have done
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something along the lines set out by the Bill because not only employees but employers will demand it.

Mr. Evans: I am not a fan of the European Union by any stretch of the imagination—quite the opposite—but we were talking about industry last week and I recognise that the European Union may wish to try to bring something forward under which every EU country will do what we have been discussing to the same degree and strength, so that none has an unfair advantage. I prefer the flexibility, however. Has the hon. Gentleman been given any indication that the European Union is interested in legislating on this issue?

Mr. Heppell: I suspect that the European Union is often interested in legislating. A fortnight ago, we were discussing another Bill and a similar point came up. Sometimes, we need to make sure that we attach importance to the sovereignty of this country and that we make rules if there is a need for them. I would not want a rule that disadvantaged us in the international markets, but I do not think that the Bill would.

The private equity and venture capital industry itself will come to recognise this point. Last year, it made pronouncements about the need for much greater transparency in takeovers, especially for the work force. I cannot believe that the industry made such statements without recognising that people would want to see the action—to see that there was consultation with the work force during takeovers and that people were not kept in the dark about what was happening until decisions were made and it was too late for them to be involved.

Good employers always recognise that it is a good idea to consult the work force, because they might have a good idea about what to do instead. I know that people think that consultation is negotiation, but it is not—it means that employers tell people what they are going to do and give them the chance to talk back. However, the employers still make the decisions. That is what the Bill is about; it tries not to fetter the industry but to make sure that there is transparency and that the work force are informed and involved.

Tony Lloyd: My hon. Friend’s most recent exchange has raised an important point. As he says, his ambition is to do no more than give employees the right to be consulted. That is not a huge right; in fact, Conservative Governments have granted such rights in the recognition that they are right and just.

Earlier, my hon. Friend the Member for Stafford (Mr. Kidney) raised the role of sovereign wealth funds. The ambitions and motivations of such funds may be very different from those of traditional equity purchases. There might be more consensus across the House than Conservative Members believe at the moment. A minimum right to consultation for employees might be an important beginning of some form of protection against the denuding of British industry by rampaging sovereign wealth funds from abroad.

Mr. Heppell: I agree completely with my hon. Friend. [Interruption.] I have just realised that I have found a copy of the explanatory notes for my Bill; if somebody
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did not mind making a copy, I would happily pass it on to the hon. Member for Christchurch (Mr. Chope).

I started out by spelling out simply what I thought the problem was. Certain workers are not protected by TUPE regulations, but they should be. To those who ask why, I say, “Why not?” The hon. Member for Ribble Valley (Mr. Evans) mentioned unforeseen consequences. I remember having conversations with lots of people very early on. I asked them what drastic consequences there would be if the Bill went through. Almost no one I spoke to suggested any.

Let us be clear: I am a serial loyalist. I would not want to put the Government in a position in which there would be drastic consequences. I would not want to put private equity firms in such a position. I envisage no drastic consequences from the proposal. The current Bill might contain some drastic things, which I want to remove—as I have said, I will take them out. I do not expect any unforeseen drastic consequences. I can see only good coming from the proposal.

I end as I began. I am grateful to the Minister and the Department for entering into dialogue with me about the Bill. I am grateful to the BVCA and the venture capital people for entering into dialogue. At last, it is starting to be commonly accepted that there is an issue. Private equity takeovers are here to stay, and we cannot allow workers in such transfers to be in a different position from workers in non-private equity takeovers. We must have some mechanism to rectify that. It will not be the end of the matter when the Bill goes into Committee. I want to pare down the Bill to the point at which we might get consensus in the industry and among employees.

I hope that hon. Members will approve the Second Reading of the Bill and allow me to take it into Committee and take the issue forward.

10.32 am

Philip Davies (Shipley) (Con): I congratulate the hon. Member for Nottingham, East (Mr. Heppell) on bringing forward his Bill and on his success in the ballot. I have never had the opportunity to introduce a private Member’s Bill. When I have such an opportunity, I hope that I can take it up with the same humility and panache that he displayed. He was disarmingly frank in saying that he is not a world-leading authority on private equity. That admission did him a lot of credit, and I will certainly not claim to be such an authority either. Over the past few days, I have rapidly tried to learn more about the subject.

The hon. Gentleman made it clear at the start that he has no intention to introduce any unnecessary burdens on business or to do any harm to the economy, and I accept, as my hon. Friend the Member for Ribble Valley (Mr. Evans) did, that he brings forward his Bill with the best of intentions. My quibble with him relates to the outcome or potential outcome of the Bill, not to his motivations. He said that he wanted to protect the rights of workers, which is a perfectly honourable and laudable aim. But my view is that the most important right of a worker is to have work, and my chief concern about the Bill is that fewer people would be in work as a result of it than are in work currently.

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