What transactions might be caught under the Bill? The Bill applies to the acquisition and disposal of substantial shareholdings, as we have discussed. A substantial shareholding may mean an interest in shares such that the undertaking holding the interest can exercise a dominant influence over the employee and entity. As I said earlier, I do not know what constitutes a controlling interest. Would it be 51 per cent., or a lower figure? As my hon. Friends the Members for Ribble Valley and for Christchurch said, we do not know how a private equity company is
defined. That could be dealt with in separate regulations. It is also unclear what would come within the scope of connected purposesa phrase used in the Bill.
Mr. Chope: I have an advantage over my hon. Friend, as I have a copy of the explanatory notes, kindly provided by the promoter. Acting as his honorary Parliamentary Private Secretary, I have made a number of copies. Paragraph 4 makes clear his explanation. It mentions:
private equity organisations (companies whose shareholdings are not listed on a recognised stock exchange).
Philip Davies: I am incredibly grateful to my hon. Friend for that clarificationif, indeed, it is a clarificationof what is within the scope of the Bill. I am not entirely sure that it clears things up completely.
Philip Davies: My hon. Friend may well be right. He is certainly more expert than I am at understanding parliamentary Bills and the language therein. His definition may well be right. I should certainly be grateful if the Minister and my hon. Friend the Member for Huntingdon expressed their understanding. When the hon. Member for Nottingham, East winds up, perhaps he will clarify the point and say how he understands the position.
The Bill would make the information and consultation obligations that apply to business sales apply to equity transfers, too. Vendor and purchaser of the substantial shareholding would be required to inform and consult employee representatives about any measures that are proposed relating to the acquisition. More onerously than in the context of a business sale, the Bill requires employees to be given information on the five-year period following the acquisition concerning the structure, the economic and financial situation of the vendor, the purchaser, the employing entity, the probable development of the employers business, the probable development of production and sales, and probable trends in investment, employment, organisational changes, working and production methods, mergers, cuts, closures and redundancies.
Employers may be particularly interested in all those things, but it is difficult to know whether it would be fair to make a business provide all that information. It may not know those things itself. In my experience, the most successful businesses are those that communicate best with their employees anyway. I am not entirely sure that a successful business needs to be told to keep its staff informed of any developments; most of them already do that.
According to the Bill, training and assistance must be provided to employee representatives, so that they can deal with and respond to information provided as part of the consultation exercise. It is important to consider the penalties that may apply to businesses that
do not follow the provisions in the Bill. Failure to comply with the consultation regulations would give employees or their representatives, including trade union representatives, the right to apply to court for an order seeking compliance. The court would have the power to prevent the share sale until the consultation obligations had been satisfied. Those obligations are rather too onerous for the market. They could well act as a deterrent to those who want to invest in companies. As I have made clear, the aim in some investments is to shore up a company that is under threat, and not just to take it over. The provision could therefore undermine the rights of workers and give them less confidence; I am sure that that would be an unintended consequence.
I think that I am right in sayingthe hon. Member for Nottingham, East might be able to help me on this pointthat the Bill provides that no changes may be made to the terms and conditions of employment of employees in connection with the share acquisition, unless there is an economic, technical or organisational reason to do so.
Philip Davies: From what I read in the Bill, I also believe that any dismissal in relation to the acquisition would be automatically deemed unfair, unless it was shown to have been made for economic, technical or organisational reasons. I am not sure that I favour an approach in which any dismissal is automatically deemed unfair, unless the opposite can be demonstrated. That may well lead private equity investors, who, unlike other industries and businesses, have a range of investment opportunities around the world, to look to make their investments elsewhere.
When the hon. Member for Nottingham, East replies, perhaps he will clarify whether the Bill goes beyond the protection afforded to trade unions by TUPE in providing that any variation or recision of a recognition agreement in connection with the equity acquisition or disposal will be unenforceable unless it is for economic, technical or organisational reasons. The Bill may go beyond what he said it was able to do.
Mr. Heppell: I understand that that is the TUPE requirement. If there is anything in the Bill that goes beyond TUPE, I undertake to remove it. I have already said that I will remove the injunction requirement. Anything that anyone can identify that goes beyond the existing TUPE regulations I will remove from the Bill.
Philip Davies: I am genuinely grateful to the hon. Gentleman for that clarification. Some of the provisions might go beyond the TUPE regulations, so it is helpful to know that he would be prepared to move amendments in Committee if necessary.
My hon. Friend the Member for Ribble Valley mentioned the CBI, which opposes the Bill. Its view is that while some deals have resulted in short-term job losses, they are more than made up in the longer term by subsequent growth in businesses and employment. It does not believe that there is any logic in applying TUPE to private equity transfers because TUPE was designed to provide protection for employees where
there is a change of employer. In a private equity transfer, there is no change of employer, so continuity of employment on existing terms and conditions is already protected for workers. That is why, to return to the point made by the hon. Member for Lewisham, West, the CBI does not believe that the Bill is necessary. It believes that any extension would not add significant additional protection for the workers, but could lead to more complex and lengthy transactions, which might damage the UK economy.
My main purpose in opposing the Bill is to ensure that we do not damage UK business. The Bills promoter wishes to protect workers rights. The CBIs view is that it will not do a great deal to achieve his objectives, but it could do a great deal to damage my objectives.
Mr. Evans: As I understand it, one of the sovereign wealth funds that we have heard about today might well invest in a particular company, perhaps to the extent that it takes a controlling interest, but have no say in its running. It will have invested the money in the first place because it was content with the way in which the company was being run. Therefore, we would be introducing a new obligation on behalf of that company that might deter it from investing in the first place. I would like to know the answers to such questions before I support the Bill.
Philip Davies: My hon. Friend makes a good point. The Bills promoter might be able to clarify some of the points that he makes to try to reassure him. I am not entirely sure that I would be reassured, but my hon. Friend might be. The hon. Members for Lewisham, West and for Manchester, Central, who seems not to have had the patience to wait [Interruption.] He is here; he was hiding behind the Chair. I thought that he had gone to the Library to pick up some information, as I suggested earlier.
The main thrust of my argument is that because there is no change of employer in a private equity transfer, existing employment legislation applies, so in terms of employment rights, an employer cannot unilaterally vary a contract of employment. Changes to individual terms and conditions, such as pay, hours and holidays, can be achieved only by agreement with the employee. Legislation also protects employees from being incentivised to opt out of collective agreements by accepting more generous terms. Any existing recognition and collective agreements remain in force following a transfer of substantial shareholdings.
Where there is a works council or an employee representative committee, employees have a right to be informed and consulted about any significant changes to their business. If no such body exists, employees in businesses employing more than 50 people can, I think from the next financial year, initiate procedures to require the introduction of such a staff council or committee. That is all part of existing legislation, which would not be affected by any private equity transfer and share sale. Where more than 20 redundancies are envisaged, legislation already requires collective consultation of at least 30 days in advance, and 90 days if more than 100 people are affected. That consultation has to be meaningful and cover the reasons for the dismissal as well as the consequences. All those
provisions already exist, so even given the laudable objectives of the hon. Member for Nottingham, East, the Bill is not necessary.
The Bill would simply allow employee representatives to delay transactions, possibly indefinitely in some cases, making the UK a less attractive place to do business. Therefore, it would not have the benefits that the hon. Gentleman seeks. I suspect that its only consequence would be to make private equity firms, which I have sought to point out make such a valuable contribution to the UK economy, less likely to invest in the country and more likely to do what they are already doing, which is to invest increasing amounts overseas to the benefit of other countries, not ours. I want to arrest that decline in the proportion of private equity money invested in the UK and instead see an increase. Such investment greatly benefits the UKs economy, employment, innovation, productivity and the skills base, which results in increased taxes for improving our public services. I fear that the Bill would undermine all those efforts, and that is why I oppose it.
Andrew Miller (Ellesmere Port and Neston) (Lab): I shall be extremely brief in setting out my reasons why the hon. Member for Shipley (Philip Davies) is wrong. He set out his argument, first in a convoluted way and then in a precise way, saying that he was satisfied with the regulations. He also said several times that we have an over-regulated economy, but he should reflect on whether we should have a better regulated economy.
In my judgment, part of what my hon. Friend the Member for Nottingham, East (Mr. Heppell) is seeking to do would take us down the road of creating better regulation, because he seeks to create a harmonious approach across all types of investor and business.
There is a powerful argument for creating more harmonious sets of regulation in all sorts of areas. I shall illustrate that with one small point: this week, my Select Committee, the Regulatory Reform Committee, considered a change to a set of rules that had been in place since 1974 within health and safety provisionssomething that is absolutely fundamental to the well-being of workers and the success of our economy. Two bodies had been in place since 1974the Health and Safety Executive and the Health and Safety Commission. I challenge any Member to read back through the Robens report of 1973 and the debates that took place in the House and the other place in 1974 and give me a simple explanation of why there ever were two separate bodies. They were illogical at the
time, and they stayed illogical, and the Government have now created a integrated body, as part of their drive towards better regulation. That is the kind of approach that we ought to adopt.
On 22 February, the House supported, with an overwhelming vote, the Temporary and Agency Workers (Equal Treatment) Billthe private Members Bill that I am seeking to take through the House. That, too, like my hon. Friends Bill, is about ensuring equality in the workplace, and it would create a more level playing field. I should have thought that, on any logical basis, the business community would like greater equality in the workplace, business compared with business. Just as my hon. Friend rightly said in his examples, different workers in different circumstances are treated differently for no good reason. Exactly the same point applies to my Bill, as agency workers and permanent employees are treated differently for no good reason, except by people who deliberately want to depress labour rates and drive down employees earnings.
The only bad guys in the equation that my hon. Friend describes in his Bill are, of course, those people who are using an opportunity to take control of a business deliberately to depress employees earnings or to get rid of large swathes of them. I accept that there may be perfectly good economic reasons for that in some circumstances. If a business is failingusually, most business failures are caused by the failure of managementit is not unreasonable for the incoming investor to change the management team and even to consider, of course, having to change working practices and so on. That is a perfectly logical thing to have to consider. But there can be no moral basis on which such an investor should not have a duty of care towards those employees that he will either dismiss as redundant or retain under different terms and conditions of employment.
There is no logical basis on which different categories of investor should be required to act differently. My hon. Friend has been frank with the House in recognising the weaknesses in some aspects of the drafting, but the important thing that the House should acknowledge is that he has hit on a very important issue in respect not only of fairness and the equal treatment of different categories of employee, but of different types of business as well. It would be totally illogical if, by use of the loophole that he has identified, an incoming investor cut a swathe through terms and conditions of employment, got rid of a lot of people and created an artificial competitive position against someone with a different set of requirements. From both the employers and the employees point of view, the principle that my hon. Friend seeks to address ought to be adopted across the economy.
In the 1980s, I worked with private investors in the Merseyside economy as a director of the Merseyside Enterprise Board. We helped to support companies in the days before Margaret Thatcherthe noble Ladyabolished the metropolitan counties. Eventually the board disappearedI will not go down that track, because you will rule me out of order, Madam Deputy Speakerbut before it did so, it worked in close partnership with private investors. When helping to
develop investment in companies, we told the investors and entrepreneurs with whom we dealt that a condition of the assistance we provided with taxpayers money was equality of treatment for employees in their businesses, as measured by the statutes in force at the time.
That is not a new principle, and it has become more important, as the hon. Member for Shipley pointed out, because the scale of venture capital and equity funds has grown enormously recently, so we must deal with the problem. When my hon. Friend the Minister replies to the debate, I urge him to accept, as in other areas of the economy, that equality and the equal treatment of employees should apply, for the reasons set out by my hon. Friend the Member for Nottingham, East, and because of the overall benefit to the economy of a more level playing field. The measure is beneficial to both employees and employers.
Lorely Burt (Solihull) (LD): There has been a lot of discussion this morning, and I should like to suggest that a key word is balance: we must balance the fair treatment of workers with the need to respond to the private equity market and the contributions that it can make.
Private equity has increased a great deal, as the hon. Member for Shipley (Philip Davies) said. Figures from the TUC show that one in 12 private sector workers are employed by private equity companies. The TUC has outlined its concerns, and I have looked carefully at the points that it has made. It is worried, because private equity threatens to erode the unions ability to influence business. That is a reasonable concern, and it deserves consideration.
Lorely Burt: I am grateful for the hon. Gentlemans intervention, but I am not sure where he is coming from. I do not see why ones right to join a trade union should be any different whether one works for a private equity company, a public sector organisation or a public company.
The TUC says that disclosure requirements are less for private companies, which file accounts up to nine months after the year end, do not have to produce quarterly or interim results, and do not have to put their annual report on a websiteit has to be applied for. The Companies Act 2006 requires quoted companies to include in their business review information such as business trends, information on the companys employees and suppliers, environmental mattershugely importantand corporate social responsibility matters. The TUC points out that that is not a responsibility for private equity companies, because they are indeed private.