Small Business, Enterprise and Employment Bill

Written evidence submitted from British Chambers of Commerce (SB 16)

Background information

The British Chambers of Commerce (BCC) is an influential network of 52 Accredited Chambers across the UK. No other business organisation has the geographic spread or multi‐size, multi‐sector membership that characterises the Chamber Network. Every Chamber sits at the heart of its local business community, providing representation, services, information and guidance to member businesses and the wider local business community.

The Small Business, Enterprise and Employment Bill

The BCC supports the thrust of this Bill, which aims to reduce regulatory burdens on firms, improve businesses’ access to finance and help companies to export. The Bill also includes provisions around against employers who breach the National Minimum Wage legislation, introduces a ban on exclusivity clauses in zero hour employment contracts and measures to increase transparency around who owns and controls UK companies with a register of beneficial ownership. The Bill also introduces changes to public sector procurement and improvements to pupil destination information.

Access to finance measures

Clause 4: Provision of credit information on small and medium sized businesses

The Bill’s proposed changes encourage greater competition in banking by improving the ability of challenger banks and alternative finance providers to conduct accurate risk assessments on small and medium sized businesses. The changes:

· Require banks to share data on their small and medium sized business customers with other lenders through Credit Reference Agencies (CRAs)

· Put in place data protections for small and medium sized businesses, data on small and medium sized businesses will only be provided to CRAs where the business has signed terms and conditions allowing that data to be shared.

· Allow micro businesses to use the Financial Ombudsmen Service (FOS) in respect of disputes with designated CRAs.

BCC position: The BCC and its members welcome action to help match SMEs that have been rejected for loans with challenger banks and alternative finance providers who are looking to offer finance. However, the safeguards put in place must ensure that businesses have ultimate control over how their details are shared and have the option to exclude certain types of lenders.

Clause 6: Disclosure of VAT registration information

The Bill’s proposed changes are aimed to improve small business access to credit by sharing non-financial VAT registration data. The changes:

· Allow HMRC to make available non-financial VAT registration data for specific purposes to qualifying parties (e.g. name and contact details) for VAT-registered businesses. No financial data will be shared.

BCC position: The BCC welcome the measures introduced to improve access to credit particularly for smaller businesses. This will help companies reduce fraud and comply with anti-money laundering obligations by improving the identification of legitimate businesses.

Regulatory Reform

Clause 15: Review of regulators’ complaints and appeals procedures

Clause 18: Duty on Secretary of State to publish business impact target etc

Clause 25: Duty to review regulatory provisions in secondary legislation

Clause 27: Section 25 (2)(a): "provision for review"

The Bill includes proposals to introduce:

· A statutory framework for managing and reporting of the economic impacts of new regulation on business and voluntary or community bodies.

· A ‘Small Business Appeals Champion’ into all non-economic regulators, who must review effectiveness of complaints handling by the regulator, and publish the findings.

· Places an obligation on the Secretary of State for Business, Innovation and Skills to publish a deregulation target, relating to the economic impact of new regulation on business, covering the whole of the Parliament.

· A requirement for all new secondary legislation to be evaluated after 5 years.

BCC position: BCC welcomes sensible measure to reduce the regulatory burden on firms, and the proposals in this Bill should help to decrease the flow of unnecessary red tape on firms.

The BCC supports the implementation of a statutory framework for managing and reporting the impacts of new regulatory proposals. Independent and transparent verification of the costs and benefits to UK plc of new regulations provides business with confidence. Business wants to see long-term stability within the regulatory framework, and if implementing this statutory framework provides this, it will be welcomed by firms. The proposed statutory review provision should also help to remove any unnecessary regulations after five years.

The BCC supports deregulation targets, as long as they are meaningful and provide a genuine reduction of burdens for companies on the ground, and encourages a change the mindset of Whitehall towards one of regulation as a last resort. EU regulations are currently in scope of this target, and we would urge this to remain the case as this measure is implemented. Tax administration, which can place burdens on business, is also currently out of scope of this target.; We would urge for this to measure to be amended to include tax administration.

In some cases, it is not the regulation itself that places burdens on companies, but rather the unfair or heavy-handed implementation of this. Therefore, the BCC welcomes measures which aim to make regulatory enforcement fairer and helps to build relationships between regulators and firms. The introduction of a Small Business Appeals Champion into regulators may help in this, however the BCC understands that these ‘Champions’ are likely to be drawn from existing employees of the regulators. We would encourage the ‘Champions’ to be representative of the business community. It is important that companies feel comfortable approaching the ‘Champions’ and believe in their impartiality. Therefore, the question of when they are employed must be addressed.

National Minimum Wage and zero-hour contracts

Clause 69: 49B: Providing improved pupil destination information

BCC position: The BCC supports the Government’s focus on improving pupil destination information by tracking students through education into the labour market. This information can be an important accountability measure and help incentivise schools to support their students’ progress into sustained employment. Publication of this information in a pupil destination league table coupled with Schools Inspectorates considering pupil destination when judging school performance, would help ensure schools prepare pupils for work.

However, currently the pupil destination data period that is tracked is too short. To obtain robust information we suggest the tracking is done over a longer period of 10 years after the pupil has finished Key Stage 5, using National Insurance Numbers to track earnings.

Clause 138: Amount of financial penalty for underpayment of national minimum wage

BCC position: The BCC supports the Government’s actions against employers who breach the National Minimum Wage (NMW) legislation. Firms who breach these regulations are engaging in unfair competition with the vast majority of employers who comply with the rules. This change will help further deter employers from breaching the NMW legislation.

However where genuine mistakes are made by businesses in this regard, it is important to have safeguards allowing employers to appeal. The Government should also ensure that all that information and guidance on the NMW and penalties attached to non-compliance is effectively promoted across the business community.

Clause 139: 27A: Exclusivity terms unenforceable in zero hours contracts

Clause 139: 27B: Power to make further provision in relation to zero hours workers

BCC position: The BCC believes the UK’s flexible labour market is crucial to keeping unemployment down. Zero-hour contracts are vital for a successful jobs market, but they must also be fair and work for all parties. We feel that a ban on exclusivity clauses which bind workers to one firm is a balanced way of addressing concerns. However the government must ensure that further changes do not jeopardise business flexibility or employment opportunities.

The Bill brings forward a new mechanism which would allow the Secretary of State to make provisions to secure that zero hours workers are not bound by exclusivity arrangements. These provisions may include modifying zero-hours contracts, imposing financial penalties on employers or requiring them to pay compensation, conferring jurisdiction on employment tribunals, conferring rights on zero hours workers).

Further clarification is required regarding the proposal to allow the Secretary of State to make further provisions securing that zero hours workers are not restricted by exclusivity arrangements. It is unclear how this power would work in practice. It is important that this is not a blanket power and that safeguards exist allowing for some scrutiny of the provisions taken by the Secretary of State. Confirmation is also required that any financial penalties or compensation would not have a retrospective effect relating to the period prior to the legal amendment.

Export Finance

Clause 9: Power of the Secretary of State under section 1 of the EIGA 1991

Clause 10: EIGA 1991: further amendments

The Bill’s contains provisions which amend legislation to increase the powers available to UK Export Finance (UKEF) to support UK exports and exporters. The changes aim to:

· Enable UKEF to support UK businesses currently exporting and potential exporters involved in supply chains, through providing guarantees of general working capital facilities or by providing information or advice.

· Give UKEF more flexibility when providing support for exports, especially where exporting arrangements involve complex contracting or financing arrangements, or where exports are made via overseas subsidiaries or joint venture companies.

· Enable UKEF to support exports of intellectual property rights and other intangibles, such as licences of software or other intellectual property.

· Remove the need for the Secretary of State to consult with the Export Guarantees Advisory Council on matters relating to reinsurance.

· Simplify the administration of UKEF.

BCC position: The BCC welcomes the broadening of UKEF’s powers. The clauses here will allow it to work more flexibly with SMEs and provide support to UK exporters similar to that available to our overseas competitors. However there is a strong need to ensure that these new support mechanisms are better marketed and more accessible to SMEs. It is clear that many businesses are still unaware of these products. Export finance support must have clearer channels to businesses through their intermediaries and brokers with the additional resourcing needed to make this happen - Chambers of Commerce stand ready to act as the key route to market. The support should aim to help exporting companies of all sizes to mitigate the financial risks of exporting, and to access trade finance and export credit insurance to enable UK companies to expand into overseas markets and win export contracts that they may not otherwise be able to take on.

Beneficial Ownership

Clause 70: Register of people with significant control

The Bill will also aim to strengthen the reputation of the UK as a trusted and fair place to do business, by increasing transparency around who owns and controls UK companies with a register of beneficial ownership, strengthen rules on director disqualifications and remove unnecessary costs from insolvency law.

Outline of the measures:

· The introduction of a register of people with significant control (providing for the central registry of company beneficial ownership information).

· The prohibition of bearer shares (share that not registered to any authority, transferring the ownership of the stock involves just presenting the physical certificate).

· The introduction of measures to tackle opaque control of company directors.

BCC Position: The vast majority of firms are already transparent in the way they run their business, so plans to improve transparency in corporate governance will be welcomed. We hope that Ministers will continue to work closely with the business community to ensure the implementation of these reforms does not create an unnecessarily high administrative burden on law abiding companies, while also ensuring the UK is not the only country taking action to encourage proper corporate governance.

Public sector procurement

Clause 33: Regulations about procurement

Clause 34: Investigation of procurement functions

The Bill will contain powers to streamline public procurement to remove barriers and help small business to access finance and tender for public procurement contracts. Also, the Bill will give additional powers to the Cabinet Office’s Mystery Shopper scheme to monitor public procurement practice.

Outline of the measure:

· Government may use the delegated power to require procuring authorities to: run an efficient and timely procurement process; accept electronic invoices and make available, free of charge, information or documents necessary for any potential supplier to apply for a contract.

· Place a general duty on the Departments and other bodies in scope to co-operate with investigations.

· Place duty on Departments and bodies to respond within 30 days to an order requesting information or documents to enable investigations to proceed efficiently.

· Give the Minister for the Cabinet Office or the Secretary of State the right to publish results of the investigations.

BCC position: The BCC broadly supports these measures in the Bill, which pertains to public procurement. Chamber members, especially SMEs, continue to experience barriers to supplying the public sector: high bidding costs disproportionate to the size of contracts; inconsistency in speed of decision making; burdensome red tape and overly strict pre-qualifying criteria out of line with private sector best practice. While central government procurement has made some important strides forward in this area - for instance by abolishing PQQs for contracts under £100k and setting ambitious targets for SME participation, this has not been reflected in the wider public sector - the NHS, local government and other agencies which constitute the majority of public sector purchasing.

Section 3 should make it easier to extend the changes recently introduced to central government procurement to the wider public sector by:

· Strengthening the power of central government over the conduct of procurement in the wider public sector

· Increasing the accountability of procurement functions across the public sector by enabling Ministers to investigate performance (timeliness, efficiency etc)

We believe it would make it easier for the government to create a public-sector-wide 'procurement passport' by enforcing common standards. The detail of any further regulations may need to be taken forward in secondary legislation.

Our one concern is that centralisation of standards and practices must not be used as a stepping stone to further the centralisation of buyer demands into large, nationwide frameworks. In practice these work against SMEs by favouring companies with broad national capability. The BCC will continue to call for a more favourable system for SMEs which come together to bid as consortia - particularly through reviewing financial pre-qualifying criteria.

October 2014

Prepared 15th October 2014