Enterprise

Written evidence submitted by the Federation of Small Businesses (FSB) (ENT 49)

C OMMONS PUBLIC BILL COMMITTEE ON THE ENTERPRISE BILL CONSIDERATION OF THE ENTERPRISE BILL

The Federation of Small Businesses (FSB) welcomes the opportunity to respond to the Commons Public Bill Committee on the Enterprise Bill.

FSB is the UK’s leading business organisation. It exists to protect and promote the interests of the self-employed and all those who run their own business. FSB is non-party political, is the largest organisation representing small and medium sized businesses in the UK.

Small and medium-sized businesses make up 99.9 per cent of all businesses in the UK, and make a huge contribution to the UK economy.  They account for 47 per cent of private sector turnover and employ 60 per cent of the private sector workforce.

The FSB welcomes the introduction of the Enterprise Bill. We believe that "to make an impact, the Bill should focus on a number of ongoing challenges facing businesses and ensure economic growth is supported. Those areas include full reform of businesses rates, tackling the UK’s poor payments culture which sees too many of our members being paid beyond terms, and lightening the burden of regulation."

In our submission we raise issues around the provisions relating to: the Small Business Commissioner, the Regulators, Apprenticeships and the Non-Domestic Rating System. We also highlight small businesses concerns relating to the possible relaxation of Sunday Trading Laws.

We trust that you will find our comments helpful and that they will be taken into consideration.

Introduction

1.1 FSB is the UK’s leading business organisation. It exists to protect and promote the interests of the self-employed and all those who run their own business. FSB is non-party political, is the largest organisation representing small and medium sized businesses in the UK.

1.2 Small and medium-sized businesses make up 99.9 per cent of all businesses in the UK, and make a huge contribution to the UK economy.  They account for 47 per cent of private sector turnover and employ 60 per cent of the private sector workforce.

Part 1 - Small Business Commissioner

1.3 Late payment and breaches of contract reduce the economic and financial resilience of small businesses. BACS data confirms that late payments are costing small and medium-sized businesses £26.8 billion.

1.4 The FSB welcomes the potential contribution a Small Business Commissioner might make to halt bad practice and to effect the cultural change that is needed. However, the Commissioner’s contribution can only be assessed once their powers and resources have been clarified. We welcome current provisions in the Bill that establishes the Commissioner as a corporation sole. This will give the Commissioner a separate legal personality ensuring, for example, that they are able to enter into contracts, separate from Government.

1.5 As the services would be voluntary and any recommendations non-binding, the FSB believes the Commissioner must be a strong business figure with a high and well-respected public profile and the strength to be able to exert influence on large businesses. We would also like to see further detail as to how unnecessary costs to the complainant could be avoided as this could potentially act as a major obstacle towards businesses using the service.

1.6 An important part of the complaints process in order to drive culture change is the publication of recommendations and the naming of the ‘offending’ company while retaining the anonymity of the complainant - this must also apply in markets where suppliers are easily identifiable due to the size or specialised nature of their business. The naming of offending companies is a critical power available to the Commissioner and must be applied mandatorily if the respondent is found to be at fault.

Strengthening the provisions

1.7 The Commissioner’s remit should be broadened to specifically cover public authorities and their public sector performance as well as larger businesses.

1.8 We would also expect to see detail on how the Commissioner would engage and consult with the business community. As such we propose enhancing the consultative powers of the Commissioner by requiring the Secretary of State to set up an advisory body, which the Commissioner must consult with on the exercise of its principal functions. The Secretary of State will also be responsible for appointing persons to the advisory body and for making arrangements that the advisory body meet not less than twice a year.

1.9 The Commissioner must publish a report of the inquiry into any complaint made under the complaints scheme. The first amendment provides that such a report must be published. Further, the respondent to a complaint must be identified again in any report.

Part 2 – The Regulators

1.10 Reducing the regulatory costs of doing business will help small firms, increase investment and support a more entrepreneurial culture. We, therefore support the target to reduce the regulatory burden by £10 billion over the Parliament. However, we would like to see further clarity on how this will be achieved.

1.11 Small businesses struggle with the complexity of regulatory guidance and the often inflexible inspection regimes of the regulators. We therefore, welcome the Government’s move to include the regulators within the business impact target. Requiring regulators to publish both an annual report on their performance against the Regulators Code of Practice, and a report on the impact on economic growth, will help reveal the extent of the burdens being placed on businesses. These measures should ensure regulators think harder about how they regulate and what they can do to support small businesses who want to comply but struggle to manage regulations. Finally, these reforms should be the first steps towards a comprehensive comparable framework for regulators.  

1.12 However, a framework, such as that proposed in the Enterprise Bill will only be effective if it is comprehensive, and includes as many regulators as possible. FSB would be concerned if any regulators were excluded from the new requirements. Any proposed exemptions should be consulted upon and decisions should be made based on clear, transparent, and publicly available criteria.  

1.13 We would like clarity from the Government as to whether fees, charges and levies will be included within the annual economic growth impact report. Increasingly regulators are imposing fees and charges for providing advice and services. Small business want to comply with regulations, but often due to the complexity of the rules and the inadequacy of guidance and support, need advice on how to apply the regulations to their individual circumstances. Charging for advice, which businesses are often reluctant to pay, can actually serve to hinder compliance. In the first instance we would like to see fees, charges and levies brought within scope of the Business Impact Target (BIT). Having charges, fees and levies within the BIT should make regulators think carefully about introducing them and their levels.

Clause 18 Secondary legislation: duty to review

1.14 Finally, we are concerned by the revisions to the Small Business, Enterprise and Employment Act 2015 which reduce the imperative on Government Departments to review secondary legislation after a period. Review of the effectiveness and burdens of any regulation is just as important as introducing new regulations. Where regulation is more burdensome or not achieving the ends for which it was introduced, it is imperative such rules are reformed or repealed. We would like to see clear, transparent and public criteria against which Ministers have to justify why they have not reviewed legislation that was due for review. Such judgments should, in turn, be reviewed by the House Regulatory Reform Committee with Departments held to account by the Committee if the Committee feel that the reasons were not justified.

Part 4 - Apprenticeships

1.15 Preventing misuse of the term ‘apprenticeship’ is integral to boosting confidence of the brand amongst employers, providers and apprentices, safeguarding quality and increasing employer investment in high quality programmes. We therefore support steps by the Government to impose a fine on those who offer or provide a course of training advertised as an apprenticeship if it is not a statutory apprenticeship.

1.16 Apprenticeships should provide training that is high quality and be free from abuse. We would like to see this focus on quality maintained as the Government continues its reform of the apprenticeship system. Achieving the Government’s 3 million apprenticeship target will require over 400,000 more apprenticeship starts a year. Small businesses are integral to achieving this but they will are unlikely to invest in apprenticeships if they cannot be assured that apprenticeships deliver high quality training. The new employer-led apprenticeships standards are vital in keeping frameworks up to date, relevant and offer an attractive training route to business.

1.17 Further to this we welcome the Government’s recognition of the importance of quality provision as part of the apprenticeship levy framework. In order to guarantee quality, we believe that training providers, including lead businesses, must meet certain eligibility and quality assurance rules, including inspection and peer review. We would also note the importance of wider reforms here, including the fact that apprenticeships will now be validated by independent final assessments of competence. We are hopeful that the introduction of the independent Institute for Apprenticeships will further ensure that the quality of apprenticeships is achieved and regulated through the approval of new standards and assessment plans that are clearly understood by businesses and the wider population.

1.18 Clarity is needed over how apprenticeships will be funded for small firms following the Government’s announcement that larger firms will pay the apprenticeship levy. A reformed funding system must not disincentives small businesses from investing in apprenticeships or put up unnecessary barriers for non-levy paying firms. It must also acknowledge the financial commitment businesses employing apprenticeships already make in wages and training support.

1.19 Finally, the Digital Apprenticeship System should be equitable to both levy paying and non-levy paying firms. It must be simple, clear and user-friendly, and the implementation of the new system should be extensively communicated and designed to suit the needs of businesses of all sizes, including small firms.

Part 6 – Non Domestic Ratings System

1.20 The Government and business recognise that the current appeals system is unsustainable. The new process must improve fairness and efficiency for rate payers, not simply seek to reduce the volume of appeals by making it more onerous to challenge valuations which, via the current proposals, could result in a process in excess of 30 months in duration.

1.21 It must also grant rate payers full access to all information and evidence, inlcluding underlying rental data, relating to how their valuations have been derived at the check stage. Recently retired President of the Valuation Tribunal for England, Graham Zellick CBE QC, has been quoted as saying the following: "Unless information is given up front, the system will remain defective and unsatisfactory and unjust. I don’t know any other tax that can be levied where the taxpayer doesn’t understand in full down to the last detail the basis on which the taxman has calculated the tax due. It’s unprecedented, it’s unique and it’s wrong."

1.22 Under current arrangements, rate payers can normally access this information but are obliged to engage in a lengthy appeals procedure in order to do so. This time consuming and inefficient approach is ostensibly driven by the need for the Valuation Office Agency (VOA) to comply with the Commissioners for Revenue and Customs Act 2005 (CRCA). The length of the appeals process is a major issue for local authorities as they are exposed to half of all losses on successful appeals, and have to hold funds that could be used elsewhere to cover potential losses. This exposure will increase with the introduction of 100% rate retention in 2020.

Strengthening the provisions

1.23 We propose that the Enterprise Bill be used to amend the CRCA in such a way as to allow ratepayers access to all of the information on which their tax assessment is based, including any underlying rental data, without having to engage in a formal process to do so. This will allow businesses to take a swift decision on whether they believe that their valuation is correct, thus avoiding the information seeking appeals that clog the current system.

1.24 We believe that the system can improve outcomes for business and local government by treating large and small premises differently. A fast track challenge system with a light touch information requirement for low value premises would help small businesses resolve their concerns quickly, providing certainty for local authorities and freeing up resource to deal with more complicated valuations. We also propose that the Bill should not allow the Secretary of State to impose fees for appealing, given that other provisions in the Bill will increase the amount of time, resource and effort required to lodge a challenge. We also ask that data on numbers of individual checks, challenges and appeals, are reported on regularly, to aid assessment of the new arrangements. Equally, we have significant concerns that levying a ‘civil financial penalty’ on any firm that "knowingly, recklessly or ‘carelessly’ provides information which is false in a material particular" will act as a barrier to justice unless great care is taken with how this is implemented. While we appreciate the need to ensure that there is provision in the system for deterring and penalising those who would seek to gain competitive advantage through dishonest behaviour, we do not want to see punitive action taken in response to genuine mistakes by rate payers simply seeking to navigate an overly complex system that these proposals as set out would make more complex.

Sunday Trading

1.25 FSB members remain unconvinced of the economic case for the proposals to relax Sunday trading arrangements. Devolving the decision to local authority/Mayor level does not change that position.

1.26 Research by Oxford Economics [1] concluded that the temporary deregulation for the Olympics in 2012 resulted in a loss of sales for independent convenience stores within two miles of a large - temporarily deregulated – store, relative to those further away. Oxford Economics estimate that if these changes in Sunday trading were made permanent they would have resulted in an annual loss of £870m of sales from all types of convenience stores, and an associated loss of 8,800 jobs. Even when replacement jobs are taken into account, Oxford Economics’ analysis still anticipates a net loss of 3,270 retail jobs in England and Wales in the event of such changes becoming permanent.

1.27 We further note the findings of ComRes’ research from February last year which found that 76% of adults questioned were supportive of the current arrangements. Of those that opposed them, 46% wanted no Sunday opening at all for large shops [2] .

1.28 Although the changes announced most recently by Ministers to enable smaller deregulated ‘zones’ to be created around high streets, while keeping current arrangements in place for out-of-town supermarkets, are an acknowledgement of business concerns about the proposals, they do not sufficiently address them. There is still insufficient evidence to support the measure, and if the power is to be devolved, there must be robust assessment of the impacts and full consultation with local businesses before local relaxations are introduced.

1.29 FSB members are keen for any local decision to have local legitimacy, and as a result we are now calling on Ministers to amend the proposals:

1.30 There should be genuine engagement with local businesses affected, before any decision is made to change the Sunday trading rules.

· The local authority/Mayor should be mandated to seek the approval of local businesses, ideally via a streamlined referendum process across the directly-affected zone.

· There should be a robust local independent impact assessment of the economic impact of this measure, before the decision. There should also be a trigger for an evidence-based review after an appropriate period of time to see the impact on the local community.

1.31 To revitalise our town centres, FSB believes that Ministers should instead consider a package of measures, which could include any of the following:

· Greater provision of discretionary business rate relief

· Protecting occupied premises for small businesses (the rate of commercial to residential conversions is an ongoing concern)

· Creating a local traffic plan that encourages short-term parking near to local shops on the high street + supporting management of the high street

· Opening up local council procurement to small firms

· Driving growth and job creation through close working with the Local Enterprise Partnership

· Improving local skills programmes to ensure local population has skills that businesses need

February 2016


[1] Oxford Economics "Economic Impact of Deregulating Sunday Trading: A report for the Association of Convenience Stores" September 2015, p2

[2] ComRes Sunday Trading Study: 13th - 15th February 2015

 

Prepared 18th February 2016