Examination of Witnesses (Questions 20-30)
Mr Pat McFadden and Mr Giles Smith
10 JULY 2008
Q20 Lord Kirkwood of Kirkhope: I
come from a Scots law background, which you will recognise, where
the concept of a principal and an agent was really quite different
in law. I guess we are doing more with commercial agencies than
legal agencies, and the question is: are you satisfied that there
is clarity in the "temporary workers agency" and is
there something more that can be done within the social partners
agreement in order to try and get more clarity to the definitions
as to what is actually involved here in the relationships, which
are really quite separate from a principal and agent? A principal
and agent is almost a fiduciary relationship where an agent can
commit contracts and other things on behalf of the principal,
and that is not where we are here. Is there not some more work
that the Government can do to shine a light into this corner and
get clarification where there is, I think, another confusion?
Mr McFadden: We think the definitions
are clear and that we can work with them in terms of what is in
the Directive and what is in our domestic law. If I can just explain
what they are talking about here, when we talk about agency workers,
we are talking about a three-way relationship. There is the worker,
there is the agency, which they have a relationship with, and
then there is the hiring company. Say, I am a hiring company for
the purposes of this discussion, I will say, "Look, I've
got a lot on. I need you to get me ten people who have experience
of this particular job", whatever it might be, "and
I need them for a month" or two months. The agency then provides
them and that is what this definition of "agency worker"
in the Directive is about, so it is a three-way relationship between
the temporary agency, if you like, the agency that supplies the
temporary workers, the agency worker and the hiring business.
What does it not include? It is not a normal temporary worker
where I come along and I am employed for six months in the office
of Lord Kirkwood here in the House of Lords and it is an understanding
that that is because you are writing a very interesting book and
you only want somebody for—
Q21 Lord Kirkwood of Kirkhope: You
will be working more than 65 hours a week, I can tell you that!
Mr McFadden: It is also not, and this
is a point perhaps worth registering because this came up during
the Private Member's Bill that was considered here, it is not
what we call `head-hunters'. This is not covering somebody whose
job it is to find not a member of staff for you for six months,
but someone who would come and work for you permanently, so the
relationship is one where it is a temporary placement with a third
party, a hiring company, and we have legislation, I think, from
1973 which defines these as, we call them, `employment businesses'
actually in this, which means that we are talking about the temporary
placement of workers, and that is different from head-hunters.
The Directive is very clear that it is talking about temporary
agency workers.
Q22 Lord Kirkwood of Kirkhope: That
is a very helpful answer and thank you for that because it is
on the record and people can see that. I have no doubt that you
understand precisely what the definitions are, but what about
the co-partners, the agency workers? Some of them may be from
overseas states and English may not be their first language, and
I defy you to give that explanation to a Pole, who has just arrived
here looking for work, in a sensible way. Are you confident that
the people who are maybe the applicants for some of these temporary
positions actually understand what the status is so that they
can make sure that they get the best out of what rights they have
available to them?
Mr McFadden: Well, that is an interesting
and good question: how do you, in what can be a complex deal of
employment law, inform people about their rights? We do this in
a number of ways. Let us take your example of someone who comes
perhaps from Poland to work in the UK and may get work through
an employment agency. The Government actually distributes information
on employment rights and responsibilities in Poland.
Q23 Lord Kirkwood of Kirkhope: In
Poland?
Mr McFadden: In Poland and in Lithuania
and, I think, in Portugal, I am not sure about other Member States,
precisely to avoid some of the exploitation that can take place
when people do not know their rights, and that is in the interests
not just of that person from Poland, Lithuania or wherever they
may be from, but it is also in the interests of UK workers and
reputable UK business because it is in no one's interests that
people are brought into the country and are paid below minimum
wage and other bad things can happen. Alongside that publicity
which is distributed elsewhere, we know we have to do more within
the UK on this. The minimum wage enforcement budget has been increased
by £3 million a year during the course of this CSR period,
and I have been chairing the Vulnerable Workers Enforcement Forum,
which has brought together the trade unions, the CBI, other business
interests, and the recruitment agencies themselves are represented
and the different enforcement agencies across government, because
we have got HMRC enforcing the minimum wage, we have got the Agency
Standards Inspectorate enforcing the regulations with regard to
employment agencies, we have got the Health and Safety Executive
and so on. We have brought them together in the last year in a
very co-ordinated way, but I think this is important. Look, let
us be honest, in any field of law, does an employee sit and read
the primary legislation? No, they are not going to do that. Does
the Government then have a responsibility to make sure that the
rights that Parliament has legislated for, either through our
own domestic legislation or through legislation that derives from
Europe, are properly and clearly understood and enforced? Yes,
we absolutely do that and we want to do more on that.
Chairman: That is extremely helpful. I think Lord
Kirkwood has teased out a piece of evidence which we have not
had before, which is really, I think, very useful.
Lord Lea of Crondall: Minister, it has often occurred
to me over the years that a good indicator of the effectiveness
of anything one does, whether it is through a voluntary agreement
or through the law, is the quality of the statistics because,
if the statistics are not very robust and we do not really know
what we are talking about in any statistical sense, it probably
means we will not be able to implement the thing very well. As
you may know, one or two of us have been pushing a little bit
at this statistical front and there is obviously a difference
between different categories of temporary agency worker and other
parts of the labour market. Temporary is one, agency is another,
one plus two, temporary and agency are somehow together. Would
you agree that everything is a priority, but it is rather important,
before we come to look at the problems about implementation and,
down the road, enforcement in some sense, that people are very
clear if you divide up the whole pie out of, let us say, three
million people from domestic service, which at some point in the
future may have to be dealt with so that people working for Lord
Kirkwood are aware? At the moment, for reasons which are implicit
in the nature of this labour market, if I can just finish on a
note in parenthesis about labour markets, I think there is a very
interesting question, that this illustrates that there are not
27 labour markets, but either there is one or there are a thousand
and there is a difference between the London labour and the Aberdeen
labour market, is one way of looking at it, but this can be seen
as a different labour market. It depends how you define `labour
markets', but the statistics somehow have got lost in some way.
I do not think that this is a problem that will go away and I
was wondering if you would just comment.
Chairman: Just for clarity, are you asking the Minister
how the pie is divided up between the different numbers of workers
and how we know that in order to help us to make policy?
Q24 Lord Lea of Crondall: Yes, linking
it to the specific problem that this very, very broad-brush estimate
is all we have got at the moment on temporary agency, yes.
Mr McFadden: I think it is a fair question
because we have temporary workers, to go back to Lord Kirkwood
and the person directly hired by someone to work for a few months
or whatever, and then we have the agency workers in the three-way
relationship I spoke of. I have seen the answer given to Lord
Lea by my colleague, Baroness Vadera, recently, saying that the
Labour Force Survey estimates a total of about 1½ million
in both categories, and then there are industry estimates of perhaps
a million agency workers. I think it is fair to say that we need
a good definition of this. The Government is doing a lot of work
on this. One thing I would say is that there are going to be seasonal
factors in the number of agency workers. We have talked about
migrant workers obviously, and there are certain parts of the
economy, the rural economy, when they might be boosted in certain
months of the year and so on. We will be publishing some government
estimates around this in the relatively near future which, I am
sure, will be of value to the Committee.
Q25 Chairman: There have been real
questions about the definitions and whether or not certain sectors
of industry can get enough workers within the timescales because
of definitions. Just as a supplementary, are the Government looking
at that?
Mr McFadden: Yes, sometimes we do get
representations saying that a particular area is under pressure,
but I am also clear that our Prime Minister, whilst he is deeply
committed to free trade and to the free movement of people rules
that apply across the European Union, is also very keen that we
do more to encourage some people within the UK into the labour
market rather than, maybe sometimes as a first resort, doing something
different. Maybe, if there are labour shortages in the economy,
that will happen in a thriving economy from time to time. Is migrant
labour an answer to that, in some circumstances? It is, yes, but
we should also do more to ensure that people here in the UK have
the right skills and the confidence and whatever other support
they need to get into the labour market. I think we have got a
duty to do that and I think those capable of work also have a
duty to try to use whatever opportunities may be available to
them.
Chairman: That takes us nicely into the area where
there are some concerns about the agreement and that is the SMEs.
Q26 Lord Wade of Chorlton: Minister,
you have mentioned a number of times how you were able to take
these agreements forward once there had been an agreed policy
between the TUC and the CBI, but clearly there was a large number
of companies that were not represented in that agreement, and
that has caused some concern with the Federation of Small Businesses.
They have come out very strongly with the view that in actual
fact this deal that was agreed between the TUC and the CBI is
going to turn out to be a very serious matter for the small business
sector. I just wondered how you felt about this and what are the
Government doing? Are the Government looking at how they might
respond to those comments and are they/you also concerned about
how this might affect the small business sector which is, economically
and employment-wise, a very important part of our economy?
Mr McFadden: Well, let me start that
by agreeing with the part that I can agree with, which is that
small businesses are absolutely critical to the economy. They
employ half the workforce, or perhaps more, and we have kept very
much in mind the needs of small businesses. In terms of the agreement
between the TUC and the CBI, the CBI are not here today and, if
they were, I think they would say that they do not just represent
big business and would be keen to say that. My understanding is
that, of the 240/250,000 or so associate and member companies
involved with the CBI, about 200,000 are either small- or medium-sized
enterprises. We have a lot of very good business organisations
in the UK and my job is to have a relationship with them all,
as is the Department's job and the Government's job, and we do
have a relationship with them all. I think it would be wrong to
see the CBI as big business and someone else as exclusively not
big business. I think this situation is a bit more fluid than
that. I believe that the agreement struck does have flexibilities
in it for small businesses. For example, the qualifying period
agreed is longer than the qualifying period that was in the draft
Directive put before us in December, there is the possibility
then of the two sides of industry making agreements beyond that,
which is something we have to further consult both the unions
and business about, and the Federation of Small Businesses and
other business organisations will of course be part of that as
we go forward. I have seen their comments, but we will continue
to work with them and with other business organisations if we
get the approval, to go back to Lord Eames' question, of the European
Parliament and we get this agreed in terms of precisely how this
is to be implemented in the UK.
Q27 Lord Wade of Chorlton: Does that
mean then that you will discuss these issues direct with the Federation
of Small Businesses as representative, as much as there is, of
the small business sector?
Mr McFadden: Yes, when we come to issuing
our own regulations on how these agreements are to be implemented,
the Federation of Small Businesses will of course be a full part
of that consultation.
Lord Wade of Chorlton: I agree with your point that
the CBI does indicate that it feels that it represents a very
wide range of business, but, in practice, it is highly dominated
by very large companies and, I must admit, my experience of very
large companies is that it is in their interests to make life
more difficult for the small business sector. The small business
sector is their competition, in effect, and I have always been
very much aware that there is a great tendency for big companies
to sort of try and make small companies' life a little bit more
difficult than it might otherwise need to be.
Q28 Chairman: To translate that more
into a question, on a number of occasions in a variety of inquiries
that we have undertaken here, the Federation of Small Businesses
have made it clear to us that they do not feel as represented
in Europe as they would wish, so what are you doing to encourage
them to be more engaged—again that word—in Europe?
Will there be more opportunity for them to feel linked to these
things?
Mr McFadden: Perhaps I should say with
regard to Lord Wade's comments that the record will show that
those are his opinions, not mine, in terms of the relationship
between big and small businesses. In terms of your question, there
are business organisations that operate on a European-wide level,
just as there is a European TUC that operates in that way too.
I would hope that UK business organisations of all stripes would
do what they could do to take part in those. I think it is important
that the voice of both employees and businesses is heard in Europe
when these kinds of issues are being considered.
Lord Lea of Crondall: I would just remind the Minister,
and I did a note for the Committee about this, having done a bit
of research on it, that it was a fact, now that you mention the
European level of business as opposed to the TUC/CBI question
originally, that the Federation of Small Businesses had a disagreement
with the umbrella body and walked out, as I understand it, and
I think there is no difference around the table that we hope the
FSB at some point will walk back in.
Q29 Chairman: There is clearly some
difficulty, which is what we are trying to indicate we have heard
on a number of occasions, and maybe your Department could have
a look at that. It is hardly a question.
Mr McFadden: There may be some business
politics in this which is not entirely within the gift of the
Government.
Q30 Chairman: Minister, I certainly
and, I am sure, the Committee have found that extremely useful,
particularly because we have been picking at this thing for so
long and the progress is obviously there. Is there anything else
you would wish to say to us about this? I apologise again for
not giving you the opportunity to say for the record who you are,
I am supposed to do that at the beginning, and I think I have
only forgotten this time and it shows how keen we are to know
what is going on in this particular area.
Mr McFadden: No, there is nothing I want
to add and I am very happy to have taken your questions. Of course,
it is open to the Committee, if there is something that occurs
to you later that you want clarification on, to come back to us.
Chairman: Well, I think you have actually covered
even more than we had anticipated and, for that, we are extremely
grateful, and thank you to you and to Mr Smith.
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