House of Lords
Tuesday, 2 December 2014.
2.30 pm
Prayers—read by the Lord Bishop of Peterborough.
Afghanistan: Interpreters
Question
2.37 pm
To ask Her Majesty’s Government how many Afghan interpreters have applied for relocation to the United Kingdom; and by when their applications will be decided and relocation completed.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever) (Con): My Lords, first, I express my condolences for the deaths of the Afghan interpreter and the British G4S employee who were killed in Kabul last Thursday. Around 600 locally employed staff, mostly interpreters, are eligible for relocation under the ex gratia redundancy scheme. Approximately 390 have chosen the relocation option. It is not possible to give a definite timescale for the relocation process due to the variable duration of medical checks, Afghan document verification, UK screening, visa processing and placement with a local authority. Nevertheless, in the past four months we have brought back 36 LESs and 19 immediate family to the UK.
Baroness Coussins (CB): My Lords, I pay tribute to all the Afghan interpreters who have provided our Armed Forces with a vital service at great personal risk. The numbers quoted by the Minister are encouraging but the pace of the paperwork seems alarmingly slow. Can the Government not find urgent extra resources so that all eligible LECs can relocate before the last of the troops withdraw? Secondly, will the Minister comment on the plight of the large number of interpreters who do not qualify for the ex gratia scheme but who have appealed for help under the intimidation policy? Can the terms of this policy be more generous, bearing in mind that some of the interpreters could continue working as much needed linguists in the UK?
Lord Astor of Hever: My Lords, we recognise the huge debt that we owe to our Afghan employees, and we are working with the Home Office and the Afghan authorities to avoid any unreasonable delays in relocation. We take intimidation very seriously and trained police investigate claims. We provide security advice and relocation in-country—or, in extremis, back to the United Kingdom. We are aware of no staff killed or seriously injured on duty. We very much welcome the noble Baroness’s ideas on interpreter opportunities and we are working closely with the Home Office to try to take this forward.
Lord Rosser (Lab): My Lords, we, too, extend our condolences after the deaths of the Afghan interpreter and the British security guard in an incident that is a
stark reminder of the dangers that those in Afghanistan still face. How do the Government now keep track of the continuing safety or otherwise of those Afghans who were interpreters with our Armed Forces? It is surely only with this information available that a realistic assessment can be made of whether an application to move to this country under the intimidation policy should be agreed. Who in Afghanistan is now responsible for what the Minister, in responding to an Oral Question from the noble Baroness, Lady Coussins, last December, described as the,
“very thorough anti-intimidation policy which applies to all staff employed since 2001”?—[
Official Report
, 10/12/13; col. 713.]
Lord Astor of Hever: My Lords, on continuing safety, we have an enduring commitment to ensure the safety of our Afghan staff. Anyone who feels in any danger will contact our staff. On who is responsible, it is the same team in Kabul which was previously responsible for delivering our intimidation policy.
Lord Trefgarne (Con): My Lords—
Lord Ashdown of Norton-sub-Hamdon (LD): My Lords, I am grateful to the noble Lord for giving way. Does my noble friend the Minister realise that when it comes to honouring the debt that we owe to these brave men, there is widespread disquiet that the Government’s policy, particularly in relation to those on the intimidation scheme, is discreditable and even Kafkaesque? Is it not true that few if any of those on the intimidation scheme have received a visit to their home or community to assess risk because it is too risky to do so? If our current staff cannot even visit them in their own community because it is too dangerous, is it not too dangerous for them to live there?
Lord Astor of Hever: My Lords, I am very happy to discuss this issue with my noble friend outside the House, but I can assure him that we take intimidation very seriously. There is an in-theatre panel of very senior military and civilian personnel who consider every case on its merits. We have returned one locally engaged member of staff to the United Kingdom under the intimidation policy. We have relocated seven in-country, and many others have been assisted with security advice; for instance, changing the route.
Lord West of Spithead (Lab): My Lords, I am afraid that the Government have been a complete shambles on this issue. They seem to have moved forward very slowly; they have been dragged into doing things. Now I believe that they are actually beginning to do things, but we are not telling the world that we are doing them. Does the Minister not agree that it is important that we make sure that our men and women around the world are supported by locally employed personnel? They will not do that unless they can see that they are going to be looked after.
Lord Astor of Hever: My Lords, I think that we have got a good news story here. We have engaged with media outlets and briefed individuals on the progress of our two LES schemes. Our focus remains
the swift implementation of the generous offers under the ex gratia scheme and the thorough investigation of claims of and effective support for locally engaged staff who believe that their safety is threatened.
Lord Trefgarne: My Lords, what support will be provided to these people when they come to the United Kingdom?
Lord Astor of Hever: My Lords, we take care to welcome staff and their families and ease their arrival and integration into this country. Before they leave, we give staff an information pack on living in the UK and offer a question-and-answer session. On arrival, local authorities provide them with support for the first four months. They help them settle into their new neighbourhood and access the benefits and services to which they are entitled, including schools and healthcare.
Lord Reid of Cardowan (Lab): My Lords, I thank the Minister for what he has said today and for keeping informed those of us who take an interest in this by communicating from the MoD. Obviously I pay my condolences to our late Afghan colleague and the G4S employee. I suggest to the Minister that this process will not be speeded up if he leaves it to the Home Office. Has he thought of volunteering assistance from the Ministry of Defence to the hard-working people in the Home Office to expedite what everyone in this House knows is an essential prerequisite, not only as a debt of honour but, as my noble friend and colleague said, to assure British troops that they will get local support in the future?
Lord Astor of Hever: My Lords, I agree with the noble Lord that we have a debt of honour. I can assure him that we have formal fortnightly meetings with the Home Office and we are in daily telephone contact. In Afghanistan, LESs are helped with applications by a member of the MoD staff, Edmund, who was formerly my assistant private secretary. He reassures them about the progress on their cases and liaises with the relevant authorities in the UK and Afghanistan to ensure that there are no unreasonable delays.
Kuwait: Bidoon
Question
2.45 pm
To ask Her Majesty’s Government what representations they have made to the Government of Kuwait about granting citizenship to the stateless Bidoon who are resident in that country.
The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con): My Lords, the British embassy in Kuwait is in regular contact with the Kuwaiti Government to lobby on this important issue. The UK recognises that the situation of the Bidoon in Kuwait causes real human rights problems. We encourage the Kuwaiti Government to implement
swiftly their plan to naturalise those individuals eligible for Kuwaiti nationality and regularise the situation for the remainder.
Lord Avebury (LD): My Lords, I know that my noble friend is well aware of the fact that Kuwaiti Bidoon children are born stateless and go through the whole of their lives without access to education, health and public services of all kinds. Over the many years that the Government have been making representations on the subject, their representations have fallen on deaf ears. Will my noble friend, bearing in mind the close relationship between the royal families of our two countries and the recent world public appeal of the UNHCR to reduce statelessness, consider making a high-level appeal to the emir himself to grant citizenship to those 120,000 stateless people, and procure that the EU High Representative for Foreign Affairs follows our example?
Baroness Anelay of St Johns: My Lords, I would not seek to invite the Royal Family to take particular actions, but I am sure that everything that the noble Lord says in this Chamber has due regard paid to it in these matters. He is right to refer to the UNHCR. The UK is a signatory to the UN Convention on the Reduction of Statelessness, but Kuwait is not. We encourage all countries to sign the convention.
I should remind my noble friend, and therefore the House, that the 105,000 estimated Bidoon who seek nationality are not all in the same category. Of those, about 34,000 were in Kuwait before independence in 1961 but did not register for citizenship. The remaining number have come to Kuwait after that date from other countries. Some of them went there to work; some were illegal immigrants. Therefore, their position is very different from those who, with their descendants, seek full citizenship.
Lord Hylton (CB): Can the Minister give us some idea of what she described as the remainder, those who will not qualify for naturalisation? Their plight is surely the most serious.
Baroness Anelay of St Johns: My Lords, the estimate is that there are 105,000 Bidoon people—or people who claim to be Bidoon, as I should more accurately reflect the position—of whom 34,000 can be identified as being either those who were in Kuwait prior to June 1961 or descendants of those families, so there is some evidential link. Therefore, a substantial number of people would like to obtain citizenship. The Kuwaiti Government have created a system whereby the position is being reviewed for all those people, and those who qualify for full citizenship will do so. The remainder may be considered to have a regularised position, which means that they will be linked to the countries from which they came, if they have an evidential link, and could have a residential status in Kuwait, just not full citizenship.
Baroness Falkner of Margravine (LD): My Lords, my noble friend will be aware that the Kuwaiti Government have offered to the 105,000 stateless Bidoons that they might emigrate to the Comoro Islands. They have particularly said that those who are found to have
broken the law will be relocated compulsorily to the Comoro Islands, which sounds rather as if the Comoros are being treated as a penal colony. Have the Government had any conversations with the Comoros Government as to what their view is of Kuwait’s intention? Moreover, for the others that she identified as having evidential links to other GCC countries, what discussions are there with the GCC countries to facilitate their removal back to those countries, if there are those links?
Baroness Anelay of St Johns: My Lords, the situation in regards to the Comoro Islands is that there have been reports in the media that a senior official in the Kuwaiti Ministry of Interior recently stated that the Kuwaiti Government would start helping the Bidoon to register for what was described as economic citizenship of the Comoro Islands. That is a media report and we do not, as a Government, have further detail of any formal proposals. I am aware that the Comoros Government have previously provided passports to stateless residents from elsewhere in the UAE. However, with regard to those persons in Kuwait who claim to be Bidoon but who are not those who can claim full citizenship and go through that process, it is for that remainder to negotiate with Kuwait how Kuwait determines their link to other countries. This Government do not get involved in that situation.
The Earl of Sandwich (CB): My Lords, is it not the case that the Kuwaiti Government made a positive move in 2011 towards bringing the health and education benefits of Bidoon people on a level with those of Kuwaiti citizens? Could the Government not encourage that move, because the Kuwaiti Government are not following through with it?
Baroness Anelay of St Johns: My Lords, in fact there were two steps taken, very appropriately, by the Kuwaiti Government. The first was to set up a mechanism by which adjudication can be made as to which category those claiming citizenship may fall into. That process is going ahead—it was established in 2010 and has a five-year life to run—and we, as others, are clearly getting impatient and making representations. With regard to education, we have had reports from NGOs and individuals that access to education has been made difficult, but the Kuwaiti Government say that that is not the case.
Wales: Fracking
Question
2.52 pm
To ask Her Majesty’s Government what representations they have received from the Welsh Government concerning the control and management of fracking for gas in Wales.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con): My Lords, the Government have been in regular contact with the Welsh Government on the subject of shale gas and have had a number of official representations. The
UK Government welcome the Welsh Affairs Committee’s report,
Energy Generation in Wales: Shale Gas
, which was received in June. Both Governments engaged throughout the process of that committee by submitting oral and written evidence. We welcome the conclusion from the committee that it is vital that the UK identifies new sources of gas to safeguard the UK’s security of supply. The UK Government are clear that developing shale gas and oil will not come at the cost of public health or the environment.
Lord Wigley (PC): My Lords, in view of the recommendations of the Smith commission report that responsibility for the licensing of onshore gas development in Scotland should be transferred to the Scottish Parliament, and in view of the commitment given by the Prime Minister on 19 September that Wales would not miss out with regards to any such development in Scotland, can the Minister give an assurance that consideration will now be given to transferring to the National Assembly for Wales and to the Welsh Government responsibility for fracking in Wales?
Baroness Verma: My Lords, as I made quite clear in my opening remarks in reply to the noble Lord’s Question, the Government are in close communication with the Welsh Government on these issues.
Lord Anderson of Swansea (Lab): My Lords, all the parties in Wales have come to an agreement that we will move to the reserved powers model in Wales. What relevance will that have for fracking? Given the trouble that the Government have had with the Supreme Court on a number of cases, including the recent agricultural one, will she give an assurance that the Government will act in the spirit of that and avoid the problems that they have had with the Supreme Court in the interim?
Baroness Verma: My Lords, I shall not comment on specific cases, but we have been very clear that the issue around hydraulic fracturing must take into account a number of issues—one, of course, is community engagement. As I said in my opening remarks, the Government are very closely involved in discussions with the Welsh Government on these matters.
Lord Teverson (LD): My Lords, does my noble friend agree that the United Kingdom as a whole has an exemplary record in regard to hydrocarbons and environmental management both offshore and onshore? Does she also agree that when it comes to issues such as wastewater and particularly the integrity of wells, not just during exploration and production but afterwards when those wells are left, improved and clearer environmental regulations need to be enforced strongly through inspection?
Baroness Verma: My noble friend raises some very important points, and of course we have taken very seriously the issues around wastewater. As my noble friend rightly points out, after exploration has taken place, any wastewater will be stored in closed metal tanks before being treated in accordance with strict environmental regulation, which is used extensively
across many industrial processes. During the drilling process, the Health and Safety Executive will scrutinise well design and the drilling companies themselves must appoint independent well examiners so that well testing may be routinely be checked.
Lord Elystan-Morgan (CB): My Lords, on a basic constitutional issue, is the granting of drilling licences or eventual planning permission already devolved to the Welsh Government? If that is not so then, in line with the remarks of my noble friend Lord Wigley, it should be done immediately. Is it not the case that on 19 September the Prime Minister put it rather more elegantly than my noble friend when he said that the Welsh people must be at the very heart of devolution?
Baroness Verma: My Lords, the noble Lord raises some important points. Noise and traffic are covered in existing guidance in Minerals Planning Policy Wales. There is already quite a lot of engagement at local level. As I said in opening, we are working closely with the Welsh Assembly on these matters.
Lord Howarth of Newport (Lab): My Lords, in the new spirit of promiscuous devolution of tax-raising powers, will the Welsh Government have complete freedom to levy what taxes they will on fracking in Wales, as well as to keep the proceeds and spend them as they will?
Baroness Verma: My Lords, businesses engaging in fracking will be working very closely with communities and are putting forward very attractive community benefits packages. As for tax-raising powers, I think that that is slightly above my pay grade.
Viscount Ridley (Con): My Lords, does my noble friend agree that in all this discussion of the drawbacks of fracking we should also draw the attention of the devolved Administration and of others to the enormous benefits of affordable energy as provided by shale gas in various other parts of the world?
Baroness Verma: My noble friend is absolutely right. Of course, we will not know what the potential is until we do further exploration. I imagine that all those who want to see greater economic growth and job growth will welcome any matters that allow that to happen.
Lord Berkeley (Lab):My Lords, in between the attractive packages that these applicants may offer the community, can the Minister assure the House that whoever issues the licences—in fact, we do not yet know—will have to do a full and comprehensive environmental impact assessment first, monitor methane in groundwater and keep the monitoring going for at least 12 months after production has started?
Baroness Verma: My Lords, I think that many of these issues were raised during consideration of the Infrastructure Bill, and many of the commitments that the noble Lord was asking for were agreed to. I think that he should be reassured that monitoring and
reporting of the processes will be there and available, because the companies know that to generate confidence they have to be open and transparent.
Baroness Worthington (Lab): My Lords, will the Minister please acknowledge that during the debate on the Infrastructure Bill we put forward a comprehensive plan of measures to improve the environmental regulation. We do not wish to stop fracking but we want to see that it is done, wherever it is done, in an environmentally safe way. The Government have put forward regulations but not a single one relates to changes in the environmental regulatory regime. Can she explain why that is?
Baroness Verma: My Lords, this country has a proud reputation of being one of the most robust regulators in the world.
Lord Greaves (LD): My Lords, there are currently two planning applications for fracking with Lancashire County Council. Can the Minister tell us whether the Government have made any representations to Lancashire County Council on those applications?
Baroness Verma: My Lords, I shall write to the noble Lord.
EU: Research Budget
Question
3 pm
To ask Her Majesty’s Government, in the light of the creation of the European Commission’s New Deal, what steps they will take to protect the European Union research budget.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con): My Lords, European Commission President Juncker made a statement about the investment plan last week. We are seeking to clarify details of the proposal, including any implications for the EU research budget, which is so important to the United Kingdom.
Baroness O’Cathain (Con): The new deal will provide €315 billion in an attempt to improve the economy of some nation states that are still in economic slump. It is reported that the current €81 billion research and innovation budget is going to be, as the Daily Telegraph says, “gutted” and included within the new deal. I ask Her Majesty’s Government what will happen to the projects that have already been started, plans that are already made and teams that have already been drawn up to use part of the €81 billion for the research and innovation budget. The UK benefits hugely from that money. I just wonder what will happen to the academic staff and the scientists if that is completely gone.
Baroness Neville-Rolfe: My Lords, my noble friend is right. Horizon 2020 has been indentified as a possible source of €2.7 billion financing for the investment plan. Further detail is required from the Commission. However, it is proposing that the plan will make existing funding for research go further through leveraging
private sector financing, which could deliver better value for money. However, of course the noble Baroness is right to express concern. We will be keeping an eye on the detail and the existing research teams to which she refers.
Lord Soley (Lab): My Lords, I really do not understand the Government’s approach to this. There ought to be support for the process. There ought to be recognition that if we are to have growth in the UK, we also need growth in Europe. Therefore, we should be taking a lead in conjunction with the European Union on this. We cannot and will not sustain high levels of growth in the UK unless we also get it in Europe.
Baroness Neville-Rolfe: My Lords, the Government agree that it is important to have an investment plan of this kind. There is much detail, for example, in the priorities that it sets out, which we would support and which link well to our own national infrastructure plan announced by the Chief Secretary today.
Lord May of Oxford (CB): My Lords, is the Minister aware that, as a preamble to the European Commission’s new deal, it got rid of its excellent chief scientific adviser? She had previously been—and did a very good job as—the chief scientific adviser for Scotland. The Commission did not replace her; it just got rid of her. This action seems to many of us to raise significant worries. In particular, can we really trust the Commission’s new deal to protect the EU science research budget, upon which so much industrial innovation depends?
Baroness Neville-Rolfe: My Lords, I pay tribute to the work of Professor Anne Glover, who has been such a force for good in Brussels. I support what the noble Lord has said about the importance of R&D. The Science and Technology Committee in another place has expressed a similar view directly to Brussels. I very much hope that a way can be found in future to ensure that robust scientific advice is at the heart of European policy-making.
Baroness Ludford (LD): My Lords, will the Minister confirm that any EU budget money would be used as loan guarantees, not as cash upfront? It is very important to safeguard the research budget. Besides that, will she confirm that this plan, while welcome, has been compared to the loaves and fishes; that an even more important boost to private investment in Europe would be through the completion of the single market, structural reforms and good regulation; and that, in that effort, the UK can take a lead only by being a positive and engaged member of the European Union?
Baroness Neville-Rolfe: My Lords, my noble friend is right to say that this is done mainly through supporting loans. I completely agree with her on the wider point; it is part of our objective that in discussing this plan we should also promote the single market, better regulation, competitiveness and her wider points that are incredibly important to our recovery in Europe, which I am as keen to see as she is. Indeed, I am off to the Competitiveness Council on Thursday to support EU work in this important area.
Lord Turnberg (Lab): My Lords, I reinforce the words of the noble Lord, Lord May, about the chief scientist and the loss of that post. Is any effort being made by the Government to find a replacement?
Baroness Neville-Rolfe: My Lords, I have explained that we are concerned. We are in discussions in Europe to see what the right way forward is to find strong, robust scientific advice at the heart of European policy-making.
Lord Deben (Con): Is my noble friend aware that we hear a great deal from the Government about the ways in which the European Union could improve itself but we have not heard a great deal from them about getting this right? I hope she will ensure that the Government are seen as being very pro the European Union’s work in science.
Baroness Neville-Rolfe: I can agree with my noble friend that the Government are indeed very pro the European Union’s work in science. It is an area where we do well; the competitive processes that have been set up under the various R&D frameworks, including Horizon 2020, are an approach to funding out of which we do well. We have a good share of research for our brilliant scientists.
Lord Allen of Kensington (Lab): My Lords, the success of UK business is dependent on R&D, as I am sure the Minister will agree, but when do the UK Government intend to set the R&D intensity target for 2020? Is this likely to be supportive of the investment of 3% of GDP, in line with the European Commission, which is likely to be discussed this week?
Baroness Neville-Rolfe: My Lords, I will write to the noble Lord as I do not wish to mislead the House on the R&D intensity target. I can say that we are extremely engaged in ensuring that the R&D framework helps the UK and UK scientists, and that we have both value for money and beacons of excellence. That is our approach.
Syrian Refugees: Food Aid
Private Notice Question
3.08 pm
To ask Her Majesty’s Government what steps they are taking to relieve the suffering of Syrian refugees and the pressure on their host countries, in the light of the suspension of the United Nations food voucher programme for want of funding.
Lord Beecham (Lab): My Lords, I beg leave to ask a Question of which I have given private notice.
The Parliamentary Under-Secretary of State, Department for International Development (Baroness Northover) (LD): My Lords, the UK has committed more than £700 million in response to this catastrophe, of which more than £150 million has gone to the World Food Programme, funding food for refugees in Jordan, Lebanon, Turkey and Iraq and those in need inside Syria. We are
in close contact with WFP, our other partners on the ground and other donors to assess what more should be done. The rest of the world needs to play its part both in terms of pledging money but also making good on its promises.
Lord Beecham: My Lords, I am sure we are all grateful to the Government for the resources that they have put in. However, 1.7 million refugees from the dreadful events in Syria are now threatened with starvation as a result of lack of funding for the World Food Programme’s support. In addition to the terrible hardship those innocent people face, it is surely unreasonable to expect Jordan, Lebanon and Turkey to assume total responsibility for them when they are already under immense pressure. Will Her Majesty’s Government press other nations in the region, notably the wealthy Gulf states, including Qatar, which is, after all, spending a fortune on preparing for the 2018 World Cup, to do much more to assist? Would it not also be in their own interests to do so rather than allowing ISIS and other extremists to exploit a possible tragedy for their own ends?
Baroness Northover: My Lords, the noble Lord is quite right about the fragility of the countries around Syria—not least, of course, Iraq and what is happening there. Just to reassure him slightly, the World Food Programme has fully suspended only in Lebanon, although that is enough of a challenge. As regards the other countries, in Turkey, Iraq and Jordan at the moment it is proposed that vouchers should be reduced, but the full suspension is happening only in Lebanon. The noble Lord is quite right that we need to engage internationally and I can assure him that we have been extremely active in that regard, not least in the Gulf. He will know that the United Kingdom helped to bring forward $1 billion at the various international gatherings that took place last year and this year brought forward $3.3 billion. We now need to make sure that the pledges that were made are delivered.
Lord Cormack (Con): My Lords, the Government do not recognise the Government of Syria—that was perhaps premature. What discussions are we having with the Government of Syria to try to expedite delivery of relief?
Baroness Northover: We have to work with the Government of Syria, as my noble friend recognises, to get aid into Syria. There have been all sorts of access problems, which we are constantly working to resolve. He will know how challenging that is because of the variety of different groups in different places, which means that you cannot, for example, have safe corridors. However, that is an ongoing problem on which the United Nations is leading and working extremely hard.
Baroness Lister of Burtersett (Lab): My Lords, last week a group of major charities wrote an open letter to the Prime Minister in the Independent. They welcomed the aid that the British Government are giving to Syria but said that aid is no substitute for accepting a reasonable number of refugees into this country. As I
understand it, only 50 to 100 refugees have been resettled through the resettlement programme, which is far fewer than originally envisaged. At the pledging conference in Geneva, will the Government pledge to increase that number in response to that letter?
Baroness Northover: Clearly, the situation with refugees right across the region is extremely challenging. However, the United Kingdom’s emphasis is to try to make sure that the situation in Syria and around is alleviated. We are putting a huge amount of support, as the noble Baroness has recognised—I thank her for that—into those countries surrounding Syria. What is needed is to try to bring this incredibly challenging crisis to an end so that people are safe within their own country. We do not underestimate the challenge of that.
Baroness Falkner of Margravine (LD): My Lords, does my noble friend agree that the only comprehensive and long-lasting resolution to this problem of refugees is to bring them back to Syria where they can live their lives in the communities they were in? What discussions have the Government had with the UN special envoy Staffan de Mistura about his attempt at a new plan to bring about those ceasefires?
Baroness Northover: I will need to write to my noble friend with the details of that.
Lord Collins of Highbury (Lab): My Lords, the one thing that is clear is that this crisis will not come to an end in a short period. Does the Minister therefore accept that longer-term funding for host government authorities is necessary to ensure that their national infrastructures do not collapse under the weight of the refugees?
Baroness Northover: The noble Lord is right that a huge amount of support will need to go to these countries. That is what the United Kingdom is in fact doing, both as regards support within Syria itself but also for those countries around, some of which, as he well knows, were under a lot of pressure before this crisis occurred and are under further pressure. We have to ensure that the situation that developed in Iraq does not develop elsewhere.
Lord Avebury (LD): My Lords, perhaps I may return to the question of the UK’s undertaking to accept a small number of refugees from the region, on which I received a Written Answer this morning. Can the Government not review the commitment to accept 500 refugees over the next five years? Is this not a very small commitment, bearing in mind the vastness of the problem?
Baroness Northover: I will certainly refer that to my colleagues.
Lord Judd (Lab): It is reassuring to hear how seriously the Government are looking at the needs of surrounding countries and not only of the refugees themselves—that is a huge challenge—but does the noble Baroness not agree that this is an acute political issue as well? In Jordan, the number of refugees now is very much
larger than the Jordanian population itself. The political implications of this in terms of future stability cannot be taken too seriously.
Baroness Northover: The noble Lord is absolutely right.
Lord Foulkes of Cumnock (Lab): My Lords, the noble Baroness has not answered adequately the question raised by my noble friend Lady Lister and the noble Lord, Lord Avebury. She has dealt with the question of humanitarian assistance and with the political situation in Syria, which, as my noble friend just said, will last for some time, but she has not dealt with the question of those seeking asylum. As my noble friend Lady Lister said, we have been asked to take substantially more refugees, but we are very reluctant to take them and we are taking far fewer than other European countries. The noble Baroness is answering on behalf of the Government. Will she go back to the Home Office and her other colleagues and say that this House wants more sympathetic consideration for those people from Syria seeking asylum?
Baroness Northover: As the noble Lord will know, asylum claims are judged across the board fairly and squarely. As I mentioned in my earlier answer to the noble Baroness, Lady Lister, the United Kingdom is contributing disproportionately in supporting those in the region—way above many of our colleagues in Europe and internationally. I said in my reply to my noble friend Lord Avebury that I would take the comments back to my colleagues.
The Earl of Sandwich (CB): Following the question raised by the noble Baroness, Lady Lister, is the Minister aware—I am sure she is—that there is an existing commitment to the United Nations High Commissioner for Refugees resettlement quota, which I understand is 500 people in the most vulnerable categories?
Baroness Northover: Yes, indeed, and we have prioritised women and girls at risk of violence.
Baroness Hussein-Ece (LD): My Lords, my noble friend has explained the situation in terms of supporting the aid programme. However, I have just come back from a conference in Istanbul over the weekend and there was great resentment there about the number of refugees that they are looking after—some 1.5 million at a cost of £5 billion—and that is being compared to the contribution that some other European countries have made. Germany has taken 10,000 refugees and Sweden has taken more, while we have taken only a very few—hundreds. With the Syrian situation deteriorating, it is not getting any better soon. People are looking to some of the richer European countries such as ours to do a little more. I ask my noble friend whether there is any consideration about stepping up and taking more responsibility.
Baroness Northover: Again, I remind my noble friend of the huge financial commitment that the United Kingdom Government are making and that we are supporting all the surrounding countries, including Turkey. We have supplied mattresses and other non-food
items and shelters for their distribution, as well as food aid within Turkey. I remind her of the huge contribution that the UK is making.
Misuse of Drugs Act 1971 (Amendment) (No. 2) Order 2014
Motion to Approve
3.19 pm
That the draft order laid before the House on 7 November be approved.
Relevant document:13th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 27 November
Electricity and Gas (Energy Companies Obligation) (Amendment) (No. 2) Order 2014
Electricity and Gas (Energy Company Obligation) Order 2014
Fuel Poverty (England) Regulations 2014
Motions to Approve
3.19 pm
That the draft orders and regulations laid before the House on 22 July, 22 October and 24 October be approved.
Relevant documents: 8th, 10th and 11th Reports from the Joint Committee on Statutory Instruments. 9th and 12th Reports from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 27 November
Nursing and Midwifery (Amendment) Order 2014
Motion to Approve
3.20 pm
That the draft order laid before the House on 13 October be approved.
Relevant document: 9th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 27 November
Small Business, Enterprise and Employment Bill
Small Business, Enterprise and Employment Bill
Second Reading
3.20 pm
Moved by Baroness Neville-Rolfe
That the Bill be read a second time.
Lord Foulkes of Cumnock (Lab): Before we begin the main business of the day, anyone wishing to participate in my QSD on Thursday about the ridiculous practices and procedures in this House will have found a great deal of evidence in our proceedings so far.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con): My Lords, I start by saying that I am delighted to see my noble friend Lady Harding of Winscombe and am much looking forward to her maiden speech.
Over 200 years ago, Napoleon said that the British were a nation of shopkeepers. He was nearly right. If he had expanded his vision slightly and said that Britain was a land of small businesses he would have been spot on. Small businesses have always been the lifeblood of our economy—and recently there has been some good news. At the start of 2014, there were a record 5.2 million small businesses in the UK, 7% more than at the start of 2013, representing the largest annual increase in the business population since the business population estimates began in 2000.
The coalition Government have led the way in their support for small business. Among the measures taken are the cut in corporation tax from 28% to 20% by 2015, the doubling of business rate relief for small firms and the doubling of the annual investment allowance. But we recognise that it is not sufficient just to offer help. People also need to be able to discover easily what help is available. We have therefore streamlined the support though the GREAT business website, giving a single point of access for advice. Similarly, we will bring together schemes for small firms into a single service, so they can access a wide range of support in one place, tailored to their needs.
The Bill before the House builds on the Government’s commitment and is designed to make the UK the best place in the world to start and grow a business. I will briefly tackle the content of this long Bill using five broad themes: making life easier for small business; improving the climate for business; improving company transparency to deliver on our 2013 G7 commitments; encouraging better employment practices; and—to pubs—helping beer drinkers and the publicans who serve them.
On my first theme, helping small businesses, one of the most daunting things for a small business is to start trading as a company. The Government propose to make the whole process easier by streamlining the company registration process, and the Bill requires this to be in place by May 2017. Especially since the economic downturn, another key challenge for businesses starting up or trying to grow is securing the finance
that they need. The Bill promotes greater competition in the banking sector by opening up the market to alternative finance providers. Some 71% of small businesses approach only one finance provider when seeking finance. The Bill will require the big banks to share information on small businesses that they reject for finance with online platforms, when the small business would like them to do so. This will help them gain access to alternative finance providers.
Nine out of 10 small businesses still use paper cheques. The Bill will provide for electronic imaging via smartphones and other mobile devices, allowing cheques to be deposited remotely, thereby speeding up the process in the banks, in addition to—not, of course, separate from—more traditional methods. This will dramatically reduce clearing times, from up to six days at present to less than two, increasing convenience and providing net benefits of nearly £94 million a year.
Cash flow is particularly crucial for small businesses and is often the difference between success and failure. It is not right that small and medium-sized businesses are, according to figures published by the Experian payment performance index in July, owed nearly £40 billion in late payments. This affects 60% of UK small businesses, with the average small business waiting for over £38,000 in overdue payments. The Bill introduces measures that will give small businesses more information on what payment practices to expect from their customers. These changes will incentivise larger companies to improve their payment policies and practices. Business representative bodies, including the Federation of Small Businesses and the Confederation of British Industry, have welcomed this work.
We should not forget the public procurement market. It is worth £230 billion and is important to small business. Alongside other measures being brought forward through secondary legislation in the new year that will transpose the new European Union procurement directive into UK law, the Bill will further help small businesses to access public procurement opportunities. The measures will extend across the public sector, including local authorities and the NHS, and make an important change for small business.
My second theme is the business climate. This Government’s regulatory reform agenda has been at the heart of making the UK one of the best places in the world to do business. The World Bank’s Doing Business 2015 report ranked us eighth out of 189 economies—an improvement in our performance of two places on the previous year. Within the European Union we are behind only Denmark. We have reduced the annual cost of domestic regulation by over £1.5 billion since January 2011. For new regulations, our “one in, two out” policy seems at last to have led to something of a culture change in Whitehall. I have known and worked in Whitehall for nearly 40 years, in one form or another. The Bill will strengthen small businesses’ confidence in government by introducing a business impact target to be set at the beginning of each Parliament, which the Government will report transparently on. It will be used for the independent scrutiny of economic impact assessments related to this target.
Where regulation is essential, we know the regulators implementing it do not always enforce it properly; 63% of businesses have, at some point, disagreed with a regulator’s decision, but have never appealed. The Bill provides for small business appeals champions to be established in the non-economic regulators—ranging from the Environment Agency and the Health and Safety Executive to bodies such as the DVLA—to improve the handling of complaints and appeals and, most importantly, to ensure that the process works, particularly for small business. For the financial services sector, the existing independent Complaints Commissioner will be required to report annually on the regulator’s complaint-handling procedures.
There are 2.9 million home businesses in the UK and they are of growing importance to the economy, with an increase of 500,000 in their number since 2010. The Bill will amend the Landlord and Tenant Act 1954 to ensure that starting a business from home will not create a business tenancy, thereby encouraging further growth in this thriving sector.
The business community, along with all parents in employment, needs access to good-quality and flexible childcare. The Bill will make it easier for schools and other providers to offer more early education and childcare. The measures will promote a prosperous and growing market to meet the needs of working families.
The UK labour market is also dependent on having a properly skilled workforce to meet its demands. Until now, Governments have not done enough to track a person’s progress through their school life and into the labour market. The Bill will enable the effectiveness of education providers in preparing pupils for employment to be assessed. The additional data we will secure will be invaluable to young people and their parents, and will focus educators on employment outcomes, as well as performance tables.
My third theme is company law. As I have said, the UK is an outstanding place to start and grow a business. However, there is a clear link between illicit financial flows and company structures. Measures in the Bill will therefore help ensure that UK companies are not used to facilitate criminal activity, such as money laundering and tax evasion. The Bill will establish a register of “people with significant control” over each company, increasing transparency around who ultimately owns and controls UK companies. The Bill will abolish bearer shares, directly removing an easy means of facilitating illegal activity. This meets an important G7 commitment. At the same time, we are simplifying the current filing requirements for companies, removing duplication and improving the accuracy and integrity of our public companies register.
Unfortunately, a natural consequence of a competitive market is that sometimes some businesses become insolvent. The Bill makes a number of changes that strengthen and modernise our insolvency regime.
My fourth theme is encouraging better employment practices. Part 11 of the Bill deals with these matters. We should not forget that this Government have secured great achievements in job creation. There are now more than 30 million people in employment, which is a record high. Since 2010, an additional 2.1 million
private sector jobs have been created. Within these totals, small businesses employ an estimated 12.1 million people. Therefore, for small businesses to succeed we must ensure that those employed are treated fairly and that businesses playing by the rules are not disadvantaged by those which do not.
The Bill will provide assurances to people who step forward and whistleblow that action will be taken. Last year, a report by the University of Greenwich and Public Concern at Work found that 75% of whistleblowers believe that nothing was done about the wrongdoing they reported. The Bill will require regulators or professional bodies dealing with whistleblowing to publish an annual public report.
The Bill will also improve confidence in the ability of the employment tribunal system to deliver justice by incentivising payment of awards and addressing the current position that there are no significant consequences for non-payment. The Bill will also reduce the delays in the tribunals process caused by frequent postponements, addressing the costs to business that often arise from these delays.
The Government are committed to ensuring that employers are penalised if they fail to pay the national minimum wage to their workers. On 7 March this year we increased the penalty percentage from 50% of total underpayments owed to workers to 100% and the maximum penalty from £5,000 to £20,000. The Bill goes further: it sets the maximum penalty to apply on a per-worker rather than per-notice basis.
Finally on employment, I know that there are strong views in this House on zero-hours contracts. Used correctly, I believe that such contracts support business flexibility and they are often welcomed by those employed on them. Recent research carried out by the Chartered Institute of Personnel and Development suggests workers on zero-hours contracts are more content than their counterparts in permanent employment. However, we want to make sure that these contracts are not abused and we recognise that exclusivity clauses sometimes included in zero-hours contracts are wrong, as they prevent people seeking work elsewhere. This is not in line with free-market or any other type of economics. I am pleased that the Bill addresses the problem by making such clauses invalid.
Finally, I turn to the subject of pubs. In my immediate family there are five adult males and me. That fact has many important consequences, one of which is that the majority view of the family is very much in favour of pubs. The pub industry makes a significant contribution to the UK economy. It is made up of many small businesses run by hard-working people and employs hundreds of thousands of people. While it is an industry which has suffered due to societal change, it contributes substantially to community spirit and cohesion, and it is one that we want to see grow and flourish.
The Bill will address the imbalance in bargaining power between pub-owning companies and their tied tenants to ensure that the latter are treated fairly and are no worse off than they would be if they were free of tie. For the first time, tied tenants will have a statutory code that they can rely on, based on the
industry’s own voluntary code. It will be enforced by an independent adjudicator, who will have real sanctions at his or her disposal.
Noble Lords will be aware that this issue has a long history. Over the course of a decade there have been four Select Committee investigations into unfairness in the relationship between pub-owning businesses and their tenants. The Government have received, and continue to receive, a huge amount of correspondence from tenants about problems in their relationship with their pub-owning business. Research by the Campaign for Real Ale appears to show that 57% of tenants tied to large pub companies earn less than £10,000 per year, compared with just 25% of tenants who are free of tie.
Industry self-regulation has brought a number of improvements, and there is evidence that there is much responsible practice in this industry, yet some tied tenants continue to face unfair treatment and hardship. The Government gave self-regulation ample opportunity to succeed but the truth is that it has not delivered.
Noble Lords will know that there was much lively debate on this subject in the other place. Members there voted against the Government to include in the Bill a market rent only option. This provision requires large pub-owning companies to offer their tied tenants the right to go free of tie in certain circumstances. The Government resisted this proposal partly on the basis that it could have unintended consequences for the sector. However, we recognise that a majority of Members in the other place believe strongly that pub-owning companies need the threat of tenants going free of tie before they will offer their tenants a fair tied deal. The elected Chamber has spoken by voting this into the Bill and the Government have listened.
On that basis, I can confirm today that the Government intend to accept in principle the introduction of a market rent only option. Our focus now will be on making this option workable to ensure that tied tenants are no worse off than free-of-tie tenants and to minimise the risks of unintended consequences, such as job losses.
Lord Snape (Lab): I wonder whether the Minister will allow me to intervene. I am sure that the House will recognise how far the Government have moved on this and will welcome that movement. However, can she assure us that any future discussions will involve representatives of the tenants and will not be dominated by the pubcos?
Baroness Neville-Rolfe: My Lords, I can assure the noble Lord that we are always discussing these issues and changes with tenants—that is extremely important when you are making changes of any kind—and, indeed, they have helped us to get to the position that we are now in. I thank the noble Lord for raising the point.
As I bring my opening remarks to their conclusion, I would like to take this opportunity to put on the record my thanks to the right honourable Member for West Suffolk and the Member for East Dunbartonshire, both of whom steered this Bill so successfully through the sometimes choppy waters in the other place, ensuring
its safe and timely arrival in this House. I know that they will be continuing their keen interest as we move through the stages in this House. This Bill is important because it provides a number of significant benefits for small businesses, and they constitute a vital part of the economic framework of our nation. I commend it to the House and I beg to move.
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Lord Stevenson of Balmacara (Lab): My Lords, I thank the Minister for introducing the Bill this afternoon, and for going through the main issues with which we will be dealing. I am also very grateful to her for facilitating a meeting this week with the Bill team and the Minister who took the Bill through the other place. Collaboration at this level makes for a much better process, as we have found in other Bills and, indeed, with her three immediate predecessors, all of whom have been highly collegiate. Long may this last.
We are all looking forward to the maiden speech of the noble Baroness, Lady Harding of Winscombe, whose career and interests bear so powerfully on this Bill. I am sure that what she says will be of considerable interest to your Lordships’ House. I note from her CV—one researches these matters—that in February 2013 she was named by “Woman’s Hour” as one of the 100 most powerful women in the United Kingdom. It gets better: last year she was named seventh most influential woman in the same list, which was headed by my noble friend Lady Lawrence. Given that we will probably be ploughing through the Committee stages of this Bill in February 2015, one dares wonder what position she will occupy by then.
As I understand it, the Small Business, Enterprise and Employment Bill has two fundamental purposes: one is to help small businesses grow and succeed; and the other is to ensure that the UK continues to be regarded as a trusted and fair place in which to do business. These are aims that we hold in common with the Government. As the Minister said, this is an extensive Bill. She did not quote it, but it is worth noting that it is in 12 parts, has 157 clauses and 11 schedules. According to the Explanatory Notes the Bill contains provisions on a range of policies spanning the responsibilities of BIS as well as HMT, HMRC, UKEF, the Cabinet Office, DCLG, DfE and the Insolvency Service. BIS speaks for the whole of the Government when it chooses to exercise its legislative powers and we must all quake in the face of such incredible forces. That also means that we have to bring forward reserves ourselves, so I am very pleased to be joined on the Front Bench by my noble friends Lord Young of Norwood, Lord Mitchell, Lady Hayter, Lady Jones and Lord Mendelsohn, who will be joining me in dealing with the detailed scrutiny of the Bill.
I was slightly puzzled that in opening the debate the Minister developed a short riff on the ways in which the Government are helping small businesses, including several issues that are not in the Bill, such as creating a single point of contact for small businesses which seek assistance. We on this side have been calling for that for some time and indeed, if we were to be elected next year, we have plans to bring forward a small business administration. Given that this may already have been set up, I am sure that the noble Lord, Lord Leigh of
Hurley, who is in his place, will be immediately inquiring whether it has the capacity to deal with the sort of inquiries with which he has been pestering BGF and other firms which purport to help small businesses. I look forward to hearing the results of his latest work in this area.
When this Bill was introduced in the other place, I noted that the Secretary of State said that there were five main topics, but they were not quite the same as the ones the Minister quoted when introducing her take on the Bill. Just for the record, the five main topics that came through in the other place were:
“to make changes to the legislation in a way that benefits both employees and employers to ensure that employees are not disadvantaged by unacceptable practices, be they exclusivity clauses in zero-hours contracts or underpayment of the national minimum wage … to ensure that our companies are trusted and transparent … to help our small businesses get access to the finance they need … to support the Government’s regulatory reform agenda … to introduce measures that strengthen the provisions on corporate transparency”.—[
Official Report,
Commons, 16/7/14; cols. 906-10.]
These are all sensible objectives, and we will be using the limited time we are being allocated in Committee primarily to scrutinise the draft legislation and, if possible, to improve it.
Our wealth creators—our entrepreneurs and particularly our small businesses—are fundamental to growth in this country and create almost two-thirds of private sector jobs. They are crucial to the success of large firms, but this is, of course, a symbiotic relationship. We on this side of the House are committed to building an environment in which business can flourish, which is why we can support the general purposes and principles of the Bill. But we also think that it can be improved. We believe that the Bill and the Government’s policies more broadly will not resolve the underlying problems which hold back businesses and employment in our economy. Surely, what we really need is a different model of capitalism—one that is more inclusive, more productive, more responsible and much more long term in outlook.
The fact is that our economy is grossly unbalanced by sector and by region. Short-termism is still endemic in business and in government. We still have a dysfunctional finance system and we have a stubborn and increasing trade deficit. The recession continues in many parts of the world, not least with our main trading parties in Europe. China and India may be slowing down, so the outlook is certainly not good. Meanwhile, the use of food banks has soared and many people still struggle. Wages have fallen in real terms and many people cannot get full employment. As a result, training and opportunities are being squeezed. The recovery, although welcome, is slow and patchy. Few people are seeing the benefits that some at the top appear to be harvesting.
Things are not what we would want them to be; nor can they be, as this is a business-as-usual recovery based on a rising housing market, increased personal debt and consumer spending. It is not the export and business investment-led recovery we need, and indeed it is not the recovery that this Government promised. So we look in vain for measures in the Bill that would intensify the pace of reform of the economy to build a better-balanced, sustainable recovery with a wider range
of flourishing businesses that pay wages which increase earnings in real terms and that provide jobs of quality and opportunity. As I have indicated, there are many areas of the Bill that we can and will support, but I will not go through them line by line. Instead, I want to pick out three areas where we will be pushing hard for change, and one gap that we would like to see filled.
The first area of concern is the Government’s proposals on late payment of invoices, particularly those of small businesses. According to the Federation of Small Businesses, 51% of the invoices of its members are persistently paid late by large companies. The Bill as currently drafted simply gives the Secretary of State powers to direct companies to publish certain information on their payment practices. Despite the wide extent of this problem, small businesses are often reluctant to report issues of late payment as they rely on the custom of the large businesses they supply for their very existence. We will be seeking to amend the Bill so as to shift the burden away from small businesses going out on a limb to ask for interest payments so that they are paid as a matter of routine.
Secondly, in the employment sections of the Bill, we will try to introduce proper protection for workers on zero-hours contracts and ban the exploitative use of those contracts. Under our plans, workers would receive a fixed-hours contract automatically when they have worked regular hours over a period of time, unless they choose to opt out. We also think that workers should be protected from employers forcing them to be available to work at all hours or cancelling shifts at short notice without compensation. People sometimes go to great expense to turn up at work. They arrange childcare and pay train or bus fares. These things take time to organise and cost serious amounts of money. Therefore, those on zero-hours contracts should be able to seek compensation if, for example, their shift is cancelled at short notice. By ensuring that workers can seek redress, unscrupulous employers would be dissuaded from cancelling work at short notice, which is often the case.
Thirdly, the Minister mentioned pubs. In the Commons, the Government suffered their first defeat on a piece of legislation when a number of Tory and Lib Dem MPs joined the Opposition and voted through a new clause which gives pub tenant licensees the option of going free of tie so that they can buy their beers on the open market whenever they negotiate a new contract. In our view, this is the best way to ensure that large pub companies offer fair terms to their licensees and finally to address the scandal of so many valued community pubs shutting. Our objective in the Lords will be to retain this new clause and to work with the Government to ensure that it does what it is required to do. I am grateful to the Minister for making clear what the Government’s intentions are on this matter and we will work with her to make sure that they come through correctly.
Missing from the Bill at the moment is anything about takeovers—an issue that was trailed by the Secretary of State at Second Reading of the Bill in the Commons but which has yet to appear. We agree with Mr Cable that our economy will benefit if we continue
to welcome inward investment and that we should welcome merger and takeover activity as a normal part of market processes. But, unlike him, we think that recent cases like AstraZeneca/Pfizer and Kraft/Cadbury reveal a problem about the enforcement of assurances on jobs and site closures which are often given during merger and takeover negotiations. We think that primary legislation is required here to make these and similar assurances stick, and we will be proposing amendments on this issue, as well as on the question of whether the Secretary of State needs additional powers in regard to the national interest in takeovers and mergers, although there is an argument to say that these are powers that are already available.
This is not a bad Bill and it is certainly better drafted and presented than many others we have seen in your Lordships’ House in recent years. It is a pity that it was not given pre-legislative scrutiny, as that could and would have improved it further. However, it makes some very sensible proposals on late payments, zero-hours contracts, the minimum wage, insolvency and how we can provide more support to parents who use childcare. But this Bill is not going to deliver a more balanced economy, a sustainable economy or even a skills-based economy in which people go to work knowing that they will be able to pay their bills at the end of the working week. It misses out on a whole score of opportunities, and we will hope to improve it considerably before it leaves this House.
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Lord Stoneham of Droxford (LD): My Lords, I join the Minister and the opposition Benches in welcoming the noble Baroness, Lady Harding, with all her industrial and business experience. I am looking forward to her speech. I welcome the Bill with its fourfold objectives: to protect employees from poor employment practice; to ensure that companies are trusted and transparent; to help small businesses gain access to finance, so vital to their growth; and to identify and eliminate ineffective regulation which holds up business growth.
I will look at the employment aspects first. The House should recall that over the past year 693,000 more people are in employment; 244,000 fewer young people are unemployed; and there has been a huge growth in small businesses—330,000 in 2013, with 66,000 employing additional people. This is a phenomenal record and wherever I go in business they talk about how remarkable it is: the fastest growing economy in western Europe, with the highest employment growth rates.
The Opposition have told us, and will tell us in this debate, that it is the wrong type of growth: we are promoting a low-wage economy and not sharing the benefits of recovery. But we know it is the vulnerable who suffer most from unemployment in a recession so the absolute priority has had to be to get employment going again. Although we are in the early stages of recovering from the massive heart attack that hit our economy, we are seeing a huge improvement in outlook, prospects and financial security for people in our communities—much greater than they experienced in the final two years of the Labour Government, and
indeed the first two years of the coalition. Recovery takes time to come through and job flexibility has been fundamentally important to that.
We welcome moves to ensure that employers abide by minimum wage regulations, by increasing fines and by naming and shaming companies that fail to do so. We also support the removal of the exclusivity clauses in zero-hours contracts. The Opposition will tell us that we should do more but we should also ask them why they did not do more when the economic prospects were better. They also have to tell us what they would do that would not now stifle employment growth. The Government have given a commitment to raise the minimum wage further but they will do this—rightly so—using the cross-party agreement that we should use the Low Pay Commission so as not to threaten jobs with higher costs, so that the increases that come through from the low pay recommendations are sustainable.
We are right to question zero-hours contracts and their fairness but let us be absolutely clear that, as the economy recovers, zero-hours contracts are not all bad, as some may try to suggest. I know there are some bad examples in the care sector but I raise the example of a British company—which employs my son—easyJet, the UK’s biggest airline, which has grown to 9,000 employees since 1995. I pass over the immigration issue that it was founded by a Greek Cypriot entrepreneur educated at our universities, and I pass over what would happen to that company if we left the EU.
Instead, I go back to 2011, when pilots were coming out of aviation schools with no prospects of jobs and with £75,000 worth of debt round their necks to pay for their training. I was sceptical when my son was offered a zero-hours contract with easyJet, due to the economic uncertainty that he was facing. But easyJet took on several hundred of those pilot trainees to give them enough work to live on. It promised that it would take them on, provide them with a living, give them enough hours, help with their training and, after two years, provided the economic improvement continued, give them a permanent job. It has honoured that promise completely, and, in 2013, young pilots were granted permanent contracts.
A lot of young people are being put on the first step of their careers through zero-hours contracts at a time of great economic uncertainty. We should respect that and recognise that it has great value. Such an opportunity has been a huge relief to the young trainees whom I was talking about in terms of being able to repay their debts and it has given them valuable training. easyJet is going from strength to strength and long may it. There are examples of overly exploitative zero-hours contracts. Those must be exposed, but flexibility is important to recovery and we must not overlook the competitive advantage that we have in our flexible labour markets.
I particularly welcome in the Bill the help given to small businesses. There are a number of major improvements: rooting out late payment, which is a scandal, and encouraging the involvement of small businesses in the procurement of government contracts, which is long overdue.
There is also a commitment in the Bill to greater corporate transparency and openness, so that we know who is controlling companies and where the power lies. If we are to deal with tax evasion, accountability for high salaries, payment schemes and general poor practice, we have to know who owns these companies. The Liberal Democrats have long had a commitment to this and we are very glad to support this initiative in the legislation.
I suspect that we will spend a lot of time on pubcos, so I turn to this issue in my closing remarks. It is a parable of our time. My grandfather was employed in brewing in Dorset and Kent. When he was working there, it was probably a paternalistic industry—there is nothing necessarily wrong with that. There were close relationships between tenants, publicans and the local and regional breweries. There was mutual benefit in providing a market for beer, helping with the improvement of pubs and providing a livelihood for the landlords and the brewers. But in the 1980s, as breweries consolidated, pressure grew to break the link between large brewers and their pubs. Parliament introduced a limit whereby brewers could not own more than 2,000 pubs. The trouble was that it did not prevent other companies doing that, and the loophole was spotted and exploited, not by brewers or by people who really knew about pubs, but by financial engineers, speculators and bankers. They sought to increase shareholder value and they had a great business model. They acquired the pubs; they increased the length of the tenancies; they increased the rents; they raised the price of beer; and they made the tenants responsible for repairs and maintenance. As they did so, they increased the value of the property, sometimes overvaluing it, so that they could then borrow more money to buy more pubs. The companies were making forecasts of practically perpetually growing income from this model, but they became ever more leveraged in the boom that followed and it has become a classic pump and dump operation—some would say that this is almost a type of Ponzi scheme—and eventually it collapsed.
The winners, of course, were the insiders who got out in time; the losers were the publicans, their communities and the pension funds that lost their money, and we are left to pick up the pieces. The tenants are tied into 25-year leases; they cannot buy their supplies from anybody but the owner of the pub; and there is not much chance of investment by these overleveraged companies. Do not believe the rumours that are being put about that the provisions in the Bill relating to pubs will stop investment and create unemployment in this sector; it is already suffering job losses and not getting the investment that it should.
In 1969, the Monopolies Commission recommended the market rent option. That is what the Bill seeks to do. It will enable tenants to have a fair living, increase investment and employment, open up supply markets and lower prices for consumers, particularly helping the small, organic brewers. Just as the industry needs to consolidate and improve its prospects, we have this mechanism, working with the industry to help to achieve that change.
This is a parable of our time. Just as the coalition has been trying to share the burden of austerity, so it must make sure that it remains vigilant as the economy picks up. We must learn the lessons of the last boom and bust, exemplified by the pub industry. Small businesses lie at the heart of our economic recovery and will drive it forward. We must encourage and support them to do so.
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Lord Bilimoria (CB): My Lords, last month, I accompanied my university contemporary, Greg Clark, the Universities Minister, on a delegation to India. I spoke at an Indian higher education conference. Sitting next to me, sharing the platform, was the first ever permanent secretary-equivalent of a department newly created in India by Prime Minister Narendra Modi: the department for skills and entrepreneurship.
I declare my various interests to do with this debate and the Bill. Last Monday, I spoke at the opening of Global Entrepreneurship Week alongside Vince Cable, where it was revealed that London is one of the top two cities for entrepreneurship in Europe. Last week, I became a founding member of the Guild of Entrepreneurs, which will soon become a livery company in the City of London. We are currently on the 687th Lord Mayor of London, so it has taken us a long time to establish a Guild of Entrepreneurs.
Yesterday, I was at my old university, Cambridge, speaking at the 10th anniversary of the Centre for Entrepreneurial Learning at the Judge Business School. I have been proud to have been appointed one of the first two visiting entrepreneurs at Cambridge, and have been involved with the CfEL since its inception, spreading the spirit of entrepreneurship throughout the university—not just the business school but the whole Cambridge University community. More than 300 students from around the university attend projects such as Enterprise Tuesday. Look at the culture shift that has taken place. When I was at Cambridge in the 1980s, there was no business school. Today, there is not only a flourishing business school but a centre for entrepreneurial learning.
However, there is not one mention of the word “entrepreneurship” in the entire text of the Bill. Can the Minister explain that omission? I am of course delighted, as the Federation of Small Businesses noted, that the Bill even exists in the first place. There is a lot that is music to my ears. There is so much of what the Minister said that is fantastic, such as helping businesses start from home, and childcare help for businesses. She herself noted that small businesses make a huge contribution to the UK economy. Between them, SMEs comprise 96% of all UK businesses, accounting for about half of UK jobs and one-third of private sector turnover—the engine of our economy.
Speaking as someone who started a business with just two people that has grown over the years, I have seen first-hand entrepreneurial businesses. My business has dealt a lot with the curry restaurant industry. More than 10,000 of them are represented by the Bangladesh Caterers Association: pioneering entrepreneurs who have made curry the favourite cuisine of this country. I know the sacrifices that those individuals have made; I know how difficult it is to start, to grow
and to survive in business. One of the first cases I ever sold of my product was to a local corner shop. Of course, those corner shops have survived and grown thanks to the Asian community. So I have been a micro-business, an “s”, an “m” and now I have a joint venture with a global giant.
There is a problem with the terminology used in the Bill. Grant Thornton—I declare an interest as I have dealt with the firm for many years as a client—has noticed that there is an unnecessarily restrictive definition of SMEs in the Bill. The current definition of SMEs used by the Government largely excludes mid-sized businesses from many of the provisions of the legislation, such as on access to finance, late payment and credit information. However, these same businesses will still have to abide by a number of additional burdens, such as the duty to publish a report on payment practices.
Grant Thornton estimates that approximately 34,000 mid-sized businesses will be left behind by the Bill, as they lack the resources of the large corporates that are needed to cope with additional regulatory reporting but are not granted the same exemptions granted to SMES within the Bill. Will the Minister acknowledge and, I hope, deal with this omission by widening the positive provisions to a larger section of the business population and altering the definition of an SME used in the Bill, which is based on the Companies Act and restricts an SME to a turnover of just £25 million.
On access to finance, the United Kingdom lags way behind our major competitors. Just look at Germany, where SMEs can draw upon close personal and financial links with a multitude of local lenders, many of which are state owned or operated as mutual firms. Germany’s small and medium-sized businesses, the Mittelstand, are exemplary and have been the centre of the economic success of that economy. The United States has always been brilliant in the way that it has helped to fund its small businesses, but I believe that we could go even further. In fact, the Institute of Chartered Accountants in England and Wales, of which I am proud to be a fellow, recommends that in order to help businesses with the wider issue of finance and cash flow the Government should foster new business growth by introducing critical growth loans, where a percentage of the loan is guaranteed for SMEs trading for between two and five years.
I have benefited personally from the Government’s small firms loan guarantee scheme, which is brilliant at enabling businesses that do not have the collateral to get the Government to back the security with the bank that lends to the business. We could and should increase that lending far more than we are. Does the Minister agree that we should be doing this? Business is going global. The Bill talks about export finance and there is so much good work going on. UK Trade & Investment has sponsored a programme called Sirius, where we attract the brightest young graduates from around the world to come and open their businesses here in the UK. This is the sort of initiative that we should be encouraging and growing.
With regard to the moral aspects of the Bill, the fact that we are addressing the minimum wage is excellent. If the Bill is clamping down on those rogue
businesses which exploit their workforce, that is great news. I cannot think of any ethical business that would pay less than the minimum wage, let alone the living wage. However, the
Guardian
reported last week that despite the Business Secretary’s rhetoric last year that the coalition Government would crack down on firms that underpay their employees, there have been no successful prosecutions of such illegality since February 2013. Can the Minister confirm that? The annual survey of hours and earnings for the Office for National Statistics recently reported that around 287,000 workers were paid at less than the minimum wage in 2012. Are the Government aware of that and why are they not doing more about it? I hope that the Bill will be able to address this. Can the Government assure us about it?
With regard to the pub industry, I said that I declared my interest and I cannot spend the whole of my time declaring my interest in this area. The sad thing is that more than 10,000 pubs have closed down in the United Kingdom in just the last decade. We need to do everything we can to save the British pub, which is at the heart of British communities. The beer tie itself is somewhat of a double-edged sword. Of course, it allows big brewing or pub groups to invest in the pubs. To actually start a pub, you have to put down perhaps £250,000. However, if you are with a big pubco you do not have to do that and can actually run a pub. That is the advantage of being part of a big pub group.
However, if by doing that you also have to pay 70% to 80% above the market price for your beer, and pay higher rents, that does not feel fair at all. Given the recent defeat on this issue in the other place, I am delighted to hear the Minister say that the Government have listened and are going to try to achieve what I hope will be a middle way, where we can have the benefits that the big pub groups bring while enabling our pubs to be competitive and flexible, and to flourish, thrive and grow.
With regard to insolvency, Britain’s insolvency environment ranks pretty highly. In fact, we rank seventh in the world. The Bill talks about reforming insolvency in this country. I do not believe it is doing it in bold enough terms. For example, we are not going as far as having the famous American Chapter 11 or the Canadian Division 1 principles—and, surprise, surprise, countries number 1 and 2 in the insolvency environment are Canada and the United States of America. Those two measures, Chapter 11 in particular, provide a company trying to restructure with protection from creditors to give it time to do so. I have gone through this. I tried to institute a company voluntary arrangement. We got 90% of our creditors to agree, but we could not go through because there was no protection and one of the creditors scuppered the whole arrangement.
The Bill talks about pre-pack administrations. This is meant to be the least worst alternative. I have had to go through this procedure. It is awfully painful, but it is there to save brands and businesses if companies go through the procedure above board, as we did. I am proud to say that today we have a brand and a company that are flourishing. The worst thing about it is that when I went through that procedure I realised how
badly misused it is in this country. It is misused to the extent that shareholders, creditors and, worst of all, employees suffer. That is not on. I do not think that the measures in the Bill go anywhere near far enough to improve the pre-pack administration regime. Bringing in Chapter 11 would be the best way of taking things forward. Do the Government agree?
Mostly importantly, this Bill is not just about businesses remaining as they are. As the Minister said, around one-fifth of small businesses say that they want to grow significantly and are determined to do so. The overall thrust of this legislation is aimed at making it easier for SMEs to operate and grow within the economy, which is something we should celebrate. Why are the Government not going further? One of the things that SMEs need is education. I attended the business growth programme at Cranfield. Cambridge has the diploma in entrepreneurship. These are fantastic courses, but they cost up to £10,000 a year. The Government should have a competition for 100 businesses a year to attend these courses to improve their competitiveness and help them to grow. Will the Government accept this suggestion?
I do not want to look a gift horse in the mouth. The fact that the Bill exists in the first place is wonderful, but I despair that it does not emphasise entrepreneurship. I worry that Britain today is number 2 in the world in inward investment. That is something we should be proud of because we are an open economy. However, I hear stories of Indian businesses having huge problems opening bank accounts and setting up companies over here. We are trying to address money laundering, but we are hampering our competitiveness and inward investment capabilities. We are one of the top 10 economies in the world. We have to encourage entrepreneurship, growth and employment.
4.13 pm
Lord Wakeham (Con): My Lords, one of the great pleasures I have had in this House before today is to follow a speech by the noble Lord, Lord Bilimoria. He always makes an interesting speech. In the first part, he tells us how he has been around the world advising people in different places how they should run their affairs, and he talks a great deal of sense thereafter. He is an old friend and he will not mind me saying that. He made one of his typically very good speeches and I enjoyed it.
I congratulate the Government on this Bill. I started my small business on 1 June 1960. If you work it out, it was very nearly 55 years ago that I started my first small business, and I think that this is the first Bill before the House that is entirely devoted to small businesses. That is some credit to the Government. While the noble Lord who spoke from the Opposition Front Bench made some interesting points, I did not detect from them that the subjects he raised, which were out of the Bill, were directed to small businesses in this country, important as they might be.
This is a very good Bill and it is designed for small businesses. It is interesting to look back to my early days in business 55 years ago; what was important then was persuading any bank manager to lend you any money to get going. That was the really important
thing. Fifty-five years on, we still seem to have problems raising the money, but we also have problems dealing with the regulations that have arisen. There were not too many regulations 55 years ago when I got started. The question was: how was I going to get it going? So I welcome a great deal in this Bill. It is going to help cash flow and assist exports, and also start something to help small businesses to get paid quickly by big businesses. I suspect, however, that that will be more difficult than what is indicated in the Bill.
I remember when I was a major subcontractor for British Steel. Could I get paid on time? I could not. It was absolutely hopeless. In the end, they invited me in to see their accounting systems and how they did it. They said, “If you think we ought to be able to pay you quicker, tell us how we should do it”. In the end the compromise was that I added something to the bill to get my money, but I still could not get them to pay on time. So I congratulate the Government on trying to have a go in getting big business to pay on time; it should pay on time, but it is very difficult.
I was interested in reading the Second Reading debate in the Commons, which the Minister referred to. Of course, a lot of the debates were all about employment. They agreed an amendment to do with pubs and what is really important is whether that question can be resolved without creating unemployment. I have no great technical knowledge about it, but there are some interesting questions that the Government have to take on board.
There is one part of this Bill that I particularly welcome. It creates a duty on the Minister to set up the small business appeals champion. The aim, as I understand it, is that we should have clear and effective procedures in place so that small businesses are not hampered by decisions of various regulators that are cumbersome or unfair. If I wanted one word to say what that man should be asking, the word is “materiality”. That is the word that needs to be considered by these people.
There are quite a lot of areas where people have tried to improve things but have actually still made things quite significantly difficult. I will give a few examples. The Inland Revenue now has a very good system where, as a small businessman, you can ring up and speak to some quite well informed people. You can find out what is the position with this, that or the other thing that you are concerned about. But if it is going to take you an hour to get through on the phone, the thing needs to be speeded up. It is the same with planning decisions. I am not criticising necessarily the planning decisions, but when I was running a small business, I wanted to know quickly whether I was going to be able to do this or not. The delays in the bureaucracy need to be sorted out, because that is very unfair.
I have given two examples from the public sector; the third is from the private sector. I think that the present money-laundering arrangements are a disgrace. The banks and financial institutions have turned all the work around to the customers—of whom 99.9% are perfectly innocent—and they expect them to do all the work in order that they can employ cheap labour to do the job. If they employed better people who were able to make some sort of judgment
on the situation, it would be more effective for money laundering and it would be better for the customers. One gets the impression that some of these institutions are more concerned with not being held responsible for money laundering than with trying to detect it. If the small business champion gets moved into some of these areas where people have tried to lessen regulations that do not help, that will be a very worthwhile effort.
I am going to sit down, but I want to say how much I am looking forward to the maiden speech of my noble friend. I made my maiden speech on small businesses in the House of Commons 40 years ago, and I guess that she will make a much better speech than I made then.
4.20 pm
Lord Kestenbaum (Lab): My Lords, this is such vital legislation and its core intention must be broadly welcomed by those noble Lords who remain desperately concerned by the uneven growth in large parts of the UK, so it would be churlish of noble Lords in all parts of the House to seem reluctant to praise good intentions when they see them. Yet so many of the interventions proposed in the Bill seem just that—modest, timid and good intentions. We do not need to go further than the Government’s own yardstick for the Bill:
“The … Bill has two fundamental purposes, one of which is to help small businesses grow … and the other is to ensure that the UK continues to be regarded as a … fair place in which to do business”.—[Official Report, Commons, 16/7/14; col. 906.]
I trust that my noble friends on this side of the House may well question whether the Bill meets that latter objective, the fairness agenda, but I fear not. However, I am convinced that it does not go remotely far enough in respect of the former objective—helping small businesses to grow.
We know what we are up against when it comes to driving small business growth. We know that the most imaginative global economies, the trend-setters of entrepreneurial zeal—the United States, Finland, Korea, Israel—all have substantial measures of supportive, and indeed aggressive, public policy and effective financing to drive their small business agenda. They have active, assertive, long-term and growth-oriented Governments who go much further than piecemeal and disconnected interventions that often lack in ambition and do little for an economy that, as someone recently put it, has become,
“drugged up on cheap money, subsidised credit and rock-bottom interest rates”.
So what might we reasonably expect at this fragile time from those with their hands on the policy levers? The first thing is an acknowledgment of what the Bill has definitely side-stepped: how to create the conditions for businesses that have the ambition and the potential to grow fast. As the horror of worklessness increases in so many parts of the UK, we know exactly where the next generation of jobs will come from. All the evidence shows, again and again, that small, innovative and high-growth firms will be producing the jobs of the future. These firms have a disproportionate impact on our national fortune and, crucially, they are creating jobs: just 7% of businesses in the UK classified as small, innovative and with high-growth potential are
responsible for creating over half the new jobs in the past decade. These firms will produce tomorrow’s jobs and will be the productivity drivers of our economy.
What are those firms currently telling us? That the very businesses that are at the core of any attempt to rebalance and grow our economy are the very businesses to which banks right now are doing one of four things: not lending fast enough; not lending in sufficient amounts; not lending on reasonable terms; or just not lending at all. The lack of long-term patient capital, the lending infrastructure on which all small business growth depends, needs nothing less than a complete overhaul. To be serious with this legislation is to call for a financing revolution that targets the high-growth, high-productivity, ambitious small businesses that create our jobs. We need the type of legislation that propels innovative, enlightened and, yes, progressive new entrants into the world of financing—everything, from peer-to-peer structures that compete with banks to big institutions supported by government that target this sector. Surely we can go further than what we have heard today in this House about banks sharing information regarding loans declined with online platforms.
We just do not have the necessary degree of scale and ambition in the Bill in front of us. Instead, at a time of retrenchment in the banking sector and nervousness among investors, we see modest steps from government, and that makes it harder and harder for small businesses to grow. Can the Minister give the House some reassurance that we can go substantially further in helping small businesses access finance? As banks tighten lending criteria to strengthen their balance sheets and as risk capital from the private sector becomes more scarce, what are the consequences? The very businesses I referred to earlier—those with ambition and the potential to grow fast—are most at risk unless the Bill becomes less timid and more assertive.
Consider this: the most recent research conducted by Stian Westlake and his colleagues at Nesta shows, starkly, that simply encouraging lots of people to found businesses and then doing very little of consequence to support their growth in a meaningful way will do nothing for the economy. Further, the loss to our national prosperity by not making the UK a better place—not just for founding businesses but for scaling them—is staggering. Nesta’s research, The Other Productivity Puzzle, shows that over a 10-year period the loss to the economy due to the stagnation of the most productive small businesses was 7.4 percentage points of productivity, which totalled £96 billion of lost GDP per annum.
That evidence tells us what we have long sensed: that the most dynamic, most productive firms, which in turn create the largest number of new jobs, struggle to grow because the infrastructure of financing is just not there for them meaningfully to scale up. The impact of that on Britain’s productivity has been eyewatering. If we are talking about stakes as high as £96 billion per annum of lost GDP, why are we considering such a modest Bill, with such modest interventions? They are of course helpful, but at best, perhaps, they will keep fragile and small businesses just that—fragile and small.
Too many aspects of the Bill are reflective of much business policy in the last four years. Too many timid programmes, often disconnected, have been launched with fanfare and quietly closed 18 months later. We hope instead for an assertive, ambitious national programme which runs right through government, which will allow us to compete with the world’s most dynamic economies and which in turn sustains the fair society we must nurture here in Britain.
4.27 pm
Lord Cope of Berkeley (Con): My Lords, I am delighted to support this big Bill for small businesses. Throughout my political life, I have worked to try to improve a lot of small businesses. I share a considerable amount of the analysis expressed by the noble Lord who just spoke, but I am not quite sure exactly what measures he was proposing. Perhaps they will come in Committee in the form of amendments. Personally, I like the title of the Bill, with its emphasis on the link between small business, enterprise and employment. After all, as has been said, enterprise creates employment. Perhaps the noble Lord, Lord Bilimoria, would prefer to say that “entrepreneurship creates employment”, but it comes to much the same thing.
Many small businesses will always remain small. They are craftsmen or professional businesses that provide services or goods and depend on the skills of the individuals who run them. They will always remain small, but they deserve our support and help in these increasingly complex times, and I am glad to say that in some respects they get that through the Bill. Other small businesses, of course, can and do grow and become large businesses, and that is when enterprise creates employment.
One cannot this afternoon refer to every aspect of the very disparate set of measures in the Bill, but I want to comment, first, on late payment, which is in Clause 3. This is a potentially important move in the struggle against large companies which are slow payers. It enables the Secretary of State to require large companies to set out their practices and policies with regard to payment. I hope that the word “practices” includes a report on performance, because that, after all, is what matters. Late payment has been a consistent complaint of small businesses for many decades. When I was a lad, learning on the job to be an accountant in Leicester, it was general business practice to offer a discount for prompt payment, and it happened a great deal. I remember one of our clients, an old boy who had a good business in decorating supplies, whose boast was, “Thirty years in business and never missed a discount”. The result of that was that he was trusted—for that and for other reasons—and had a flourishing business.
Another problem today is large businesses—and, indeed, sometimes government departments and agencies—that use their enormous buying power to pay their small suppliers late. There is also, of course, a knock-on effect. If you are paid late by the people to whom you are selling, you cannot easily pay your own suppliers promptly. There is a knock-on effect right through the whole of business. Governments have tried different tactics in the past to improve this situation but it remains a big problem. Basically it is, I think, a
problem of culture. The idea in the Bill is that disclosure will help to shame large businesses into doing better. However, the disclosure will work only if the press—prompted, I am sure, by the small business organisations—shines a light on big businesses that do not pay. I cannot imagine that their shareholders will take much notice. Indeed, they may welcome the fact that the directors of the large companies are relieving the strain on their finances at the expense of other people. But they should not, and I hope that this measure will be successful.
Like others, I welcome the provisions in Part 1 which are designed to make it easier for SMEs to get the necessary finance. As has been said, a high proportion of small business finance comes from the large clearing banks, but other sources are being used more and they certainly should be. Your Lordships’ Select Committee on Small and Medium Sized Enterprises, of which I had the honour to be the chairman, reported on exports in March last year. We recommended that businesses shop around for finance. We felt that too few businesses looked in more than one place for where their finance might come from. Well established sources such as invoice financing and that sort of thing have been around for a long time, and now there are newer sources, such as crowdfunding and the challenger banks. There are, in fact, far more banks available to help, particularly with export finance, than just the well known clearers. As we know, the Government themselves have an involvement, although not quite as vigorous as we would wish, but that is being improved. We urge the Government to help to stimulate the use of these new sources of finance. I therefore welcome Clauses 4 and 5, which open up information for such other sources of finance and will encourage people to use them.
Of course, privacy and transparency often conflict. We all want our banks to keep our secrets. The Bill ensures that information will be given to credit reference agencies or finance platforms only when the customer agrees.
Pubs are another aspect that has been mentioned. The problem of tied pubs and beer orders is another long saga, as the noble Lord on the Liberal Democrat Benches just made clear. When you look back, it is astonishing how the beer market has changed since I first started going to pubs. After all, there were fewer and larger businesses all the time at that stage, and Red Barrel was everywhere; there was practically nothing else, in places. But the credit for changing all this is due to one of the most effective campaigning organisations of recent decades, the Campaign for Real Ale, which my noble friend the Minister mentioned. Now, of course, there are microbreweries everywhere. The provisions in this Bill, particularly as amended in the Commons, are another tribute to that campaigning organisation. The Government were wise to accept the decisions taken in another place and inserted as amendments into the Bill. Titivate the drafting by all means, but I am glad that the policy of a market rent-only option will remain in the Bill.
I was somewhat startled by Clause 13, which relates to cheques. I did not realise that they could be presented for clearance only physically, not by electronic means.
It is astonishingly Victorian, is it not? I do not wish to cast aspersions on Victorian methods; in many cases, they were very efficient. When there were four deliveries of mail a day and people’s businesses did not extend over such widespread parts of the country, they worked extremely well. However, things have changed, and the number of days it takes to clear a cheque has increased immensely over time. But cheques still have their uses, and it is very good that we are making this change to the law.
Clearly, we will discuss insolvency in Committee, as we already have a little. It is a very complex, specialist area, with the interests of creditors, employees and others all having to be balanced in seeing what is to be done with a business. As the noble Lord, Lord Bilimoria, remarked, we have no real equivalent of Chapter 11 in the United States to try to freeze the position and save a business, so I foresee Committee debates in that regard.
The last matter that I want to mention briefly is company registration. The clauses and the schedule dealing with that matter in the Bill are highly complicated, but they are designed to simplify the procedure, which is a very good idea. This contradiction is not a new phenomenon; we are used to complicated things being proposed in an attempt at simplification. I welcome the clauses, provided they will actually simplify the procedures, which are unnecessarily elaborate and, I suppose, Victorian in their origins.
Overall, it is a welcome Bill, which takes opportunities to help small and medium-sized enterprises. It is a Christmas tree of a Bill, but that is appropriate for the time of year.
4.38 pm
Lord Sugar (Lab): My Lords, I welcome the noble Baroness, Lady Harding, into the Chamber, and I look forward to hearing her maiden speech. We have worked together in the past on some rather large projects, and I assure noble Lords that she is a very capable business person who will bring a good contribution to the House. She will be about the only person here to recognise the genius in what I am about to say now.
I welcome the opportunity to discuss the Bill with your Lordships today. I start by stating that there are indeed a few positive parts in it. As your Lordships will recall, I was once appointed by the previous Prime Minister as an adviser specialising in SMEs. In that role, I travelled the country visiting many small companies and spoke to thousands of business people at specially organised seminars where the delegates were invited to ask me questions about their businesses or issues of government policy. I used these seminars to try to understand people’s concerns. Unsurprisingly, one of the most frequently asked questions of me was, “What can the Government do to help my business?”.
In principle, we all agree that support for small business and employment is a good thing, but this Bill does not go far enough in offering practical, common-sense solutions for small businesses. That is the test that should be applied to the Bill before us today. What can it do to help small business and enterprise in
the UK? The simple answer is: as drafted, not enough. It goes some way to addressing the problems that small businesses face, for example around access to finance, but there are some seriously weak points in the Bill.
One of the biggest issues that came up in my seminars was late payment and how that was crippling the cash flow of some of these companies. Who were the culprits? They were the large organisations which in many cases were executing lucrative government contracts. Here we are, five years later, and the same issues exist. In the matter of late payments, we have an example of this Bill, as drafted, being great on paper but having no real impact where it matters—in people’s factories, offices and, most importantly, in small businesses’ accounts. One of the most crippling things for small businesses is to cope with late payments or, in some cases, no payments at all. It is, sadly, becoming an increasingly common issue, with 60% of UK small businesses reporting that late payments are a real problem for them.
In my early days of business I knew that one needed to build up trust with suppliers. I treated them as I would have treated a tax or electricity bill: they simply had to be paid on time. People who specialise in insolvency have estimated that one in five business failures is simply down to bills being paid late rather than a failed business model. It takes only a few late payments to bring a small business close to the edge. This government Bill will do very little to help solve this problem. It offers no incentive for companies to make payments on time and, more importantly, no deterrent for paying late. The Bill as written only gives powers to the Secretary of State to direct companies to publish certain information on their payment practices. This will have virtually no impact on whether they adhere to these self-published policies. In my opinion, it changes nothing. The onus will still be on the small businesses that are being short-changed to chase the payment.
I often wonder what experience those who draft these Bills have. It is clear in this case that they have no idea whatever of what it is like in the real world—at the coal face, so to speak. Small businesses are hesitant to alienate their suppliers for fear that they will have business taken away from them if they complain too much. We should be using this Bill to remove an environment in which businesses can be paid late. As has been suggested and discussed in the other place, we need the Government to be tougher in showing companies that late payments are not an acceptable part of our business culture. It is totally unacceptable for companies to accrue to their own interest and improve their own cash flow while other smaller businesses suffer. Harsh but fair penalties should have been included in the Bill. Instead of small businesses fighting for payments, causing further financial and reputational cost, late payers should automatically pay interest owed to their suppliers at, I suggest, 8% above the Bank of England interest rate. It is only then that we will see businesses suddenly waking up and starting to pay on time, where failure to do so will hit their bottom line. When you have a Business Secretary and, with respect, a Government who do not really get it—by that I mean what life is really like for the
average small business—there is no point in creating legislation if some clever lawyer can find a loophole or where the policies have no impact on businesses or people’s lives.
I would like to draw your Lordships’ attention to the clauses that seek to deal with enforcement of the national minimum wage. We are in agreement on all sides of the House that we want to see more people in work and off benefits, but a staggering number of people currently do the right thing and do not even receive the minimum wage. They have gone out and got themselves a job, only to find that their work does not even amount to the minimum of £6.50 an hour. There are now reports that at least 300,000 people in the UK earn less than the minimum wage, which leaves the door open for unscrupulous companies to exploit inexperienced, desperate and, in some cases, migrant workers, all so that they can undercut firms that are playing by the rules.
The solution that the Bill offers is simply to increase the penalties for companies failing to pay the national minimum wage to their workers, which, on the face of it, sounds very good. It seems a sensible way to tackle the problem, but when one hears that the Government have identified only 25 firms breaking minimum wage law, it is clear that investigation and enforcement are the real problems, not the size of the penalty. The Bill fails to protect those people expected to work for less than the minimum wage and businesses that pay their staff a fair wage from being undercut. As I said before, it would appear that the current BIS Secretary aims to pass a Bill on small businesses without knowing what the real challenges of running a small business are, let alone how to deal with them effectively. The Bill contains some good intentions, but when we legislate to help small businesses, good intentions are not enough if they do not translate to real changes on the shop floor, in the backs of the vans or in the bank balances of our small businesses.
4.46 pm
The Lord Bishop of Peterborough: My Lords, like others I welcome the noble Baroness, Lady Harding, and look forward to hearing her maiden speech when I sit down.
I warmly welcome the Bill. Small businesses and local enterprise are part of the life-blood of communities and play a major part in enhancing the life opportunities of many people. Granted, there are areas where the Bill could go further, but every initiative to support small businesses is to be welcomed.
I draw your Lordships’ attention to the role that churches and church-linked groups play in local enterprise. For example, the Cathedral Innovation Centre in Portsmouth has recently been involved in a number of very good initiatives, including working with the South East local enterprise partnership and Provide to develop a major social enterprise strategy, which is being launched today in Thurrock. Alongside my right reverend friend the Bishop of Derby, the centre has supported the St Peter’s Innovation Centre in central Derby. In partnership with the YMCA, this has created micro-businesses led by young people who have been unemployed. The centre has also opened a Southampton
office, from which the Southern Policy Centre has been launched, with support from five parties in the southern counties. The noble Lord, Lord Adonis, and Greg Clark, the Minister for Universities, Science and Cities, spoke at the launch. Numerous small businesses and enterprises are up and running, often employing young people from disturbed backgrounds—all this using virtually no public cash.
I am also delighted to draw to your Lordships’ attention the good work being done by local authorities, not least the City of Peterborough. For example, through its involvement with the supply chain network, the city council is supporting larger organisations to work with and mentor smaller businesses to improve their resource efficiency and reduce their business costs. Local support for small businesses is vital and should be encouraged.
I very much welcome the introduction of a register of persons with significant control. This is an essential requisite for transparency and trust. I congratulate the Government on being, I think, the first in the world to set up such a PSC register. It is surprising—perhaps shocking—that we need to legislate to force businesses to reveal who runs them and who benefits from them, but, as we do, let us do it thoroughly but without too much delay.
I have some concern that the proposals in this area may not be strong enough, so I ask the Minister whether the Government are working to persuade the EU, G7 and G20 countries and our own overseas territories and Crown dependencies to introduce similar public registers. How will the Government ensure that the register is kept up to date and that there is an adequate verification regime? Will the Government publish a list of possible sanctions for those who do not fulfil their duties in regard to the register? I believe that these are important questions but I stress that I ask them in a spirit of support for the Bill.
4.50 pm
Baroness Harding of Winscombe (Con) (Maiden Speech): My Lords, I first visited this House when I was eight years old with my grandfather, the then noble and gallant Lord, Lord Harding of Petherton. I sat in the Gallery with my grandmother and my brothers looking down at my father sitting on the steps of the Throne, as he is today. Then, I was struck with awe at the wisdom and history that is this place. As the eldest daughter of a hereditary Peer, I knew with certainty of course that I would never sit on these Benches myself, so it is with deep respect, considerable trepidation and a deep sense that this is an honour that I do not deserve that I address your Lordships today.
One of my grandfather’s sayings when I was a child was, “You can’t be brave unless you are afraid. It’s not the fear that matters; it’s what you choose to do with it that counts”. I used to whisper this to myself every time I circled at the start of a steeplechase. I could almost hear him murmuring his sage advice to me as I walked up the stairs from the Peers’ Cloakroom this afternoon and passed his coat of arms. As an aside, a maiden speech takes about the same amount of time as a three-mile steeplechase, and—for me, at least—it is quite debatable which is the more terrifying.
Of course, my first few weeks here have been made so much easier by the tremendous help and support that I have received from all the staff and from your Lordships on all sides of this House. I thank everyone who has made such kind comments in this debate, and I particularly thank my two supporters, my noble friends Lord King of Bridgwater and Lady Lane-Fox. I also thank my noble friend Lord Henley—my mentor—whose advice in the procedures of this House has been completely invaluable, although please forgive me when I trip, as I undoubtedly will do, on a procedural hurdle.
My life to date has been made up of three things: my career in business; my love of steeplechasing and horseracing, itself an industry with many small businesses, employing some 85,000 people; and my still young family. I find all three represented in the Bill today.
I must declare an interest in that I am the chief executive of a publicly quoted company, TalkTalk Telecom Group. By most standards TalkTalk is a large company, but when compared with our large competitors, such as BT and Sky, we are in fact quite small and clearly affected by many of the provisions in the Bill. The business that I run went from no customers in 2006 to serving more than 4 million households today across the UK. As a result, I have great empathy with the many thousands of small businesses across the UK that are looking to grow.
I myself am proof that sometimes the little guy—or, in my case, the small blonde girl—wins big. I learnt this when I was 30, when my horse, Cool Dawn, won the Cheltenham Gold Cup as a long-odds outsider. I learnt then that sometimes dreams do come true. If a one-horse amateur can win the Cheltenham Gold Cup against the odds, entrepreneurs with big dreams can surely succeed as well, provided that we give them the space and encouragement to try.
I commend this Government for all the great work done over the last four years to make it easier for entrepreneurs to start and grow businesses. I would encourage the Minister, my noble friend Lady Neville-Rolfe, to stay true to the principles of this Bill to reduce unnecessary bureaucracy and burdens on businesses. It is so much easier to add regulation than it is to take it away, and the more complicated and complex the regulation, the harder it is for small businesses to compete. Whether it is greater transparency, easier access to finance, modernised and simplified insolvency procedures, or simpler procedures for childcare providers—all these measures will make it easier for all British businesses to thrive, but they will have a disproportionately positive effect on much smaller businesses. If we aspire to create the conditions to give birth to a British Google, Alibaba, or maybe the next generation Dyson or Rolls-Royce, by definition today they are at best very small businesses—maybe not even yet a business plan. This Bill will make it easier for them to join the FTSE 100 over the next 10 years.
I would also like to speak very briefly about one specific element of the Bill—zero-hours contracts. I suspect that I am alone in this House in having previously run a supermarket—not a chain of supermarkets, just one—Tesco Extra in Yeovil in Somerset. I spent one
year out of my 10 in the supermarket sector as a trainee store manager for Tesco. I appreciate that many Members of this House are concerned about the impact of zero-hours contracts, especially when combined with exclusivity clauses. I totally agree with the Bill’s proposals to prevent such abuses. But I can tell you that, with Christmas fast approaching, with stores heaving with people filling their trolleys ready for the festivities and huge queues at the checkouts, zero-hours contracts are not all bad—for employers, for employees and for another critical constituency: customers.
I have been that store manager, walking down the bank of checkouts, staring at a sea of customers all impatient to get on with their Christmas celebrations and I have racked my brains on where to find extra people to man the tills. The ability to call on employees on zero-hours contracts to work at very short notice is something that not only every store manager in Britain would want to be able to do at this time of year, it is something that their customers would thank them for. Zero-hours contracts, when well managed, can be good for employees, too. Thesecontracts work well for people juggling busy lives—from students to working mums to the recently retired—and I have found that they all get great value from them.
I completely support the provisions in this Bill to ban the use of exclusivity clauses in zero-hours contracts, but I would also ask my noble friend the Minister to ensure we remember that maintaining flexibility in our working practices is an essential ingredient to the success of British businesses, and it is an increasingly essential ingredient to many modern lifestyles. Flexible working practices help businesses, big and small, to deliver better customer service, which makes customers happy, and which in turn makes for happier and better rewarded employees. It is something that this Bill will help more businesses to deliver.
4.57 pm
Lord Mitchell (Lab): My Lords, last week I had the pleasure of having a drink with the noble Baroness, Lady Harding. We barely knew each other, but since we are both in the digital sector it seemed to me a good idea to get to know her. To me it was immediately evident that the noble Baroness was going to make a major contribution to your Lordships’ House and I knew instinctively that her maiden speech would be a tour de force. On both counts, I have not been disappointed. What she said today has given us all the hints we need to know that we are all the better for her having joined us.
The noble Baroness has an MBA from Harvard Business School. As a graduate from Columbia Business School myself, it takes some effort for me to admit that Harvard is as good as it gets. She has had a meteoric rise in the UK corporate sector, from McKinsey to Thomas Cook to Woolworths to Tesco. Today, as she said, she is CEO of TalkTalk, and as one of her customers I can attest to the quality of her company’s products.
This afternoon I will be addressing four policy issues: first, late payments; secondly, pre-pack administration; thirdly, the scaling-up of small and medium-sized businesses; and finally, the abuse of
employing unpaid interns. I am nothing if I am not a serial entrepreneur, and nothing if I cannot speak about the joys, pains, thrills and disappointments of founding one’s own business. In my time, I have started three companies from scratch, all in the IT services area. On each occasion, it began by sitting around a table and asking the inevitable question, “Wouldn’t it be a good idea if?”. Three times I have been successful and the companies I started grew from nothing to become national and, in some cases, international market leaders. But I have also had my fair share of spectacular failures: the hugely costly Soho restaurant, the coolest place in town which attracted the young and the famous, but it haemorrhaged money and died an inglorious death. I founded a sophisticated asset finance company designed to lease intellectual property and brands. It also hit the buffers. There was the venture in Oxford to sell high quality souvenirs with “Oxford University” engraved on the items. It, too, bombed. And then there was the iPad app that was going to revolutionise mobile computing. Sadly, it did not. I know about the sleepless nights when you worry whether you will meet the monthly payroll. I have been to the meeting with the bank where a negative answer to a request for funds would be catastrophic. I have had an investment bank pull out of an initial public offering a week before impact day, only to recover and put the flotation to bed with another bank some three months later. Luckily for me, I have had more winners than losers.
I must make one declaration of interest. I am an investor in and director of a new company called Instant Impact. This company is involved in graduate recruitment and the placement of paid interns. My declaration is particularly pertinent because in this speech I will be addressing the issue of the mistreatment of unpaid interns. We on these Benches welcome this Bill but I think the Minister will get the message that we think it is timid where it should have been hard-hitting and much more encouraging.
The Labour Party is in no doubt that small business holds the key to our country’s economic success. We understand that the public sector has seen its employee base collapse under this Government and, to be honest, we see no reversal of that position for many years to come. It is similarly true that large companies are seeing little growth in their employee base. The real growth in employment, as many noble Lords have said, is coming from the small and medium-sized sector and that is why Labour is committed to providing a framework to ensure that this growth continues.
In my time, I have asked Ministers questions about the financing of the SME sector. I have pleaded with the Government to stop fooling themselves that Funding for Lending is working. I have said that it is a flop, that the money the Government have provided to banks has found most of its way into domestic mortgages and helped to fuel a boom in real estate that has been of little use to business. Nothing would improve the lot of small companies more than a commitment to eliminate late payment. It is endemic that big companies put the squeeze on small companies for no other reason than that they can. It is wrong and I am pleased to see that the Bill partially addresses the issue. Shaming late payers will be a start. Many of them are public
sector organisations which pay late often because they have no motivation to do otherwise. They need to know that we simply will not tolerate any behaviour like this. I speak from experience. I have been involved in small companies which have diced with death simply because moneys due were delayed for spurious reasons. In these days of electronic payments, living off your creditors is simply unacceptable.
Pre-pack administration has always struck me as an odious concept. In effect, it occurs when a company is in severe trouble and is faced with administration or worse. It is abused where the directors, owners and the administrator conspire to put the company into administration and then—surprise, surprise—for there to be sitting on the sidelines a new company which quickly buys the assets and leaves the liabilities behind. On Friday, the company is Smith and Jones, and on Monday, the new company is Jones and Smith. It is true that jobs may be preserved and a business will continue, but to me it is all wrongly focused. I come from a background that says that the shareholders of a business are the ones who prosper if it does well and suffer when it fails. To see shenanigans where the creditors are dumped, legal cases are abandoned and other liabilities are tossed into the delete bucket cannot be right. I know that the Graham review into pre-pack administration argues in favour of pre-pack deals, but in my view the basic proposition that shareholders lose all when a business fails is not addressed strongly enough. I agree with the noble Lord, Lord Bilimoria, that we should replicate the US Chapter 11 option.
One report that has made a great impression on me recently was published in October by the serial entrepreneur and angel investor, Sherry Coutu. The Scale-Up Report on UK Economic Growth makes a very clear proposition: the game is not about creating companies, laudable though that may be; the real game is about scaling up our successes. As Reid Hoffman, the co-founder of LinkedIn, put it:
“First mover advantage doesn’t go to the first company that launches, it goes to the first company that scales”.
A “scale-up” is an enterprise with average annualised growth in employees or turnover greater than 20% per annum over a three-year period and with more than 10 employees at the beginning of the observation period. Why do we lag behind the US in companies being able to scale up? There are five reasons: the skills gap; leadership capability; accessing customers in other markets; accessing the right combination of finance; and navigating infrastructure. There is no reason why the UK has not produced its own Google or Amazon, but we must make it easy for our successful companies to scale up quickly.
Finally, I wish to address the issue of unpaid interns. I am prepared to bet that even in these Houses of Parliament there are many young people working for nothing. It is outrageous. Certainly, up and down the country many young hopefuls are forced into taking unpaid internships just so that they can enhance their CVs or in the hope that someone might notice them and offer them a full-time job. There is a word in English that defines forcing people to work for nothing—“slavery”. Indeed, the Modern Slavery Bill is currently going through your Lordships’ House. Unpaid internships are another form of slavery. For the rich kids, for those
whose mummies and daddies can open doors, unpaid internships are a sure-fire way to get a good job. But what about the poor kids whose families cannot afford for them to work for nothing and whose parents have no such contacts? I hope the Government will back me in this. They should do if they are in favour of equal opportunity. But if they do not, I am determined and confident that Labour will support me. Certainly, I will be introducing amendments at later stages of the Bill to right this wrong. Quite simply, unpaid should become paid.
I have taken a smorgasbord of issues that I aim to address as the Bill goes through your Lordships’ House, and I look forward to our debates in Committee.
5.07 pm
Lord Curry of Kirkharle (CB): My Lords, I, too, congratulate the noble Baroness, Lady Harding, on her excellent maiden speech. Like other Peers present, I have no doubt that over the coming years her contribution to the debates in this House will be enormous, and we very much welcome that.
I am rather sorry that the noble Lord, Lord Bilimoria, has just left his place because I was going to comment on the fact that he had supported the establishment of a lot of curry businesses. I get lots of comment on my surname—I have started a number of Curry businesses. Like him, I employed two people when I formed my first business, although I must confess it has not been anything like as successful as his.
However, I speak not just as someone involved in small business but as the non-executive chair of the Better Regulation Executive. I will repeat what I said during the Deregulation Bill. I was appointed by the previous Government and it is an independent position. I was—very correctly—reprimanded by the Front Bench for using the word “we” when I referred to the Better Regulation Executive because it sounded as if I was part of the Government. I am not. I am an independent chair but we have contributed significantly to elements of the Bill.
I want specifically to refer to Part 2 of this important Bill and, first, to the proposal for small business appeals champions. Clauses 17 to 19 set out a new duty to appoint appeals champions to the national non-economic regulators. It is important to growth and the economy that poor regulatory decisions do not hamper businesses, so businesses must know how to appeal or complain when they feel that they have been unfairly treated by their regulator and believe that that process will be fair, value for money and accessible. Regulators’ appeals and complaints procedures must work for businesses—in particular, small businesses, which we know suffer disproportionately from burdensome regulation.
However, when we looked at this question, we found that most businesses did not feel that the procedures were working. Common issues included: that there was no informal way to resolve issues without a formal appeal; that there was often no alternative to court action; and that it could be extremely difficult to get a second opinion. Of the businesses we spoke to, many simply had not bothered to appeal a decision that they
did not agree with, citing as reasons that there was no point, that it was too expensive or that they simply did not have enough time. Some felt that they might be targeted by the regulator if they appealed against the decision.
However, issues varied both between sectors and between regulators, and there were some examples of extremely good practice, so a one-size-fits-all approach will not work. That is why I welcome the duty to appoint small business appeals champions as part of a wider programme of work on better enforcement across national non-economic regulators, which also includes the regulators’ code and the growth duty. The latter was recently debated by the House as part of the Deregulation Bill.
Secondly, and in a similar vein, I want to speak on the business impact target, set out in Clauses 21 to 27. Regulation is important. We need it for essential protections and to allow the market to function efficiently. Many people have asked me as chair of the Better Regulation Executive whether I am against regulation. Of course, I am not; regulation is essential. But it needs to be efficient and smart. We need to ensure that regulations deliver the maximum protection for the minimum cost on small businesses. That way, we get the best of both worlds, with protections that do not create an undue drag on the rest of the economy.
The UK can take great pride in having been a leader in regulatory reform. Other nations, grappling with the same issue of balancing protections and burdens, look to the UK’s advanced regulatory management structure. A growing number of other countries are now following our lead in setting some form of regulatory management target. Italy, France, Spain, Portugal, Austria, Canada and South Korea, for example, are now all implementing forms of one in, one out.
When I visited Brussels after taking up my position and suggested that the approach be taken there that we were considering in the United Kingdom, I was scoffed at and told that this would be an impossible task and certainly would never be accepted in Brussels. Increasingly, member states within the European Union are following our lead in adopting this principle.
The savings to business that have been delivered under the current one-in, one-out and one-in, two-out systems are impressive: over £1.5 billion per year so far. But behind this figure lie real-world examples of how life has been made easier for all UK businesses, while retaining necessary protections. I could give a number of examples, but, for brevity’s sake, I will not. However, it is worth highlighting that much of the progress described in the business impact target clauses—the setting of the target, reporting against the target and independent verification—build on already established ways of working.
For example, Clause 25 creates a duty to appoint an independent body to verify the economic impact of new regulation in scope of the target. Currently, this function is performed successfully by the Regulatory Policy Committee, which verifies the impact of all measures in scope of one in, two out. The RPC also has a wider role beyond the proposals in the Bill. For example, it currently scrutinises the impact assessment
for new regulation on the smallest businesses as part of the small and micro-business assessment process. It is the success of that approach that convinces me of the value of a long-term structure for regulatory management, which is why I support the introduction of a business impact target.
My third point concerns the provisions on statutory reviews of regulation. For too long, Governments of all types have focused on new regulation, rather than effectively managing their accumulated stock of existing regulation. Too often, I have heard from business groups that Governments have tried to remove regulatory burdens while at the same time new regulations kept piling over the horizon. When the Better Regulation Executive and the Cabinet Office began the Red Tape Challenge exercise, for example, we found that some departments did not even have a solid grasp of the regulations that they owned. They did not know what stock they had. Regular review of existing regulation to ensure that it remains fit for purpose in an ever-changing world is an essential part of good governance and, indeed, good policy-making.
Finally, I shall speak about the statutory definitions of small and micro-businesses in Clauses 33 and 34. I have no doubt that there will be further comments on this. We should be doing all we can to manage the often disproportionate effect of regulation on our smallest businesses. The clauses enable either exemptions or special treatment for small and micro-businesses in future secondary legislation. That will provide an important tool for future Administrations to design new regulations that are not just a one-size-fits-all imposition but are smarter regulations that recognise the significant differences between large and small businesses in the United Kingdom.
The regulatory reform measures in the Bill are an important evolution of the UK’s regulatory management structure. We lead the field in Europe. The Minister mentioned that we were second to Denmark in the “best place to do business” league in Europe. The truth is that we were top of the league and lost out to Denmark two years ago. We need to retain that position, and these measures will help us to achieve that.
5.17 pm
Viscount Eccles (Con): My Lords, as many of those who have spoken this afternoon have pointed out, there are things in the Bill that should happen anyway. I ask myself: when we legislate for things that should happen anyway, will it work? As the noble Baroness, Lady Harding, said, space—a very important word—is needed if things are to happen which should happen. The question then sophisticates into: will legislation reduce or increase space? I suggest that normally it reduces space; it does not increase it.
The Bill is 279 pages long and, as is said in the memo to the Delegated Powers Committee,
“contains 75 individual provisions concerning delegated powers, 14 of which are Henry VIII powers”.
The noble Lord just mentioned the one-in, two-out policy. Someone has to get rid of 150 regulations once the Bill is enacted. Apart from its length and the complexity, it is a package of very different subjects and is largely enabling. Intentions have been mentioned several times this afternoon, and I will not go down
the path to hell. Nevertheless, the question arises: what will actually be achieved? For anything much to be achieved under the Bill, it is dependent on secondary legislation, not on what is in the Bill.
Five months from a general election, which of the 12 parts of the Bill will attract public attention? Perhaps three, including late payments and the lending, borrowing and credit discussion. That raises the question: where and why is there market failure, if indeed there is? Why have people departed from 30 or 60 days? Prompt payment is in everybody’s interests. I think the noble Lord, Lord Mitchell, mentioned cash flow but if you want to wreck your balance sheet, you just let your creditors go crazy. That may not affect the public sector but, in my business life, it certainly would have been a very serious matter if my balance sheet had looked all adrift on current liabilities. I am sure that we will discuss this question more. It seems very strange that people do not believe in prompt payment. When we come to the lending and borrowing issues and the market failure, my question is: will this legislation help? I rather think, as the noble Lord, Lord Sugar, said, that it is not likely to be of much assistance. Indeed, market failure needs more careful thought than it has been given in recent times, since 2008.
Part 4, on the pubs, will certainly arouse public attention and much discussion will be had in your Lordships’ House; we have already had some. Within the Bill, there is a Pubs Code Adjudicator, which I think is modelled on the Groceries Code Adjudicator— not, if I may suggest, as yet a very successful model. The Groceries Code Adjudicator is struggling to find the role that was envisaged in the 2013 Act, and I dare say that a pubs adjudicator would have some of the same problems.
Then there is Part 11, headed “Employment”. To me, this illustrates a division in our society. When problems occur, there is a big following for saying, “Somebody else should do something about it”, and another following which says, “We would rather get on with this ourselves”. That is not the end of the division because there are those in authority who think that something should be done because people cannot be expected to do it for themselves. That lack of confidence in people is certainly not good for business, for entrepreneurship or for all the virtues that we have been discussing this afternoon. Nevertheless, many people think like that.
I come back to the public reaction to the Bill and to our discussion of it. In general, the public will conclude that it does not have much to do with them. They will have flashes of recognition: in the pub, they will hear horror stories about late payment and credit, and the lack of a willingness to give them credit. Indeed, ever since Mr and Mrs Stainton kept the Strong and Co Cross Keys pub, 65 years ago, tied pubs have been debated. There is nothing new in that. In a slightly imaginary world, a white van would arrive with a delivery and the following exchange might take place. The van driver might be asked, “How are you doing?”, and the driver might say, “I’m doing okay. I’m getting £1 an hour more because I only work for Fred”. The reply might be, “Something should be done about that”. So will go the flashes of recognition but there
will not be much public debate. I look forward to subsequent stages and, since all three main parties will in general be agreed, your Lordships can be sure that there are several things in the Bill that will not work well.
5.24 pm
The Earl of Lindsay (Con): My Lords, I welcome the Bill in its many parts. I particularly welcome Part 2, having had a long-held and active interest in better regulation. In that context, I should declare an interest as a former member of the Better Regulation Commission and the Risk and Regulation Advisory Council. I am at present a member of the better regulation strategy group, which advises the body chaired by the noble Lord, Lord Curry—the Better Regulation Executive. With this background, I shall talk about the four measures to which he also referred, which are set out between Clauses 17 and 34. The first is the proposed duty on Ministers to appoint an independent small business appeals champion to each national non-economic regulator. Driving greater efficiency, accountability and transparency into the interaction between regulators and those they regulate has to make sense, as does having a simpler, more effective, more transparent, less costly and better understood series of processes by which small businesses are able to challenge regulators’ decisions and behaviour.
For both the small business community and government to be confident that regulators are delivering against the goals relating to appeals and complaints set out in the new statutory regulators’ code is a positive step. Equally, ensuring that regulators have appeals and complaints processes that work well, are fit for purpose, rectify wrongs with minimal delay and are sensitive to businesses, in particular small businesses, will help to address any inefficiencies and unintended outcomes arising from the implementation of regulations.
The second measure I welcome is of very much greater significance in terms of the breadth of the benefit it will bring to the business community and civil society. This is the proposed duty on the Secretary of State to publish a business impact target, similar to one-in, two-out, for the duration of a Parliament. I believe that the one-in, one-out, and now one-in, two-out, approach has been and is working well. It is providing a powerful incentive on departments to measure, reduce and offset new burdens on business. It is important that future Governments maintain this progress and ensure that the regulatory system is as streamlined as it can sensibly be and delivers desired regulatory outcomes as efficiently as possible. I therefore wholly endorse a statutory requirement that the Government should publish an overall target for the economic impact of new legislation for each parliamentary term as well as a mid-point milestone target. I endorse that there should be transparent reporting of the burdens on business arising from new regulations and that the reporting should be underpinned by robust independent verification. The current Regulatory Policy Committee has proven itself to be very effective in providing robust independent verification, and this
Bill rightly ensures that the Regulatory Policy Committee or a similarly capable body will continue to do so in future. I equally endorse departments being subject to annual and final-year reports that include assessments of: actions taken to mitigate the impact of new regulations on small businesses as part of the annual and final reports; and instances of gold-plating as part of the same reports.
The third measure that I welcome is the proposed duty on Ministers to ensure that, where appropriate, all new regulations affecting business will contain a statutory review provision on a five-year cycle to ensure that regulations remain effective and necessary and that businesses are not subject to unnecessary burdens. I recall that it was a continuing concern of the Better Regulation Commission that too little legislation and too few regulations were subject to post-implementation scrutiny and the benefits that can arise from such a process. The causes of better regulation and good government are both well served through regular reviews that assess the extent to which the original objectives of regulations have been achieved, and if not, why not; and whether those objectives remain appropriate, and, if so, whether they could be achieved in a less burdensome way.