It is strange that this Deregulation Bill will create three types of licence—rather than the current one—with new exams, oversight and monitoring. The assertion has been made, but with no evidence, that it will attract new entrants; the assertion has been made by the Government that IP fees will be reduced, without any evidence; and the assertion has been made that training costs will be reduced. Again, no evidence was supplied. This whole shake-up is on the basis, by the Government’s own estimates, that there will be only about 100 partial licences.

Furthermore, it is likely to be the large insolvency firms that train corporate-only practitioners at the expense of smaller insolvency firms, of which two-thirds do both corporate and personal insolvencies. More than 80% of smaller firms do not believe that they would get much benefit from lower training costs.

3 Feb 2015 : Column 581

Indeed, 90% said that they would not train a partial licence holder. Smaller firms are least likely to specialise and are therefore least likely to benefit from the change. So there is no help to smaller firms—just when the Small Business, Enterprise and Employment Bill is aimed at trying to help small firms.

Why have the Government dreamt up this clause? There is no evidence of a waiting group of would-be IPs dying to enter the market if only they could train simply in corporate insolvencies. Indeed, a number of firms have been reducing their workforce. The Insolvency Lawyers’ Association questioned the logistics of operating a two-tier mixed system, while R3 has serious concerns about the change. It considers that partial licences will have a negative impact on businesses and individuals seeking financial advice, and on the quality and competitiveness of the UK’s insolvency regime, which is currently rated one of the world’s best by the World Bank. Meanwhile the Institute of Chartered Accountants of England and Wales, the largest authorised body regulating insolvency practitioners—regulating, I think, about half the profession—opposes this partial insolvency licence system. It set out its reasoning to the Government a year ago. The Government, however, ignored that, despite the reputation and expertise of the ICAEW. The institute sees no need for partial licensing; it is unaware of any demand for it; and it does not consider that regulatory costs would be lower.

The ICAEW is also concerned that an insolvency practitioner with partial authorisation would not acquire the broad range of knowledge and expertise necessary to provide appropriate advice in a corporate insolvency. We also fear that the proposal would lower standards, given that Jenny Willott MP, the Minister in the Commons, said that the partial licence would,

“reduce a little the high bar on entry to the profession”.

As the ICAEW retorted:

“Reducing the breadth of knowledge required of IPs could be regarded as a lowering of standards”.

We are talking about people’s futures: whether jobs are to be saved or a company liquidated; whether individuals will be made bankrupt; whether creditors will get their money back; whether a company will be sold to someone who can retain at least some of the business.

The Institute of Chartered Accountants of England and Wales, which operates under a royal charter, works in the public interest. Given the potential impact on standards of practice that partial authorisation might have, it does not believe that the proposed reform would be beneficial to the public. The proposal to allow corporate bankruptcies to be handled by people who are unqualified in personal insolvency is misguided, unnecessary, criticised by the profession and other stakeholders and based on unsubstantiated claims. Apart from that, it seems a very good idea.

I urge the Government—even at this late stage—to think again, to listen to R3, the ICAEW and other specialists, and to accept Amendment 6. I beg to move.

The Advocate-General for Scotland (Lord Wallace of Tankerness) (LD): My Lords, I am grateful to the noble Baroness for tabling this amendment. We have debated this matter in Committee and I met her and

3 Feb 2015 : Column 582

representatives of R3 a few weeks ago to discuss it. The amendment seeks to limit partial authorisation to personal insolvency. This debate allows the Government to set out why we believe that allowing specialised authorisation for insolvency practitioners for both personal and corporate insolvency is the right thing to do.

I recognise that this is a matter of considerable interest to those in the insolvency profession. However, there is a wider impact. The purpose of generally requiring insolvency practitioners to have certain qualifications and experience is that they are given significant powers by statute and it is important that there is confidence that they will use such powers appropriately. It is not to protect insolvency practitioners as a profession as such. It is important, therefore, that the barriers this places on entry—there is quite properly a barrier because of the statutory responsibilities and powers—are no higher than needed for the purpose. I think this was the context in which my right honourable friend Jenny Willott was speaking. The noble Baroness has not provided any evidence whatever that having separate authorisations for personal and corporate insolvency would in any way lower the standards in each of these disciplines.

Most insolvency practitioners are already qualified, usually as accountants, sometimes as lawyers. What we are discussing is what specific training and qualifications they need in order to act as insolvency practitioners. The amendment would allow specialised authorisation in personal insolvency but not corporate, so I will focus on why we believe that it would be helpful to allow specialised authorisation for corporate insolvency.

Opponents have said—as the noble Baroness herself did in moving her amendment—that there is no evidence of the need for change. However, there have been reports on the insolvency profession that have raised concerns about the level of competition in this profession. Two independent reports have noted failings in the current regime that result in fees being higher than they should be. We believe that partial authorisation will increase competition and place downward pressure on fees, which in turn could benefit creditors in the form of higher dividends.

5.45 pm

The noble Baroness also referred to the member survey from the Insolvency Practitioners Association. She indicated that 61% responded that they did not think the proposals were a good idea. However it is important to put that response in its proper context. Opinions were broadly divided depending on the stage of the respondent’s career and the nature of the practice where they worked. A majority of more junior professionals considered the proposals to be a good idea—between 65% and 68%. A similar majority of those working in specialist practices thought the proposals a good idea. It may well be that if you are there—already in the tent—you might not see the need to change. However those who wish to enter the profession may well see a need for change. It is interesting that the more junior professionals thought that it was a good idea.

3 Feb 2015 : Column 583

The argument has been put forward that large corporate firms will benefit from reduced training costs, giving them a competitive advantage over small firms, which will need to train fully authorised practitioners. To argue that such firms as the Big Four accountancy companies compete in the same market as small local practices is not really credible as regards corporate insolvency. Yes, businesses of all sizes may require insolvency advice, but your small family business does not ordinarily go to the big four firms when it finds itself in financial difficulties. Large corporate firms will benefit from reduced training costs if they wish to train specialists, and this is a good thing. It will make our UK-based global players that little bit more competitive when they go to compete for work in the international marketplace. Those who wish to specialise in corporate insolvency will be able to spend precious training time perhaps learning about more specialised disciplines, such as cross-border insolvency issues or wider restructuring complexities, rather than the intricacies of personal bankruptcy law which they may never need.

The concept of partial authorisation is essentially about choice. No one will be required to specialise but they may choose to if it makes sense for them. If a small firm’s business model and client base means that it operates as a boutique corporate specialist, it should be allowed to train corporate specialists. It should not be held back and subjected to unnecessary costs by the firm down the street which chooses to train only fully authorised practitioners.

We must also not forget those who pay the price if there are unnecessary costs to being an insolvency practitioner—it will be the creditors, themselves often small businesses. The noble Baroness, Lady Hayter, said that the changes would do nothing to help small firms. However, they will reduce the cost of training for applicants who wish to specialise, and savings on training and examination fees are likely to be of proportionately greater benefit to smaller firms of insolvency practitioners.

Concerns have been raised about corporate specialists who provide advice to directors of small businesses and do not have the requisite knowledge to advise both the company and the directors in their personal capacity. In order to be able to offer advice that does not give rise to unacceptable conflicts of interest, corporate specialists will need to possess a basic understanding of the wider insolvency landscape, including personal insolvency. We have, furthermore, already indicated—in Committee and when I met the noble Baroness and the representatives of R3—that officials will work closely with the Joint Insolvency Examination Board to ensure that specialists, both corporate and personal, will have a sufficient overview of insolvency and issues such as ethical issues to be able to act appropriately.

Insolvency practitioners are required to act in accordance with a professional code of ethics. The code is clear that practitioners should take reasonable steps to identify situations that may arise in the course of their work which could pose a conflict of interest, and then put arrangements in place to manage them. Giving advice to both the company and its directors in

3 Feb 2015 : Column 584

their personal capacity is one of the situations that could well pose a conflict of interest in many insolvencies. Granted, a practitioner acting for the company may offer some general advice on the personal affairs of the directors, but this should be basic information. We believe that this can be achieved without the need for a corporate specialist to spend many hours at considerable cost studying the finer details of personal bankruptcy.

We recognise that the numbers may be small—we are not running away from that and we are not overselling this proposition—but they must be seen in the context of the relatively small number of practitioners anyway. A more important point is that we should not insist on wider requirements than are actually necessary as this will increase costs which ultimately small businesses and others have to pay. In 2013, Professor Elaine Kempson carried out a review of the fees and found that the headline rates for insolvency practitioners could be as much as £800 an hour. These fees are paid for by creditors who receive dividends only after such costs have been paid. The then Office of Fair Trading also carried out a study of the corporate insolvency market and found that competition was not fully effective. As I said earlier, additional competition will place downward pressures on these rates and creditors will benefit in the form of increased dividends.

Let us not forget that many of those paying thousands of pounds for tuition are funding that from their own pockets, investing their time in necessary study. Removing the need to study and sit the exam for one of the current three exam papers would save close to £4,000 in tuition and exams fees, and this is what we will work with the exam body to try to achieve. Allowing specialised authorisation for both personal and corporate insolvency will provide choice for those who wish to enter the profession, reducing the time and cost to qualify without reducing necessary standards. This is an important industry which has a vital role to play in promoting rescue and helping to resolve intractable debt problems. I believe that our proposals are measured and proportionate and I therefore hope that the noble Baroness will not press her amendment.

Baroness Hayter of Kentish Town: I thank the noble and learned Lord for that response and for the meeting with representatives of R3. I do not mind the Government not listening to me, but they do not listen to R3, to the Institute of Chartered Accountants in England and Wales, or to all those who are practising in this area. I will say only two things.

The first is a point on fees and the idea that this is simply a matter of bringing more people in. I hae ma doots about that; it is about the big ones charging high fees. Indeed, in the Small Business, Enterprise and Employment Bill, the Government are going to abolish creditors’ meetings, which is the one point at which creditors can negotiate over those. Perhaps that might have been a better way of helping creditors achieve a better fee rate.

The only other point to make is this. I refer to the noble and learned Lord’s own profession of the law. As with doctors and accountants, everyone does general training before moving on to specialise. This is an important and fundamental way of understanding the

3 Feb 2015 : Column 585

environment, and it is strange to separate one profession away from it. I do not think that the barrier to entry should be lowered, which is what I fear this will be. As I say, the Government have failed to listen to those who know this industry, and they are clearly not going to change their mind tonight. On that basis, I beg leave to withdraw the amendment.

Amendment 6 withdrawn.

Amendment 7

Moved by Baroness Byford

7: After Clause 23, insert the following new Clause—

“Applications for public path extinguishment of diversion orders: review

(1) Within two years of the coming into force of the rights of way provisions in this Act, the Secretary of State shall lay before both Houses of Parliament a report containing an assessment by Natural England’s Stakeholder Working Group on Unrecorded Rights of Way of how effective the right to apply provisions and the accompanying guidance have proved in getting local authorities to respond positively to applications for public path extinguishment or diversion orders.

(2) As well as looking at the overall effectiveness of the legislation and the accompanying guidance, the report shall include an assessment of any notable disparities between the various local authorities.”

Baroness Byford (Con): My Lords, I should remind noble Lords of my farming interests, that I am a member of the CLA, and of the other interests that are set out in the register. Clauses 20 to 27 cover the “Use of land” where, thanks to the excellent work of the stakeholder working group on unrecorded rights of way established by Natural England, improvements have been made to the legislation before us. However, there are still some outstanding areas of concern. Amendment 7, which is supported by my noble friend Lord Skelmersdale, proposes that there should be a review within two years of:

“Applications for public path extinguishment of diversion orders”.

I moved an amendment in Committee that such a review should be carried out within one year, but on reflection I do not believe that that would have allowed adequate time to assess whether the proposed changes in the Bill had been successful or not. In Committee I was very grateful for the contributions made from around the Chamber by the noble Lords, Lord Rooker and Lord Cameron of Dillington, and the noble Earl, Lord Lytton, and by my noble friends Lord Cathcart and Lord Plumb, to name just a few. We debated the whole question of wider access for the public to farmland and, in some cases, through people’s gardens and close to their houses. I accept that philosophical differences were reflected in those contributions, but I have to tell noble Lords that for those families who are affected by such intrusions, this has proved to be distressing, to say the least.

I am grateful to the Minister, my noble friend Lord De Mauley, for arranging a meeting at Defra for myself and my noble friend Lord Skelmersdale at which we were able to debate this issue further. However, I understand that following a recent meeting of the stakeholder working group, the CLA has raised three further issues with the Minister to which it has not

3 Feb 2015 : Column 586

received a response. Is he in a position to clarify these matters as they reinforce my belief that an earlier review is needed? Perhaps I may quote the association:

“CLA remain concerned that the ‘right to apply’ does not provide a presumption that paths will be diverted away from gardens, houses and business, nor does the right to apply ensure a different outcome for the landowner.

“The legislation does not provide a means by which a farmer, for example, who wishes to put a gate on his drive to make his farm less susceptible to theft, or wants to put bollards to prevent illegal vehicles, can do this. He cannot apply to the authority for such a structure, and the authority, even if it is sympathetic would have to be extremely creative with current legislation, to satisfy such a request. Structures can only be requested if required for the control of livestock. The SWG recommendation that a clause be inserted allowing authorities to consider structures in a wide variety of circumstances was a pragmatic, deregulatory solution to a currently very regulated and constricted practice.

“There is also the issue of right to access in extremely intrusive areas such as through private gardens and yards based on memory of a path rather than hard evidence. It can only be right that any access or right of way should have to be based upon objective evidence rather than subjective opinion and memory. This is especially important given that there is no time limit within which claims can be made—thus claims can be made about very detailed routes which people claim to have walked 30, 40, 50 years ago.

“The Deregulation Bill presents an opportunity to ensure clear guidance for users, landowners and local authorities in what can be the very emotive issue of rights of way”.

In Committee, my noble friend Lord De Mauley quoted figures from research undertaken by the Ramblers which recorded that of the 1,200 diversion orders applied for, some 94% were granted without any objections, which is good. Of the remaining 6%, only 1% were not confirmed by the Secretary of State. But some of those were affected, and I have received evidence citing many examples from different counties around the country where great distress has resulted. In one case, an owner was subjected to an onslaught by the council, and it was feared that all that worry was one of the contributing factors to his later suicide. When speaking to his own amendment in Committee, my noble friend Lord Skelmersdale said that:

“The stress and the financial hardship involved in employing specialist lawyers, only to learn that one has virtually no legal rights, have led to illness, mental breakdowns and at least two suicides”.—[Official Report, 28/10/14; col. GC401.]

Noble Lords may be wondering why I am quoting these remarks. It is to reinforce my view that we need to bring the review forward, particularly if we are not going to see further changes to the Bill to address the three outstanding issues. Given that, waiting three years for a review is three years too long, but if the Government did not like my suggestion of one year, I hope that the halfway house of two years might be considered.

This is an important debate and again I thank the Minister for his courtesy in talking about these issues through the amendments we tabled in Committee. I beg to move.

6 pm

Lord Skelmersdale: My Lords, as my noble friend Lady Byford said, my Amendment 12 has been grouped with her Amendment 7. Not surprisingly, the scene has moved on in the long period since Committee, when there was a surprising amount of support for the series of amendments in my name which had the effect

3 Feb 2015 : Column 587

of a presumption in favour of a diversion or stopping up of a footpath that passes through the curtilage of a residential building, including the gardens and driveways of premises. In other words, those amendments were somewhat more restrictive than that in the name of my noble friend, which I supported at the time and, as noble Lords can see from the Marshalled List, still do.

Since then, strange things have happened and I have had reports of odd decisions made by footpath officers in local authorities, the worst of which was the refusal to annul a recent order dedicating a footpath through someone’s dining room. The council in question refused point blank to change its decision. It may be—I am sure my noble friend could tell me—that the officers are not allowed to do this under current legislation but they most certainly are under this Bill. That is one good reason for the Bill. Another local authority insisted that footpaths going through a farmyard barn, which has been in existence since well before footpaths were regulated, should be shown on the definitive map. It is not unlikely, in the modern age, for barns to be converted into housing, with the full agreement of the local planning inspector. Nobody seems to check whether a footpath goes through the old farmyard and thus becomes, potentially, a major inconvenience to the owner of the barn conversion. There is something wrong, somewhere.

It was for these reasons that I moved my amendments in Committee. Because it was a Grand Committee I could not press them, although at the time I was sure I would have been justified in doing so, such was the support from all around the Committee. My noble friend Lord De Mauley was far from keen on my approach and wished to stick to the formula in the Bill—namely, the right for the householder to apply to the local authority and, if necessary, appeal to the Secretary of State. This was backed up by a meeting which he kindly hosted shortly after Christmas, to which my noble friend Lady Byford has already referred. At that meeting, it was explained that the scheme in the Bill would take time to bed down among local authorities and the rank and file green lobby. The department wanted time for this to happen, for the curious reason that the consultation on the agreement of the footpaths working group had not gone wide enough. One rather wonders why the working group existed in the first place, but it did and it agreed changes to the Bill which the Government have been so reluctant to approve that they just have not done it.

I hope that I am not taking my noble friend Lady Byford’s name in vain when I say that both she and I are suspicious as to whether the scheme in the Bill, backed up by guidance to local authorities, simply will not work, however thorough the consultation is. Amendment 7, to which I have put my name, asks, as my noble friend said, for the department to produce a report on whether the scheme has actually worked or not after two years. I have to say that I consider the amendment to be very mild, even though it presumes that legislation will follow if the report is negative, although it does not say so. That, of course, means primary legislation, and it will be some time before that becomes law, even if it gets approval from the business managers.

3 Feb 2015 : Column 588

Amendment 12 allows the Secretary of State a fall-back position, whereby, if the proposals in the Bill are not followed by local authorities, the Secretary of State can lay regulations to make rules according to which a local authority shall make decisions regarding the scheme. This will have two distinct advantages. First, it will reduce the number of appeals, which are likely to be much higher than the department currently envisages, because I suspect that most aggrieved applicants will appeal against the local authority decision on the basis that the latter has not followed the guidance. At the same time, it will cut out vexatious appeals because everyone will know what the rules are. In the event that this amendment finds favour with your Lordships, it would be necessary to have a further one at Third Reading specifying that the regulations will be by affirmative instrument.

Returning to my basic point, it is quite wrong for footpaths to oppress home owners by taking away the enjoyment of their close property and, to that extent, the Bill, imperfect as it is, may help.

Earl Cathcart (Con): My Lords, I spoke in Committee in support of the amendments in the name of my noble friend and I will do so again today.

I have three points. First, if you have a public right of way through your garden, you have lost your security, safety and privacy. Anyone can walk through your garden at any time of day or night. Their dogs may run loose, frightening your children, fouling your garden, chasing your pets and even killing your chickens or cats, but there is little or nothing you can do about it. You may be subject to theft or vandalism. Secondly, it costs several thousand pounds to divert a path, but it costs absolutely nothing to object to it. This increases the cost to the applicant dramatically, often beyond their reach. We should be trying to make it easier for the applicant. Thirdly, as my noble friend Lady Byford mentioned, the law as it currently stands does not allow home owners to apply for permission for gates or stiles. Without these, you cannot allow your pets to be left, or allow your children to play, unattended in your garden. This needs changing.

My honourable friend Tom Brake, speaking for the Government at Third Reading of this Bill, said:

“The Government acknowledge that for householders, farmers and others, an intrusive footpath can have a substantial impact on their quality of life or on their ability to run a business. We understand that while this is not a widespread problem, where it occurs it can cause severe difficulties, and in a significant number of cases people have been put through years of considerable inconvenience and stress”.—[Official Report, Commons, 23/6/14; col. 77.]

I could not agree more. I understand that, when the Bill was going through the other place, the Government were going to propose an amendment to rectify this but for some reason they did not. This House has a perfect opportunity to put that right.

My noble friend Lady Byford has also mentioned the concern that there is no presumption that the paths will be diverted away from gardens, houses and businesses. There should be. The Government say that there is guidance on this, but it is only guidance. Some councils comply with it, but too many do not. The answer is for the Government to put something in the Bill, and I hope that my noble friend will.

3 Feb 2015 : Column 589

Lord Grantchester (Lab): My Lords, legislation on public rights of way is complex, often archaic and certainly plentiful. I declare an interest as an owner of farmland in Cheshire over which there are a number of uncontentious footpaths.

In Committee, many of the issues behind the proposals in the Bill were examined. One of these was the question of procedures and costs involved in addressing the complexities highlighted by footpaths going through gardens and farmyards and alongside private homes, with the consequential privacy and safety concerns. I agree with the noble Lords that this is an important issue and the stakeholder group did address it. However, the measures in the relevant passage of the Bill should alleviate most of the problems. This is not to deny that there may be the further concerns to which the noble Baroness, Lady Byford, has drawn our attention.

In Committee, we were concerned that these measures and others should be subject to follow-up through a report to Parliament. They are, as I have said, very important measures and progress must be made. From the debate in Committee, it is clear that there are several channels of communication through which progress can be monitored and outcomes highlighted, and I am not sure whether there is a need for this proposed new clause to be in the Bill. The Minister at the time may find that a Written Statement would be entirely sufficient and satisfactory as a method of addressing this, but there may be others. The stakeholder working group can issue reports for deliberation. However, if progress is not forthcoming, then we shall certainly return to the issue.

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con): My Lords, like my noble friend Lady Byford and the noble Lord, Lord Grantchester, I declare an interest as the owner of a farm across which there are public rights of way and, indeed, as a user of public rights of way myself.

We have considerable sympathy for those people, mentioned by my noble friend Lady Byford, who face problems with a public right of way that passes through their farm or garden and who feel that the system has let them down or conspired against them. Where these cases occur, people may indeed experience acute problems, but they are comparatively few and we should ensure that any changes we make to legislation are proportionate to the extent of the problem.

Rather unconventionally, I will go in reverse order, and turn first to Amendment 12, in the name of my noble friend Lord Skelmersdale. I understand that the intention behind the regulation it proposes is to enable the creation of rules prescribing how local authorities must make decisions on applications to divert or extinguish rights of way. We believe that the combined effect of our existing measures, which have cross-party support in both Houses, will make a significant difference and that we should not legislate further before seeing how these measures work out in practice. I will explain why that is.

There is clear agreement among stakeholders on the working group that the major difficulty for landowners is in getting local authorities to make a diversion or

3 Feb 2015 : Column 590

extinguishment order in the first place. Our plans to implement the right to apply for such orders are designed to overcome this. The right to apply will enable a landowner to make a formal application for the diversion or extinguishment of a public right of way. With that will come the right to appeal to the Secretary of State if the authority rejects the application or fails to act on it. Therefore, local authorities will no longer be able to ignore requests or dismiss them out of hand; they will be obliged either to make an order or to be prepared to justify their reasons for not doing so on appeal to the Secretary of State.

The right to apply will be extended to land-use types other than those for agriculture, forestry and the keeping of horses—for example, to private residential gardens. The right to apply will be supplemented by guidance that will effectively act as a presumption to divert or extinguish public rights of way that pass through the gardens of family homes, working farmyards or commercial premises where privacy, safety or security are a problem. I suggest that guidance such as this, which has been introduced though agreement among stakeholders, is far more likely to prove successful in practice, regardless of whether it has statutory backing.

I realise that there is the further hurdle of getting an order confirmed. However, my noble friend Lady Byford quoted my words in Committee to the effect that, according to Ramblers, which keeps accurate records of these matters, of the 1,257 diversion orders which have reached a conclusion in the last three years, 94% did not attract any objections. Of the 6% that did, less than 1% were not confirmed following submission to the Secretary of State.

In addition, the guidance will give authorities more scope to confirm orders made in the interests of the landowner in circumstances where a right of way may cause hardship because it goes through the garden of a family home, a working farmyard or other commercial premises where privacy, safety and security are a problem. In light of the guidance, authorities would have to put forward compelling reasons for not confirming an order in such circumstances.

We appreciate, and my noble friend will be the first to point out, that the numbers of orders confirmed without objections may fall under the right to apply. Each case will depend on the merits of the proposal. However, given the statistics I have outlined, we believe that the combination of the right to apply and the guidance will have the desired effect and that we should not rush to legislate before giving these measures a chance to work in practice.

6.15 pm

Lord Spicer (Con): I thank the Minister for giving way. The problem with this is that we have been hearing it for 40 years. I was chairman of something called the Spicer committee 40 years ago, which comprised the National Farmers’ Union, the Government and a whole lot of other bodies. We came up then with what we thought were solutions to try to make it easier for the applicant. Forty years later, we are still in the same position and still being told roughly the same stuff by the Government. This is why it is so difficult to believe what is coming out now.

3 Feb 2015 : Column 591

Lord De Mauley: I understand my noble friend’s point, but I hope he would be prepared to give the provisions in the Bill a chance. They are actually quite far reaching. With great respect to my noble friends, who have raised some important points, we are talking here about points which, in their eyes, would make yet further improvements. I think my noble friends acknowledged in their speeches today that there are already some good, positive changes in this Bill. I hope my noble friend would accept that.

Moreover, under the right to apply provisions, the Secretary of State will be the confirming authority for all disputed orders. The Government will therefore be in a prime position to promote implementation of the revised policy set out in the guidance by setting a clear precedent with any cases that come before the Secretary of State. In addition, the Government will work with rights of way officers, through their professional organisations, actively to promote to local authorities the existing guidance on diversion or extinguishment of rights of way which pass through gardens, farmyards or commercial premises.

To return to the amendment, the existing legislation on extinguishments and diversions, in Sections 118 and 119 of the Highways Act 1980, already sets out rules, which Parliament has debated and agreed, under which local authorities make decisions on applications to divert or extinguish rights of way. My noble friend’s proposed regulation-making power would, in effect, be a power to make new rules by delegated legislation and therefore without full parliamentary scrutiny. I suggest that it is highly unlikely that we would get stakeholder agreement to such a measure, knowing that this was the purpose behind the amendment.

Lord Skelmersdale: Will my noble friend give way? I thought, or at least I hoped, that I had made it quite clear that, if my noble friend accepted my amendment—which, clearly, he is not going to—it would be necessary to have a Third Reading amendment to make these regulations by affirmative order. In that case, of course, they would have parliamentary scrutiny.

Lord De Mauley: My noble friend makes a fair point.

It has been clear throughout the Bill’s passage that Parliament agrees with our view that that the consensus should be supported by keeping the rights of way package as it stands. I spoke to the stakeholder working group at its latest meeting and learnt at first hand that its overriding aim is to get the package implemented intact. We are determined that the consensus should not be put at risk by adding measures that have not been discussed with stakeholders and, of course, not consulted on.

Amendment 7, tabled by my noble friend Lady Byford, is intended to ensure that the Government review the success or otherwise of these measures after their implementation. That is an absolutely laudable aim and one that, in any event, would be a matter of good practice. However, although we agree with the aim of evaluating the effectiveness of the right to apply and associated guidance, I hope that my noble friend will agree that it would not be appropriate to

3 Feb 2015 : Column 592

use a deregulatory Bill to impose on the Government the statutory burden of making a formal report. That would run contrary to the aims of the Bill.

In the other place, the Government have already put on record that the stakeholder working group’s advice will be sought on the constitution of a review panel to advise on how well the reforms are working and whether any further measures need to be taken before the cut-off date. I am happy to put on record now that we will ensure that any arrangements to review the rights of way reforms will include an assessment, within two years of implementation of the reforms package, of how effective the right to apply provisions and the accompanying guidance have proved in getting local authorities to respond positively to applications for public path extinguishment or diversion orders.

The proposed assessment will include an opportunity for people to provide evidence to the stakeholder working group either through wider consultation outside the group or a call for evidence. The assessment will send a message to authorities that the Government are determined that the new policy should work and that if guidance does not bring about sufficient change, we will consider introducing further measures.

My noble friend Lady Byford returned to the issue that we discussed in Committee about the authorisation of gates. We recognise that an amendment to extend the powers to authorise gates and similar structures could be helpful to people with a right of way going through their premises or garden. The stakeholder working group discussed this at some length. While there was agreement about the proposal in principle, the group has not yet arrived at a formulation on which it could agree. Those measures have not, unlike the rest of the package, been widely consulted on and are therefore not necessarily agreed by wider stakeholders, whose views we also have to consider.

Concerns have been expressed by users of rights of way about the possible proliferation of gates and other structures across rights of way. Particular concern has been raised with me by equestrian groups in the stakeholder working group that I attended. They are worried about riders with disabilities who may not be able to dismount or who have difficulties in opening and closing gates without risk of injury to themselves or their horse. Since the House of Lords Committee stage of the Bill I have received correspondence expressing concern about the suggestion that the powers of local authorities to authorise gates should be further extended beyond those changes already being introduced by Clause 24.

My noble friend also raised the point about the right to apply not providing a presumption that paths will be diverted away from gardens, houses and businesses. We have covered that quite extensively. The guidance agreed by the stakeholder working group introduces a presumption that paths will be diverted away from houses and businesses. We believe that the guidance, combined with the right to apply, will have the desired effect. My noble friend also asked whether there should not be a time limit on making claims based on long use. The stakeholder working group has not been able to reach an agreement on that, but it will continue to keep it under review.

3 Feb 2015 : Column 593

On that basis, I hope that my noble friend will withdraw her amendment.

Baroness Byford: My Lords, although I am grateful to my noble friend for his full response to my Amendment 7 and for his acceptance that the review should take place two years after the Bill becomes enacted rather than after three years, as was originally proposed, I will read Hansard carefully—but this is indeed welcome.

I still have some concerns about the important ongoing work by the stakeholder working group. We get such few opportunities of such legislation coming before us in Parliament, when we have a chance to try to make sure that practicalities are overcome if they possibly can be—although that is not always possible. I hope that the stakeholder working group will continue to work closely together to try to resolve some of these issues. They are not impossible to resolve. My noble friend Lord Cathcart said that it is costly to apply for diversions. I gather that unopposed diversions cost about £2,000, but those that are opposed cost more than £8,000 and can be dearer. We need to keep that in the back of our minds when we are talking in fairly general terms about something that was a problem 40 years ago, to which my noble friend Lord Spicer referred.

Although there are improvements in this Bill, which I have publicly acknowledged, there are still things that need addressing. If that cannot be done within the Bill, I hope that the words that my noble friend the Minister has given me today will fill me with confidence rather than suggesting that he thinks that I have got it wrong.

We have another stage. Other Peers have taken part in this short debate: my noble friends Lord Skelmersdale, Lord Cathcart and Lord Spicer, as well as the noble Lord, Lord Grantchester. The noble Lord has, as I do, footpaths across his land and we are happy to have them. Ours are not contentious, but there are people—and 1% is 1% too many—who are having a rough time, because the various interested bodies cannot get together to try to reach a proper outcome to something that I hope is not an insurmountable problem. It may seem a huge problem to those who want the right of way; and those who say that if they were to divert it, that would be of benefit to everybody. Perhaps the working group could attach a little more vigour to some of the outstanding issues.

I thank my noble friend and other noble Lords who have taken part in this debate, and, with my noble friend’s words saying that within two years there will be a review panel rather than a report, I beg leave to withdraw the amendment.

Amendment 7 withdrawn

Clause 25: Applications for certain orders under Highways Act 1980: cost recovery

Amendment 8

Moved by Lord De Mauley

8: Clause 25, page 22, line 32, leave out “or (3)(b)” and insert “, (3)(b) or (5)”

3 Feb 2015 : Column 594

Lord De Mauley: My Lords, government Amendments 8, 9, 10, 11, 13, 14 and 15 in this group are minor and technical in nature and do not make any substantive change to the policy of Clause 25 or Schedule 7. They make in fact the following changes.

One is a correction to new Section 54C(3) of the Wildlife and Countryside Act 1981, which is concerned with modification consent orders, to make any path or way resulting from such an order “maintainable at public expense” instead of making the surveying authority responsible for its maintenance. This small change in terminology makes the provision consistent with existing rights of way provisions and avoids creating any uncertainty among practitioners. There are extant provisions that enable diversion and extinguishment orders to be severed, where only part of an order is subject to a valid objection. Another change in terminology substitutes “parts” for “modifications” in these provisions. That is because “modifications” has a very particular meaning in relation to definitive map modification orders and is best confined to that context.

The final change is to enable the Secretary of State to decide which procedure to use in deciding appeals and objections on rights of way diversion and extinguishment orders. This will make the procedure consistent with that for recording rights of way. It will enable the Secretary of State to opt for the exchange of written representations rather than a hearing or public inquiry and avoid unnecessary and costly public inquiries where there is no justification for them.

My noble friends Lord Greaves and Lord Bradshaw have amendments in this group, but it is appropriate that they introduce them before I respond. I beg to move.

Lord Bradshaw (LD): My Lords, the problem we are trying to deal with is the unauthorised use of green lanes by 4x4 vehicles and trail motorbikes. This problem is getting worse, making many rights of way impassable and creating an intrusive noise nuisance. Present legislation is entirely inadequate for dealing with this problem. Local authorities which are short of resources are unable or unwilling to commit to dealing with an outdated and burdensome situation.

When the Peak District National Park and other national parks were formed, the use of rights of way by 4x4 vehicles and trail motorbikes for recreational purposes was not foreseen. At present there is no simple way of dealing with this obstructive and noisy nuisance and some fresh way must be found to deal with a problem that prevents walkers and riders enjoying the countryside. The purpose of any new legislation would be to create a right of appeal where a highway authority fails to make a traffic regulation order that excludes motor vehicles from a byway open to all traffic, and other green lanes, where there is evidence that such an action is necessary. At present, local communities have no redress if their highway authority refuses to act.

6.30 pm

New legislation is needed to establish the right-of-way status of 3,000 miles of unsealed, unclassified highways in England—the country’s green lanes. Under current

3 Feb 2015 : Column 595

legislation, in 2026 they are all destined to go into permanent limbo. That is because 2026 is the legal cut-off date for establishing rights of way under the CROW Act 2000. Those 3,000 miles of green lanes will become bridleways, footpaths or restricted byways. Motor vehicles will be able to go on using and damaging them. The new legislation we seek would not affect the current legislative framework for motorsports or other off-road use that takes place by landowner permission. I am not seeking to curtail that.

The Government have accepted that the destruction of the country’s green lanes by motor vehicles is a problem and that a solution must be found. They have now committed to setting up a stakeholder working group to try to find a solution. While this is a welcome first step, we should listen very carefully to the people who contributed to the previous debate, stressing that stakeholder working groups that cannot come to an agreement because of disagreement between the parties must somehow be made to make a majority recommendation so that the matter can be taken forward.

Attempts to date to solve the problem through voluntary measures have already been tried and have failed. The matter is becoming urgent for many reasons, not least the approach of 2026. The only way to save green lanes from destruction will be to legislate. But I would welcome hearing more from the Minister about the Government’s current thinking on the composition of the motor vehicles working group that they say will be set up. When will it start its work? What timeframe will it work to? What are its terms of reference? Will it be allowed to make majority recommendations? When can we expect to see full public consultation?

Lord Cameron of Dillington (CB): My Lords, I have added my name to Amendment 17. I declare an interest as a farmer in Somerset with rights of way on my land. Like the Minister, I am a great enjoyer of our rights of way across the country.

I will not repeat all I said in Committee about this being a deregulatory amendment, but it does have the potential dramatically to reduce the administrative work of the local highway authority while greatly simplifying the law and the lives of others. It also has the potential to reduce the onerous duty to repair the surfaces of all highways on the part of local highways authorities, which we know are extremely strapped for cash at the moment. The fact that most local highway authorities pay virtually no attention at all to their duty of repair on anything less than an adopted highway is no excuse for us not to try to minimise their responsibilities.

Anyone who has seen pictures of green lanes from all around the country, particularly the pictures of green lanes in the Lake District National Park that have been circulated recently, will be in no doubt that regular motorised traffic on those green lanes is not compatible with fair enjoyment of the countryside by walkers, bicyclists and riders. Something has to be done and the wrongful assumption that motorised vehicles automatically have rights on all those green lanes needs to be rejected. If they have rights, I and others believe that it is their responsibility to prove them.

3 Feb 2015 : Column 596

I recognise that the Minister proposes the setting up of a motor vehicle working group in response to the amendment. I am sure that is not a way of pushing the whole issue into the long grass. I have every expectation that he will respond favourably to the amendment or at least its intent. I also realise that we have to tread softly, softly on this matter. All I would say is that this long-lasting sore on the face of responsible access to the countryside has to be firmly gripped, and soon; or, as the noble Lord, Lord Bradshaw, said, come 2026, which is just 11 years away, we will still find ourselves floundering around in the mud, both literally and metaphorically—literally on the ground and metaphorically, administratively in county halls—with no greater clarity than today. Defra has already acknowledged that the 2026 cut-off date cannot be met under the current circumstances—it is 11 years off and it cannot be met—due to the number of green lanes and the lengthy processes involved. We have to find a better way forward and this amendment, or something like it, is a very reasonable way of achieving that.

Lord Skelmersdale: My Lords, I understand the rationale behind what the two noble Lords have said on the amendment but I would add a slightly cautionary note. Although we all enjoy walking on footpaths and we get irritated by bicycles, quad bikes, Land Rovers, et cetera, on paths that are not BOATs, there are those, such as disabled people, who are able to enjoy such footpaths only through the use of some sort of propelled vehicle. Although I readily understand that there is a need for control, I do not believe that it should be absolute and I look forward very much to listening to what my noble friend the Minister has to say on the working group that is proposed.

Lord Judd (Lab): My Lords, I very strongly support Amendment 17. I thank the noble Lord, Lord Bradshaw, for putting it forward. It is constructive, public-spirited, responsible and sensible—just like the old Bradshaw’s timetables.

There is one caveat I want to make. There is an issue that we all have to face. Those of us who are able to enjoy remote and attractive areas must remember that there are very many people for whom this is not a practical possibility because of their physical condition. We all need to get our minds round the issue of how we can improve access for such people so that they are able to share in something that we all regard as precious. Of course, that has to be done by consultation and, if necessary, appropriate legislation and regulations, but it should be done in a sensible way, with the full co-operation and backing of the authorities that are responsible for a particular piece of land.

Having said that, the noble Lord put it in very moderate language but what he revealed is actually a nightmare. At times it can be described only as vandalism—if it were to happen in an urban area, there would be an outcry—despoiling and ruining decent, attractive countryside and making a hell for some people who are trying to enjoy that countryside in a quiet and peaceful way. In fact it can be quite a frightening experience for those who may be able—I count myself among those now—to just about make

3 Feb 2015 : Column 597

those areas, but who may have certain disabilities and so on which make them feel vulnerable. That is not least the case for those with loss of hearing, for whom the sudden noise and disturbance of these vehicles can be an unpleasant experience.

The issue is mainly about what is being done to places of special significance, scenically and in other ways. It is also about this “couldn’t care less” attitude—that it is left to somebody else to deal with and clear up, which is utterly selfish as well as being vandalism. We should all recognise that, and wish godspeed to the noble Lord’s amendment, because it is vital. I should of course declare an interest as patron and former president of Friends of the Lake District, and as vice-president of the Campaign for National Parks, but I assure you that the remarks I have made this evening come from the heart in terms of being a resident of one of the areas that has quite a number of beautiful things that can so easily be ruined and destroyed.

Baroness Byford (Con): My Lords, I will add a few words on this amendment, because it is at the very heart of enjoyment of the countryside, and the contributions we have heard from around the Chamber tonight rather reflect the challenges that we place on our countryside. From the perspective of disability access, which my noble friend mentioned, it is hugely important that people who are not able to walk freely, or cannot get around in the way they used to be able to, have access to the countryside. But due to the sort of damage to the green lanes that my noble friend Lord Bradshaw was talking about, they would not be able to get through those anyway. In many cases the countryside is being ruined as the green lanes have become bogs, and the people that do it have very little regard for the enjoyment and pleasure of anybody else.

There are also landowners who are quite willing to open up areas of their own land and make it available to those who wish to follow the sport of 4x4s, who get a thrill from that sort of activity where it is well organised. But it is the result of the devastation that is caused to some of our most beautiful areas that we are trying to address within this amendment. I had not looked to speak in this debate, but I am moved to do so because if we are going to have another working group looking at it, there are clear aspects that need to be taken into account. It is not just a question of saying to people who enjoy the sport of 4x4s, “You can’t do it”, but that they can and that there should be areas in which they can do it; nor saying to people who are disabled who need to have motorised access to the countryside, “You can’t get through because we are going to ban everything”. There is a balance to be found in the way that this is looked at.

I do not know what the Minister’s response will be to this amendment, but I hope that he is able to give some words of encouragement to the setting up of the working group and that it specifically looks at separate issues, because it is all too easy to say, “That will cover the whole”, when it clearly will not. I will again listen with interest to what the Minister has to say on this, but I hope we clearly recognise the needs of those who would like to access countryside but cannot, and those who would like to use 4x4s in a particular manner.

3 Feb 2015 : Column 598

One further thing to add to this debate is the whole question of the countryside and of our wildlife. Not too much takes place on that; I suspect that these issues have been driven aside. Another aside to add is that those of us involved in stewardship and single farm payments know very well where we have got the six-metre strips or whatever it might be. One is very careful as to what motorised vehicle goes over that at all because of the damage to the wildlife and its sustainability. I am delighted that this amendment has been raised, and I look with interest to the response we get from the Minister.

6.45 pm

Lord Skelmersdale: My Lords, would my noble friend accept another thought? As she said, she is a farmer but not a farmer on—for example—the Quantocks, or Exmoor, or further north in Cumbria like the noble Lord, Lord Judd, although I believe he is not a farmer; none the less he is a resident. They have to get around their land on some sort of vehicle, whether it is a tractor or a quad bike.

Baroness Byford: Indeed. I am so sorry I did not include quad bikes; they are a normal sort of motor vehicle that is essential to farming in many areas. We do not happen to have one on our farm, but we do not have the sort of access being debated this afternoon. My noble friend is quite right to reflect on how important that access is.

Lord Grantchester: My Lords, the stakeholder working group is to be commended on finding and building consensus around the main interested groups to recommend the changes to the Bill as a package, to streamline the process, and to make quicker progress with less contention and confrontation, even though there may appear to be plenty of time until 2026, the cut-off date under the CROW Act 2000. We agree with the measures in the Bill as a balanced approach to speed up the process. We wish to retain the consensus and build on it. I am grateful to the Government for listening to our views and those of many others, reflecting on the proposals and coming forward with these further technical clarifications. We agree that the stakeholder working group must be retained following this excellent report, and its remit extended to experience more contentious, protracted issues. Indeed, in the other place, the Minister agreed to set this up.

The problem raised through Amendment 17 is one that needs addressing, but not in the context of this Bill. This is not to deny that there are issues, costs and damage created by the use of off-road all-terrain vehicles. However, they must be addressed in the context that 62% of byway traffic is due to land management and dwelling access, with the remaining 38% due to recreation. The damage done by this 38% cannot be denied, and the noble Lords, Lord Bradshaw and Lord Cameron, and my noble friend Lord Judd have highlighted this tonight. But 70% of byways are without drainage, and much damage can be done by farm vehicles, water erosion and poor maintenance. The stakeholder working group must be allowed to examine the issue to find solutions first, to be arrived at through dialogue, a

3 Feb 2015 : Column 599

process more likely to result in less conflict, more compromise and thus acceptance, reducing the need for enforcement. Ministers could then make better informed decisions. These measures relating to public rights of way will bring benefit to all interests—land owners, local authorities and the public, even with their competing interests.

Lord De Mauley: My Lords, in what is an understandably contentious debate about the recreational use of motor vehicles on unsurfaced routes in the countryside, and particularly inside national parks, we are addressing similar issues to a debate we had in Committee. We sympathise with genuine concerns about the problems that can arise from the recreational use of motor vehicles on unsealed roads, encapsulated in Amendment 17 by my noble friend Lord Bradshaw. I have seen some of the pictures that the noble Lord, Lord Cameron, referred to. We agree that this is an issue which needs to be tackled and some means of resolution found. The Government’s published response to the Joint Committee’s report of pre-legislative scrutiny on the Deregulation Bill said as much, but also recognised that this Bill is not the right mechanism for doing so. The issue of recreational off-road motor vehicle use is an emotive and contentious one, where one person’s pleasurable pastime is anathema to another. The noble Lord, Lord Grantchester, said that by no means all damage to unsealed roads and tracks is by the recreational use of motor vehicles, and I broadly confirm the figures that he mentioned.

We believe that the best way to review policy on the recreational off-road use of motor vehicles is for it to be based on the stakeholder working group model. I am grateful to noble Lords who echoed those sentiments. That approach has proved to be successful, as demonstrated by the stakeholder consensus on the rights of way reforms package, of which the clauses in this Bill form the major part. This has resulted in mutually beneficial solutions being arrived at through dialogue and negotiation.

The Government plan to set up such a motor vehicle working group, with an independent chairman, as soon as possible after the Deregulation Bill has completed its passage. My department will work with Natural England to organise a secretariat, and it will invite stakeholders with the relevant experience and expertise to join the group. We propose to invite interested organisations to put forward their suggestions for suitable members. In response to my noble friend Lord Bradshaw’s specific question, I say that a key principle is that the group should contain a balance of interests across all sectors. We plan to have members who can represent the interests of national parks, areas of outstanding natural beauty, national trails as well as all the different types of users of rights of way.

Within such a group, recognised professionals can explore all the viable possibilities and their likely consequences. Resolutions arrived at in this way, based on agreement and mutual interest, are likely to result in less conflict and reduce the need for enforcement. Solutions will work best if based on compromise, and I have been assured by those representing the anti-vehicle groups that it is not their intention to change the

3 Feb 2015 : Column 600

legislation in relation to allowing motor vehicle trials and competitions. I welcome this approach, as I do the points made by my noble friend Lord Skelmersdale and the noble Lord, Lord Judd.

My noble friend Lord Skelmersdale raised a point about access for disabled people to the countryside. This is a complex issue with many different aspects, which is why it needs to be considered carefully by a working group and fully consulted on.

My noble friend Lord Bradshaw asked about timing. I have said that the stakeholder working group will start its work upon completion of the passage of the Bill. We will set a target time for the group to report. The original stakeholder working group took 18 months to report and I believe that a similar timeframe is realistic for this group to work to. I can confirm that a public consultation will follow the report.

While the group needs to have a clear remit, it will be invited to come up with its own terms of reference. I expect that it will look at all the issues in the round and include assessments of any economic and social benefits of the current recreational use of unsealed roads as well as an assessment of the costs and burdens. On that basis, I hope that my noble friend Lord Bradshaw will be prepared not to press his amendment.

Lord Bradshaw: I thank the Minister for what he has said, but what was missing was the question of what happens—

Lord Gardiner of Kimble (Con): My Lords, it is my noble friend Lord De Mauley’s amendment that leads this group, so I rather think that my noble friend Lord Bradshaw is not in a position to make the speech that he is proposing to make.

Amendment 8 agreed.

Schedule 7: Ascertainment of rights of way

Amendments 9 to 11

Moved by Lord De Mauley

9: Schedule 7, page 118, line 38, leave out from beginning to “(including” in line 43 and insert—

“(3) Where a modification consent order takes effect, any path or way, or any part of a path or way, which is shown in a definitive map and statement in consequence of the order or any special order combined with it under section 54B(5) is maintainable at the public expense”

10: Schedule 7, page 118, line 46, leave out “the” and insert “an”

11: Schedule 7, page 119, line 1, leave out from “effect,” to “and” in line 3 and insert “a path or way, or part of a path or way, would be maintainable at the public expense by virtue of subsection (3);”

Amendments 9 to 11 agreed.

Amendment 12 not moved.

Amendments 13 and 14

Moved by Lord De Mauley

13: Schedule 7, page 138, line 19, leave out “modifications” and insert “parts”

3 Feb 2015 : Column 601

14: Schedule 7, page 138, line 21, leave out “modifications” and insert “parts”

Amendments 13 and 14 agreed.

Amendment 15

Moved by Lord De Mauley

15: Schedule 7, page 138, line 42, at end insert—

“( ) In that paragraph, after sub-paragraph (4) (as inserted by sub-paragraph (4) of this paragraph) insert—

“(5) In the case of an order relating to England, the Secretary of State may, instead of affording a person an opportunity of being heard as mentioned in sub-paragraph (2)(b), (2A)(b) or (3)(b), afford the person an opportunity of making representations (or further representations) to a person appointed by him for the purpose.

“(6) Where the Secretary of State acts under sub-paragraph (5) by affording a person an opportunity of making representations (or further representations) instead of an opportunity of being heard as mentioned in sub-paragraph (2)(b) or (3)(b), the reference in sub-paragraph (2) or (as the case may be) (3)(c) to the report of the person appointed to hear representations or objections is to be read as a reference to the report of the person appointed under sub-paragraph (5).””

Amendment 16 (to Amendment 15) not moved.

Amendment 15 agreed.

Amendment 17 not moved.

Clause 44: Household waste: de-criminalisation

Amendment 18

Moved by Baroness Hanham

18: Clause 44, page 37, leave out lines 28 and 29

Baroness Hanham (Con): My Lords, I shall speak also to Amendment 19 and in doing so remind the House that I am co-president of London Councils. It is on behalf of London that I shall speak this evening.

Clause 44 changes the penalties on a national basis for waste collection. It amends provisions in the Environmental Protection Act 1990 on waste collection and waste receptacles. It changes the system from one which was subject to a fixed penalty notice regime—that is, a system based on the criminal law—to one based on the civil processes of a penalty charge notice system. This change seems wholly proportionate and sensible, and I have no disagreement with it.

However, to make this a national system, two provisions have had to be put in the legislation to bring London into the whole pot; namely Clause 44(6) and Schedule 12. Both of those have had to be inserted into this part of the legislation to ensure that it is a national scheme. The reason is that London is already running such a scheme, based on the amended Environmental Protection Act and under the London Local Authorities Act 2007.

This system has been running perfectly happily. It is a decriminalised penalty notice system based on the normal penalty notice way of doing things. It has an appeals system. It is managed by a joint committee of London Councils. It has been the forerunner of what the Government are now trying to do. The system is now recognised by everybody who lives in London.

3 Feb 2015 : Column 602

I do not know whether people who are not involved in local authorities realise that it is not always easy either to identify somebody who is causing an infringement of the law or to make sure that they cough up when they are charged or recognised as having done so. As the system has been running perfectly successfully, London wants to stay that way.

My first reason for not wanting to see London included in the processes set out in the Bill, therefore, is that its system has been running perfectly well. The second is the bureaucracy that surrounds the Government’s proposals. There are four pages of legislation to tell enforcement officers how to issue a penalty charge notice. This is meant to be a Deregulation Bill, not a “pile it on high” Bill. With a penalty charge notice—as we all know, because we all get them from time—you receive it, you sigh deeply, you think about throwing it in the bin but, largely, you pay it because it tells you that if you pay up in two weeks you can do it more cheaply than if you wait for four weeks. If you feel really brassed off about it, you appeal. The process is neither very long nor very complicated, but there are four pages of legislation to introduce this new national system.

7 pm

Before issuing the notice, the enforcement officer, who has nothing else to do with his time, will have to write a note to the intended to say that he is intended, or to warn him that he is going to, perhaps, issue a penalty charge notice. Then the person who is going to receive it has a right of appeal against the fact that it is going to come. Then, the officer has to issue a notice of an intent to issue the penalty charge notice, so in my calculation, we are now about eight weeks down the line. He then can have the penalty charge notice and he can put that; but the offender has the right of appeal to that as well. It is—in very few words—Byzantine. What system or local authority would want to get caught up in having to provide those processes? London certainly does not.

Why should London not continue to be exempt from that bureaucracy and why, having led the way for many years on a system which, as I said, has been recognised and well trialled, has it been scooped up into this scheme at all? It has been deliberately included: there is no question that this was a mistake. It has deliberately been included because of those two specific aspects of Clause 44(6) on page 37 and Schedule 12. That schedule runs to four pages of legislation as well, because it replicates everything that is on the four pages that we have before us.

Will the Minister, before Third Reading, sit down with us, or with London Councils, and with other Ministers, to see whether we cannot get this system changed, so that London is able to carry on doing what it is doing? It will not be doing anything that is not part of the national decriminalising system, because it has been doing that already. It would just like to carry on issuing penalty charge notices in a way that is simple to understand and that everybody can go along with. It really is an enormous mistake to try to bring London in; it is wholly unnecessary.

If the rest of the country wants to or has to conform to the legislation, so be it. In many, many occasions, under the London Local Authorities Act, London

3 Feb 2015 : Column 603

differs from other parts of the country. That is what that Act is about: to give London the ability to do things that it needs to do on the basis of London’s necessities. I ask the Minister to consider meeting us again to discover whether we cannot, before Third Reading, have London removed from this process. It will not do anything different from the rest of the country: it will be part of it, but it will do it in its own way. I beg to move.

Lord Tope (LD): My Lords, I support my noble friend Lady Hanham very strongly and very warmly. I have no particular London interest to declare now, other than that as a resident of London for many years. I was until last May, when I took voluntary retirement, a London borough councillor for 40 years and leader of the council for 13 of those years. If I learned anything from that experience, it was not to mess around with the waste collection system unless it really needed it.

The very simple question to the Minister is: why do the Government feel that London’s system—which, as far as I am aware, has worked extremely well for the last six or seven years and meets all the Government’s requirements in this Bill—is so in need of change that it requires what is in effect eight pages of primary legislation, if you include what is in the Bill and in the schedule, to correct it? What is so wrong with it? The current system is decriminalised and has an appeals system. In fact, it is working so well that there has never actually been an appeal on waste, but the system works well because it is the same or a similar system to that used for parking appeals. There have been just a few parking appeals over the years, so we can say that the system works well and would work well should there ever be an appeal within the waste system.

The other purpose may be to bring London into line with the rest of the country. Why is that necessary? As my noble friend said, there are many issues—two of which we will be discussing next week—on which London has different and separate legislation and provisions to those of the rest of the country. This is one that has existed since the 2007 Act. As we have said, it has worked well and I am not aware of any difficulties, although perhaps we might be about to hear them, so why not leave well alone? This is a system that is tried and tested, is working well and is hugely less cumbersome, time consuming and cost consuming than that proposed in the Bill.

If the Minister is not in a position to agree to these amendments tonight, may I echo the request from my noble friend that he at least agree to meet with us, try to understand our concerns and see whether we can, at least, reach a sensible solution that does not bring such lengthy, cumbersome and unnecessary burdens on London, which already has a much better system that is working? This is not deregulation; it is excessive regulation and does not belong in a Deregulation Bill.

Lord Harris of Haringey: My Lords, like the noble Lord, Lord Tope, I do not have any current London government interests to declare, although I was the founding chair of the artist currently known as London Councils, which was then called the Association of

3 Feb 2015 : Column 604

London Government, for five years. I was a London borough leader for a number of years and an elected representative in London for 26 years, and for two—or perhaps four—years I was chair of a London organisation called London Waste Action.

I find Clause 44(6) to be quite bizarre, particularly in a Deregulation Bill. What I understand has happened is that the Government looked for a model of deregulating some of the complexities outside London, found that London had a system that worked and decided to replicate something like it for the rest of the country. However, because of some natural desire in the relevant government department to make things more rather than less complex, which this Bill is supposed to stop from happening, they produced a system that is more complicated than the London one. Then, for ease of simplicity and universality—quite against the principles of localism and devolution, which we understood the Government were in favour of—they decided to impose this more complicated system on London, even though London has a system that works perfectly well.

I frankly do not understand the logic of this. The model that exists in London has emerged through a London Local Authorities Bill, which was passed into legislation by Parliament; it is a locally determined scheme that decriminalises the system and provides a system of appeals which, as the two noble Lords who have spoken have indicated, has worked well since it was introduced. The Bill before us would sweep it away and replace it with a more complicated system, which would necessarily introduce a degree of delay. The process that the noble Baroness, Lady Hanham, has described—of forming an intent, telling someone that you might have an intent, then telling them that you have had an intent and giving them an opportunity to make representations and an appeal at each stage—is unnecessarily cumbersome.

The reality is that we are talking about people who are dumping waste. They do so—I have watched it happen, taken photographs and tried to get something done about it. They turn up late at night with a van and they dump a pile of waste somewhere, on the assumption that local authorities will sort it out. The reality is that this is not a process where you need this incredibly complicated system to deal with it. You simply need to pursue those who are offending. What we will create as a result of the Bill is something that will be more bureaucratic and slower, will cost more and will go against the principles of devolution, because it was a system developed by London local authorities in the first instance.

Waste is a big matter—as the noble Lord, Lord Tope, said, “Never go against issues of waste”—and is the third-largest item of expenditure within local authorities. It is a massive part of the business of local government. Here we have a scheme that was developed by London local authorities and that is working well. Now the Government want to come in heavy-handed and against the principles of deregulation and devolution, and impose a complicated, overly bureaucratic and expensive system.

I am sure that the Minister will recognise that Clause 44(6) has crept in by accident, along with its accompanying Schedule 12, and agree to the amendment of the noble Baroness, Lady Hanham, and simply take

3 Feb 2015 : Column 605

them out of the Bill so that we can allow the current arrangements to continue. However, if he does not have the authority to agree that tonight, I hope that he will meet with the noble Baroness, myself and others who might be interested, along with London Councils, so that there can be a proper discussion about this before we get to Third Reading. It can then be remedied at that stage, either by the Government or perhaps by the noble Baroness, Lady Hanham, introducing a similar amendment and putting it to the vote.

Lord McKenzie of Luton: My Lords, I can be brief because of the powerful arguments made this evening by the noble Baroness, Lady Hanham, the noble Lord, Lord Tope, and my noble friend Lord Harris. The points they made were extremely telling. It is incumbent now upon the Government and the Minister to try and answer why an approach that is non-localist and bureaucratic should proceed rather than the current arrangements under the London Local Authorities Act 2007. What is the problem with London that this seeks to solve? It is incumbent on the Government to say.

The Government’s focus on this area is all very well, but is it the right priority at the moment? The Minister will be aware of current figures for recycling rates that show that for England household recycling has pretty much flatlined, with a very small increase in the last figures that I have seen. There are real concerns that recycling rates could potentially decline. I would have thought that the Government should be more worried about that than tying up these bureaucratic arrangements that have been so roundly challenged tonight. I hope the Minister will be able to explain very clearly why the Government are where they are on this.

Lord De Mauley: My Lords, I believe that there is broad political consensus that Clause 44 is needed to introduce a fair system of penalties related to household waste collection in England. This new system will treat individuals more fairly than hitherto and deal effectively with those whose behaviour has a negative impact on residents’ local neighbourhoods, such as leaving bin bags on the street for days on end.

The clause removes the current criminal sanctions available under the Environmental Protection Act 1990. The system we propose means that fixed penalties of between £60 and £80 will be available if a person does not present household waste as required and this causes a nuisance or is detrimental to the locality. The clause introduces a “harm to local amenity” test. Civil sanctions will be available to deal with behaviour such as putting waste out in a way that causes obstruction to neighbours, attracts pests, unreasonably impedes access to pavements or is an eyesore.

In Amendments 18 and 19, my noble friend proposes to retain a parallel system in London. We want to change the law so that only people causing real problems for their community will get punished—for example, people leaving bin bags on the street for days on end. The new test of causing harm to local amenity is designed to ensure this. My noble friend’s amendment would enable London boroughs to bypass this important safeguard. That would mean that if a London resident

3 Feb 2015 : Column 606

happened to leave a bin lid open or if someone threw the wrong rubbish into someone else’s recycling bin then the householder—that is, someone else—could be punished, in London.

We do not think it appropriate for people to be penalised for a first-time mistake or someone else’s careless action. They should be told what they have done wrong and have the opportunity to rectify their errors. Clause 44 introduces these changes to the Environmental Protection Act 1990. I am confident that this will not add significant burdens compared to how the current arrangements operate in practice. We know that many authorities already communicate well with their residents and seek to educate them if they have difficulties with collection requirements.

7.15 pm

Lord Harris of Haringey: Can the Minister tell us how many instances of the cases he has described have led to action under the London local authorities scheme?

Lord De Mauley: I am quite happy to do that. If I cannot do so during this debate, I will let the noble Lord know whatever information I can find for him.

Clause 44 would ensure that this best practice is adopted and that additional safeguards for the individual are available across all boroughs.

I understand that my noble friend is concerned that the process of issuing penalties will take too long. We need to get the balance right between protecting individuals’ civil liberties and dealing with behaviours which damage local neighbourhoods. We intend that this is reflected in legislation. Since the Deregulation Bill was first published in draft, we have amended Clause 44 so that local authorities will not have to issue multiple warnings to people who repeat the same behaviour of causing harm to the local amenity within a year.

We also believe in a fair and measured approach to penalties. A shoplifter committing a first offence may be issued with a £90 penalty notice for disorder. My noble friend’s amendment would levy penalties of £110 for mistakes and carelessness with Londoners’ bins. Clause 44 allows us to set the level of penalties at between £60 and £80 because we do not believe such mistakes and carelessness should be penalised more heavily than shoplifting. I understand my noble friend’s focus on London and know she would like the city to be treated as a special case. However, other cities in England have, for example, high-density housing, transient populations and student populations. I am sure she would accept that a proportionate, fair approach should apply throughout England.

My noble friend asked why the clause needed to be so wordy. We appreciate that the clause and the schedule are long and look complicated. There are two reasons for that. First, we want to be clear about the process that local authorities must go through as we do not want householders to be penalised for a first-time, inadvertent mistake. Secondly, we are looking to align two different systems, set out in the Environmental Protection Act 1990 and the London Local Authorities Act 2007.

3 Feb 2015 : Column 607

To summarise, this clause as it stands will introduce the protection that a household needs from being punished for a simple mistake or for people throwing the wrong rubbish into someone else’s bin. It will align all of England with a sensible approach that keeps residents informed and levels of penalties proportionate.

My noble friend Lord Tope asked whether I would be prepared to meet him about this, and the noble Lord, Lord Harris, asked the same question. Of course I would be prepared to do that, but I would not want to raise any expectation that the Government will change their position on this. I ask my noble friend to withdraw her amendment.

Lord Tope: Is the Minister able to answer the question that the noble Lord, Lord Harris, put to him about the number of prosecutions? As I understand it, he does not have that information to hand. The fact is that in the six or seven years of operating the scheme there has not been one single appeal against the issue of penalty charge notices. Would he conclude, as I do, that that suggests there have been very few issued and even fewer judged to have been unfairly issued?

Baroness Hanham: My Lords, I originally put the question to my noble friend of whether he would be prepared to meet us. He said he will and I thank him for that. I will take up his offer as soon as we can so that we can try and get some sense into this before Third Reading.

I have stood in the same position as the noble Lord, Lord De Mauley, and I have at times thought that the brief in front of me was absolute rubbish. I have to say that I think that this falls into that category. This is not about one person putting a bit of rubbish into somebody else’s recycling bag. This is about bringing into the whole country a decriminalised system of enforcement of waste in relation to receptacles, dustbins and whether or not you put your rubbish out in plain bags. If the five pages plus five pages of schedule on this legislation are intended to amend the problem of one unknown person putting one bit of rubbish into another bag, I think deregulation has lost its meaning.

I will not say any more. I am extremely disappointed with the noble Lord’s response. London has its own legislation on many fronts and it always acts responsibly. It has led the way with the decriminalisation of waste collection and changes to the Environmental Protection Act. It is not just being unfriendly and prosecuting people unnecessarily. The whole nature of what I was concerned about in the noble Lord’s briefing has been misunderstood. I hope that that was what it was. I look forward to meeting him and we will make sure that that happens. In the mean time I will withdraw my amendment.

Amendment 18 withdrawn.

Amendment 19 not moved.

Amendment 20

Moved by Baroness Thornton

20: After Clause 52, insert the following new Clause—

“Nursery schools: inclusion in schools trusts

3 Feb 2015 : Column 608

In section 18 of the Education and Inspections Act 2006 (alterations that may be made under section 19), omit subsection (4)(f).”

Baroness Thornton: My Lords, as we know, with this Bill we move from waste to education to farms to taxis and now to schools and nurseries. Amendment 20 would enable nursery schools to become full members of trusts and Amendment 21 would ensure that co-operative schools could establish an industrial provident society, should it be desirable, so bringing co-operative schools into line with other kinds of co-operative organisations.

By way of background, I should say that the first co-operative trust school was established just over five years ago. Few would have anticipated the extent of their growth: there are now around 700 co-operative trust schools and that figure is expected to rise to 1,000 by the end of 2015. In other words, more than 250,000 pupils in England now attend co-operative schools. The values of co-operative schools are drawn from the global statement on co-operative identity, which is recognised by the United Nations and forms the basis of co-operative law throughout the world. The co-operative values of self-help, self-responsibility, equality, equity and solidarity, together with the ethical values of honesty, openness, social responsibility and caring for others, have been seen by governing bodies to resonate powerfully with their schools.

Moving to a co-operative model provides a framework in which everybody with a stake in the school’s success—parents, teachers, support staff, local community organisations and pupils—have the opportunity to be involved in running it. There is a growing recognition that working co-operatively helps to avoid duplication and distraction, allows school leaders better to focus on the effective leadership of teaching and learning and raises standards. The value of this kind of collaboration and partnership working between schools was recently examined by the Education Select Committee, whose report highlighted the benefits that collaboration between schools brings, in particular where it is on the basis of mutual benefit.

Examples of these trusts can be seen in Cornwall, where over 100 schools have become co-operatives and are part of 13 trusts. Most of these are geographically based clusters, enabling small village primary schools to be part of a learning community with a secondary school that most of their young people will move to. In Leeds, a significant proportion of the city’s schools are already in co-operative trusts and others are in the consultation process.

The remarkable growth in co-operative schools has happened despite, not as a result of, current government policy. This demonstrates that the models developed under the pathfinder scheme programme following the 2006 Act under the last Labour Administration are enormously attractive to schools.

The reason why these amendments have been put down and I proposed them in Committee is that there is scope within the Bill’s intention—to,

“Make provision for the reduction of burdens resulting from legislation for businesses or other organisations or for individuals”—

3 Feb 2015 : Column 609

to correct two specific burdens on the development of co-operative schools and co-operative school trusts. The first amendment concerns nursery schools. Many co-operative networks and co-operative trusts are based on strong geographically based clusters. They have an all-through vision of education, raising achievement by supporting young people throughout their journey through the education system. Yet the 2006 Act excludes nursery schools from becoming parts of trusts. The amendment would correct this and, in effect, amend the 2006 Act.

Nursery schools are in many ways the most co-operative part of the sector, in relation to both their engagement with parents and carers and their pedagogy, as is reflected in the early years foundation stage. Enabling nursery schools to become full members of trusts or, indeed, academies would provide a vehicle for that parental and family engagement in early years to enthuse the trust to further develop the all-through vision of education essential for sustainable changes in achievement.

The second amendment seeks to amend the School Organisation (Requirements as to Foundations) (England) Regulations 2007 to ensure that schools are able to establish themselves as an industrial provident society, should it be desirable. Despite an all-party commitment to co-operatives and mutuals in the public sector, co-operative schools have had to work around existing legislation, as no provision is made in the relevant education Acts for schools to be established formally as co-operative societies as defined in the 2014 consolidation Act. The new clause seeks to amend this, ensuring that any future legislation provides a level playing field and a more understandable legal framework for co-operative schools—in other words, using the co-operative legislation that exists.

There is a question of the Government’s commitment to co-operatives, mutuals and social enterprises in this area. In a real way, they are disadvantaged because they cannot use the legal form that exists for co-operatives. This issue was first raised in the Commons during the first part of the discussion about the Bill. The amendments were withdrawn then on the basis that there would be discussions with the Department for Education. While Michael Gove was the Secretary of State, he was personally supportive of the proposals but said that the department lacked the expertise and resources to adopt the changes. Since his departure, there has been what you might call a decided lack of enthusiasm about the issue in the department. We are told that the department would like to work with co-operative schools to help with these proposals, but that has yet to happen. I am not hopeful that the Government will accept the amendments now, but I would like to see some sign that progress can be made in this important matter. I beg to move.

Lord Wallace of Saltaire: My Lords, the Government have been, and continue to be, supportive of the broad aims of partnership, collaboration and co-operation in education, as in other fields. I have been a long-standing supporter of the Co-operative movement and I was sorry to see its decline in the north of England over the last 30 or 40 years, just as I am glad to see that in many ways it is now reviving. I am a member and a

3 Feb 2015 : Column 610

regular user of the excellent Co-op shop in Saltaire and I was on the point of considering moving to the Co-operative Bank before its recent sad problems.

We all recognise that mutuals are model forms of enterprise that we need to extend across a whole range of fields. As I deal with elderly relatives, I think that we all need to work much more actively to develop mutual models for care homes. As far as schools are concerned, we know that partnerships between schools can be a powerful tool in raising standards and improving educational achievements for all pupils and we place great value on that.

The academies programme continues to deliver examples of schools working together in multi-academy trusts, which help to ensure success for everybody in those partnerships. These trusts pull together schools across both phases of education to work effectively as a family of schools. There are currently 260 multi-academy trusts which have both primary and secondary provision, so it is not simply primary schools working with primary schools and secondary schools working with secondary schools. We are promoting collaboration across the sector and we see the benefits across the educational landscape.

7.30 pm

Outside the academies programme there are other examples of collaboration within the existing system, including sharing best practice in both teaching and school improvement strategies, and schools are able to share services and specialist provision. Therefore, we are very much in favour of the general principles attached.

Nursery schools are currently able to work with local partners and the wider community as well as to federate with other schools and early years providers, should they wish to do so. This sector has a diverse range of providers that facilitate parental choice and enjoy a high degree of autonomy. It is not clear to the Government what further educational benefits there would be in creating a separate category of nursery academy at this time. The vast majority of nurseries are not under local authority control. Local authority nursery schools are a relatively small part of that field.

Amendment 21 seeks to build on the existing opportunities open to schools to join and operate as co-operative trusts. Our continuing highest priority as a coalition is to ensure that all schools are good schools and we are keen to promote all aspects of good practice that support that, including the need for clear accountability. In particular, we want to ensure that schools have strong governance arrangements with clear accountability for educational standards. The current system allows a variety of school models to be established, including maintained co-operative schools and co-operative academies, which, as the noble Baroness stated, have been expanding in particular areas of the country, without weakening school accountability or adding complexity to an already complex system.

Baroness Thornton: Why does adding provident societies to the sort of business forms that schools can have in legislation make anything more complex? It is not a complex question. It is a simple question; it is

3 Feb 2015 : Column 611

straightforward. We are just asking that co-operative schools can have the legal form that co-operatives have. That is all.

Lord Wallace of Saltaire: My Lords, we have been open to discussion and we are still open to continuing discussion on what precise forms are needed, but we want to be persuaded of the educational advantages of the changes that have been proposed and we would want to be assured of the advantages for schools before we were to support these very specific amendments. In line with the Government’s undertaking given in the other House to investigate the proposals—

Baroness Thornton: Would the Minister like to tell me exactly where in the legislation creating academies it says that companies limited by guarantee bring better educational results?

Lord Wallace of Saltaire: My Lords, I take the point that the legislation does not specifically say that. I was in the process of saying that we are open to discussion. We offered to investigate the proposals further and my noble friend the Parliamentary Under-Secretary of State for Schools met interested parties to discuss their concerns last year. He also wrote to the noble Baroness in November last year, inviting her to provide evidence about the problems that these amendments would address and to meet to discuss the issue further. We regret that that meeting has not been held and we are still open to further discussions, but, in consequence, the position has not changed and he remains unconvinced of the educational benefits of the noble Baroness’s case.

The Government are determined to continue to remove the barriers and obstacles that prevent schools delivering the best education possible for their pupils and to promote flexible and collaborative ways of working such as the amendments are intended to promote. So far, more than 700 co-operative schools have been established and, as the noble Baroness said, there will be 1,000 by the end of 2015. We firmly believe that there are sufficient alternative options already available without needing to introduce these additional legislative changes, but we are open to continuing discussions about the obstacles that the noble Baroness and others clearly think still exist. In the mean time, and in openness to further discussions, I urge the noble Baroness to withdraw her amendment.

Baroness Thornton: I thank the Minister. I know that he is sympathetic. Indeed, we shop at the same Co-operative store in Saltaire—and a very good shop it is, too. I have been a member of the Co-operative society in Bradford since I was 16 years old. I am grateful for the offer of further discussions and my Co-operative colleagues from the Commons and this House will certainly take the noble Lord up on that offer, because there are issues to do with equity, a fair playing field and recognition of different business types. I think that we would all agree that plurality in those issues is important. In the mean time, I beg leave to withdraw the amendment.

3 Feb 2015 : Column 612

Amendment 20 withdrawn.

Amendment 21 not moved.

Consideration on Report adjourned until not before 8.36 pm.

Small Businesses

Question for Short Debate

7.37 pm

Asked by Lord Risby

To ask Her Majesty’s Government what steps they are taking to encourage the growth of small businesses in the United Kingdom.

Lord Risby (Con): My Lords, the statistics regarding small businesses are truly remarkable. Small businesses account for 33% of turnover in the private sector and employ 12 million people. Of our country’s 5.2 million private sector businesses, those with fewer than 50 people account for 99.3% of the total number.

For many years I have been deputy chairman of the Small Business Bureau. In November, a number of our directors produced an SME manifesto called “Liberating the Entrepreneur” under the Genesis Initiative. I pay tribute to the many parliamentarians of all parties in both Houses of Parliament who have highlighted the needs and potential of our small businesses over the years.

I most warmly welcome the Small Business, Enterprise and Employment Bill, which deals with key areas, such as access to finance, regulation, public sector procurement and filing requirements. This, of course, builds on the Government’s publication, Small Businesses: GREAT Ambition of December 2013.

The increase of over 40% in the overall business population since 2000 has been driven by SMEs. In turn, that figure was driven largely by the increase in the number of businesses without employees—for example, sole proprietorships, run by one self-employed person, or ordinary partnerships, run by two or more self-employed people. Most of the growth in non-employing businesses comes from unregistered businesses. The smaller ones not registered for VAT has increased by 83% since 2000. This trend arises from the possibilities offered by modern technology and communications.

The Government have plans, which I applaud, to extend superfast broadband, but it is a question not only of cover but of the quality of the cover. A note that I received from the City of London Corporation indicated this to me. Many SMEs in and around the City do not have access to the superfast broadband required to boost their growth and, while larger businesses are able to afford dedicated fibre optic broadband, the needs of SMEs have been overlooked by the large telecoms companies. As a result, average speeds for SMEs in the City are half that of the London average. Given that, and considering the particular impact on small and microbusinesses of broadband, I would be grateful if my noble friend could indicate what percentage of the UK will be covered by at least one of the four

3 Feb 2015 : Column 613

main networks and by when, and how we deal with areas where broadband infrastructure may not be commercially viable.

Inevitably, following the financial crisis and a change to the regulatory framework, lending institutions became very cautious. Over the years, we had seen the growth of a concentrated banking structure in this country. In 2007, at the peak of business lending, there were perhaps only 100 lenders to business; that number then halved, but today there are at least 300. I greatly welcome the vast number of government schemes and assistance under the umbrella of “providing finance and support for your business”. However, many feel that all that can be confusing and time-consuming for a small business owner. Therefore, the issue is not only the availability of funding but awareness and access; a recent survey indicated that only 6% of SMEs are fully aware of the whole array of borrowing possibilities. Is my noble friend confident that the now vast range of funding available for business is being made available on a clear, easy to access basis, and does he envisage some further improvements in enhancing access and clarity of information?

While it is true that interest rates remain very low, and general corporate profitability has much improved, the issue of late payment remains a continuing burden. The FSB has indicated that some half of the invoices of its members are paid late, persistently. Additionally, of course, suppliers remain nervous about pursuing larger businesses, for very obvious reasons. It is good to have a new reporting regime to help small business to identify best payment practices, with attendant benchmarking. However, it is very daunting for a small business to deal with the might of a major purchaser. Is my noble friend satisfied that, by giving smaller businesses more rights to challenge unfair terms, that problem will be reduced? While I greatly welcome the strengthening of the prompt payment code, would it not be advantageous and very reassuring for SMEs to have a small business conciliation service to resolve those disputes?

With their Red Tape Challenge, the Government have sought to address needless regulatory pressures. It is gratifying that the World Bank’s Doing Business 2015 report showed us as eighth out of 189 economies—up two places—as domestic regulation has been reduced. However, given the considerable impact of EU legislation on businesses, can my noble friend confirm that the Government are pressing for an annual statement of the true cost of EU regulation and legislation? That would certainly be advantageous to all EU members in a generally static European economic environment, which of course impacts on us, too.

I salute the substantial increase in direct lending finance by UK Export Finance and the package of support for first-time exporters. As somebody who is involved with UKTI, I find the new and functionally improved emphasis on highlighting what is available to support SME business activity abroad most encouraging.

In 2014, the House of Commons BIS Select Committee identified business rates as the main threat to the survival of existing retail businesses on the high street, and the biggest obstacle to entrepreneurial new retail

3 Feb 2015 : Column 614

businesses starting up. Business rates on the retail sector account for 25% of taxes on domestic property, and many small businesses pay more in business rates than they do in rent. The introduction of the 2% cap in 2013 certainly recognised that. The next revaluation is due in 2017. There have been suggestions that property revaluations should be more frequent. Perhaps my noble friend can comment on whether there are any thoughts in place for a long-term reform of business rates, particularly for small companies.

SMEs feel better supported today than at any time—which is absolutely excellent news. As I know from personal experience, starting a business is very daunting, and to grow that business requires confidence in both economic environments and growth, and a pro-business atmosphere. It is significant that this country has been such a magnet for many young people from neighbouring countries where youth unemployment is shockingly high, and where in some instances anti-business sentiment and policies apply. Tech City is a brilliant example of attracting business-minded young people from all parts of the United Kingdom and abroad.

Of course there have been differences, but essentially a message has gone out from this Government and from the previous Government that Britain is open for business, and that spirit has prevailed in debates about current business legislation and in the export debate last week. Recently, however—I feel compelled to say this—some senior political figures have taken to attacking business and successful businesspeople. Those comments have been ill judged, and I hope will cease on sensible reflection, because they undermine the vitally necessary pro-business message in this country and, quite frankly, they are profoundly counterproductive.

7.46 pm

Lord Cavendish of Furness (Con): My Lords, the House is indebted to my noble friend Lord Risby for introducing this short debate. As he said, the contribution that small business makes to our national life is now, finally, well understood and appreciated. As the Federation of Small Businesses points out, 99% of our nearly 5 million businesses are small or micro—another point my noble friend made.

In contributing briefly this evening I declare an interest. I recently relinquished the chairmanship of a group of small businesses based in south Cumbria, details of which can be found in the register. Perhaps more importantly, I will not disguise from your Lordships the fact that these family ventures will be seeking strenuously to participate in the very considerable investment that is being directed towards the Furness peninsula, where I live. It is anticipated that over the next decade some £40 billion will be spent in the area, including civil nuclear, biopharmaceuticals and energy projects, and providing national security in the shape of the next generation of attack and deterrent submarines.

The question is: will small—or indeed medium-sized—businesses benefit from those large investments? That is not an idle question; in the past, very little indeed has trickled down, and there has been a pitifully small number of consequential start-ups. Part of the problem is cultural: big corporate businesses feel naturally more comfortable dealing with organisations of

3 Feb 2015 : Column 615

comparable size and structure. We must all seek to change that. There is also an ugly element, which can be found especially, in my experience, among what I might term the large private monopolies. They dread small, agile competitors muscling in on their territory, and resort to sometimes quite ruthless measures to see them off.

Local participation is reliant on the agencies set up for the purpose of promoting growth in the local economy being in good shape. South Cumbria has had the benefit of such grants. Most recently, I thank my noble friend Lord Popat for his role in supporting Furness Enterprise’s bid for money from the Coastal Communities Fund. That has been crucial in allowing that simply excellent organisation to continue with the work it does for small businesses.

In one area especially, it is my contention that there is scope for government to influence procurement policy and help the local economy. BAE Systems in Barrow has made some encouraging statements in respect of local involvement and has been extremely approachable. However, once the tendering process gets under way and outside contractors become involved, my fear is that the interests of the local economy become diluted. In the case of the expanding and modernising of the shipbuilding facility, I understand that the Ministry of Defence has a substantial direct investment. Therefore, will my noble friend ask his colleagues in the Ministry of Defence to ensure that their own guidelines in respect of local procurement are followed?

The benefits of these policies were described very well by my noble friend Lord Shipley, who I see is in his place, in a compelling contribution that he made on 23 October last year, when he pointed out that,

“profits accrue locally, training is provided locally and local labour is recruited—there is a local legacy”.

He went on to ask,

“whether the Government are content with the current operation of framework agreements”.—[

Official Report

, 23/10/14; col. 784.]

I hope that I have not pre-empted too much but I think that that very important point bears repetition and I hope that my noble friend will press the point.

Good practice in the matter of procurement really can deliver enduring benefits to an area and provide strength and resilience against the ebbs and flows of global economic conditions.

7.50 pm

Lord Shipley (LD): My Lords, I welcome this opportunity to say something about the importance of small businesses to our economy and to growth, and I shall be saying some things very similar to what was said by my noble friends Lord Risby and Lord Cavendish of Furness. I want to address in particular issues around business rates, public procurement policies and problems caused by late payment, all of which can be barriers to local growth. I declare my vice-presidency of the Local Government Association.

On business rates, I think that we would all agree on the vital role that small businesses play in their local economies. It is clear that some small firms and businesses feel penalised by business rates in their current form, not least in the retail sector, where they can face

3 Feb 2015 : Column 616

enormous competition from the internet. Retail businesses trading from premises rather than online can be unfairly penalised by business rates, particularly at their current levels.

I noted the announcement in the Autumn Statement of a review of the future structure of business rates, which is most certainly needed. I hope that we will get a much more flexible system that would allow councils greater discretion to support the economic growth of small businesses.

On procurement policy, I agree entirely with what my noble friend Lord Cavendish of Furness said, and I hope that the Government do not plan to use powers in the Small Business, Enterprise and Employment Bil1 simply to centralise procurement more and introduce a one-size-fits-all approach. That would not help local government's support for local small businesses and voluntary organisations. We should note that half of local government’s total procurement spend is with SMEs, compared with around 15% for central government. We have already seen the impact of centralised procurement in some areas, such as construction, which can advantage national companies rather than regional or more local companies, which employ and train a long-term local workforce.

I share particularly the concerns of my noble friend Lord Risby about late payment. I know that the Small Business, Enterprise and Employment Bill currently being considered in this House is attempting to address some of the problems of late payment, which can impact on the viability of small businesses and in turn on their growth potential. I note that there will be a requirement for companies to report payment practices towards their business suppliers. I am pleased, therefore, that the Department for Business, Innovation and Skills is now developing a better understanding of the payment practices across different industrial and commercial sectors and is assessing whether to take action sector by sector to encourage better payment practices. At this point, I welcome the work of the construction industry in its fair payment commitments, with its clear plan for delivery of reduced payment timescales over the next 10 years. I wish them well. This is not a matter just for central government; it is the responsibility of everyone. In some cases, the pressure placed on the finances of businesses can be so great that it can result in bankruptcy.

I would like to draw attention, at this point, to the valuable role of the North East Institute of Business Ethics, which was established in May 2013 as an independent regional resource to encourage responsible business behaviour. It encourages regional firms to adopt a fair and ethical approach towards their supply chains. I welcome strongly the Pay Fair campaign; through the Journal newspaper, the local press is encouraging north-east companies of all sizes to take a responsible and ethical approach to paying firms within their supply chain. The problem is that, in a contract with 30-day terms, some will inevitably pay late. In the UK, the average payment was 15 days late. The Federation of Small Businesses says that, on average, its members in the north-east of England are owed around £40,000 and are waiting eight working weeks to get paid. It also tells us that it costs in the region of £100 million a year for small businesses to

3 Feb 2015 : Column 617

chase payments. Clearly, if more companies paid on time, it would really help other companies and the economy more generally.

7.54 pm

Baroness Byford (Con): My Lords, I thank my noble friend Lord Risby for securing this Question for Short Debate. I will not repeat the figures that he gave at the beginning but I agree with him that Britain is open for business. I have a farming business in Suffolk, which would be considered small; as my noble friend will know, more than 50% of small businesses are based in rural areas.

The Government should be congratulated on the way in which they have encouraged small business. The Autumn Statement announced some £400 million through the venture capital funds investment and some £500 million through new bank lending and through the enterprise and financial guarantee scheme, which required 75% of bank loan, with the lenders having to put up 25%. I could go on but I will not.

I turn quickly to apprentices, because the growth of small businesses can be enhanced by young people. Again, the Government have put an allocation of £170 million aside for youngsters between the ages of 14 to 16 and between the ages of 16 and 24. That encourages youngsters to get involved in business and to go on from there and, it is hoped, to become involved in small businesses in their own right. In hindsight, nearly 100 years ago, my father-in-law, who was a farmer’s youngest son, set up in Leicester, with two machines and two men, employed in the sock business; he eventually employed just under 2,000 and exported some 50% of all the socks he made. Exports are hugely important to this country and, indeed, to small businesses. Although others have not touched on it, I hope it is something that the Minister will be able to reflect on.

Secondly, as has been referred to by others, the Government, through legislation, are looking at deregulating as much as they can, thus freeing up small and medium-sized businesses to be able to get established in a much sounder way. With that, obviously, comes the question of late payment, which still needs to be addressed. Where breakdowns occur—such as in the farming and food industries—we have the groceries adjudicator. It is a very sad reflection on business that that is actually needed, but a wise move. What we need are powers to fine.

Finally, on the general side, I turn to businesses in rural areas. Many of them start up as one-man businesses and then grow a little, but what is key to all of them is broadband, as has been mentioned. In some areas, it is not a question just of broadband quality; it is actually getting broadband access in the first place. Linked to that is the question of enabling local companies to put in for public procurement tenders, where they will have a chance locally. I think that some opportunity is being missed. On the other hand, there are some very good examples of what is actually being done. The important thing is that people are encouraged.

I congratulate the Government on what they have done. There is still much to do: let us not forget exports—they are the lifeline for us in this country, in the past and in the future.

3 Feb 2015 : Column 618

7.58 pm

The Lord Bishop of St Albans: My Lords, there is no doubt that we need to create a culture in which entrepreneurial skill is encouraged and supported. Small businesses form a vital part of our national landscape and are integral to the flourishing of our society. The social capital that we all seek depends on strong partnerships: partnerships between manufacturing, finance and chambers of commerce; between new entrepreneurs and established businesses; and between local and national government and the universities, as well as the voluntary and faith sectors.

Last evening, I was at a social function and found myself talking to Peter Goodman, the president of the St Albans District Chamber of Commerce. It was too good an opportunity to miss so I asked him what he thought about small businesses. In particular, we ended up discussing start-ups. He identified three main problems that small business start-ups were facing in St Albans. First, he said, there was insufficient advice for small business in the early stages. I therefore ask the Minister whether Her Majesty’s Government can help with better signposting of the business advice that is already available, and whether additional specialist resources could make a significant contribution, especially in emerging areas such as the high-tech industry.

Secondly, Paul Goodman said that it is hard to recruit staff with the appropriate qualifications and, thirdly, that there is a dearth of appropriate premises for small businesses and a need for many more “easy in, easy out” licences. These are areas that I hope Her Majesty’s Government will review carefully as we want to support new business start-ups.

Allied to these challenges is the clear need to improve access to start-up capital for small businesses. With the diversification of financial services, social investment has the potential to provide an alternative way forward for many would-be entrepreneurs. Community development finance institutions are among the social finance options available. They provide loans and credit to, among other groups, businesses and entrepreneurs, especially in disadvantaged communities, which are unable to secure finance from mainstream commercial institutions such as banks. Community finance seeks to bring about a range of economic and social benefits and is not limited to a concern with profit margins.

While this is a fast-growing sector, current levels of community finance provision leave a huge gap in capacity, skills, expertise and availability of capital. The Community Development Finance Association’s recent report Mind the Finance Gap highlighted the extent of the disparity between demand and provision.

As well as the DCLG’s work in encouraging social impact investment, have the Government given any consideration to supporting the growth of the community finance sector? In particular, are there ways in which Her Majesty’s Government can further assist in bringing together the banking, public and independent sectors to work more closely with each other in providing funding for small businesses?

3 Feb 2015 : Column 619

8.01 pm

Lord Leigh of Hurley (Con): I congratulate my noble friend Lord Risby on securing this debate. As we have heard, small businesses are the lifeblood of our economy. Small businesses are often worthy of our praise, just as they are deserving of policy support from government. I declare my interests as recorded in the register of interests.

The register shows that I have started a small business which, 26 years later, remains a small business, sadly, but, none the less has a modicum of success and is not to be confused with my noble friend Lord Cavendish, despite the similarity of name. So when I heard the leader of the Opposition suggest scrapping our proposed reduction of corporation tax for large businesses to support a rate cut for small businesses, I realised that the right honourable gentleman had missed the point entirely and had misunderstood the mentality of the entrepreneur and the small businessman. The point is that many small businesses do not want to stay small. They want to grow, open new sites and stores, invest in new products and hire new staff. As anyone who is concerned with the state of the public finances—we on these Benches certainly are—will know, larger businesses pay more tax. I am pleased to say that this Government have recognised this point and introduced a succession of targeted measures throughout this Parliament to assist SMEs. We have seen entrepreneurs’ relief increase dramatically from £2 million a year to £10 million a year in tax-free lifetime gains—or tax at 10% for lifetime gains—meaning that founders and entrepreneurs can keep more of the wealth they have created by taking a risk and starting a new business.

As has been mentioned, the start-up loans scheme has helped thousands of individuals start their own businesses, often moving people away from welfare and into their very first new business. So far it has made 25,000 loans worth some £130 million. As the Federation of Small Businesses has said, this Government have made it easier not just to start a small business but to run one. In particular, the changes in the laws on employment tribunals and extending the qualifying period for unfair dismissal will help individuals by giving them more opportunities to enter the labour market, and mean that employers such as me will take a chance and employ an extra person. We in Britain now benefit from one of the most liberal labour markets in the developed world and one of the world’s most competitive tax systems. The Government have abolished Labour’s jobs tax, cutting employer NI by £2,000, meaning that 450,000 small businesses—that is nearly one-third of all employers—pay no jobs tax in the current financial year.

As has been mentioned, the Government are committed to helping further through their powerful procurement footprint, securing 25% of all spend going to SMEs. But there is still more to be done. I would welcome the Minister’s comment on the recent study by the Association of Accounting Technicians, which has found that the UK’s complex tax system is costing SMEs £9.9 billion a year in compliance, whereas it costs larger firms only £100 million. I note the work of the Office of Tax Simplification—it is looking to simplify our tax code to make it easier—and only encourage it to look particularly at aspects affecting small businesses.

3 Feb 2015 : Column 620

As we encourage people to found and work in small businesses and make them cheaper to operate, we must help them grow by encouraging more investment and, of course, exports. It is pleasing to see the Prime Minister take a personal interest in that in promoting SMEs on all his trade trips. The enterprise investment scheme has been expanded to offer tax reliefs of 30% for the investor— up from 20%—and the aggregate limit to which a single company can take such investment has increased from £2 million to £5 million. Likewise, for companies using money from venture capital trusts, the individual company limit has increased to £5 million, as opposed to £2 million previously, and the maximum number of employees for eligible companies has increased from 50 to 250.

We have incentives and encouragement to start a business, help in bearing down on costs and policies to help businesses grow. This represents a joined-up approach to business policy, one that understands the complete business ecosystem and, in particular, the challenges and opportunities of running a small business that wants to grow and one day become a large one. It is no wonder that businesses are lining up to point out how disastrous a change of government could be for SMEs, the economy and the country.

8.06 pm

Lord Empey (UUP): My Lords, I, too, congratulate my noble friend Lord Risby on securing this debate.

I want to focus on trade issues and the contribution SMEs can make to our economy. A recent statement from the European Commission forecast that the UK is on course to record the worst trade deficit in the industrial world in 2014. Howard Archer, chief UK economist at IHS, said that trade was unlikely to be a major driver for UK growth in the near term.

Even a superficial examination of our trade statistics illustrates that, even with our exports to partners in the European Union, we are achieving a monthly deficit of up to £3 billion, £4 billion or £5 billion a month. This has gone on since the 1980s, which was the last time that we had a trade surplus in this country. If the same statistics were coming out of the health service or our education service, there would be a revolution in this place. We are sleepwalking our way through the fact that we are living and paying our bills by doing two things. First, we are selling our assets. Secondly, we are borrowing. That, added to what we do sell, is how we pay our bills. How long can that go on? SMEs are where the solution lies, because we have proved conclusively that reliance on the large corporations is no solution.

I have asked my next question on a number of occasions but never had a clear answer to it. I hope that the Minister will tell us whether we as a country have any policy on import substitution. If there is one, I would like to know what it is. I have never heard it. We are ignoring something vital. It is not that we support the production of articles that are completely unprofitable but we can do things in this country on the land, in manufacturing and in our services that are done elsewhere that I believe we could do just as well here.

The second thing is really a training issue. We say that we are committed to exports and that we want to see small companies and others take the leap and start

3 Feb 2015 : Column 621

to export. But do we? For instance, we train our dentists and doctors. Would you send a car to a garage that had no trained mechanics? However, we are perfectly happy to try to see exports grow in companies where there is no training for people to export. I am a vice-president of the Institute of Export, an educational charity providing training for people in business so that they understand what exports are, how they do them and the pitfalls. Surely it would be possible for government to give an incentive, even through a capital allowance, for people to be trained in export qualifications, so that the small companies at least are encouraged, and so that we send a signal as a Government and a country that we are serious about trade.

These figures, which have now been going for 30 years, indicate that we are not serious about trade. We are prepared to run huge deficits almost indefinitely and pass on a huge burden of debt to the next generation. I hope that the Minister can address those issues in his response.

8.11 pm

Lord Freeman (Con): My Lords, I, too, congratulate my noble friend Lord Risby on securing this debate. He is a former colleague of mine with a long and distinguished record for East Anglia in the other place. I think your Lordships owe him a debt of gratitude for the time to discuss this very important issue. I want to concentrate on advisory support for high-technology companies, particularly small technology companies, for which the failure rate in this country is far too high. It is not about the absence of finance, but about experience and knowledge being passed on, in particular from government. That is the burden of my brief comments.

My experiences in high-tech small companies stem from my chairmanship of Cambridge University’s technology transfer office and my chairmanship of the Security Innovation and Technology Consortium, which has more than 100 members of small firms in the high-technology field. I am pleading on behalf of that small but important proportion of small high-tech companies that fail because of a lack not of finance but of guidance and help concerning their ambitions and the direction of travel that they have chosen. In some cases it may be correct—it may result in substantial benefit to the United Kingdom—but in others it can be misguided.

The burden of my comments is that we need better to capitalise on the tremendous wealth of experience and knowledge of some of our smaller high-technology companies and make sure that they do not end up in a blind alley. I have great admiration for the American Research and Development Corporation in Massachusetts, which over the years has nursed and encouraged smaller firms which have grown to very large entities in the United States. It has a very good track record.

My plea to the Minister is: can he please communicate with the Department for Business, Innovation and Skills and suggest that it might create and sponsor a group of technology experts drawn from many industries, but those that particularly depend on high technologies, to act as advisers and guardians of the technology—not of the wealth of those individuals? They could provide

3 Feb 2015 : Column 622

a bit of sober advice to say, “Have you thought about this technology, which might now proceed at a pace in Japan, the United States or on the continent?”. Some of these small companies, which might have a tremendous future in front of them, might fail and fail badly, simply because of that lack of advice. We should emulate not only the United States but Germany, which has the right institutions to cover the point I made: not only financing but the intelligence network of experience in particular fields. We have the brains in this country, but in this case we need a few wise uncles—some from the Department for Business, Innovation and Skills, I hope.

8.15 pm

Lord Borwick (Con): My Lords, I thank my noble friend for raising an important debate. I declare my interests in several small companies. I have run several businesses. I have always found it quite thrilling: the chase after a new customer, a new product or a profit—that is real fun. The best thing that government could do to encourage business is to show that government understands business by running government the way a businessman would. The best thing to inspire business is to get the background of the country right, with low taxes and certainly with underspending, but also with respect for business and enterprise; a supply of smart, numerate school leavers who can read and write; and a culture that applauds success and encourages failures to try again.

The general health of the UK economy is improving, with good figures on growth and jobs. It is interesting, however, to find out exactly where that growth and job creation is coming from. Last year, a report by the Centre for Economics and Business Research, commissioned by Octopus Investments, found that 68% of employment growth and 36% of economic growth was created by just 1% of UK businesses. These businesses are all high-growth small businesses with an annual turnover of between £1 million and £20 million. It is quite remarkable: small businesses really are driving the economic recovery.

The Octopus Investments report suggests several ways in which we can further support the sector. One of those is allowing corporation tax deferral in order to provide more capital investment to support growth, along with other tax breaks. The report also suggests an overhaul of regional funding. I think that low, simple and predictable tax rates for all businesses are preferable to tax breaks and funding through grants.

We could also do more on business rates, which are often higher than rents, and employers’ national insurance, which stops firms hiring more people. Some good things have been done. If, however, we are to implement tax breaks, they should be targeted at high-growth small businesses.

Overall, when I read reports like that of the CEBR and take part in debates like this, I am heartened to be reminded just how entrepreneurial this country is. I want that to continue. A big part of it will be inspiring young people about the world of business. There are great examples of organisations looking to engage young people and interest them in business. Indeed, every year 180,000 young people in England and Wales take on a real business challenge with Young

3 Feb 2015 : Column 623

Enterprise, an educational charity that I support. Mentored by a member of the local business community, they find out first hand what running a business involves and how much fun it can be. I have had the pleasure of meeting many of the wonderful young people who have done well in their competitions, and I hope that they all go on to start a high-growth small business. Young Enterprise plans to be in 50% of secondary schools this year. It should be in all of them.

8.19 pm

Lord Mendelsohn (Lab):My Lords, I draw attention to my entry in the register of interests, which includes my current involvement in small businesses.

I congratulate the noble Lord, Lord Risby, on securing this debate, and on his excellent speech. I commend also the excellent comments across your Lordships’ House on a range of issues, including payments, finance and procurement. This has been a very interesting debate and raised important issues.

It is incredible that for a long time we have not had a much greater focus on small businesses. If the past is any guide to the future, in the next decade small firms will create most of our country's new jobs. Research has shown that over the past 20 years small businesses have created the majority of new jobs, and that has really been in businesses with fewer than 50 employees. Small firms have increased their share of total employment, too: their share of jobs was three times that of 1998.

We also need to understand that small businesses are not all turbocharged start-ups ready to explode with growth in the right circumstances and a bit of luck. Of new firms, 75% that start small stay small. As MORI has pointed out, however, some worrying trends are emerging. Surveys have shown that entrepreneurs with high growth ambitions have declined in Britain since 1999. This is very worrying. While the internet has provided for a huge proliferation of commercial activity, it appears that entrepreneurs are worried that the UK is not an easy place to scale from.

To make sure that we meet the requirements for supporting growth companies, we need more attention on access to finance, whether it is start-up capital, growth capital or working capital. We have an unusually low level and small amount of early-stage venture capital and a still sub-par banking sector. We need to use regulation to level the playing field for small businesses that operate in markets with power, economic and informational imbalances and asymmetries. We need a more aggressive use of public sector procurement to trigger the benefits of using small businesses and to support their access to export markets.

We need to look at particular sectors and how they are developing, and to see what we can do. I commend the excellent work of the Creative Industries Council, which has brought forward a very impressive strategy, involving government and industry, to develop the creative economy, which is dominated by small businesses. Of the UK's total workforce, 2.6 million—that is 8.5%—are employed in the creative economy. On average, employment in the creative economy grew over three

3 Feb 2015 : Column 624

times faster than in the UK overall. Growth stands at 10%, more than three times that of the UK economy as a whole, and higher than any other industry.

However, initiatives to open employment opportunities to young people are as important—and probably more important—as engines of employment growth. We are very impressed with the Apprenticeship Ambassadors Network and the work of its chair, David Meller, who has helped to make apprenticeships more accessible to small businesses.

Government should not be afraid to be a market catalyst, to provide an economic and political framework of stability and pro-business character. We must not, however, make the mistake of believing either that one size fits all or that we can intervene in every market. Public policy must make sure that local businesses with more modest ambitions and dynamic start-ups both get the sort of bespoke and customised attention that they require.

The Labour Party's adoption of a more assertive and aspirational role for public policy in supporting small business is really the legacy of Nigel Doughty, who led the Small Business Taskforce, established in 2011. Nigel tragically passed away nearly two years ago today, on 4 February. He was one of the most accomplished and visionary businessmen this country has ever had, and his tragic passing has robbed this country of someone who would have made an extraordinary and even greater contribution. His report remains required reading. It also shows how far we have drifted behind key international competitors in responding to current challenges and the type of agencies that would make government more effective.

We all welcome the Government’s small business Bill. The discussions we have had on that have shown that we all agree that it is a good start. However, I hope that the Minister takes this discussion as encouragement, as we move to Report, to strengthen its provisions in some key areas.

8.23 pm

Lord Popat (Con): My Lords, I am grateful to my noble friend Lord Risby for initiating this important and timely debate. He speaks from great experience and I commend his interest in small businesses. It is an honour and a privilege for me to respond to a debate on my favourite subject and I commend organisations such as the Federation of Small Businesses and the British Chambers of Commerce for the work that they do.

Perhaps noble Lords will permit me a moment of self-indulgence. For some 30 years before joining your Lordships’ House, I was a small businessman and I am the third generation of my family to start and grow a small business. My grandfather, Haridas Hemraj, was a jute trader. My father, Amarshi Haridas, was a shop owner with a sub-post office. I initially followed in my father’s footsteps as a sub-postmaster before a career in accountancy, specialising in business and corporate finance, so business is very much in my DNA.

It is one of life’s great satisfactions to start and run a business and I am proud to have been a member of a Government who have done so much to support small

3 Feb 2015 : Column 625

businesses. This Government recognise the importance of small businesses, which are the engine of our economy. The UK economy is recovering from the biggest financial crisis in generations and I would like to share what we have done so far and what we are doing to help small and medium-sized enterprises, which I will refer to as small businesses from here on.

Let me talk first about the fiscal incentives. We have cut corporation tax from 28% to 21% and announced a further cut to 20% by 2015, the joint lowest rate in the G20. For small employers, there is a £2,000 cut in national insurance bills with the employment allowance. We have extended the small business rate relief for a further year from April 2015. Small businesses that are starting up or relocating to an enterprise zone will qualify for enterprise zone relief. They can get up to 100% business rate relief for five years, up to a maximum of £275,000. In the last Budget, the Chancellor doubled the capital allowance from £250,000 to £500,000 until December 2015.

Moving to banking, a number of noble Lords mentioned concerns over finance for small businesses. For too long there has been an overreliance on our four biggest banks, which between them account for 85% of business current accounts. We have introduced many measures to help small firms to have access to finance. We have increased competition in the banking sector, we have increased the availability of credit through the Funding for Lending scheme, and we have finally established the British Business Bank. On competition, two new banks are being spun from Lloyds Bank and RBS, while other challenger banks such as Metro Bank, Aldermore and Cambridge & Counties are also growing. There are a further 20 applications for new banking licences in the pipeline, so it is hoped that with more competition, our SMEs will be able to access finance more easily than they are able to do at the moment.

The Financial Services (Banking Reform) Act has created a payment systems regulator to ensure that the UK has a payment infrastructure that supports a competitive banking sector. The Government are also taking very practical steps to help small businesses to access alternative sources of finance. The Autumn Statement announced an upgrade to the seven-day current account switching service to include 99% of all small businesses. Provisions in the Small Business, Enterprise and Employment Bill will require the banks to refer small business customers who have been declined a loan to alternative lenders via designated platforms. So far, the overall lending picture is encouraging. Gross lending to small businesses in the year to the end of 2014 was up by 25% on the equivalent period in 2013. Some 66% of new finance applications from small businesses are now successful, from a low of 33% in the first quarter of 2013.

We have also launched the British Business Bank, which has facilitated a total of more than £890 million of new lending and investment to over 21,000 small businesses in the year to the end of September 2014. Last month the Prime Minister announced the 25,000th start up loan, which means that more than £129 million has been lent to people of all ages who have made the leap to start their own business.

3 Feb 2015 : Column 626

As the noble Lord, Lord Empey, has just said, one of our long-standing economic weaknesses is our record on exports. We do not export enough to pay for our imports. I can recall that in 1971, when I was a 17 year- old, Harold Wilson wanted Edward Heath to resign because we had a deficit of £14 million. I am glad to have shared over dinners and discussed in corridors what more we can do to help in the export effort. Currently, one in five SMEs exports, but if we can change that to one in four, we will be able to clear our trade deficit.

When I came to your Lordships’ House, one of the first things I did was set up an ad hoc committee, chaired by my noble friend Lord Cope, to see what more the Government could do to help SMEs export more. The committee, of which the noble Lord, Lord Empey, was a member, took evidence from all over the country, and went to Brussels. The committee published a report in 2013, to which the Government responded positively and they have since launched a number of initiatives. In the last Autumn Statement, the Chancellor announced further financial support for UKTI. In 2013-14, around 48,000 businesses were helped by UK Trade & Investment trade support services; nearly 90% were small businesses. This support helped generate additional sales of more than £49 billion and created or safeguarded more than 220,000 jobs. The Government have also provided a further £20 million to help companies export for the first time. UK Export Finance also continues to support exporters with a network of regionally based export finance advisers who help businesses with risk and trade finance issues. UKEF’s trade finance and insurance solutions products have provided more than £1 billion of support to UK exporters of all sizes.

The Small Business, Enterprise and Employment Bill, which I have enjoyed debating with the noble Lords, Lord Mendelsohn and Lord Stevenson, and on which I have had the pleasure of working closely with my noble friend Lady Neville-Rolfe during its progress through this House, contains measures that will open up new opportunities for small businesses. More specifically, the Bill will support small business in a number of areas including improving companies’ payment practices and helping to tackle the issue of late payments. The noble Lord, Lord Shipley, had strong views on this. I am pleased to confirm that a summit was held this morning at Downing Street attended by the Federation of Small Businesses and the CBI. The Bill will also improve access to finance. It will assist small business expansion overseas and streamline public procurement to help small businesses gain fair access to the £230 billion public procurement market, which my noble friend Lord Cavendish mentioned. It will cut down on red tape and will also help to support home businesses and streamline small company filing requirements. The Bill will reduce the barriers that can hamper the ability of small businesses to grow and compete and will pave the way for Government to be more supportive of, and less burdensome to, small business in the UK. I look forward to the support of the Opposition when the Bill has its Report stage.

Infrastructure investment will help small businesses, which need to be able to operate in an environment that allows them to flourish. The Government are

3 Feb 2015 : Column 627

trebling investment in major roads schemes by 2020-21, the biggest investment in roads since the 1970s. Under way is the largest programme of investment in the railways since Victorian times. Crossrail, electrification, HS2 and HS3 all show our commitment to secure a step change in Britain’s connectivity.

My noble friend Lord Risby remarked on broadband in relation to SMEs and micro-businesses. The Government are working hard to put the UK at the forefront of the digital revolution and are committed to 95% of UK premises having access to superfast broadband by 2017. Five community projects are currently being funded to help improve connections to remote locations. My noble friend Lord Freeman mentioned commercialising ideas in Cambridge. I will write to him on the points he raised. Many ideas in the technology sector in Cambridge are supported by venture capital, which was mentioned by my noble friend Lord Leigh. Angel networks play a particularly important role in providing finance and guidance to small businesses in some of our fastest growing industries.

In summary, there were a record 5.2 million private sector businesses at the start of 2014. That is an increase of 760,000 compared with the start of 2010. At the start of 2014, small businesses employed 15.2 million people, 60% of total UK private sector employment. The Government have worked hard to support small businesses. Time has prevented me from mentioning many other initiatives, such as local enterprise partnerships, but we know there is more to do. The Government are committed to fostering and assisting the entrepreneurial spirit that thrives in the UK. We have continued to lead the way in our support of small businesses because we want to make Britain the best place in the world to start and grow a business.

I have covered a few of the questions that were raised, although not every one. My noble friend Lord Risby asked whether the Government will review the structure of business rates. We will report by Budget 2016 and the Government will publish terms of reference in due course. We will certainly review it. My noble friend was right that in some cases the rates exceed the rent. My noble friend also raised the issue of prompt payment. We are improving public sector payment practices through the Small Business, Enterprise and Employment Bill.

Once again I thank my noble friend Lord Risby for initiating this debate and all noble Lords who took part in it.