Enterprise and Regulatory Reform Bill
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Marland)
My Lords, I begin by underlining this Government’s commitment to fostering growth and restoring the UK’s economic prosperity. We recognise that legislation itself cannot generate economic activity, but it can help to set the framework in which enterprise can flourish. The Bill provides a package of measures that will get rid of unnecessary bureaucracy that encumbers business, improve the competition framework to ensure well functioning markets and advance business and consumer confidence alike.
To support enterprise, we are including several initiatives: to legislate for the UK Green Investment Bank; to improve the employment tribunal system and promote resolution of disputes; to give shareholders of UK quoted companies binding votes on directors’ pay; to promote competition through a single Competition and Markets Authority—CMA—and strengthen powers to address anti-competitive behaviour; and to make our copyright laws fit for the modern age.
We intend to simplify regulation and reduce unnecessary red tape by extending the primary authority scheme to more businesses for one-stop advice; by providing clear powers to time-limit new regulations via sunset clauses on new measures introduced; by ensuring regulation, such as on heritage protection, is delivered in an efficient manner while still providing necessary protections; and by repealing other unnecessary regulatory requirements on business.
I will address each of these measures in turn. On the Green Investment Bank, the transition to a low-carbon economy is important for the future, both globally and nationally. Some analysis suggests that more than £200 billion of investment will be needed over the next decade to develop the new technologies and products that will underpin this transition. Yet these are new markets, and the long-term nature of returns on green infrastructure investment may be deterring private-sector investors. That is why we have established the world’s first Green Investment Bank, which is now fully operational and ready to drive the UK towards a green economy.
Our employment reforms reflect our commitment to tackle employment legislation to help employers manage their workforce more effectively and ensure growing businesses have the confidence to take on new staff. Through the employment law review, we are taking decisive steps to remove the fear of employment tribunals and reduce the legislative burden on employers which stifles growth. This includes measures outside the Bill, such as introducing fees to the employment tribunal system and a fundamental review to streamline the rules on employment tribunals and make sure they operate as efficiently as possible. The Bill will provide business with more certainty about its liabilities and provide clarity on dismissal and tribunal processes, while supporting both parties to resolve their disputes earlier. The changes, such as on early conciliation and settlement agreements, will save time and cost for employers and employees. The Bill will give businesses more confidence and flexibility to deal with workplace issues, thereby providing the platform for growth that employers need.
On directors’ pay, the Government are clear that an effective corporate governance framework is necessary to support long-term sustainable growth. Investors agree that the governance of directors’ pay needs to be strengthened. The growing gap between pay and performance is damaging and unsustainable. Our reforms will require companies to be more transparent and to give shareholders a binding vote on remuneration policy. For the first time, shareholders will be able to agree real limits on what companies can pay. Investors agree that these reforms will help tackle excessive pay while still allowing companies the necessary flexibility to set pay packages that suit their specific circumstances and which reward genuine success.
On competition, a free and open market place is key to a growing economy. Pressure from competitive markets enables efficient and innovative businesses to thrive, which benefits consumers. The Government are setting up the new Competition and Markets Authority, which will provide a single, strong voice on competition. It will have a duty to promote competition to the benefit of consumers. The Bill will also streamline and strengthen competition enforcement powers, meaning that anti-competitive behaviour will be tackled more quickly and effectively, bringing benefits for businesses and consumers alike.
Chattels are a particularly damaging form of anti-competitive behaviour.
Lord Marland
Sorry—I meant cartels. I am glad noble Lords were listening. It is one of those days already; if only I were not dyslexic. I repeat, cartels are a particularly damaging form of anti-competitive behaviour. In this Bill, the removal of the requirement to prove that individual cartelists were acting dishonestly will make prosecutions easy to mount, therefore deterring more cartels. These provisions, which will take out of the cartel offence those arrangements which have been notified to customers or publicised in the prescribed way, will provide a safe harbour for those businessmen engaged in legitimate commercial behaviour. Further comfort will be provided by prosecutorial guidance and by the statutory defences in the Bill.
I intend to bring forward a new provision in Committee and will first provide your Lordships with the necessary briefing on midata. To further benefit consumers, we will be introducing a power to make it compulsory for suppliers of services and goods to provide to their customers, upon request, their own transaction and consumption data in a portable electronic format. This will help consumers to make better decisions on the products and services that offer them the best value. The power will be targeted on certain sectors—namely, the energy, mobile phone, current account and credit card sectors—but may be extended to other sectors if appropriate.
Turning to copyright, the UK’s copyright regime needs to be brought up-to-date. The measures in this Bill will help to bring the law into the modern age and will be of benefit to creators and users of copyright alike.
The primary authority scheme is a highly effective mechanism which allows firms to get assured advice from one local authority on regulatory issues. This is not about scrapping regulation, but about ensuring that the necessary rules are enforced in an efficient manner. We want to extend eligibility, so that more businesses—especially smaller enterprises—can benefit.
On bankruptcy, this Bill reforms the process by which an individual may apply for their own bankruptcy; it will remove the existing requirement that such individuals petition and attend court, replacing it with a suitably robust and more efficient process under a suitably qualified adjudicator. In these cases, there is no dispute for the court to resolve. This measure will therefore free up judges’ time and court resources.
On sunset and review, the Government have already strengthened the scrutiny of new regulations before they are brought into force. But it is also vital to review new regulations after their introduction to establish whether they are meeting their objectives; whether they are still required and whether burdens can be reduced. Past weaknesses in this area have been highlighted in the excellent work by the merits committee—and I am grateful to the noble Lords, Lord Filkin and Lord Goodlad—most recently in their 2009 report, What Happened Next. The changes that are being made by this Bill will ensure that sunset and review provisions can be included in future secondary legislation. That will support the establishment of a robust and enduring system for tackling obsolete, burdensome or ineffective regulation, and help ensure that regulatory burdens on business are minimised.
Overly burdensome and obsolete rules stifle business. That is why we need to get rid of them wherever that is sensible. For example, it is currently the case that, where health and safety regulations impose a strict duty on employers, they can be liable to pay compensation, despite having done all that was reasonable to protect their employees. To address this potential unfairness, the Bill will remove the right of individuals to make civil claims for breach of most statutory health and safety duties, unless it can be proved the employer has been negligent.
The Bill will also exclude from the scope of the Estate Agents Act 1979 some intermediaries, such as private sales portals, that merely enable private sellers to advertise their properties and provide a means for sellers and buyers to communicate with one another. This is a limited deregulation that should bring benefits to the consumer and to the industry without reducing consumer protection.
The heritage measures in this Bill deliver on commitments made in the Government’s response to the Penfold review of non-planning consents. In particular, they will reduce burdens on owners, developers and local planning authorities but, importantly, without diminishing protection for key heritage sites and buildings. For example, the measures on Osborne House will enable English Heritage to put an unused wing of the building to productive use and to generate income to cover maintenance costs.
The package of measures on equalities reflects the Government’s clear commitment to equalities and the maintenance of core protection under equalities law, while addressing legal requirements which are not necessary or helpful. We want the Equality and Human Rights Commission to focus on its core functions as an independent equality body and an A-rated national human rights institution. We are therefore repealing vague and unnecessary duties and powers from the Equality Act 2006—the legislation that established the commission.
This Bill also implements two repeals arising from the equalities Red Tape Challenge, as well as delivering on this Government’s commitment to promote equal pay by ensuring that there is proportionate further action for the very few employers who flout equal pay laws.
The measures in this Bill are designed to help in our efforts to restore the United Kingdom economy to health and to pave the way for sustained recovery. I much look forward to the contributions from noble Lords and working with all Peers in the constructive way in which this House operates. I commend the Bill to the House. I beg to move.
Lord Stevenson of Balmacara
My Lords, I thank the Minister for his introduction to the Bill, and for the meetings and briefings which he and the Bill team have provided for us: indeed, I had one at 11 am today on midata proposal, which the Minister has just mentioned. This has made our task that much easier, and has helped us to prepare for today and Committee stage when our Front Bench will be joined by my noble friends Lord Young, Lord Adonis, Lord Mitchell, Lady Thornton, Lady Hayter, Lord McKenzie and Lord Whitty. Noble Lords may wonder why we have so many: it is because this is such an extraordinarily wide-ranging Bill that we need all the talents we are able to bring to bear in order to give it the proper scrutiny that it requires.
When the Enterprise and Regulatory Reform Bill was introduced in the other place, the Secretary of State suggested that the measures in the Bill will help to make Britain one of the most enterprise-friendly countries in the world. This is, however, the same Secretary of State who wrote to the Prime Minister in February 2012 complaining about the Government’s failure to develop a plan for growth. He said:
“I sense … that there is still something important missing: a compelling vision of where the country is heading … and a clear and confident message about how we will earn our living in future”,
and that there is,
“no connected approach across Government”,
to driving growth. Perhaps the Secretary of State’s most damning criticism of the Government’s actions to date is that they are “frankly, rather piecemeal”.
Therefore, is this so-called flagship BIS Bill the answer to the Secretary of State's concerns? I do not think so. This is a hotchpotch of measures, ranging from banking to employment law; competition policy to copyright; and equalities to health and safety. In six parts, and with no overarching narrative, the Bill provides no discernible overall vision or confident message. If there is one, it certainly was not evident from what the Minister has just said.
The Bill is a missed opportunity. It does nothing to help Britain out of a double-dip recession made in Downing Street. Nor will it assist businesses to enhance their competitiveness or give them what they want in terms of a long-term industrial strategy. Business leaders are already unimpressed with the Government’s business policy and this Bill will not change their views. It contains inadequate measures to boost business confidence, nothing to enhance the UK’s international competitiveness and no measures to increase competition in consumer markets or to protect consumers from powerful vested interests. The Bill also fails to live up to the rhetoric of shareholder activism, which featured large in government statements only a few months ago, as it fails to empower shareholders to bring to an end the culture of excessive rewards for corporate failure. At the same time the Bill sets out to undermine equalities policies and to dilute long-established rights of people at work. The four copyright clauses have aroused concern and worry among one of our most important areas of potential growth—the creative industries.
Much of the employment changes are inspired by the recent Beecroft report commissioned by the Prime Minister, which the author admitted in evidence to the Public Bill Committee was not based on statistically valid research or evidence. Many of the most controversial issues were introduced after the Commons Committee stages and were therefore not subject to proper scrutiny in the other place.
Many of the later sections of the Bill seem to be minor issues that were perhaps omitted from earlier legislation. Some seem to have been put together in haste and without impact assessments or proper consultation. I do not believe that this Bill as it stands meets the standards required of Parliament.
It is not hard to be struck by the difference in approach taken by this Bill and that taken by the Prime Minister’s other adviser, the noble Lord, Lord Heseltine. In his report, published a few weeks ago and circulated widely round your Lordships’ House, the noble Lord, Lord Heseltine, called on the Government to produce a radical growth strategy if Britain is to win what he calls the relentless economic war. This is not it.
I turn to the Bill itself. Part 1 will set up the Green Investment Bank. There is, and will continue to be, a growing demand for green technology, so we need to have an active industrial strategy to support the low-carbon economy. A critical component of that is the Green Investment Bank, which is why the previous Government set up the Green Investment Bank commission in 2009, and why we committed to establishing such a bank in our 2010 manifesto. We will therefore not oppose the provisions of the Bill although we have some issues which we will wish to explore in Committee, including whether this institution is, indeed, a bank capable of borrowing in support of its investments or is merely a fund. The Minister did not cover the vexed question of when the Green Investment Bank would be allowed to borrow although we understand that this will not happen unless and until public sector net debt falls as a percentage of GDP in 2015. That means that the earliest it is likely to be able to borrow is therefore 2016—some four years from now. We will certainly want to probe in Committee how we can ensure that the Green Investment Bank is able to borrow from the capital markets as soon as possible while, of course, being mindful of the need for rigour and discipline in the public finances.
However, we also believe that the Green Investment Bank must not be a bank of last resort that simply takes the projects that no one else is prepared to take. Surely the main point about the Green Investment Bank is that it can provide policy certainty for investors in the green economy—the certainty that so far the Government have not been able to provide. There is a huge and pressing need to promote the growth of small and medium-sized UK based enterprises in the supply chain and to ensure that we can realise the great potential of the green economy from within the UK and thereby support manufacturing in the UK and the ability of our home-grown businesses to provide apprenticeships, jobs, growth and exports.
Part 2 of the Bill relates to employment law and seems to be based on Adrian Beecroft’s report to the Prime Minister. Contrary to the thrust of his report, we do not take the view that watering down employee rights will boost demand. We think that it is highly likely to do the opposite—increase job insecurity and damage growth and consumer confidence rather than increase them. I would like to highlight three or four areas. Surely the essential components of an employment relationship are trust and confidence between the parties. The employment tribunal system exists to resolve the minority of disputes between workers and their employers that cannot be resolved within the workplace. However, the system has a second equally important role. For the great majority of low-paid workers who are not unionised and who have no opportunity to join a union, it provides almost the only defence against the small but significant minority of rogue employers who believe that they can obtain a competitive advantage through deliberate mistreatment or exploitation of their workforce. There is no evidence to support the contention that the current very small number of employment tribunal claims is a significant barrier to economic growth. That is not to say that more cannot be done to help workers and employers resolve workplace disputes. Of course, a commitment to strengthen the management of all our businesses would be a good place to start, but the Bill is silent on that matter. However, we welcome and support, subject to adequate resourcing of ACAS, the Bill’s provision for ACAS to offer early conciliation before any ET claim fully enters the ET system.
The Bill amends the Employment Rights Act 1996 with a view to encouraging greater use of compromise agreements, which are to be renamed settlement agreements. To our mind, this looks like a further erosion of the legal protection against unfair dismissal which, it must always be remembered, does not prevent employers dismissing workers for poor performance but simply requires them to follow a fair procedure when doing so. This proposal needs to be considered against other changes in this area: the qualifying period for such legal protection against unfair dismissal has been increased from 12 months to two years and we are told that from some date, yet to be defined, in summer 2013 workers will have to pay issue and hearing fees totalling some £1,200 to pursue an unfair dismissal claim.
We have significant concerns about the changes being proposed for the introduction of a public interest test to whistleblowing which we think is disproportionate as it will, for example, limit the protection for workers who want to raise concerns about health and safety issues in the workplace.
Healthy competitive markets reward the innovator, the new entrant and the risk-taker. They keep incumbents on their toes, benefiting consumers, and they create the disciplines at home that drive success abroad. That does not happen by itself, however, because markets are not always efficient. Even when policy frameworks can correct market failures, markets require active stewardship, constant vigilance against unhealthy concentrations of power and cartels and, above all, the deliberate promotion of competition through a strong, robust competition regime. In principle, we support the Bill’s proposal to improve the competition regime established under the previous Government. Following the transfer of certain OFT powers to the FCA there is definitely some sense in combining the rest of the OFT and the Competition Commission into one body, removing duplication and concentrating expertise in one place. However, we will be seeking to ensure that both the governance and objectives of the new CMA have due regard to the long-term interests of consumers, the very people for whom we seek to make markets work.
In this part of the Bill we would also like to probe the issue raised by the noble Lord, Lord Heseltine, about how the existing national interest provisions could be strengthened in cases of mergers. We will also be probing the new clauses on cartels. We welcome the proposed change to drop the need to prove dishonesty, but we worry about the reliance on transparency.
Part 5 ostensibly deals with the reduction of regulatory burdens. In fact, very few of the clauses in this part of the Bill do that and some may actually increase the regulatory burden. We should seek to reduce the regulatory burdens when we can but not by compromising the rights of employees or the health and safety of employees and customers. This is an issue not just of the quantity of regulation but of its quality too. We welcome the proposals to extend the primary authority scheme so that any business operating in multiple local authorities could ease its regulatory burden locally and form a partnership with a single local authority.
Far less welcome in Part 5 are the measures undermining the Equality and Human Rights Commission. Why are the Government seeking to repeal the general duty on the EHRC which seeks to promote fundamental values of humanity and decency in our society? After all, the commission’s statutory remit was the product of cross-party agreement when the Equality Act 2010 was passed. The EHRC is currently taking forward plans to change the way it works, responding to the changing economic, financial, demographic and social context but also, and particularly, the significantly reduced resources allocated to it by the Government. It recently published a new, three-year strategy and is implementing a new organisational design and operating model to deliver its work more effectively. We therefore agree with the commission when it argues that, if the Government wish to legislate further in this area, they should use the opportunity to strengthen the commission’s accountability to Parliament thereby making it better able to fulfil its mandate as Britain’s equality regulator and better ensure its continuation—which I gather is in doubt—as a national human rights institution in accordance with the Paris principles.
The Government’s proposal to end civil liability in health and safety is a major change in the existing law and was added to the Bill on Report in another place. It needs to be scrutinised very carefully. Is it really the Government’s intention that a worker injured due to an employer’s breach of a statutory duty within the health and safety at work regulations—such as failing to guard a machine—will be required to prove that the employer knew, or ought to have known, of such a failure in order to gain redress for the injury sustained?
The requirement to prove foreseeability is a very high bar of proof for an individual injured or killed through no fault of their own. Do the Government really think that by proposing this change they are sending the right message to employers about the importance of health and safety? There has been no public consultation on this proposal and what is being proposed goes further than the recommendations made in this area by Professor Lofstedt, in his recent report.
We are all, I think, seized by the growing disconnect between executive pay and average earnings, and between executive remuneration and the performance of the companies they lead. Between 1980 and 2010, the ratio of the median pay of the highest paid directors in FTSE 100 companies and median wages had risen from 11:1 to 116:1. We support the thrust of the proposals in this area, which build on work done by the previous Government. However, we believe that the Bill should go further and be bolder. Shareholder activism should be supported and not left out in the cold. Representatives of the company’s employees should be active and full members of the company’s remuneration committee. Directors’ compensation should be agreed by requiring an annual binding vote on pay policy at the AGM.
The proposal to repeal the provisions in the Equality Act 2010 relating to employer’s liability for third- party harassment of employees was another key recommendation of Mr Adrian Beecroft. Relatively few third-party harassment tribunal claims are made, and it is therefore not easy to see how the current provisions constitute an unjustifiable burden on business.
The Government’s copyright proposals have raised a storm of representations, and some of the clauses were amended late in the day in another place. However, as we may have to spend some time on this area in Committee, let me briefly outline where we are coming from. Clause 65 has been widely welcomed by designers because it redresses a clear anomaly, but others have not been so welcoming. There was no impact assessment for this clause, and there has been no consultation.
Clause 66 continues to excite a great deal of interest. The amendments made on Report are welcome because they help to clarify that the Government cannot use the clause more widely than permitted under the European Communities Act, except as regards criminal penalties. However, what is the clause actually going to be used for? All major previous copyright changes were enacted by primary legislation, and there is a strong case for this to be the rule for all future legislation.
Clauses 67 and 68 deal with orphan works, and the major question here is why we are going further than the recent EU orphan works directive, which EU countries have to implement within two years. We may need to be convinced about the intention to extend this from purely cultural to commercial purposes.
The proposal to introduce extended collective licensing has raised concerns. It may well be that the UK’s existing rights clearance system is complex, but it is not entirely clear to us that an ECL is a “tool for simplification”. There may well be other solutions to the perceived problem here, through the exciting plans for a copyright hub or by extending existing licensing arrangements, particularly in the moving image area.
The Bill is a missed opportunity to provide a strategy for economic growth. It contains inadequate measures to improve business confidence, investment and competitiveness. We want enterprise to flourish, but we also want a society where people’s rights are respected. We want to see our economy grow, but growth cannot be at the expense of the basic protections that people enjoy in this country.
We would like the Bill to be amended in ways that better support business, including measures to ensure that the Green Investment Bank can be a strong and transparent catalyst for green growth, to improve the competition framework, to preserve employment rights and obligations, and better to empower shareholders in relation to directors’ remuneration. We support in principle a number of measures in the Bill, but there are certain red lines that it crosses which we do not wish to be implemented.
More than 2.5 million people in this country are out of work. Long-term unemployment has risen and the number of young people out of work and claiming benefits for more than a year has gone up yet again, and yet we are still searching for the green shoots of a sustainable recovery. That situation will not be resolved by taking away people’s fundamental rights. It will be resolved by getting demand back into the economy. That is what creates jobs, and that should have been the sole focus of an enterprise Bill. Instead, we find ourselves back where we started: in a big black hole when it comes to helping businesses to create enterprise, generate wealth and grow. The sad fact is that there is no compelling vision here, no confident message about how we are to pay our way in the world, and no connected approach across government to drive growth.
Lord Razzall
My Lords, because this is a Bill that emanates from a department with a Liberal Democrat Secretary of State, noble Lords would not expect me to agree with the noble Lord’s remarks, and certainly not their tone. It is clear that the Bill must be looked at in the context of government economic policy since the creation of the coalition Government in 2010, which my party signed up to—first, coming primarily from the Treasury, a credible fiscal policy with the aim of restoring the economy to be an improvement on where the previous Government left it; and secondly, coming from the Minister’s department, a growth agenda attempting to improve demand and increase business investment.
Inevitably, this is a mixed bag of a Bill, although it is not the ragbag or hotchpotch referred to by the Opposition, both in another place and here. Although generally we on these Benches support it, I think that a review of the Bill in your Lordships’ House must look at each measure against the question whether a particular measure improves demand and/or increases business investment.
Like the noble Lord, Lord Stevenson, as we go through Committee stage I shall be joined by a number of colleagues, although not quite as many as him. I shall be joined by my noble friends Lord Teverson, Lady Brinton, Lord Clement-Jones, Lord Lester and Lady Bonham-Carter. In Committee, my colleagues and I will exercise our constitutional responsibility—many noble Lords regard it as their constitutional obligation—to review the Bill and amend it as we see fit. My colleagues will elaborate on many of these amendments as we go through Second Reading, but I would like to summarise a number of questions on which we want to be satisfied.
Let us take the UK Green Investment Bank, which was hugely welcomed from these Benches. The Liberal Democrats have been advocating an institution like this for a number of years, and I welcome the fact that this is in the Bill. I think I am right in saying that there was no obligation to put it in legislation, as the bank could have been established without any legislative framework, but it is important to have it on the statute book. I am slightly disappointed, as I expect the Secretary of State is, that the Treasury has authorised an initial investment of only £3 billion, but at least that is a start. I shall not attempt to muzzle the concerns of my noble friend Lord Teverson, but I am concerned that we need a proper explanation from the Minister about the policy regarding borrowing. The noble Lord, Lord Stevenson, touched on that. I am not sure that the current statement that there has to be a net reduction in borrowing before that can happen is sufficiently adequate with regard to something as important as this. At some stage of this Bill, the Minister needs to reassure us on that. I know it is Treasury policy, not his; nevertheless, I am sure that he will be able to come up with something that can satisfy us. As this part of the Bill passes through your Lordships’ House, the second area on which we need to be clear concerns exactly where we are on transparency and accountability.
On the unemployment proposals, to which the noble Lord referred, I think he was slightly churlish in not referring to the confirmation given by the Secretary of State in another place that the heavily criticised proposals by Mr Beecroft regarding no-fault dismissal will not be proceeded with. That is a significant development, which has been put into Hansard in another place. I do not wish to second guess what my noble friend Lady Brinton will say, but there are four issues where it is clear to me that your Lordships need to be satisfied. First, we need to be satisfied that the fears expressed by Citizens Advice and the TUC are groundless, that the new provisions will wrap up employees in legally challengeable unintended consequences. Secondly, there is a significant shift to put more obligations on ACAS in these proposals, and I think we need some undertakings that ACAS will be properly funded. Thirdly, we need assurances that, whatever the consultation on the cap on unfair dismissal payments comes up with, there will be no cap attempted on compensation for racial or sexual discrimination, or sexual oppression by an employer. Fourthly, there is the issue that is still out there about whether there should be an improvement in the enforcement of tribunal decisions, which is not touched on in the Bill. It would be useful to have a statement from the Minister about where the Government are on that issue.
The changes to competition law and the creation of the Competition and Markets Authority will be dealt with by me in Committee. Noble Lords will be aware that KPMG said that the UK’s competition structure was unique in its technical competence, its independence from political process, its transparency, access to decision makers, accountability and robustness. There is also significant evidence that, although we may have the best regime in the world, we also have the slowest. I support the creation of the new authority, but we must make absolutely certain that the five characteristics that KPMG listed are enshrined in its development. We must be satisfied that the proposals streamline and improve the efficiency of the competition regime.
The noble Lord touched on the issue of directors’ remuneration. It is a huge achievement of the Secretary of State to have arrived at balanced proposals that both the TUC and CBI, across the political divide, seem to accept. It is worth putting the issues into context. Many of the largest UK companies listed in the FTSE 100 have the majority of their employees and shareholders resident outside the United Kingdom. The noble Lord spoke of a policy applying to them that would go further, but it would be quite difficult to enforce.
I come finally to the two most difficult issues for our Benches. The first is the Equality Act amendment, which will be dealt with by my noble friend Lord Lester, who will be recognised by the House as the UK’s, if not the world’s, great expert on this topic. I understand that my noble friend cannot support Clauses 57 or 58, so I suggest that we watch him light the blue touch paper and stand back.
The final issue concerns copyright proposals. I often think that on this issue we have an irresistible force meeting an immovable object. Virtually everybody under 30 believes that everything should be free, but the creative industries want to ensure that proper value is given to their products and services. I am glad that I will not have to find the right balance on this. On these Benches it will be left to the noble Lord, Lord Clement-Jones. As the noble Lord, Lord Stevenson, indicated, we have seen significant lobbying on the issue.
In conclusion, noble Lords ought to recognise that we cannot create growth by legislation. All we can do is pass legislation that provides a modest degree of help. This Bill does that and I welcome it.
Lord Smith of Kelvin
My Lords, I declare two interests. First, I am chairman of Scottish and Southern Energy, which is the biggest generator of renewable energy in the UK. Secondly, I chair the Green Investment Bank, which has just been mentioned. I can confirm the statement of the noble Lord, Lord Marland, that we are up and running. We have state aid approval. We have been charged with five priority areas: offshore wind, waste, waste to energy, non-domestic energy efficiency and the Green Deal, which is effectively domestic energy efficiency. We are very new. We had our first full board meeting at our headquarters in Edinburgh just one week ago. However, we have appointed a chief executive and most of the senior management team, and we have inherited a pipeline of possible investments from an outfit called UK Green Investments, which has been operating inside the Department for Business, Innovation and Skills.
Conditions in capital markets and in clean energy markets are difficult. In capital markets, UK banks are unwilling to lend beyond seven or eight years, and many of these projects need finance for up to 20 years. However, sovereign wealth funds, pension funds and foreign banks have been in touch with us to indicate that they are interested in investing in the UK. In the clean energy space, we need good policy and clarity on electricity market reform to remove the uncertainty that is deterring developers and lenders.
I want to talk about three areas included in the Bill which may help your Lordships—green issues, borrowing and independence. We know that we are going to be held to very high standards on green issues in both the investments and our own operations. We welcome the requirement to report on carbon emissions and the positive impact that our investments should have on reducing UK emissions. We will go further than the requirements of quoted companies by reporting in detail on our portfolio. We will also take the long-term view and have regard to the work of the Committee on Climate Change.
I ask noble Lords for support for the Government’s broad definition of “green purposes”. Waste and recycling —for example, anaerobic digestion—can have a positive impact, and it would make the Green Investment Bank’s task more difficult if there were changes in our mandate by a narrowing of the green definition.
On borrowing, under the terms of state aid approval, we have to prove that all investments are commercial. In showing that we can make commercial investments, we will attract in private capital alongside us. Incidentally, we will definitely not be the lender of last resort. Is £3 billion enough when most commentators are saying we need £200 billion invested in this area over the next 10 years? My answer to that is that businesses have to be built on solid foundations if they are to endure, and we will need this institution to endure because we will be making investment in green infrastructure long beyond 2015. We need to show government and private capital markets that we are a well run organisation with a good track record worthy of the injection of more capital or, indeed, borrowing money in capital markets.
I can promise noble Lords that if we feel we need to borrow we will approach the shareholder well before 2015. As a public limited company, we have the power to borrow, but we have to ask the shareholder, and the shareholder is the Government. As our team has only recently been assembled and projects such as the ones we are looking at can take quite a long time in planning and construction, I think that the original budget of investing the first £775 million over the next five months will be difficult to achieve. However, I am confident that we can commit £3 billion wisely by 2015 and crowd in an awful lot of private capital from around the world alongside that.
I fully take on board the comments of the noble Lord, Lord Stevenson, on having a UK supply chain and looking after small and medium-sized enterprises. That has already been pointed out to me by the noble Baroness, Lady Worthington.
In closing, I would ask noble Lords for their patience, for support for the Government’s broad green definition and for help in dispelling uncertainty over electricity market reform. I can assure noble Lords that the Green Investment Bank is already acting independently of Government, but, of course, prudently, as befits working in the public sector.
Lord Tugendhat
My Lords, this is a wide-ranging, detailed and innovative Bill but I will concentrate on one aspect of it, as the noble Lord who has just spoken did, and that aspect is directors’ remuneration.
I congratulate the Government on tackling this issue. They have not done as much as I would have liked or as some other people would have liked, but they have created a precedent and a platform on which investors, remuneration committees, directors, the media and public opinion can all build in future. This is not an area in which everything has to be done by government or by statute. The Government have established that there is a public interest involved in this matter—that is very important—and they have established minimum standards. Others can build on these and I will make suggestions on how that might be done.
Let me make it clear that I approach this issue from the standpoint of a strong supporter of capitalism. I believe that capitalism has demonstrated that it is the best way of creating a prosperous society and enhancing the life chances of the great majority of people. That is not in itself a sufficient condition for a society to be fair, free and just, but it is a necessary one.
However, pace Gordon Brown, capitalism does go through periods of bust as well as boom and it develops warts and faults that need to be corrected. We are in just such a situation at present—and not just in this country, as the debate in the United States on these issues shows. Economic growth is slow and unemployment, especially for the young, is high. Uncertainty is rife and living standards for many of our fellow citizens are being painfully squeezed. That has now been the case for some years, yet during those years, and continuing now, the total compensation of those who run our largest companies has increased at a phenomenal rate. In 1998, according to the Financial Times, FTSE 100 CEOs’ pay in all its various forms was 47 times that of average employees. In 2010, it was 120 times higher. There are a number of other measures that have different bases, but basically they all convey pretty much the same impression: those who run our largest companies have enjoyed a bonanza in terms of pay that is quite out of line with any other segment of society.
What this has led to was made starkly clear by two news stories, one above the other, that happened to appear on page 6 of the Financial Times on 6 November. One reported that in addition to the increases I have just mentioned, the median pay of FTSE 100 directors rose by 10% last year, or more than six times the increase in overall average earnings. The other was headlined:
“Business chiefs warn against compulsion on living wage”.
Of course I realise that these are complex matters, that circumstances differ from company to company, and that generalisations are dangerous. I have chaired two FTSE 100 companies in my time and I have sat on the boards and remuneration committees of several others. I know that the CEOs and other senior executives who manage these companies are entitled to high rewards. Those who create wealth for others deserve to be generously rewarded. But I also know that the state of our society and of our capitalism, as revealed by the juxtaposition of these two stories, is deeply troubling and unsustainable.
The country needs its business leaders to speak out in the interests of their companies and of business in general, but when their pay and pay increases so far outrun those of the people who work for them, they lose moral authority, their words will be discounted and the business case on important economic and social matters will go by default. The Government are right to act and investors, remuneration committees and directors themselves would be wise to build on what has been done. The long-term health of our society and of our capitalist system demands that.
I will conclude with a short list of practical suggestions that can be introduced voluntarily, or as the result of investor or public pressure, to build on the Government’s minimum standards. First, the three-year gap between AGMs for approving a board’s remuneration policy is too long; it should be voted on annually. Secondly, a simple majority is not sufficient; two-thirds would be more appropriate. Thirdly, there is too much deliberate opacity and obfuscation in too many top-of-the-line remuneration packages. What is at stake and what is required to achieve it needs to be clearly comprehensible. One way of achieving that would be for the auditors to be required to provide a detailed explanation. Fourthly, an axe must be taken to bonuses and rewards that are linked to short-term share price movements. These are too open to manipulation, they tend to distort the judgment of executives, and they have exacerbated the tendency towards short-termism in British industry. I am not saying that there should be none, but I am saying that great care needs to be taken to avoid prejudicing a company’s overall long-term future in order for executives to be able to pocket substantial short-term rewards.
Finally, the activities of those Father Christmas figures, the remuneration consultants, must be curbed. At the very least, they should be hired by the non-executive remuneration committee, with no input from the executives, and they should on no account be permitted to carry out, at the same time, any other services for the company in question.
As I say, I do not think statutes are required to achieve all the objectives that I have set out. However, I do think that some further legislation to build on the Government’s admirable start would be helpful. I much look forward to the Private Member’s Bill of the noble Lord, Lord Gavron, which will be introduced in the not too distant future.
Baroness Warwick of Undercliffe
My Lords, there is a huge number of issues in the Bill. For example, along with others, I am very concerned about the proposal to exclude the use of lay members in the Employment Appeal Tribunal. In my experience, the judges at the EAT value the industrial relations and management skills of employer and worker representatives and I hope to return to that at Second Reading.
However, today, I want to concentrate my brief remarks on Part 6, which relates to copyright. I support Clause 68 in particular, which will create a new power for the Government to license so-called orphan works and also open the way to extended collective licensing. Both of these measures are badly needed. As the Hargreaves review pointed out in 2011, a system to allow people to access, preserve and use works where no author can be traced has the potential to open up what he called a “treasure trove” of material. This is of particular interest to universities, libraries and museums. The British Library has drawn attention to the fact that, where it cannot trace the author of a work that may be in copyright, it is currently prevented from doing anything to preserve that work. It cannot digitise it or make it available other than in its original physical form. The British Library has said that this applies to a staggering 43% of the works it holds from between 1870 and 2010. This means that there is material of potentially huge historical, cultural and scientific interest that will literally lie buried away.
Universities also have very large and important collections in their libraries and museums and so face similar difficulties—and I should declare an interest as a member of the council of the University of College London. They have the added frustration of being prevented from using such material for the purposes of teaching and research publications. Of course, some activities are covered by exemptions for teaching and non-commercial research, but those exemptions do not include any form of digital representation such as displaying material on a PowerPoint slide; nor do they include publication, for example in a journal, website or institutional repository, for which a licence would be needed. If you cannot trace the author of a work or secure a licence to use it, you simply cannot reproduce it in this way.
Universities UK has given two examples. The first is of a researcher finding material in an archive that is potentially in copyright. She is unable to identify who the copyright holder could be and so cannot get permission to use the material, say in a research paper. She has no choice but either to not publish the material or to risk court action should the copyright holder later be identified.
The second example is of a lecturer wishing to use photographs on PowerPoint slides as part of a series of lectures. Because such usage does not currently fall within the exceptions granted for the purposes of education, he would have to seek permission in order to do so. If the copyright holders of those images cannot be identified or located, he risks court action were he to use the photographs in this way.
Professor Hargreaves argued in his recommendations for reform of the copyright licensing system that making it easier to secure a licence to use orphan works was a measure that had “no economic downside”. Not only could it place in use a vast range of forgotten material but it will create an incentive for researchers to look for authors. Currently, if you suspect that a work may be an orphan, the time and cost involved in establishing whether that is the case, and the likelihood that you will not be able to use the material at the end of the process anyway, means that in many cases researchers will decide not to bother pursuing it. Under the provisions of the Bill, once you have conducted a diligent search but still cannot trace the author, you may be able to get a licence to use that material. You will pay a fee that will be held for the author should they eventually emerge, which, in my view, makes it more likely that authors will benefit from the reuse of works that are currently abandoned.
The Bill also establishes provisions for extended collective licensing, which is an important counterpart to the measures on orphan works and will make it easier to clear rights to use or digitise large volumes of work. I congratulate the Government on bringing forward these measures and urge colleagues to support them. In Committee, there will be plenty of time for necessary debate about the safeguards attached to these measures. In particular, I shall be interested in the regulation of collecting societies. Universities UK, and others, have argued that collecting societies should operate in a more transparent way and should increase the extent to which they ensure that rights holders and users are represented.
There are also some concerns within the academic community about provisions in Clause 65 extending the copyright period for industrial designs. I understand that there has been inadequate consultation about the effects of these measures and will certainly look to probe the Government on this at a later stage.
Lord Lester of Herne Hill
My Lords, I will focus only on the equality provisions. I welcome Clause 74, which adds a new and significant power enabling employment tribunals to require defaulting employers to provide equal pay audits. I also support the removal by Clause 56 of some provisions relating to the Equality and Human Rights Commission that were included in the Equality Act 2006. At the time, we on these Benches supported the previous Government in their inclusion, but experience has shown that these vague and aspirational provisions have blurred the commission’s focus. Their removal will not impair the commission’s core functions or jeopardise its well deserved “A” status at the UN, but should enhance its effectiveness.
I cannot support Clause 57, which would abolish the existing liability for third party harassment of employees and applicants, and I cannot support Clause 58, which would abolish the procedure for obtaining information for proceedings. These changes are regressive and damaging to the rights of vulnerable minorities. They impair access to justice and efforts to avoid unnecessary litigation, and undermine the very essence of the principle of equality before the law and the equal protection of the law. They were introduced by the Government in the Commons too late to receive adequate scrutiny.
As regards Clause 74 and equal pay audits, the continuing problem of sex discrimination against women in the unequal pay they receive for doing equal work with men has been well documented again and again, decade after decade, as has the tortuous complexity of the law on this subject. We were unable to persuade the previous Government to introduce effective measures to secure equal pay for men and women, including provisions on the lines of my own Equality Bill for workforce reviews and pay equity plans by designated employers.
Clause 74 enables a Minister to make regulations requiring employment tribunals to order employers to carry out equal pay audits where they have found them to have breached equal pay law or to have discriminated because of sex in non-contractual pay, such as discretionary bonuses. Regulations made under this power will rightly be subject to the affirmative resolution procedure. The exercise of the power should not, I submit, be dependent on a finding of unlawful conduct. Equal pay audits should be regarded as essential elements in good employment practices rather than as punitive sanctions on defaulting employers. The public sector equality duty may result in encouraging effective voluntary measures to tackle sex discrimination in pay. I hope the Minister will be able to confirm that this is the Government’s understanding of the position. I should be grateful if the Government would also consider whether Clause 74 should be widened to apply not only to employment tribunals but to the courts, since they, too, have jurisdiction in equal pay cases.
Clause 56 repeals Section 3 of the Equality Act 2006, which sets out the commission’s general duty. It repeals Section 10, which imposes a duty on the commission to promote good relations between members of different groups. It repeals Section 27, which enables the commission to arrange to provide conciliation in non-employment disputes, and it amends Section 12 by reducing the frequency with which the commission has to publish a report from three to five years. The commission’s briefing of September 2012 explained:
“The Commission concludes that these changes are unlikely to have a significant adverse impact on its work”.
I agree with that assessment and should explain the reasons why.
The commission will continue to have all functions relating to equality and diversity, as well as promoting understanding or the importance of human rights, encouraging good practice in relation to human rights, promoting awareness, understanding and protection of human rights and encouraging public authorities to comply with Section 6 of the Human Rights Act. The commission will remain obliged to have particular regard to the importance of exercising the powers conferred in relation to the convention rights. It will monitor the effectiveness of the equality and human rights enactments. It will publish information, undertake research and training, give advice and guidance, issue codes of practice, conduct inquiries and investigations, issue unlawful act notices, require the preparation of action plans, give legal assistance, and have the capacity to institute or to intervene in legal proceedings, whether for judicial review or otherwise. It will still assess compliance with public sector duties and be able to issue compliance notices.
None of these powers and duties will be affected by Clause 56, and the commission will be stronger and more effective as a result, led by its excellent new chair, the noble Baroness, Lady O’Neill, and professionally managed under a new chief executive, Mark Hammond, who has been in post since July 2011, and his board. The statutory guarantees of the commission’s independence from unnecessary government interference will remain, notably the obligation for the Secretary of State to have regard to the desirability of ensuring that the commission is under as few constraints as reasonably possible in determining its activities, its timetables and its priorities. There is the obligation also for the Government to pay to the commission such sums as appear to the Secretary of State,
“reasonably sufficient for the purpose of enabling the Commission to perform its functions”.
Apart from the lamentable state of the law on equal pay, British equality legislation is the finest anywhere. It is essential that the commission should be a strong and effective public authority rather than a poorly managed and politicised NGO, a commission carrying out its demanding public functions with a clear strategy and skilled professional staff. It has underperformed since it was set up, and the Joint Committee on Human Rights on which I serve has been critical of its record. By removing vague and unnecessary duties and powers, the Bill will focus the commission’s legislative mandate on its core equality and human rights functions. The commission needs a board with strong business and corporate governance skills to provide strategic leadership. It needs to work more in partnership with others so that it is greater than the sum of its parts. The JCHR may wish to take on a greater role in scrutinising the commission’s business plan. This was suggested by the noble Baroness, Lady O’Neill, in her pre-appointment hearing with the JCHR and would have the virtue of increasing the profile and transparency of the commission’s work for Parliament.
The commission has a well deserved UN “A”-rated status as a national human rights institution. The UN High Commissioner for Human Rights and the chair of the International Coordinating Committee have expressed concern about, among other things, the cuts made to the commission’s budget. As part of the 2010 spending review, the coalition Government announced plans to reduce the commission’s budget from a baseline of £55 million to £26.8 million by 2014-15. The Government announced a comprehensive review of the commission’s budget in May 2012 to examine the level of funding that is reasonably sufficient for the commission to perform effectively its core functions as a national expert on equality and human rights issues, a strategic enforcer of the law and a guardian of human rights.
The commission is not alone. The JCHR and devolved institutions also play a vital role, as do Parliament and the independent judiciary.
We look forward to the outcome of the review of the commission’s budget. The commission’s independence is well protected by the statutory scheme, but it is also important that it is accountable to the Government and Parliament for the way in which it uses taxpayers’ money. I hope that the JCHR and other bodies with human rights functions will have a greater opportunity to understand, challenge and scrutinise how that money is put to best use. I emphasise that nothing in the Bill or the current review should jeopardise the Commission's “A” status; on the contrary, it should go from strength to strength.
I turn finally to the two provisions with which I disagree: the abolition of the questionnaire procedure and the removal of liability for third-party harassment. The questionnaire procedure has been in place since the 1970s, when it was included in the Sex Discrimination and Race Relations Acts, and later in legislation to combat disability, religious, sexual-orientation and age discrimination. It was introduced to enable would-be claimants, lacking legal assistance, to decide whether to pursue their claims through costly and time-consuming legal proceedings or by means of a simple statutory procedure. It was designed to help the individual who considers that she or he may have been unlawfully discriminated against to decide whether to institute proceedings and, if so, to present the case in the most effective manner. It has worked well in practice and no independent equality expert has ever criticised its operation. Its abolition would impair access to justice and result in unnecessary litigation.
At a time when senior judges, including the Lord Chief Justice, as well as leading academics and lawyers are warning that the growth of DIY litigants is clogging up the civil justice system, it is wholly misconceived and without common sense or good political judgment to abolish a useful way of helping many vulnerable people—women, the disabled, ethnic and religious minorities, gays and lesbians, and the elderly—to be protected against discrimination and to decide whether to have recourse to our courts and employment tribunals to seek remedies. Clause 58 is not based on evidence. I hope that it will be removed during the Bill’s passage.
Section 40 of the Equality Act 2010 made it unlawful for an employer to harass employees and people applying for employment. It also made the employer liable for the harassment of its employees by third parties, such as customers or clients, over whom the employer does not have direct control. Liability arises only when harassment has occurred on at least two previous occasions, and where the employer is aware that it has taken place and has not taken reasonable steps to prevent it happening again.
Section 40 was designed to replicate the effect of provisions in the Sex Discrimination Act 1975 as regards harassment by employers, and to extend to the other protected characteristics—apart from marriage and civil partnership, and pregnancy and maternity—the position in relation to employer liability for sexual harassment under the Sex Discrimination Act. The Explanatory Notes on Section 40 gave the example where a shop assistant with a strong Nigerian accent tells her manager that she is upset and humiliated by a customer who regularly uses the shop and each time makes derogatory remarks about Africans in her hearing. If her manager did nothing to prevent it happening again, he would be liable for racial harassment.
I should be grateful if the Minister would explain whether he agrees that this is a fair, balanced and proportionate provision, and, if he disagrees, in what respects it is any way oppressive or unfair. The consultation paper stated that the introduction of Section 40 had given rise to concern that businesses, especially small businesses, would find it difficult to comply with. But it gave no evidence to support this concern and, had that been the problem, the Government could have introduced, and could still introduce, an exemption for small businesses. It also stated that it had no evidence to suggest that the third-party harassment provisions were serving a practical purpose or were an appropriate or proportionate way of dealing with this kind of misconduct. The previous Government considered that there was sufficient evidence and carefully confined Section 40 to really flagrant cases. The official Opposition did not then oppose Section 40, or suggest that there was insufficient evidence to justify its inclusion. The Equality Act has been in force for only a short time.
Presumably the coalition Government accept, as did the Labour Government, that harassment because of gender, sexuality, disability or age is a serious social evil that needs to be tackled effectively. That requires third-party harassment to be unlawful. As the Discrimination Law Association noted in responding to the consultation, the other possible remedies suggested by the Government do not offer the same protection to employees vulnerable to third-party harassment including women, ethnic minorities, disabled people, members of minority religions, gay men and lesbians, transsexuals and older workers. I hope that the House will agree to remove Clauses 57 and 58. The Equality Act 2010 is a great British statute of which we should be proud. We should protect it in the interests of everyone, including employers and their workers.
Baroness Buscombe
My Lords, the Bill has much to commend it and I welcome it to your Lordships’ House. I found the speech of the noble Lord, Lord Stevenson, from the Dispatch Box opposite a little surprising given the previous Government’s lamentable track record in this area. I well recall, as it was so close to Christmas, standing in the same place almost alone on 21 December 2000. I spoke on behalf of Her Majesty’s Opposition at Second Reading of the then Regulatory Reform Bill. We were promised so much. I remember that we talked a lot about better regulation but, following the introduction of that legislation, we had to endure more and more ineffectual regulation, often leading to unhelpful, unintended consequences and the stifling of enterprise. This Bill will help to address that. Yes, it covers a number of different measures. The noble Lord, Lord Stevenson, said that it was piecemeal; I say that it is focused. There is a lot to do to deal with the last Government’s mismanagement and approach to enterprise, which stifled business and made it incredibly hard for enterprises, particularly small and medium-sized ones.
Today, I focus my contribution on the creative industries. This is an incredibly valuable area and sector which we must do all in our power to support. Ten years ago, I introduced a debate in your Lordships’ House on the importance of intellectual property. I am sad to say that no one felt moved to speak in it. Now we have a very different situation. We have a much better appreciation of what we have in this country and therefore what is at risk in a digital world. The Minister made it clear that we want to make our copyright laws fit for the modern age but I urge him to ensure that our laws support creators.
Clauses 65 to 69 and Schedule 21 introduce measures relating to copyright which fail to meet the Government’s intention, stated in verbal assurances in another place. The Intellectual Property Office consulted on the implementation of the Hargreaves review of intellectual property, with many of the 471 responses disputing the financial evidence of the review and consultation. Impact assessments for proposals that would shift the balance towards free use of original content were well wide of the mark, often claiming inflated growth forecasts or incorrectly stating that there would be no negative impact on rights holders. For instance, one impact assessment drafted by the Intellectual Property Office stated that an exception for free usage of copyright content for use in parody would lead to no monetary impact on the content creators. I am sure that television companies that license clips of footage every week to the likes of “Have I Got News For You”, “Russell Howard’s Good News” or “10 O’Clock Live” would dispute that.
Despite this disquiet, there has not been an adequate response from the Intellectual Property Office to this consultation, just a publication of responses. There was understandable and widespread shock among the companies that invest in original content and therefore rely on copyright protection when some of Hargreaves’s most contentious proposals about exceptions to copyright and extended collective licensing appeared in this Bill. In short, we fear that these provisions will threaten the success of British creative businesses large and small, reduce their ability to make a living from their work and thereby put into question the UK’s proud position as the world’s leading home for the creative industries. But the provisions are free-standing and losing them from the Bill would not impact on the other parts.
I want to focus a bit more today on extended collective licensing. At present, the UK operates collective licensing systems in markets that fail to have independent licensing or where the dynamics lend themselves to one body representing a number of others, such as music where the Performing Rights Society—PRS—does a fantastic job representing the rights of artists. However, many sectors have taken great strides to make content accessible to those who want to license it. This has been done through digitising content so that it can be viewed, purchased and downloaded online, while others will set commercial terms for another company to license its content. This commercial model for optional collective licensing already exists but we fear it would be pulled apart by this measure as companies spring up in what I might dare call a “copyright Wild West” to appropriate and license other companies’ content.
The proposals here for extended collective licensing will mean all rights can be taken from rights holders. Bodies will spring up to license copyright material on behalf of content creators without their consent. These bodies will set financial and commercial terms for that content. The system is being called voluntary, but I fear that that is disingenuous. This is the nub: it is an opt-out system and there is little or no detail as yet to explain important factors such as which companies will be set up to conduct extended collective licensing for a particular sector, how a rights holder can find out which companies have been created to license copyright material from their sector so that the rights holder can opt out and whether the rights holder can opt out all content in perpetuity or whether they have to opt out each piece. For companies such as ITN, Reuters, Associated Press and Getty, this would be vital as they make thousands of pieces of content every day. There are also big questions over how such a scheme would be policed and regulated, with just £10,000 per annum being earmarked to administer it. Of course there is also the question of whether extended collective licensing bodies could license content for the internet, meaning that in fact extended collective licensing would spill well beyond these shores.
The Government suggest that such a scheme is successful abroad but only one very limited example exists as far as I know—in the Nordic countries. This is no model on which to change our very different copyright market. Any new system should be opt in only—if the Government have confidence in this, why not make it opt in?—or limited to a specific remit such as extended collective licensing for non-commercial use of orphan works.
The industry concerns and economic ramifications being raised are that content will be licensed by ill-regulated bodies that can undercut prices, be ignorant of any exclusive licensing agreements or license sensitive material for usage that the creator would not otherwise grant. The Intellectual Property Office has stated that extended collective licensing will bring no economic benefit to the UK, but industry tells us that it will do great damage to burgeoning creative industry sectors and that the aim of making licensing simpler is being achieved by industry innovation to make content available online. I fear that we tinker with this at our peril.
In conclusion, as I said at the outset, there is much to commend in the Bill. I suggest that we use this opportunity to do what we always do well in your Lordships’ House: work to make it an even better Bill that, when enacted, will genuinely support UK enterprise in our global economy.
Lord Gavron
My Lords, like the noble Lord, Lord Tugendhat, I address Clause 70(4) and proposed new Section 439A on directors’ pay. I am advised by colleagues in the House that I should state my qualifications for speaking on this subject. In 1964, I started my own firm and I retired from it, when it was a public company, after 29 years as chief executive and chairman. I also served as a non-executive director on three other plcs. I now manage investments, both private and charitable, as well as a publishing company which exports two-thirds of its turnover. I first raised the problem of directors’ pay with the last Government almost 15 years ago.
In my long business career I have made many mistakes. You could say that I am something of a connoisseur of mistakes. I believe the Government are about to make a mistake regarding directors’ pay in the Bill we are discussing today. They are not going in the wrong direction, but they are not going far enough in the right direction. Fifty years ago, High Court judges, Permanent Secretaries, generals, admirals, air marshals and the heads of our leading public companies were all paid, broadly speaking, about the same. Outstandingly able people were all fairly and properly rewarded. Today, while the others have remained roughly in line with each other, the directors of our public companies have soared ahead to the extent that they are paid up to 50 times as much as their former peers, some even more than that. Have they suddenly become 50 times more intelligent or 50 times more effective? No. The reasons they get so much more is that they are the only members of the above grouping who can, in terms of rewards, help themselves.
When Clive of India was criticised for the size of the fortune he had extracted from our then colony, he replied:
“I stand astonished at my own moderation”.
The directors of our public companies have not exercised moderation. They have helped themselves beyond all reason, beyond the bounds of fair play. There are about 4,000 people who are executive and non-executive directors of our largest public companies. They sit on each other’s remuneration committees and they are responsible for each other’s compensation packages. Unsurprisingly, they are not known for recommending decreases in earnings. There are exceptions. There are directors, both executive and non-executive, who try to exercise restraint. They have a difficult time. Most members of remuneration committees are non-executives who owe loyalty to those who appointed them to their well salaried positions and on whose earnings they are adjudicating. This is a structure which can lead to excess and, my goodness, it does.
The earnings packages are often complex and composed of many items. In the interest of transparency, we should require the auditors to give full and complete valuations in the annual report of all directors’ reward packages. I am delighted to know that the Minister intends to make that compulsory. When remuneration committees—I shall call them remcos—are criticised for their generosity to directors there is much talk of the international market for good people. That is largely fiction. Over the last decade the number of our chief executives who have been lured abroad amount to fewer than 1%. The Government deserve credit for trying to tackle the subject, albeit not fiercely enough. The Minister has consulted widely on this subject and has substantial business experience himself. He has written to me confirming his intentions to implement more of the policy that I and others would like to see in this Bill. He has sought advice from public company shareholders. The trouble is that these days shareholders are, or are represented by, large institutions, insurance companies and the like. Many of their directors are part of the problem.
We could describe the ultimate shareholder as the widow in Eastbourne, Hastings, Balham or Hebden Bridge. Her pension and her insurance premiums and a great deal more of her incomings and outgoings are affected by the decisions of these remcos. Before anyone challenges this on the basis that the aggregate of bonuses, and so on, is too small to affect the outcome to shareholders, let me remind noble Lords that Barclays Bank last year paid £700 million in dividends. However, they spent £2.2 billion on bonuses for their already very well paid directors and senior managers—more than three times as much. The ultimate beneficiary, our Eastbourne widow, was the loser. Together with noble Lords from other parties, including the noble Lord, Lord Tugendhat, I am preparing a Private Member’s Bill on directors’ pay. The Minister has indicated the Government’s interest in this proposed Bill, but that is for another day.
If your Lordships agree with me that the heads of our Armed Forces, our judges, our Permanent Secretaries and so on are in no way inferior to our company directors, you might subscribe to the view that directors should not be paid 50 times more. If your Lordships are of this mind then—like my noble friend Lord Stevenson as well as the noble Lord, Lord Tugendhat—I ask for your support for a stronger restraint in the proposed new Section 439A in the Enterprise and Regulatory Reform Bill in the form of a compulsory annual binding vote from the shareholders in the AGM or, if necessary an EGM, before any increases recommended by the remco can be put into effect. This vote on pay would replace the Bill’s requirement of a shareholders’ vote on policy. The change that we are asking for would be only a small step towards preventing the already great inequality in one part of our society from growing further. It is not enough but it is worth doing.
According to last Saturday’s Financial Times,
“a number of academic studies—covering companies in both the US and Europe—suggest that a big gap between what directors are paid and what other staff receive affects motivation negatively, and that there is a strong correlation between narrower pay dispersion within an organisation and improved performance.”
These research findings are themselves good enough reason for our Government to strengthen any legislation that will reduce the excessive disparity between the highest and lowest paid in our companies. This would strengthen not only our society, but also our economy. I urge your Lordships to support any effort to do so.
Baroness Campbell of Surbiton
My Lords, I am delighted to return to the Chamber today after a long period of illness. I am even more delighted to be accompanied by my assistant. She is a new, stronger voice who will enable me to continue contributing to debates in your Lordships’ House. I thank your Lordships for your understanding and agreeing to this new and unique arrangement. This is equality in action; and it is how we achieve equality that I wish to address in this debate. I am, however, daunted by having listened to the noble Lord, Lord Lester. I admire him above all other legal experts in the field of equality and human rights. Imagine how especially daunted I am, as I am not convinced that the repeal of the general duty will enhance the Equality Act and the work of the Equality and Human Rights Commission. I first declare an interest as a founder and former commissioner of the Equality and Human Rights Commission.
This summer, the opening ceremonies of the Olympic and Paralympic Games provided us with spectacular and moving accounts of the values and ideals that have shaped and continue to shape Britain: that every individual should be able to achieve his or her full potential, uninhibited by prejudice or discrimination; respect for human rights and for the dignity and worth of each individual; and equality of opportunity and mutual respect. It is because we in Britain treasure these values so highly that, in 2006, we passed legislation to establish an institution to be their advocate and guardian—the commission for equality and human rights. These values are those incorporated into the commission’s general duty, which the Government intend to repeal by Clause 56.
The general duty offers not only a statement of values and mission; it also distinguishes the commission from those disinterested regulatory bodies whose purpose is confined only to promoting and enforcing compliance with legislation. Parliament invested in the EHRC the task of working towards the vision set out in its general duty by drawing on, but not being confined to, existing equality and human rights law and standards. It requires the commission to promote the values which the legislation represents, not just the legislation itself. Through doing so, Parliament also made clear the precise character and scope of the commission’s purpose and role. It was to be an agent of change, encouraging and supporting the development of a society in which these values are upheld. Parliament endowed the commission with a broad suite of hard and soft powers. Without the general duty, the EHRC would be left simply to address equality and human rights in the here and now, with no mandated direction as to what it should work towards.
Section 3 also underpins the commission’s independence. This continued independence is required if Britain is to continue to benefit from a national equality body recognised by the European Union, a national human rights institution recognised by the United Nations and an independent mechanism under the United Nations Convention on the Rights of Persons with Disabilities. If Section 3 is repealed, the character and scope of the commission will be fundamentally diminished and its independence placed at risk. Britain will lose a statutory champion of values which underpin modern democracy. Is that really what this House wants to endorse? Indeed, is such a fundamental change really understood by all in government? I cannot believe that this is really what our modern democracy wants from the EHRC.
The decision on whether to repeal Section 3 is, I believe, of utmost significance. For me, it is a choice between a strong independent body, committed to promoting and safeguarding British values irrespective of the Government of the day, and a much diminished and far less independent body, confined to promoting the enforcement of law. At this time of economic hardship, the British people need to take comfort from the values that bind us as a mutually supportive nation. It therefore deeply saddens and concerns me that the Government have chosen, on the occasion of a Bill designed largely to reduce red tape for business, to seek to erase fundamental values from British law. I urge the Government to reconsider this potentially harmful proposed reform and I ask your Lordships to safeguard Section 3 by keeping it where it belongs.
Baroness Andrews
My Lords, I am sure that noble Lords would want me to say how splendid it is to see the noble Baroness back in the Chamber and to congratulate her on a very powerful speech. I am afraid I will not be able to follow what she said because I have to talk about the clauses that reflect heritage protection. I hope that she will forgive me. I therefore turn to Part 5 of the Bill, which deals with the way in which we manage our heritage in England. As chair of English Heritage, I must obviously declare an interest.
It is a great responsibility to live in an old country and, by and large, we live up to that responsibility to a global standard of excellence. However, there are risks and difficulties facing our heritage now. In our recent annual report on heritage at risk, our list included nearly 6,000 listed buildings and archaeological and other sites that are threatened one way or another—and that excludes almost all grade 2 buildings, which are the ordinary fabric of our towns and cities. We have to find better ways of incentivising owners and guardians to take better care of our heritage, and ways of simplifying processes. I am delighted to say that this Bill does some of that and, for the most part, I welcome it.
I start specifically by welcoming Clause 54, which the Minister has already referred to. It refers to Osborne House; many noble Lords will know Osborne House and its collections very well. English Heritage has invested considerably in recent years in the house, the private beach that belonged to Queen Victoria and, indeed, her bathing machine. Unfortunately, that is not available for public use but it is very beautiful. Clause 54 repeals those parts of the Osborne Estate Act that restrict the use of the site and is very welcome. In this context, when we are discussing ways to promote growth in this country, it is absolutely vital that our historic sites and buildings can play their full part in generating economic, social and environmental benefits and regeneration. This clause will allow English Heritage to manage the site with a bit more freedom while protecting and enhancing it, so that even more people can enjoy Queen Victoria’s extraordinary domestic and national legacy.
I was also extremely pleased that the Bill has picked up four of the provisions that were in the draft heritage protection Bill, which was regrettably dropped at the last moment from the last legislative programme of the previous Government. Clauses 52 and 55 and Schedule 17 cover these provisions, and these changes will bring a simpler, speedier and more constructive consent system for heritage protection. I want to mention four of these reforms briefly today. The first change is the replacement of the requirement to apply for conservation area consent with a requirement for planning permission in the same circumstances. That is a modest but sensible efficiency because, at the moment, conservation area consent applications are often accompanied by planning applications that cover the redevelopment of the site. This change means that one application rather than two will have to be made.
The second change will allow the description of the extent of a listed building and the nature of the special interest in it to be more precise. Essentially, it means that we can ensure that people are not left wondering whether the charmless 1970s office extension to a beautiful, characterful Victorian office needs protecting. That is an extremely important development because, at a time of dwindling resources and the catastrophic loss of expertise in this field, it will help those involved in managing change to listed buildings to focus on what really matters. We have to make the best use of declining resources.
The third change will allow an owner of an unlisted building to apply at any time for a certificate of immunity from listing. At the moment these can be applied for only when a planning application has been made, at a time when the owner has already made a substantial investment in the future of the site. Again, this is a good change which will allow owners and developers to resolve any constraints that the listing system may place on the development potential of a site at the earliest opportunity.
The final change, drawn from the heritage protection Bill, is the new scheme of heritage partnership agreements. These are voluntary agreements between an owner and a local planning authority. They will cover how a listed building should be managed and in so doing may grant listed building consent for certain works. This is a significant step forward, particularly in relation to large sites. The agreements have the potential to save a considerable amount of time and paperwork and will do away with the raft of minor applications that tend to swamp the desks of conservation officers.
However, I have a very important caveat for the Minister. As presently drafted, I am concerned that the Bill does not replicate the legal requirement for the local authority to consider the desirability of preserving the listed building, as currently applies to all listed building and relevant planning applications. This, by definition, is the core requirement in primary legislation. It is the raison d’être for the listed building regulation. I recognise that the regulating powers given to the Secretary of State will allow for this core decision-making principle to be reintroduced in secondary legislation. However, I believe that it is so fundamental to the purpose of the listed building regime that it ought to be back in primary legislation. Indeed, I think we are looking at some inconsistent drafting here because I note that for local listed building consent orders—which I will come on to in a moment—this statutory requirement to consider the conservation objective has been replicated. I can certainly write to the Minister to clarify that.
I am sure that the Government will be able to confirm that there is no intention to reduce heritage protection levels—the Minister said as much in his opening remarks—and that the provisions of Section 16(2) of the 1990 Act will effectively be reintroduced for heritage partnership agreements through regulations. I suggest that something so fundamental must be in primary legislation. With that one proviso, I very warmly welcome the proposals as I think they are good for owners and users.
I now turn briefly to the other changes that have arisen from Adrian Penfold’s review. More than 400 organisations and people responded to some very controversial proposals. However, I was very reassured to see that the Government have listened very carefully to their views and I can support in principle what has been incorporated into the Bill, although there are a few points we need clarified.
I support the idea of a system of local listed building consent orders which would allow local authorities to set aside the need for listed building consent for certain types of work. They will find that very useful where they are confident that works of a common type are appropriate. However, I do not think that there is a need for an annual report. The Secretary of State should give the power to set an appropriate period for reporting. I suggest that five years might be better.
The Bill also empowers the Secretary of State to grant national class consents—that is for a group of assets that cross local authority boundaries. It potentially covers the whole of England. This is rather controversial and has been seen as so by the heritage community. I can see some benefit in specific circumstances, such as for organisations with widely dispersed historic infrastructure where works of a type to buildings of a type have been assessed. For example, you can imagine the newly formed Canal and River Trust benefiting from such an arrangement in relation to locks. The problem is the breadth of discretion that this gives the Secretary of State, particularly in relation to listed buildings which are so different and so refined, which, of course, is why they are listed. There is concern that a general national class consent order, saying something about the works that could be done to listed buildings without consent, could not conceivably be so sensitive that it did not have some perverse or damaging consequences.
I know that the solution has been borrowed from the planning system. It does not work when it is transferred like this. I hope that the Government may be clear on the intended use of the national class consent power and will undertake only to use it to allow a specific organisation, such as an infrastructure owner, to carry out specific works to specific buildings or a class of building.
Finally, while I very much support the introduction of certificates of lawfulness of proposed works to listed buildings, I do not think that Clause 53 will achieve its objectives. The proposed certificates are simple mechanisms but they do not offer, for example, the owner of the listed building sufficient certainty for long enough that the works are going to be lawful because you have to specify what is special about the building. I will write to the Minister setting out our concerns about that and similarly our concerns that the certificates will potentially last for ever, which again introduces a rigidity to the system that we would not want to see. That is a problem as well.
There is a great deal in regulation and it is notable how much of the processes for heritage partnership agreements, and so on, have been left to secondary legislation. We do not have those regulations yet. I hope we will have them before we get to the Committee stage. I would welcome confirmation from the Minister that the regulations will essentially reflect those in place for listed building consent, as far as appropriate, and maintain current levels of protection.
These are welcome changes. They will liberate parts of our national assets to play a greater role in creating wealth, which is exactly what we want to see. Heritage is part of the solution to the economic challenges we are facing. I look forward to the Bill’s Committee stage.
Lord Lucas
My Lords, I am very comforted that the noble Baroness, Lady Andrews, feels comfortable about her bits of the Bill, given what a superb job her organisation has done on Wrest Park in Bedfordshire, in which I have a strong interest, and the good work it is doing generally. It is on song at the moment. I very much hope the Minister will pay attention to its views.
I welcome this Bill. I do not share the view that it is a pity that it is such a miscellaneous Bill. It is great that we are not making any radical changes but are instead making much needed changes in small ways. Change works better in that fashion.
I will be concerned with only two parts of the Bill. The first is copyright. I thoroughly approve of what the Government are doing. They have got the balance pretty well right. However, there are arguments against, and I will listen to them carefully. I look forward to enjoying the Committee stage and to seeing if there is anything that needs to be done to improve the Bill. Doubtless we will find the opportunity to discuss things such as fair use and other aspects of copyright that do not appear in this Bill but might perhaps appear in a future Bill.
The other aspect is going to be competition. I want to be sure that the new arrangements have sharp enough teeth and enough ability to act on their own decision to deal with that tax-avoiding, morality-free monopsony that is Amazon. It is a very good place to shop, but it is a very oppressive business. It has extraordinary contracts with its suppliers. Its arrangements with its Marketplace sellers must breach something, but I have, in the past six months, been unable to find a single major UK publisher who was willing to have tea in the Lords to tell me what they think of Amazon. It has got the whole business frightened. I want the organisation we create to have enough confidence and oomph to tackle things such as this on its accord rather than waiting for some frightened Penguin to complain.
Lord Borrie
My Lords, that was a short and sweet speech, which I am sure we all welcome.
Lord Borrie
I would not dream of complaining. I am afraid I shall take a little longer than the previous speaker. I want to concentrate entirely this afternoon on Part 4 which concerns competition and reform. I will not make the usual remarks about reform. From 2010—I think it was the Public Bodies Bill that drew my attention to it—the Government first seemed to propose the amalgamation of the Office of Fair Trading and the Competition Commission into one new Competition and Markets Authority. I had doubts then, and I have had doubts since, about the desirability of this change. Partly, I admit that it is, of course, a matter of nostalgia because I had been director general of fair trading for some 16 years and had come to value the independence and degree of separation of the Office of Fair Trading on the one hand and the Competition Commission on the other. For nearly 40 years, from the Fair Trading Act 1973 to today, it has been the job of the OFT to investigate whether there is a prima facie case for saying that some business practice, takeover bid or merger is anti-competitive and to the detriment of the consumer. If the OFT has found a prima facie case of that sort, it can send the matter to the Competition Commission for judgment. I use that word deliberately because I want to emphasise that the OFT phase of the proceedings that go on today and have done for so many years could properly adopt a more aggressive stance, rather like a prosecutor; whereas the Competition Commission must, of course, be much more balanced and is more quasi-judicial.
The Government admit in the papers leading up to the Bill that there has long been international commendation of the UK’s method of administration of competition law. Of course, I see the disadvantages of the existing separation of the OFT and the Competition Commission, including the need for any particular business or company to have to present their case twice: first to the one body, then to the other. There is a certain amount of duplication of effort. However—and this has not been mentioned today, even by the Minister—the Government intend that the new arrangements will maintain the separation of phase 1 and phase 2 decision-making in mergers and market cases. The various provisions in the Bill to ensure that phase 1 and phase 2 are conducted independently of one another make it difficult to see how the key objective of the creation of the new authority, which is to remove the duplication and inefficiencies caused by the division of responsibility between the OFT and the Competition Commission, can really be achieved. The answer might be that the same officials in the authority, the same staff—whether they are generalists, lawyers, economists, accountants or whatever—should examine the case at both phase 1 and phase 2 of the new arrangements. If that is so, it then becomes difficult to see how phase 2 can be the fresh, in-depth investigation which it is claimed it will be.
I certainly welcome the Government’s intention to retain as final decision-makers in the Competition and Markets Authority the panels of independent people who spend their normal work day as accountants, businessmen, lawyers and whatever. Their immediate and continuing relationship with the outside world is a great benefit to the Competition Commission at the moment and would be of great benefit to the new authority.
I am glad that in the other place the Government emphasised that the objective of promoting competition in the interests of the consumer is not just for the short-term interest but for the long-term interest of the consumer. I am glad that the Government have also emphasised in the other place the value to the consumer of the deterrent effect of the work of the competition authorities. Recent OFT figures show that for every cartel case which is pursued, 28 breaches of cartel law are deterred. The OFT has also said that for every abuse of monopoly pursued, 12 others have been deterred. This is important because, as and when the new authority comes to condemn a particular industry’s anti-competitive practice, we can appreciate that this can have a beneficial effect well beyond the particular businesses involved in a particular case.
It was a significant factor of the OFT structure from its creation in 1973 that it had both competition powers to combat anti-competitive practices in mergers and so on, but also had a general power in consumer protection. This seems appropriate. We can all recognise that you can have competition in a particular industry but not necessarily completely happy consumers. If you look at the second-hand car industry, there is plenty of competition, but is the consumer never harshly or unfairly dealt with? In this House, on more than one recent occasion, attention has been drawn by Members to the credit industry. Here, again, there is plenty of competition between people offering this and that kind of credit, but are consumers not still harshly and unfairly dealt with? The answer, I am afraid, is that they are.
The Government have said—I quote from the Minister in the other place—that the Competition and Markets Authority,
“will continue to operate the combined OFT and Competition Commission’s markets regime, to ensure that markets work well for consumers”,
and will,
“have power to enforce unfair contract terms legislation”.
The OFT has long had good, close relations with citizens advice bureaux and the trading standards departments of local authorities. I would like reassurance from the Government that Citizens Advice, now that it is to have the main role in terms of consumer advice and education, will have adequate resources to do that. As for trading standards departments, which are in the front line of enforcing consumer protection legislation, they are of value; I am glad that the Minister mentioned this in his opening speech. I am glad to hear about the creation of the new national trading standards board. It is a logical development of the primary authority scheme which was introduced by the 2008 Act, whereby a business that operates across several local authorities can form a partnership with one local authority whose advice and enforcement powers will prevail over those of other local authorities.
I have a little query at the back of my mind which I have not heard the Minister or others explain. What happens to the power and influence of elected members of local authorities? The new body, I understand, has officials from local authorities on it. What happens to the existing authority of the councillors who are members of the authorities?
Finally, I am pleased that dishonesty is no longer required to be proved before a covert cartel can be successfully prosecuted. During my time as director general of fair trading, anti-cartel legislation did not even include a criminal offence at all. The 2002 Act brought it in so that price-fixing, market-sharing and other agreements between apparently competing companies could now be attacked in the criminal courts. Unfortunately, the requirement to establish dishonesty was found to be too high a hurdle. I am glad to learn that the Government have every intention of resisting CBI blandishments on this matter.
Lord Low of Dalston
My Lords, this is not a Bill to set the pulse racing. I find it difficult to summon up much enthusiasm for it. Like most Bills of this sort, it consists of a random miscellany—I hesitate to say “hotchpotch”—of provisions. Like Winston Churchill’s pudding, it lacks a theme, but the Government have sought to give it one by describing its purpose in the 2012 Queen’s Speech as being to,
“create the right conditions for economic recovery by strengthening the business environment, reducing regulatory burdens and improving business and consumer confidence”.
In a recent series of exchanges on the economy at Question Time, I was heartened when the noble Lord, Lord Forsyth, warned against a purely one-club approach. He stressed the need for supply-side measures, which I took to mean monetary policy. When I shared this with an economist friend, however, he replied, “I’m afraid not. He means cutting red tape and labour market flexibility—by which I understand slashing employment and equalities rights and cutting wages”. This Bill would seem to be the proof that he was smack on the button.
I do not intend to speak at any great length and keep people from their autumn break any longer than necessary, but I simply want to put down a few markers for Committee. First, I should like to ask the Minister for an assurance. Clause 66 would give the Government power to change copyright exemptions. As he will know, the Copyright (Visually Impaired Persons) Act 2002 exercises a power of containment in the copyright directive to introduce an exemption to copyright law which permits the making of accessible copies for the benefit of visually impaired people. The scope of these exemptions has been hotly contested within the World Intellectual Property Organization, where visually impaired people’s organisations have been arguing for a treaty which would permit the exchange of accessible copies for the benefit of print-disabled people across national boundaries. The UK Government have been very helpful. I just want to be sure that there is no intention to use the powers in Clause 66 to restrict the exemption in favour of copies for the benefit of visually impaired people in this country. I should be most grateful if the Minister could give me that assurance.
Next, I turn to the provisions relating to whistleblowing in Clause 15, which—unless I am much mistaken—have not featured very much in the debate so far. The effect of these would be to limit the definition of a protected disclosure in whistleblowing cases and create an additional hurdle for those speaking out against wrong-doing to clear. We will want to debate the legal niceties of the provisions in Committee, but in the light of recent scandals—the Jimmy Savile affair, the system of care homes in North Wales, the rigging of LIBOR, price-fixing in the energy industry, Hillsborough, the Mid-Staffordshire NHS Foundation Trust, phone-hacking at the News of the World; the list goes on—one has to ask whether it is really wise to be narrowing the protection given to whistleblowers.
I will touch only on the changes proposed in Part 5 to equality law, the remit of the EHRC and the procedures available in equality cases, as these have already been dealt with very fully by the noble Lord, Lord Lester, and my noble friend Lady Campbell. As someone who was heavily involved in debates on the Equality Bill, which led to an Act commanding widespread support in your Lordships’ House less than three years ago, it pains me to see such an assault on a piece of legislation—which embodies so many of the values of a liberal society with broad, cross-party support—so soon after its enactment.
As the noble Lord, Lord Lester, has reminded us, Clause 56 repeals Section 3 of the Equality Act 2006, which sets out the commission’s general duty. It repeals Section 10, which imposes a duty on the commission to promote good relations between members of different groups. It repeals Section 27, which enables the commission to arrange to provide conciliation in non-employment disputes and it amends Section 12 by reducing the frequency with which the commission has to publish a report from every three years to every five years. The EHRC’s general council has described this as the abolition of the EHRC by stealth. As the noble Lord, Lord Lester, has indicated, there are different views about just how much impact this will have; but removing the general duty of the commission to promote human rights and a society free from discrimination and prejudice, and abolishing the commission’s duty to promote good relations between different groups in society, feels to me like a pretty fundamental alteration to the remit of the EHRC.
Whatever differences there may be about the remit of the commission, the noble Lord, Lord Lester, was particularly critical of the proposals to abolish liability for third-party harassment and the questionnaire procedure, which enables potential claimants to ascertain the facts by means of a simple statutory procedure and helps them to decide whether to pursue the claim and to present it most effectively if they decide to go ahead. Given the noble Lord’s unrivalled expertise and authority in this area, the Government would do well to heed his warning.
A number of measures which put the clock back and chip away at workers’ rights, which have been hard-won over the last hundred years, will inevitably be the subject of close scrutiny. In many cases, the evidence base for change is open to question. The proposal to end strict liability in health and safety cases will fundamentally change the balance of power between employer and employee and will place the burden of proof on vulnerable employees. Indeed, one is tempted to feel some sympathy with Iain Wright, the shadow Minister in another place, when he said that if reasonable practicability became the sole test, it,
“risks taking us back to a 19th century mill owner’s view of health and safety”.—[Official Report, Commons, 16/10/12; col. 198.]
I have only touched on a few clauses of this wide-ranging measure; I hope they will be the subject of lively debate. There is a lot more in this Bill, however, which probably means that we will be slugging it out for some considerable time during the protracted Committee stage.
Baroness Ford
My Lords, I begin by drawing attention to my interests in the register—in particular, that I chair one plc remuneration committee and serve on three others. I greatly welcome the provisions contained in Clauses 70 to 74 of the Bill. These provisions mirror what the more responsible companies are already doing and I could not possibly take any exception to them. This probably confirms, as the noble Lords, Lord Tugendhat and Lord Gavron, already said, that the Government have not gone far enough. I absolutely echo the comments made by those noble Lords and encourage the Minister and the Government in going further in these provisions for executive remuneration, as they would find support from right across the House.
I also welcome the provisions about cartels, about which I hope to say more in Committee, and the simplified bankruptcy procedures which will be, sadly, enormously valuable to small businesses that find themselves in that position. It is really the position of small businesses that I would like to talk about today, because, before coming to your Lordships’ House, I spent most of my executive career in business, specifically in creating and growing successful businesses in property, businesses services and, finally, publishing. I therefore have first-hand experience of what it actually takes to create and build a successful business: to take a thought out of your head and go the whole way to that happy day when you send out your first invoices. I understand what that takes and, by implication, how to achieve growth in the economy because it is from the small business sector that any growth will come.
I agree with the noble Lord, Lord Low, that—sadly—there is virtually nothing in this Bill that will help the vast majority of new and growing businesses. In terms of the signals we are sending to that sector of the economy, can we really say that our biggest priority in the current environment, however worthy, is the creation of a new competition authority? Perhaps we should not be surprised by this set of priorities from the Government. Over the past couple of months we have seen some genuinely bizarre signals. The idea floated by the Chancellor that individuals should trade their employment rights for shares in their company is simply ludicrous. The concept that individuals can participate in approved share schemes is, of course, eminently sensible and most decent businesses do that as long as these are fair and liquid. But to link this with the removal of employment rights is just plain wrong. I cannot think of a single small business which would want to do this or would want to be associated with it as an idea.
However, that is what seems to pass for enterprise policy from this coalition Government. The Government seem to have missed the basic point about most British businesses; namely, that they are owned and run by decent, fair-minded people who have absolutely no wish to remove employment rights but who each day work extremely hard to create good conditions for their workforce and strive to have harmonious relations, especially in smaller companies where—I can tell noble Lords from my own experience—the difference between success and failure is frequently that your staff will go the extra mile for you and with you.
That is not to say that some changes to employment law are not desirable and sensible. I sat on employment tribunals for many years in the 1980s and 1990s. When you do that job, you realise quite quickly that there is rarely, if ever, only one side to a story. It was frequently clear to me that had there been an opportunity for conciliation earlier in the process, a huge amount of time, emotion and cost could have been saved. When we come to those clauses in the Bill, I will be interested to see how the Government propose to balance sensible changes with maintaining important rights for employees. I think that we will have some lively debates during our discussions of those clauses.
If the Government see fit to create a green investment bank, which I completely support, why do they not also see fit to do something really practical for the thousands of small businesses which, despite massive government backing for the high street banks, still cannot access debt or debt at reasonable terms? When I set up my own businesses, the support of my local bank each time was absolutely critical. Often, that meant the implicit support also of the Government. The small firms loan guarantee scheme, which was in place at that time, enabled banks to loan a sensible amount of money to new businesses, typically up to £250,000. In the event of a default, the Government guaranteed 90% of the amount back to the banks. That did not mean that the banks lent willy-nilly or without any proper diligence but it did mean that they had confidence to lend to new businesses, in particular those which did not have a track record. In my experience, that is completely absent at the moment from the lending regime of the high street banks.
That scheme was responsible for thousands of successful businesses getting up and running in the 1980s and 1990s, and made the difference between success and failure in that first, always fragile, year of trading. By all means let us have a green investment bank but why can we not also deliver funding for small businesses as well, which we know are the backbone of the UK economy and without which we will not achieve the growth we so desperately need?
I am sure that owners and managers of businesses are not preoccupied, sadly, with the measures in this Bill. They are preoccupied with interest rates, accessing finance at the right cost, cashflow, chasing bad debts and slow payers, recruiting and keeping good staff, and with having the right supply chain and the right routes to market. I have never enjoyed myself as much as when I set up my own businesses. But I never got up in the morning wondering how to get around the health and safety regime, wishing that employment law was weak, looking to dilute people’s human rights, or thinking that all my Christmases would come if only the competition authorities were reorganised. I do not believe for one minute I was unusual in that. Do the Government really think that this Bill will make one iota of difference to the small business economy?
We owe it to the decent hard-working businesses in this country to do very much better. The Government really need to get a grip of their enterprise policy. Indeed, it would be good to find that they have discovered an enterprise policy that will deliver the changes that are really needed today. Sadly, this Bill, which I look forward to debating in detail and improving, in my opinion wastes a golden opportunity.
Lord Bates
My Lords, when I previously have participated in debates with the noble Baroness, Lady Ford, it has often been about the Olympics and I have always paid tribute to the tremendous work that she did in her role. But, on this issue, I could not be more opposed to her assessment of the Government and whether they have an enterprise policy. Yes, they do have an enterprise policy; namely, cutting taxes, freezing business rates, cutting taxes on jobs, cutting regulation and encouraging start-up businesses. By every name, that is an enterprise strategy. The noble Baroness slightly protests but let us look at some of the numbers. It is quite interesting that, if we look at the past year, the UK has created 250,000 new businesses. That was the fastest rate of growth in new business establishment that we have ever known in our history. There are now 4.8 million private businesses in the UK, which employ 23.9 million people. The Government need—in a sense, it is what this Bill seeks to do—to signal whose side they are on.
The message which seems to be coming through this legislation is, “Listen, we are on the side of the wealth creators, the creative minds, the people who take a risk and those who create a job more than going out to get a job”. Why are we on the side of those people? We are not in the slightest hard-hearted, harsh people. We care for the 2.5 million people who do not have a job. What about their employment rights to get into work, to have a future and to have a job? We need to state absolutely that we are on their side.
There has been a view that successive legislation has paid far too little attention, particularly, to small businesses. In this Second Reading, I want to focus on small businesses, which are the only type I know. I wish that they had been big businesses but it turns out that I have spent my life in small businesses and I know how important they are. In conversations with officials, development agencies and people like that, they all seem to roll off the tongue that a small business is something like 100 employees to 500 employees. I say to that: get a life. Most small businesses are one person, or a husband and wife, selling things in the shop during the day, and going upstairs and filling in the books at night. They might have one or two part-time employees. These people are the backbone of this country and its economy. We depend on their success to pay off our debts and to fund the public services that we all value. Therefore, we need to treasure these people in a way in which all good employers would treasure their employees because, in a sense, they are part and parcel of the overall success.
The fact that we are focusing on how to free up those businesses is very important. I know that the Minister is acutely aware of this point, a point to which I will return in Committee. There is an impact assessment that I want to hear repeated time and again. I do not want to hear, “What does this mean for the big FTSE companies which can employ government relations firms, PR firms and pummel Members of your Lordships’ House with lots of good, legal briefings on what should be happening?”. What about people who do not even know that this legislation is going through the House but who will feel its effects through enforcement? What will be the impact on those people? How can we make sure that this will demonstrate that the Government are not on their back but on their side? That is very important. What does it mean for the businesses with fewer than two or three people?
When we come to the relevant sections of the Bill, such as employment provision and unfair dismissal, that is important because if you happen to be a major corporation or a major business, you probably have an HR team. You hire your firm of executive search and selection consultants, which produce a shortlist and do all sorts of psychometric testing et cetera. People are brought in. They go on all sorts of training schemes and visit different offices around the world and what have you. Yet, still, with all that, big companies make some very big mistakes in employing the wrong people.
What happens if you are a one- or two-person band and you are taking on another person? You have never been trained in a human resources department and you do not have that expertise to call on, yet you are effectively going to share your income with this person and you have to make sure that they deliver to the required standards. If it is possible for big companies to make mistakes, of course it is possible for smaller companies to do so.
At the moment, if an employee feels that his or her case is being dealt with unfairly, they can go to the employer tribunal. The Bill suggests that people ought to go to arbitration first as that is less costly. I was persuaded by some points in the briefing note that we received which showed that in many cases people were effectively doing a trade-off. When you have a small business and you have to keep the office open during office hours and you are summoned to appear at an employment tribunal, that is an additional cost that you will have to bear that a larger company does not because they can simply dispatch someone to go to the tribunal or dispatch a lawyer to it to act on their behalf. Therefore, it seems to me that we ought to treat big and small businesses differently. The trade-off suggestion was that people would effectively be advised to say, “Listen, if you contest this in an employment tribunal, it will cost you around £8,500. However, if you just agree to it, the average pay-off is £5,400. So, on average, you will be better off if you just settle rather than go through the process”. That does not seem right. Of course, it is right that everybody’s rights ought to be protected. There ought to be conciliation, but the fact that at present only one in five people go to the arbitration and conciliation service first and 80% go directly to the employment tribunal seems wrong. It is like people who are having marital difficulties rushing off to the divorce court rather than trying to settle their difficulties through Relate. This is an important issue and those changes would be helpful.
The primary authority function is very important. Dealing with local authorities is often frustrating. It is often said that if you want help from local authorities they send somebody on a bicycle in a couple of weeks’ time, but if it is a health and safety or trading standards matter they come galloping along in a coach. There is a huge disproportion in what local authorities believe their role is. We need to look carefully at local authorities and ask what they are doing to help businesses. They seem to have many more people employed in the policing functions of their organisations than in those areas that assist business, and that reflects badly on their priorities.
The Bill is welcome. I look forward to the Committee stage. As I say, we need to focus on what it means for small businesses in this country which are the backbone of our economy.
Lord Clement-Jones
My Lords, this summer Britain emphatically demonstrated the quality of its creative talent to the world in the opening and closing ceremonies of the London Olympics and Paralympics. The Government have done much that is positive to support the UK creative industries, not least through the new IP attachés, the new tax break for video games and high-end TV production and the extremely important work of Mr Richard Hooper in the creation of a copyright hub to simplify and improve copyright licensing, which has the enormous good will and co-operation of all rights holders concerned.
However, as a recent All-Party Parliamentary Intellectual Property Group report has demonstrated, there is real doubt about the championship of intellectual property in this country, not least by the IPO itself, which is reluctant to accept intellectual property as in reality a property right. Creativity, content and copyright are crucial for future growth and investment, yet Professor Hargreaves and others express the view that copyright is a barrier to innovation. As a result, I fear that we risk going on the wrong track with copyright reform and having an IPO which has lost the confidence of creators and the creative industries.
My noble friend the Minister, who I have every hope has assumed the role of IP champion, has been very willing to engage in discussion about Clauses 65 to 69 in Part 6 of the Bill dealing with copyright and rights in performances, but the fact is there are still a great many questions to be answered during the passage of the Bill and it is that area that I wish to focus on today. I start with Clause 65. This clause has been widely welcomed by designers. It means that copyright for works of artistic craftsmanship will now last for the usual term of copyright: that is, life of the author plus 70 years. However, others have not been so welcoming. The Minister will have seen the letter to the Times of 25 July signed by Lionel Bently, Herchel Smith, Professor of Intellectual Property at Cambridge University, and others. They asked: where is the impact assessment for this measure? Why was there no consultation?
We are assured that there will be transitional provisions and that there will not need to be a bonfire of unauthorised copies after the Bill comes into effect, but what are the specifics? Why do we have to wait until the clause is on the statute book before we know what they are? Why not outline the provisions at this stage, in particular those which will permit stock which is currently legal until this clause becomes law to be sold, and then consult on them? What about using or making images of these artistic works for illustrative purposes? Will this be a breach of copyright after this clause goes through? Publishers, galleries, museums and academic institutions need to know that.
Then we have Clause 66, which has already been the subject of some comment. Amendments that were made on Report stage in the Commons are welcome as they help to clarify that the Government cannot use the clause more widely than is permitted under the European Communities Act 1972 except as regards criminal penalties. Furthermore, it appears that the application of Clause 66 in relation to penalties will only be in respect of copyright exceptions. If that is the case, why is the clause not simply worded so that it is targeted specifically at introducing penalties greater than those permitted under the European Communities Act, as set out in the Explanatory Notes? As an aside, the Minister will, of course, be aware that there is a major doubt whether the Court of Appeal Oakley Inc v Animal Ltd case of 2005 would allow the Government to implement much of what the Hargreaves report suggests by way of extensive copyright changes by statutory instrument. Will the Minister confirm whether the Government have received legal advice on that?
Exceptions to copyright are potentially of huge economic importance to rights holders and creators. The fact is that all major previous copyright changes were enacted by primary legislation—the 1911 Act, the 1956 Act and the 1988 Act. Surely that should be the rule for all future legislation. What assurances can my noble friend give in that respect that primary legislation will normally be used? Even if my noble friend cannot concede that point, it might help if we knew exactly what the Government’s intentions were. When are we going to see, and be consulted on, the draft regulations bringing in the various exceptions recommended by Hargreaves such as format shifting, parody, data mining, right to digitise and so on? Crucial issues still remain to be resolved with the exceptions. Will there, for example, be an exception for photographs from the parody exception? Cannot the draft regulations for these exceptions be published with the relevant consultation paper while the Bill is going through the House? Furthermore, can the Minister give an absolute assurance to this House that, contrary to the fears of many, if regulations are used to introduce exceptions they will not be bundled together in a single statutory instrument and an individual impact assessment will be produced for each exception proposed?
Clause 67 enables the Government to reduce the term of copyright for unpublished works or published works which are anonymous or pseudonymous. The Minister may be pleased to know that I am not going to dwell long on Clause 67. However, there is a major problem here, too. Are the Government seriously proposing that unpublished works by Robert Graves, who died in 1985, or Christopher Isherwood, who died in 1986, should be prematurely thrust into the public domain and the owners of these rights summarily deprived of them? Is this a way of enforcing publication when authors or their estates do not want it?
Clause 68 deals with orphan works and extended collective licensing. The major question on orphan works is why we are going further than the EU orphan works directive which EU countries have to implement within two years of this September. This specifically makes provision for museums, galleries, archives and libraries, educational establishments and public services broadcasters to make use of orphan works. These are all, essentially, cultural institutions and would fulfil entirely what the noble Baroness, Lady Warwick, desired in her speech earlier. It may not be a perfect directive at this stage but, if it will apply in 27 EU countries, we should surely be building on it, not building an alternative.
The Government’s proposals under Clause 68 go much further, by permitting exploitation for commercial purposes. This is a matter of real concern to many, particularly the creators of images where the metadata has been stripped and attribution lost. This is the reason why equivalent provisions failed to get through Parliament last time in the Digital Economy Bill. Has no account been taken of the photographers’ strong concern, voiced during passage of the Digital Economy Bill and in the Hargreaves consultation? The impact assessment for these provisions sets out a ludicrous range of benefit to the economy of between £9 million and £91 million. This is hardly a credible business plan especially when, implausibly, it cites using genealogy as the example of where great commercial income might be made from the exploitation of commercial works. Furthermore, what will the “authorised body” under the proposals be? Is the copyright tribunal really suitable? What alternatives are being considered? Will it be the IPO itself? This could require an expensive infrastructure well beyond that envisaged in the European directive.
The second part of the clause deals with extended collective licensing. Without consulting a rights holder, an ECL agency would have the right to act on his or her behalf, agreeing commercial terms and financial compensation for the use of his or her content. ITN and many other news agencies such as Associated Press, Thomson Reuters, AFP, Press Association, Getty Images and DPA are deeply concerned about ECL. In their view, ECL removes the business logic for investing in digitisation and will starve the UK creative sector of valuable digital content. As Richard Hooper says in his second report, why proceed in this way when we have the digital copyright hub in the making? This is precisely what the copyright hub will do for non-orphan works. Is ECL not obviated except, perhaps, for orphan works, now that a more streamlined clearance system is being designed through the new copyright hub?
What is being proposed will, in effect, be compulsory for most people and organisations. Every creator of copyright-protected material outside the UK—and many English language creators are in other countries around the world, such as the USA, Australia, Canada and India—would need to keep themselves constantly updated about all the organisations which have been issued, and still retain, permits to operate ECLs within the UK and which might be licensing their works.
There is nothing in the impact assessment to quantify any benefits from ECL and there is no analysis of the losses that it would create. In any event, how on earth can the cost of administering the ECL be estimated at only £10,000 per annum, equating to 20% of the salary of two people on £25,000 per annum, as set out in the impact assessment? No countries operate ECL in the broad way envisaged by the Hargreaves report and the Intellectual Property Office. The use of ECL in Nordic countries is very specific and narrow. Rights holders, however, are generally very supportive of the broadcasters’ desire to open up their programme archives and appreciative of the administrative challenge that they face in doing so. That is precisely why they have been holding detailed meetings with the UK broadcasters in order to make their rights clearances both cheaper and more efficient.
The noble Baroness, Lady Buscombe, raised a number of questions about ECL. I can add others: how do we know what will make a collecting society sufficiently representative to operate ECL? What sums of money or percentages will be paid to copyright owners and what will be retained by the ECL organisations? What will be the duration of licences? With a few minor exceptions, much more straightforward identification and licensing of rights is universally thought by creators and the creative industries to be the way forward, through the proposed copyright hub and not through extended collective licensing.
Finally, I have a general question for the Minister, arising out of paragraph 168 of the second Hooper report. As Richard Hooper asks, what are the Government doing to meet the challenge of reducing the incidence of copyright infringement on the web in return for the creative industries making licensing easier? There are several avenues to explore, such as improving site-blocking court procedure and tightening up on metadata stripping, which is at the root of so much concern among image rights-holders. Will the Government examine the whole issue of moral rights in the context of giving better protection to individual creators?
In conclusion, we have a very flimsy set of ill- thought-through clauses here which risk confusion and litigation on a huge scale and risk the UK being shunned as a country to license to, produce in or license from. It is particularly sad that so little, if any, account seems to have been taken of the 471 responses to the Hargreaves consultation in framing the legislation. The clauses need a complete rethink. Will the Minister undertake to do so in Committee?
Lord Whitty
My Lords, I believe that the Minister is today presenting his first major piece of legislation in his new department. Over the past two or three years I have watched him get his head around energy policy in DECC. In his new department, he has quite a task with this Bill because he has got to get his head around everything from the obscurities of employment law to, as we just heard, the intricacies of copyright law in its various dimensions. I wish him the best of luck because he has got what I will call, for the purposes of neutrality, a patchwork of a Bill. There are some attractive patches and some less attractive ones. It seems to be an amalgam of old ideas, which have been around the department for a long time, and some rather barmy new ones. I have to take at face value the view of the noble Lord, Lord Razzall, that Vince Cable has managed to resist the barmier elements of the Beecroft report, although some of them actually do appear here in one way or another. There are also some areas which we all agree would be useful.
We have, in the Bill, the good, the bad and the ugly. If it helps the Minister, I will, rather than dwell on any individual area, help to categorise the various parts of the Bill from my point of view. I start with the good; at least in conception. I very much welcome the announcement of the Green Investment Bank. I welcome what the noble Lord, Lord Smith of Kelvin, said earlier about it getting off the ground. However, it is not yet a real bank. A bank which cannot—at least at this stage—borrow on the market and thus multiply its leverage of private investment is not a real bank. In some ways, it is not as green as all that. We need some criteria for its investments that relate, for example, to targets for carbon saving and other resource reduction. This part of the Bill will need strengthening.
Likewise, I welcome the big picture in relation to the competition regime. I agree with the merger of the OFT and the Competition Commission and regret that I part company with my noble friend Lord Borrie on that matter. It should add coherence and speed up investigations. I also welcome the dropping of the dishonesty requirement in relation to cartels which has been an inhibition to interventions in this area. My concern is about what will happen to the bits of the OFT’s responsibility relating to consumer protection, enforcement of trading standards and consumer education which drop out of the new organisation. They are coming forward in a number of different respects but are, essentially, being privatised or localised. I am not necessarily against that but I will need some reassurances. I recall my previous interest as chair of Consumer Focus, a body which is imminently to disappear, greatly reducing the amount of consumer protection or, at least, consumer advocacy. I also declare my role as honorary vice-president of the Trading Standards Institute. I shall definitely return to this whole area of consumer protection and the competition provisions at a later stage.
Some aspects of the Bill are mixed or inadequate. On the contentious area of copyright, I support the broad sweep of the Hargreaves recommendations and the adoption of the IPO proposals on orphan works and collective licensing. However, from a personal point of view at least, I am deeply suspicious of any attempt to extend copyright protection and I require a better justification for it than we have yet received. I regret the failure largely to come to grips with the new reality of copyright protection in a digital age. We rehearsed this ground under the previous Government with the Digital Economy Act and I fear that I shall once again probably part company with the noble Lord, Lord Clement-Jones, on aspects of that. In terms of the balance sought by his colleague, the noble Lord, Lord Razzall, I shall probably have slightly more sympathy with the under-30s, although I am evidently not one of them, than I do with some of the more aggressive antics of rights holders in this respect. We certainly need a new balance that reflects the reality of the internet.
My noble friend Lord Gavron and the noble Lord, Lord Tugendhat, have already welcomed the provisions on director remuneration but wished to extend them. This is one of the great difficulties of our time. The impact of the level of director remuneration on the morale of the workforce and the attitude of the population as a whole to our leaders of industry needs to be seriously tackled. I am glad that the Government are at least beginning to do so.
I now come on to the bad bits of the Bill. Most of the provisions on equality fall into this category. As the noble Baroness, Lady Campbell, movingly pointed out, the narrowing of the scope of ECHR interventions, and of its support, advice and conciliation services, is going to set back the mainstreaming of equality issues in terms of gender, race and disability. The commission needs to have independence and general responsibility. The threat that the Bill presents to both is of considerable concern to many around the House.
Most of the employment law provisions fall into the “bad” category. Indeed, I should probably move them into the “ugly” category. It is not just these provisions which are of concern. They are part of a wider strategy. I hope this is not being done as consciously by the Government as the word “strategy” implies, but when we look at what has happened under the Legal Aid, Sentencing and Punishment of Offenders Act and the Welfare Reform Act in terms of access to tribunals and redress, we see a whole range of reductions in access to justice and redress for those in the most vulnerable and least powerful negotiating positions in our society. It is a strategy of which the Government ought to be ashamed. I am sorry to see bits of it in the Bill.
Ugliest of the lot are the provisions referred to by the noble Lord, Lord Low, relating to Clauses 61, which appears to provide that victims—physical, mental, financial or mortal—of the failure of private or public corporations to fulfil their statutory responsibilities will, in most cases, no longer be entitled to compensation. That takes us back more than 100 years, and it is something that I had not expected the Government to bring forward. This issue has not had adequate coverage. It was a late entrant to the Bill in another place. We need seriously to consider whether those provisions ought to be part of the Bill.
This is a bit of a tinkerer’s charter. It tinkers with a lot of bits of legislation in areas for which the Minister’s department is responsible. I am sure that Vince Cable is capable of doing better than this, but I recognise that he is somewhat hobbled in his intentions to turn the department into a driver for economic recovery and a provider of business confidence and jobs. He is hobbled by the Treasury, by some of his colleagues, by the right wing of the Conservative Party in another place and partly by the department, which—even going back decades, from the Board of Trade onwards—has never quite managed to translate itself into a real engine of economic growth.
The Bill is, frankly, one of the least impressive exigencies from that department, and it certainly will not fulfil the role of developing a proper and effective industrial strategy and giving confidence back to the population and businesses of this country.
Lord Currie of Marylebone
My Lords, I declare an interest as the chairman designate of the Competition and Markets Authority which the Bill proposes should replace the existing Office of Fair Trading and the Competition Commission. I shall therefore focus on Parts 3 and 4, which establish the new authority and make some important changes to the competition and consumer regime that it will oversee. Without appearing presumptuous, I hope that noble Lords will allow me to speak of the new authority on the assumption that its creation comes about and that the Bill passes and receives Royal Assent.
I knew when I took on this role just what a privilege and responsibility it represents. Few people have the opportunity to create a new organisation, and I have been given that privilege twice, first as the founding chairman of Ofcom and now, exactly 10 years later, as the founding chairman of the new authority. I am conscious that I follow in the footsteps of many distinguished economists, lawyers and competition experts who have led the Office of Fair Trading and the Competition Commission in the past, including the noble Lord, Lord Borrie, who has already spoken in this debate. The responsibility is considerable. The Office of Fair Trading and the Competition Commission have strong reputations as effective competition authorities, both here and internationally. I have always known them as bodies that have attracted highly professional and dedicated staff; and that view has been confirmed by my many meetings at all levels of the two organisations over the past couple of months.
The early processes for building the new authority are necessarily under way—the search for the new CEO designate; the formation of a transition team drawn from BIS, the Office of Fair Trading and the Competition Commission; and the clarification of the legal basis on which the transfer of staff will happen. There is a great deal to be managed over the next year or so before the authority comes into existence. We need to make sure that the Competition and Markets Authority is established as a vibrant organisation with a fresh, dynamic culture that embodies both new elements and the best of the two legacy bodies and retains and integrates the talent of their staff. In contrast to many public sector mergers in the past, we have adequate time to manage this process and its complexity, and get it right.
Three high-level objectives will be paramount. First, we will ensure that the new body is a high-performance organisation that is at least as effective as, if not more so than, the two organisations that it replaces. That is a high ambition, but entirely achievable. Secondly, we will ensure that the casework of both the Office of Fair Trading and the Competition Commission continues unimpeded and that the transition of work in progress to the new authority is entirely seamless. We will safeguard business as usual. We need to find ways of enabling colleagues in the Office of Fair Trading and the Competition Commission to engage with the complex transition process, while not distracting them from their current roles. Thirdly, we will ensure that all colleagues are treated fairly and appropriately in the transition. We have established the legal principles for that transfer under an arrangement equivalent to TUPE. Not all staff will transfer to the new authority, but I expect that all but a handful of positions in it will be filled from the existing bodies, and at this point we envisage rather few redeployments or redundancies.
Despite these reassurances, it is a long and unsettling period of transition for staff, and we will need to work hard to communicate effectively through the processes to keep uncertainty to the minimum. There will be real benefits from the creation of the CMA. The combined organisation will be able to deploy resources more effectively and flexibly to different parts of its work, including phase 1 and phase 2 merger and markets decisions. It will deliver decisions in a more timely way, with no diminution of quality, to the benefit of consumers and businesses. It will provide a single and, therefore, stronger voice and advocacy, both at home and internationally on competition issues. With the right work environment, it will provide for its staff a wider range of work opportunities and experience.
I recognise the question that the noble Lord, Lord Borrie, has raised: how does one maintain the independence of the phase 1 and phase 2 processes while delivering those decisions in a more timely and efficient way? I believe that, with the redesign of the processes under a single roof, and while maintaining independence, we will achieve both timeliness and greater efficiency.
I am sure we shall debate the measure in the Bill to remove the dishonesty test in cartel cases. It is the single most important reason why the Office of Fair Trading has been unable to bring more cases to trial. Cartels represent a major barrier to dynamic, innovative markets and economic growth, and the change is greatly to be welcomed.
The new authority will have an important interface with the sector regulators in financial services, communications, energy, water, transport and, of growing importance, public markets such as health and education. In most of these sectors, competition and Enterprise Act powers are held concurrently by the sector regulators and the Office of Fair Trading, and in future the Competition and Markets Authority. Some have been critical of the sector regulators for using sectoral regulatory powers rather than competition powers, and the Office of Fair Trading has held back from exercising its competition powers. This has led some to call for the sector regulators to be stripped of their competition powers. I think there are better options, not least those laid out in the Bill. Removing concurrency could induce the sector regulators to use their sector-specific powers more, not less, which would be entirely counter-productive. It could also force the Competition and Markets Authority to build sectoral expertise that would be duplicative and wasteful. It may well be better to try what is envisaged in the Bill: enhanced co-operation, led by the authority, drawing on the sectoral expertise of the regulators and the competition expertise of the authority. Steps are already underway to put in place new mechanisms for that co-operation. We should be clear that if this co-operation does not work, the authority must be willing and able to exercise its powers in those sectors if regulators have not.
A number of other measures in the Bill, which I do not have time to discuss, will give rise to a much enhanced competition regime with a more dynamic authority with wider powers to deploy, but the Competition and Markets Authority will be more than a competition authority. It also has the important and complementary role of consumer protection. Consumer protection and competition law work together: effective competition empowers consumers; and well-informed and protected consumers make competition more effective.
As has been discussed, the Bill brings about a shift in the landscape for consumer protection and enforcement. Trading standards, under the National Trading Standards Board, will play a bigger role in the enforcement of consumer law, with the co-operation of the Competition and Markets Authority. The authority will have a broad range of consumer enforcement powers, and it will have primary expertise and responsibility for the enforcement of unfair contract terms legislation, taking responsibility for high profile national cases, such as surcharges that stem from misleading advertising prices as well as international cases. Mechanisms are being put in place to ensure enhanced co-operation between all the bodies involved, which include trading standards, Citizens Advice, the Competition and Markets Authority and the new Financial Conduct Authority, to make sure that they share intelligence on consumer detriment and allocate enforcement action. This will be a critical area of the new authority’s work and, as an early signal of its importance, I have already engaged with trading standards at both a national and local level.
Effective competition and vibrant markets play a crucial role in promoting the investment, innovation and growth that we need in these difficult times. Together with a high performance Competition and Markets Authority, this will maintain and enhance a world-class and robust competition and consumer framework that benefits businesses and consumers and promotes economic growth. Faster decision-making, a lower burden on business, and the better deployment of expert resources will all work to this end.
Lord Clinton-Davis
My Lords, I add my congratulations to the noble Lord, Lord Marland, who regards this Bill as exemplary. In no way do I think that he would be regarded as immune from myopia. I do not think that some of this Bill is worthy of support. Notwithstanding its controversial aspects, the Bill has been introduced without adequate supervision. There has been no review in which the regulatory provisions imposing strict liability have been properly examined, as recommended by the independent Health and Safety Executive. I ask the Minister: why not? Why has he refrained from legislating on that important aspect of any Bill? Of course, this is not the only controversial provision. Indeed, there are so many others but I simply do not have time to mention them all.
I am particularly concerned about Clause 61, about which the Government have either had no discussions or have summarily dismissed the anxieties voiced by, among others, the Association of Personal Injury Lawyers, which concluded that health and safety provision would be put back by much more than 100 years. Indeed, the only time that the coalition reacted to this provision was when the House of Commons debated the Bill on Report. Why? Were the Government surrendering to the representations of the insurance bodies and their right-wing allies? Where do the Liberal Democrats stand on this?
In effect, the Government are now saying that employees will have to establish that employers have been guilty of negligence. Will it not make it infinitely more difficult for them to prove valid claims? They and the legal aid bodies will be exposed to more complicated, more protracted and more expensive claims. Employers will more easily get out of their proper civil law liabilities. Moreover, insurance premiums are bound to increase. In this probable event, do the Government think that that will be beneficial? If not, why do they not say so?
The Government opine that the so-called burden of health and safety requirements will be reduced by Clause 61. What evidence do the Government adduce for that proposition? I believe none whatever. Simply to assert that Britain will be able to compete more effectively in the world markets will not suffice. Evidence is important and evidence is lacking.
The TUC has also made some valuable criticisms of the Bill, all based upon the claims that the Bill will reduce the employment rights of working people. We have heard something about that today. Yes, I am troubled by the fact that employers will find it much easier to fire employees. How can that benefit the country as a whole? Compensation awards for unfair dismissal are being reduced. Whistleblowers will be disproportionately hit. It all combines to support the view of those who proclaim that there should be a radical re-examination of the situation.
What is being claimed by Government in support of the provision that fees for employment tribunals should be introduced? Will this not have the effect of preventing many employees pursuing their just remedies? I submit that it is wholly unjust.
Legal officers, as they are described in the Bill, who will have no real training in employment law, are to preside over some employment rights. Is this worth while? Will it improve the law? This is another point that is missing from the Bill.
The Government ought to consider very carefully what outside bodies say. At the moment there is no evidence that the Government are willing to listen. I look forward to hearing what the Minister says in this regard. I hope that he will be rather more constructive than he was in his opening remarks.
Lord Grade of Yarmouth
I hope noble Lords will agree that it is not contentious to say that the creative industries in this country are vital to our economy. They employ 2 million people and account for 6% of GDP. It is a growth sector that must be allowed to flourish. The creative industries can be defined as those that create copyright. Therefore, we should tinker with copyright legislation only with great care. I regret that I am in no doubt that proposals in this Bill would stem this growth by undoing the copyright framework that underpins the sector. I concur fully with everything that my noble friend Lady Buscombe said about extended collective licensing, and I fully support the remarks of my noble friend and erstwhile colleague Lord Clement-Jones.
Clause 68 would allow companies to license intellectual property belonging to others, and to set prices and terms for this property. Clause 66 would pave the way for statutory instruments to enable widespread free usage of copyright material. All of this would be economically damaging and morally wrong. I have yet to meet any serious commercial investor in new content who is not petrified by the potential unintended consequences of these measures. They seem to be designed to introduce the flawed Hargreaves report by the back door.
If someone invests in creating original material, and then invests further to digitally preserve it so that it can be licensed to others, that individual or company has a right to expect a full commercial return on their creative and financial investment. It seems to me that the Department for Business, Innovation and Skills has neglected its remit for business in favour of pursuing fashionable and ill founded innovation. The beneficiaries are likely to be companies such as Google and other international corporations that live off the backs of British creative industries on the internet.
Content companies across the media landscape questioned the unsound findings of the Hargreaves review. They voiced their concerns to the IPO in its consultation on copyright, and now they are perplexed at why legislation has sprung up in the Bill without the IPO having given an adequate response on its own consultation. Rather, the industry has been thrust into uncertainty about whether its continued investment in content is sustainable without important revenues from the licensing of its copyright material.
Industry innovators and investors are already developing business models and freeing up copyright content for widespread use. It is in their commercial interests to do so, and it does not require legislation. For example, the ITN archive was fully digitised last year in a multimillion pound project. News clips from 30,000 film cans and tapes dating back to 1955 are online for people to license at the click of a mouse. Other world-famous news agencies supply text, video and pictures from all over the globe to a host of UK companies. Without a robust intellectual property framework protecting those who make such investments, can we count on them continuing to keep making and investing in content? Film, TV and music companies, along with publishers, can continue to invest in new content only if they can be sure that copyright laws will enable them to earn the full rewards of that investment. If we dilute that certainty, as the Bill would inevitably do, we should understand the dire consequences for future investment in the most important growth sector of the UK economy: our creative industries.
I know from too many years of experience in content industries around the world that there is a queue of parasites waiting to pounce on and leech off other companies’ investments in the wild west of the web. The Bill provides a charter for companies such as Google to enjoy a free ride on the backs of our cherished creative investors. These clauses require very close scrutiny, and I urge the Government to listen carefully to the alarm bells that have rung around the Chamber today. I would be grateful if the Minister would indicate that the Government understand that there may well be unintended consequences following from these two clauses.
Baroness Dean of Thornton-le-Fylde
My Lords, I certainly agree that our creative industries are not a contentious issue in this House. They are probably at the base of how we will get out of the recession, and will probably provide a lot of our growth in future. What is contentious is the stated intention of the Bill, as expressed in the Explanatory Notes, to promote long-term growth. It does very little of that.
It is a complex Bill. In my time as a Member of this House, I have not seen another Bill that covers such a variety of issues. It does not even cover just one department. That is not unusual in Bills, but this Bill is particularly complex. As my noble friend Lord Whitty said, there are some good parts to it—but very few. I, too, agree with the bringing together of the Competition Commission and the OFT; I agree with the green bank; and I certainly agree that the issue of copyright will have to be debated very carefully. We need to get the balance right, because there are very strong arguments on both sides. It will be a difficult issue on which to get a resolution.
While I read the Bill, the words, “We are all in this together”, kept coming to me. It is not a claim the Prime Minister has used recently—probably very wisely. The Bill does nothing to contribute to that. It loads the burden of helping get us out of our present situation on to the people who are least able to bear it. Working people have already faced many challenges to their family income since the introduction of the austerity measures. Many of those measures were much needed; I would not argue against them. However, the Bill goes beyond what is reasonable and fair, even given our difficulties in this country. In many respects it sets back the relationship between employer and employee. You cannot bring about good relations through legislation; it has to be by mutual respect and by working together. The Bill, in part, strips away a great deal of the basic, decent values in the workplace that have been hard fought for, in some cases, over many years.
On my reading of the Bill, Clause 15 introduces a public interest test which whistleblowers have to meet. The noble Lord, Lord Low of Dalston, is absolutely right. He gave a list of areas where whistleblowing has brought to the public attention many wrongs which needed to be put right, but the amendment in the Bill will mean that people will think not once or twice but whether they should at all be a part of whistleblowing. That cannot be right. The changes that were made certainly helped make dealings much more transparent and open in both the public services and private companies.
Clause 16 will make a change in employment tribunal proceedings. At the moment, if a judge feels that a claim for unfair dismissal is vexatious and does not have a chance of succeeding, he can say that the claimant will need to pay up to £1,000 to register the claim. The Bill moves the boundaries to provide that if the judge feels that part of the claim for unfair dismissal will not succeed the requirement to pay up to £1,000 to have the claim heard can be ruled out. Many people in Britain are not members of trade unions and do not have representation and this requirement will put them off claiming for unfair dismissal. This clause will apply whether they have worked in a company for two years or 20 years. As the Bill is worded, if it is felt that part of their unfair claim will not succeed, they can be required to pay an amount of money. I suggest that most people will just walk away. We could be forgiven for thinking that that is the intention of the clause.
Much has been said about Clause 56 and later clauses in the Bill in relation to the Equality and Human Rights Commission. The noble Baroness, Lady Campbell, whom we are all delighted to see back in the House today, made a strong case in regard to the removal of the general duty. That provision in the Equality Act went through with cross-party support, not 20 years ago but very recently in the past few years. I ask the Minister: what is the Government’s intention in regard to the future of the Equality and Human Rights Commission—not what its role will be, but its future? I asked myself that question when I read the Bill and other briefing material. By 2014-15, the budget for this organisation will have been cut by 62% and 72% of its staff will have gone. The commission was formed by the merger of three independent organisations, which were brought together in the past few years. In addition, last month it shut down its helpline. It received 40,000 calls a year but is no longer available. It has to end its grant programme.
The Government have brought in a new chair and are bringing in new board members who have stronger business skills and experience. However, the organisation covers racial equality, gender equality, human rights and equality across the board, so why specify in one area when what is needed is a commission that has a range of skills? I ask the Minister whether the statement that if there is insufficient progress made on these changes the Government will move to implement more substantial reform, is a coded message to say, “We will end the Equality and Human Rights Commission, break it up and put it into different departments”. What is the long-term plan? Has the commission been given an agenda that will lead it to fail? If the Bill goes through as it stands, it will assist that failure.
Clause 57 deals with the repeal of Section 40 of the Equality Act and covers the issue of harassment of an employee by a third party. It makes the employer liable—but only after three formal complaints have been brought to the employer. When I read this I wondered whether any member of the Government has ever been in an accident and emergency unit on a Saturday night, or whether they have ever been on a bus or a train when the people working on those modes of transport have been subjected to physical violence. This is a retrograde step which will harm only one group of people—those providing services in the public and private sectors.
Clause 61 deals with health and safety. It is new: it was not introduced in the original Bill in the House of Commons until the Report stage and it has not been properly scrutinised. I advise the Minister that it will receive proper scrutiny in this House. If an employee has an accident at work, the clause will remove from the employer a liability that goes back to 1898, when people were able to claim compensation for an accident in the workplace. It removes that liability because the burden of proof will be on the employee to prove that the employer has been negligent.
When we go out to work in the morning, we all hope that we will come home to our family at night in the same state as when we left. Anyone who has worked in industry—and a number of noble Lords have—will know that industrial accidents happen to workers, who arrive at work fit and well and sometimes never go home. Many, many accidents happen. When I was a union official, certainly about a third of my time was taken up working in this area. To remove this protection and place the burden of responsibility on the employee is a retrograde step, not only for the Government—who may feel that they have not taken the right decision—but for the whole of the country. We lead the way in treating people decently, I hope. If the Bill goes through without changes, that record and many, many years of lobbying and work—much of it cross-party work, accepted by both sides not only in this House but in the other place—will be wiped away. The Bill needs to be severely scrutinised in some areas and I hope that it will leave this House in better condition than it arrived.
Lord Teverson
My Lords, I welcome the Bill and my noble friend at the Dispatch Box who will take it through the House.
I should like to give the House some figures on the green economy. World-wide, the green economy is worth something like $4 trillion, or £3.3 trillion; in the UK it is worth some £1.2 billion, which is 8% of GDP and is only a couple of percentage points away from the financial services industry. It accounted for something like one-third of total growth in the economy in the last fiscal year. It employs some 950,000 people—almost 1 million people—of our workforce in the sector. It is estimated that by 2015 it could provide an extra £20 billion of GDP and reduce our trade deficit by some £0.8 billion. Those figures are not from an NGO or a green pressure group but from that hard-nosed organisation called the CBI, which feels that there is an opportunity to be taken to make sure that the green economy works for this country and provides that growth and that employment. That is why I particularly welcome the fact that this Bill includes the Green Investment Bank, which was a core part of the coalition agreement. It provides a way of adding the extra piece of the jigsaw to ensure that we as an economy can capture green growth and call it our own.
There is other good news. As I understand it, we have had state aid approval in terms of the initial proposals, and we have the chairman and the board. As we heard earlier, the noble Lord, Lord Smith of Kelvin, is confident that this bank can be effective and move forward. I like the subsection in the Bill that will ensure the independence of the bank in terms of decision-making. Clearly nothing is more important for potential future investors and indeed for those who the bank will lend to than knowing that the decisions which are made will be objective and taken properly by an investment bank-style committee and not swayed by politicians. That is vitally important for the integrity and the reputation of the bank.
The noble Lord, Lord Smith, expressed his concerns about ensuring that this is the institution that is able to provide a longer perspective for investment in this country’s green sector. While it often sounds like a cliché, we need to be clear whether the bank is to be a fund or is it to be a proper investment bank. I am the first to accept that the £3 billion birthright that it is to start with is not inconsiderable in today’s fiscal position, but in the end the bank has to build up a reputation and find investors. The last thing we want to do is rush into investments that will not work. We have seen that kind of pressure from time to time and it is a very negative one. It is £3 billion, but 2015 is not that far away, so we have to start planning for the position after the £3 billion has gone away. It is important to recognise in the Bill that the bank will be able to borrow on the commercial markets and that it is able to produce leverage not just through the initial investments it makes, which no doubt will be matched by considerable private sector funding, but that it is able to bring in its own leveraged funds from the markets so as to make the institution a far more powerful one financially as time goes on. The scale of the challenge is huge. We know that the electricity generation industry alone—the grid and so on—is potentially worth £200 billion. There are other areas for the bank to look at, including the extraction of energy from waste, adaptation issues and so on. It could get involved in a broad range of sectors, so it needs to be a financially strong and significant institution.
I would like to see the implementation of two ideas that were discussed at length by the Environmental Audit Committee of the other place: being able to raise money through green bonds and the democratisation of green growth by the use of ISAs and similar instruments. In that way we will involve individuals and households in investing in the sector through the new and reputable channel of finance that we are launching as a part of the Bill. I shall be interested to hear from the Minister when and how he thinks green bonds might be brought about.
There is also an issue around the scope of the lending of the Green Investment Bank. The noble Lord, Lord Smith, is obviously content with it as it is, but I think that we need to investigate it further. I hope that the Government will look at this to make sure that we are clear about the areas where the Green Investment Bank can, and more particularly cannot, invest for the future.
Another crucial aspect is the Chancellor’s statement that the bank will not be able to borrow beyond being a fund, if you like, until the deficit as part of GDP starts to decline. That is currently estimated to happen in around 2017. That is of real concern to me. Like all Members on this side of the House, and I am sure on the other side, I understand the importance of bringing the deficit down. We see it as a core part of the coalition’s mission. But if we are not able to move into a much more geared level of funding until 2017, we will forgo economic growth, quality and important jobs for the future. Indeed, let us look at the German equivalent of the Green Investment Bank, the KfW banking group. It is a much broader state bank that is owned both by the federal Government and the Länder. It has a balance sheet worth some €400 billion, so it is even larger than the European Investment Bank and only slightly smaller than the China Development Bank, which makes it one of the highest ranking banks in the world. As I understand it, its balance sheet and borrowings do not come under the German federal state’s public sector debt. Given that, I would like to ask the Minister why we are not so favoured, given that that bank also has to go for state aid provisions and that presumably it is subject to the same European fiscal rules as we are. Why is that much larger bank able to bypass this constraint while we feel that we are not able to do so?
I shall make one last point on the Green Investment Bank. It is an important piece of the jigsaw in terms of the investment we need to make into this nation’s future energy and green infrastructure. What is absolutely clear is that we on the Government side need to make sure that our message is singular and clear: in this country we want investment in this sector. We are determined not just to make our economy the greenest economy, which is perhaps a cliché but an important one, but are steady in our vision of decarbonisation.
Lord MacKenzie of Culkein
My Lords, I do not believe for a moment that the provisions for the removal of the so-called regulatory burdens relating to employment in this Bill, which are clearly intended to water down or remove hard-won protections for workers, will do anything whatever to meet the claims of the coalition that economic recovery will be more likely and that more workers will be taken on as a consequence. Quite simply, I am of the view that a lot of the stuff on employment in the Bill is dogma-driven.
I want to concentrate on Clause 15 in Part 2, which deals with whistleblowing, and on Clause 61 in Part 5, which relates to civil liability for breach of health and safety duties. The proposed changes on whistleblowing will make it more difficult—much more difficult—for employees to enjoy protection from detriment and/or dismissal. The changes proposed in the Bill will mean that whistleblowing claims will be successful only if the worker believed that the disclosure was made in the public interest and can show that that belief was reasonable. The Public Interest Disclosure Act 1998 was never intended to be a complainer’s charter, which is why the legislation was so tightly drawn. Notwithstanding the Employment Appeal Tribunal decision in 2002 in Parkins v Sodexho, it is still not easy for anyone to make a protected disclosure under the legislation. The 1998 Act was successfully introduced after outrage at a number of disasters and company failures where many employees had known for a long time that matters were not as they should be but were afraid to go to the employer or, where they were ignored, to go public lest they would be dismissed or suffer other detriment. I can give a couple of examples, such as the Piper Alpha tragedy and the Barings Bank fiasco.
What is the background to the Government’s proposed changes? I think, as I suggested earlier, that it is an ideological matter where the hard-won rights and protections of working people are to be removed; yes, rights and protections, but also obligations. That is because there are obligations on employees to draw attention to dangerous practices and wrongdoing. As a nurse, I have always thought it in the public interest to draw attention to health and safety issues, both the health and safety of staff and, crucially, of patients.
The environment that obtains in health and other care services has never been very good at providing support mechanisms for whistleblowers. This is not new. Those who were around 20 or more years ago will remember the Graham Pink saga, where a well respected charge nurse, former military nurse and really decent human being—someone who could never be construed as a trouble-maker—complained about poor staffing levels on three wards at Stepping Hill Hospital, for which he had responsibility on night duty and where patients with multiple pathologies were being treated. Levels of staffing were so bad that patient care was poor in the extreme but he could not get management to listen. He went to the health authority but it did not listen. The regional health authority and the Department of Health did not listen, or even respond to his communications. He eventually went to the press, with the predictable outcome that he was sacked for breach of confidentiality.
In the end, Graham Pink was proven to be right. He was exonerated but nevertheless his career was destroyed. Lessons were supposedly learnt, but in reality it is a case of, “Plus ça change, plus c’est la même chose”. A quarter of a century later, we have two well publicised examples in healthcare. First, there is Winterbourne View—a classic example of where someone had to go outside the organisation, where management support and clinical governance were non-existent. Had someone not been brave enough to be a whistleblower, that maltreatment would be continuing to this day.
Secondly, the initial Francis report into the Mid Staffordshire NHS Foundation Trust raises the case in point. Despite that trust having a whistleblowing policy in place, nurses who complained about inadequate staffing never got a satisfactory response. Because managers at senior level did not listen, any prospect of a persistent pattern of reporting of concerns was discouraged. Managers told junior nurses that they should take care in making statements about staffing levels, and therefore it is not surprising that a culture of fear mixed with apathy was engendered, with the inevitable result that there was substandard care and far too many unnecessary deaths.
The Mid Staffordshire issues came at a time of relative feast for the health service. With the Nicholson challenge and the mix of cuts and reorganisation in the NHS, I think there will be relative famine in future years. We need nurses and clinicians to be able to speak confidently where there are very real concerns about delivery of care and to not be afraid of victimisation, bullying or worse. The NHS constitution, which is out for consultation at the moment, has a section on staff responsibilities to the public, patients and colleagues. It says that staff should aim to raise any genuine concern about risk, malpractice or wrongdoing. Will these new hurdles in whistleblowing make it more difficult for someone to expose wrongdoing in the caring services? We need to know.
Whistleblowing take courage. Fear of victimisation or losing one’s job is very real, despite all the efforts made in the health service by the Department of Health, regulated bodies, trade unions and others to show that there are occasions when it is justified. As the noble Lord, Lord Low of Dalston, said, it is very unwise for any Government to make it more difficult for whistleblowers to do what is right. Had there been whistleblowing 25 years ago, we would not be in some of the difficulties we are in over Savile and Hillsborough today.
I now turn briefly to Clause 61 in Part 5, which will amend Section 47 of the Health and Safety at Work etc. Act. It looks as if it is going to remove the ability of an employee to enforce a civil claim for workplace injury on the grounds of breach of workplace regulations. I am a nurse not a lawyer, but I understand the concept of strict liability, which was introduced over a century ago to recognise the very different balance of power between employer and employee. This Bill goes much further than removing strict liability, which the Government seems to justify by saying that they want to remove the burden of health and safety regulation on employers. The amendment will not achieve that objective, because compliance will still be there for the good employer. However, it will assist the unscrupulous to ignore health and safety law by reducing the chances of successful civil action. That is going to lead to more workplace injury in the future. We all know that almost all enforcement of health and safety law is done through civil litigation rather than criminal prosecution.
As a simple example, as a former theatre nurse, I am well aware of the problems of rubber gloves causing skin reactions and so on. There was a case where a member of my union, a nurse, succeeded in a claim where strict liability applied. The nurse suffered a series of serious anaphylactic episodes as a result of exposure to latex gloves coated with corn powder. The court found in her favour and awarded compensation, as it held her employer was strictly liable because it had not ensured under the COSHH regulations that employees were protected from harmful substances. Will the Minister confirm that this suggested amendment to the Act would mean that this nurse, whose nursing career was ended, would not receive compensation for an act of omission on the part of her employer?
As has already been said, this part of the Bill was introduced on Report in another place and has not been subjected to proper scrutiny. As my noble friend Lord Whitty said, some parts of this Bill might be good, some bad and some ugly. This bit of the Bill is particularly ugly and I think it deserves to be removed long before we ever get to Committee.
Lord Touhig
My Lords, I want to follow on with much of the theme of whistleblowing spoken about by my noble friend Lord MacKenzie of Culkein. The revelations of the Jimmy Savile scandal paint a sadly familiar picture about the culture of silence. As with other scandals and disasters in recent times, such as Mid Staffordshire and phone hacking, some people knew about his appalling behaviour and were prepared to turn a blind eye. Some can legitimately say that they had only heard a rumour or conjecture, or that they only had a suspicion. Others will say that they spoke up but were ignored. How do we move on from the damaging perception that speaking up is futile? An all-pervading culture of silence operates in the workplaces of Britain. It is clear from these scandals that we need to remove barriers that discourage whistleblowers.
A great deal has already been done to improve whistleblower protection. Former Members of Parliament Ian McCartney and Tony Wright led the way. Mr Richard Shepherd MP played an important part by introducing a Bill, and my noble friend Lord Borrie and the whistleblowing charity Public Concern at Work have been campaigning on this for some years. I was pleased to have been able to introduce the first whistleblowing Bill in the other place in 1996. Unfortunately, that Bill failed, but a Private Member’s Bill introduced two years later by Richard Shepherd received cross-party support and reached the statute book. The Public Interest Disclosure Act protects individuals who make certain disclosures of information in the public interest and allows them to bring action in respect of victimisation. At that time, the United Kingdom led on the corporate governance agenda. We were the first country to offer whistleblower protection to workers in all sectors. However, since then, a number of legal loopholes have come to the fore, and the Act is now ripe for review.
In the Bill before us, the Secretary of State proposes to remove one of the loopholes in the means by which workers complaining about their private employment rights can be protected. That might be a good aim, but I fear that introducing a public interest test will not deal with the problem. It will make legislation that is already showing signs of strain more difficult and complicated for workers to navigate their way through—a point made quite ably by the noble Lord, Lord Low of Dalston, and my noble friend Lady Dean of Thornton-le-Fylde.
Public Concern at Work and the BMA have argued that the Bill will be a barrier to whistleblowers. Business and trade unions have suggested that the amendment to the Public Interest Disclosure Act set out in Clause 15 will not tackle the problem of claimants using the whistleblowing laws in private employment disputes. Indeed, it will cause more confusion, litigation and uncertainty for all parties involved. While we would all agree that the whistleblower legislation should have public interest at its core, as currently drafted, this Bill will discourage the ordinary, honest worker who has witnessed malpractice from speaking up about difficult issues, as it adds another layer of complication to the law and will only enrich lawyers. I hope that in Committee some further consideration is given to this test to see how it will operate within the framework of whistleblower protection. During the Bill’s passage in the other place, two amendments were put forward to try to remedy these perceived deficiencies. Sadly, the Government would not accept them. We need to consider whistleblowing law in the round. As some recent news reports show, it is important that nothing is done to discourage whistleblowing.
I look forward to some consideration being given in Committee to the issue of vicarious liability. A loophole in the protection for whistleblowers has arisen in the context of three nurses from Manchester who raised a concern about a colleague lying about his qualifications. The nurses were concerned about the impact that this might have on patient care. They raised their concern within their service and their primary care trust, and it was upheld. However, the nurses were subject to bullying and harassment from co-workers. One of the nurses received a telephone call threatening her daughter and to burn down her house. The case went to court and proceeded as far as the Court of Appeal, which found that vicarious liability does not exist in the Public Interest Disclosure Act as it specifically does in discrimination law. Shortly after the publication of the judgment, the noble Earl, Lord Howe, the Health Minister, agreed that this area needed to be reviewed. He was quoted in the Independent on 31 October last year as saying:
“We are considering whether we need to do more to protect whistleblowers following this judgment. It was a complex case”.
We clearly welcome the response of the noble Earl, Lord Howe.
I know from my contact with Public Concern at Work that people calling its advice line speak of harassment and bullying by co-workers after they have raised a concern. If there is to be no protection in this area, the matter will be extremely problematic, and whistleblowers could be facing a cardboard shield in terms of legal protection. They will simply not blow the whistle when something is wrong. My noble friend Lord MacKenzie listed a number of cases where whistleblowers have played an important role. When I first took up the issue of a whistleblowing Bill, it was after seven reports of ferries sailing with bow doors open before the “Herald of Free Enterprise” went down. I had a young girl come to me. She was a 16 year-old student who had a Saturday job. She worked on the delicatessen counter in a supermarket, where she discovered that the manager was changing the sell-by dates on cooked meats. In all these instances, people were victimised as a result of bringing these matters to public attention. That is why we need strong law.
It surely cannot be right so far as vicarious liability is concerned that an employer can fail to do enough to protect a whistleblower from victimisation and yet escape any liability. The simple answer to this problem is to mirror equality legislation—that may be something that we can pursue in Committee. As it stands, this Bill is bad news for whistleblowers. It is up to us in this House to make sure we do all we can to protect them.
Lord Ouseley
My Lords, I shall focus my concerns on the equality aspects of the Bill. I welcome the statements made by the noble Baronesses, Lady Campbell and Lady Dean, and the noble Lord, Lord Low, in support of the provisions that I shall refer to—namely, Clauses 56, 57 and 58.
The noble Lord, Lord Lester, said that we have some of the best equality legislation across the whole world. The UK can rightly and justly be proud of the legislative framework that has been created since the mid-1970s to tackle inequalities essentially about race, gender and disability, and more recently the enactment of more coherent equality legislation incorporating a wider range of protected characteristics that has enabled us to enhance that framework. However, the implementation of equality policies and the enforcement of our laws have been patchy to say the least. Parliament passed legislation with a clear definition of unlawful discrimination, enabling it to be challenged, to make equality of opportunity more accessible and above all to promote good relations between different groups of people with one or some of the protected characteristics that make up our diverse society.
This reform Bill reminds me of what I would call a rollback Bill. It almost takes us back to some of the darker ages of poor employment practices by employers. It should be an opportunity to consolidate the progress made to date on the equality front by encouraging more of the practices that have worked for our society, employers and employees while seeking to improve outcomes where appropriate. Instead, we have before us in these clauses another attempt to dismantle the equality infrastructure that has been built up—the architecture for which was expertly and carefully crafted by the noble Lord, Lord Lester of Herne Hill, starting some four decades or more ago. He has continued to devote himself to protecting human rights and fighting for equality legislation and its enforcement.
As someone who has had the privilege of running large, medium and small organisations as well as a small business, I support unequivocally the eradication of unnecessary and time-wasting bureaucratic burdens. I also appreciate the necessity of information gathering for scrutiny, analysis and monitoring purposes as part of efficiency, effectiveness and accountability in any organisation’s operations. In so far as they relate to the Equality Acts of 2006 and 2010, Clauses 56, 57 and 58 fail to achieve the balance necessary to remove bureaucratic burdens and retain fairness, particularly in the context of the respective rights of employers and employees.
Whether by intention or not, the Bill would remove the rights to reasonable redress for employees who have been treated unfairly, restrict access to justice and render the EHRC impotent at a time when prejudice and hatred are on the increase. The Government’s own Equalities Office report, Changing Attitudes to Equality, indicated as much. When we look at the data and statistics on hate crime, there are huge concerns. At the same time, the Government are imposing employment tribunal fees and cutting legal aid and the funding of advice agencies. Above all, with the ethos associated with this particular Bill, they are encouraging employers to ignore equality legislation, abandon good and best practices and become cavalier in how they treat their employees.
Virtually everyone involved in equality work has told the Government that these clauses will have an adverse impact on our society and have the potential to damage race and community relations in Britain. It is disheartening to know that the Government blatantly ignored their own consultation results, which indicated only minority support for their proposals. Surely the minimal perceived benefits for employers through these clauses would be worthless if there was deteriorating social and community cohesion to contend with.
The EHRC’s general duty and its duty to promote good relations are fundamental to the core purpose of the 2006 Equality Act. On that, I agree with my noble friends Lady Campbell and Lord Low of Dalston, and disagree with the noble Lord, Lord Lester. If the EHRC does not undertake such promotional activity purposefully and with statutory underpinning, who else will do it? Many public bodies, voluntary organisations and businesses seek to pursue their activities purposefully with a view to achieving inclusion, equality, fair treatment and good relations—all contributing to better social cohesion. However, they have had help, support, prompting and occasional coercion from the various statutory bodies when they existed to yield the positive benefits from such actions.
During my stint as chair of the Commission for Racial Equality, which preceded the recent legislation in 2006 and 2010, we relied on the Section 71 provision of the Race Relations Act 1976 to apply—in elastic and creative ways—what was then a more limited concept to identify and challenge exclusion, prejudice and bias in any organisational practices. The duty was also used purposefully to assist the commission in enabling people from different backgrounds to achieve greater interaction, better mutual understanding and secure improved relationships. I note that in a recent parliamentary briefing, the EHRC states that,
“these changes are unlikely to have a significant adverse impact on its work.”
I do not know if it said that to satisfy the Government to ensure its survival, particularly in the light of all the massive reductions that it has already experienced in its budget and which will continue to decimate the organisation and its capacity to do anything useful or purposeful. On the one hand, I agree with what it says, because it failed to use the provision in the way that it was intended. A light-touch, invisible regime was not what was envisaged or needed. The previous Government were as culpable for this failure as this Government. On the other hand I disagree with it, because it is an outrageous thing to say and demonstrates a serious incapacity to lead on such a dynamic, creative and central concept and achieve collaboration across employers and organisations to secure the success intended and required.
In Clause 57, repealing the provision for third-party harassment, there is no evidence that the third-party harassment provisions are a burden on businesses—none at all. Why should employees be unprotected from harassment by customers, clients of their employers or others who come on to their employers’ premises? I read in the London Evening Standard only last night an interview with the chairman of Chelsea Football Club, Mr Bruce Buck, who himself is a lawyer. He stated that his club complied with this provision to provide its players with additional protection from harassment. Employees have a right to be protected in relation to all the protected characteristics; and employers benefit from having a defence against a harassment claim if they can show that they took all reasonable steps to prevent or deal with the alleged harassment.
Clause 58 would repeal the questionnaire procedure provision. It is quite incredible that the Government could even attempt to justify this proposal. There is no appetite for it—it will not save money. Yes, it will remove the employers’ requirement to answer relevant questions about their policies, procedures, practices and decision-making, but it will also create more problems for them as a consequence, as they return to that era of hiding behind bad and discriminatory habits. This repeal proposal is opposed by 83% of consultees, including the judiciary. It is ridiculously short-sighted, restricts access to justice and will deny both parties the opportunity to review the relevant information and conclude earlier in the process on the relative merits and weakness of a case before going further with any justified or unnecessary litigation.
In conclusion, I plead with the Government to reconsider these reforms. They bring little or no benefit to employers as perceived or intended. The current provisions are hardly burdensome. The evidence shows that there are more benefits to the workplace environment, to our society as a whole and to promoting fairness and equality if they were retained and applied with greater urgency and in ways which many employers and organisations can already demonstrate bring benefit to the workplace, employers and employees.
Lord McKenzie of Luton
My Lords, I rise to speak on one specific aspect of the Bill, but one that I consider to be very important. I refer to Clause 61, already spoken to by my noble friends Lady Dean, Lord Clinton-Davis and Lord MacKenzie of Culkein. This is a provision which seeks to turn back the clock on employer liabilities for breaches of health and safety duties. I wholeheartedly agree with the assessment of my noble friend Lord Whitty that it is an “ugly” part of the Bill. Noble Lords will doubtless have had briefings from the Law Society, the Bar Council, the Association of Personal Injury Lawyers, the Personal Injuries Bar Association, trade unions and the All-Party Health and Safety Group. They deliver a consistent and compelling message: if adopted as it stands, this clause will mean fewer injured employees being able to claim for their injuries, claims will be more costly to pursue, greater costs will fall on the state and safety standards for employees will fall. As the Association of Personal Injury Lawyers points out, if the Health and Safety at Work etc. Act 1974 is amended in accordance with this clause, the law relating to workplace health and safety will be returned to where it was more than a century ago, which is quite unbelievable.
Currently when a worker is injured at work, perhaps by inefficient and unsafe machinery provided by an employer, they do not need to prove negligence to make a claim for compensation because the regulations provide for “strict liability”—that is, liability without proof of fault on behalf of the employer. The law was changed to create this situation because it became abundantly clear that it was difficult for employees to prove fault on behalf of the employer. As the Bar Council put it by way of an example, the equipment may have been chosen and bought by the employer, installed by the employer, maintained by the employer, and the employee may have been required to use it. The employee may know nothing of the history of the machine, and will probably be in no position after the accident to investigate whether the employer was at fault for the machine breaking down and injuring them. If Clause 61 remains intact, an injured person would have to rely on the law of negligence to claim compensation in the future. This is a much more complex approach, with the burden of proof shifting to the employee. The balance of power in these matters will shift dramatically against employees, a point that the noble Lord, Lord Low, made earlier.
Litigation will become more costly, time-consuming and protracted for everyone. Of course, the gainers from reduced compensation claims are the insurance companies because compulsory employer liability insurance would otherwise have to meet these costs. It certainly was the case that premiums on such policies have never been particularly sensitive to differential health and safety performance. I doubt this will change much, so employers will not see reductions in premiums. If the gainers are the insurance companies, the losers are the individuals, their families and, of course, the state. We should be mindful that compensation should not be viewed as some bonus or prize for an individual or family. Who would not want their life back to where it was before an accident rather than have the compensation? Which family would not prefer to have a loved one, who will never return home, back with them again?
The state will pick up the tab too. There is a scheme for compensation recovery where the state—the DWP, in fact—recovers elements of civil compensation awarded where benefits have been paid to claimants. In 2011-12, this amounted to some £75 million. Fewer compensation claims will mean reduced compensation recovery and therefore greater costs on the state. The adoption of Clause 61 will send signals to employers that they can be more lax in their health and safety arrangements. Coming at a time of restricted funding for the Health and Safety Executive, the curtailment of proactive inspections and the lack of resources for major preventive campaigns, all this risks undermining our health and safety system.
The Government point to the recommendations of Professor Ragnar Löfstedt in his independent review, Reclaiming Health and Safety for All, as the basis for these provisions, but they can derive no such authority. The report recommended that a review of the strict liability provisions should be undertaken by June 2013, with either a qualification of “reasonably practicable” attached or consideration of removing civil liability, but no such review has been undertaken—or certainly no review involving notice, consultation and engagement with stakeholders. As we have heard, the clause was slipped into the Bill on Report in another place with little opportunity for scrutiny. That task now falls to us.
The Löfstedt review concluded that there is no case for radically altering our current health and safety legislation. It is fit for purpose. Indeed, it states in its foreword to the Minister:
“There is a view across the board that the existing regulatory requirements are broadly right, and that regulation has a role to play in preventing injury and ill health in the workplace. Indeed, there is evidence to suggest that proportionate risk management can make good business sense”.
We strongly support this view, although it could not have been music to the ears of much of the Government, where we have heard the Prime Minister perpetuating the myths around health and safety to get cheap conference platform applause. Neither is it palatable to a Government who believe deregulation is the answer to everything, despite it not yet delivering sustainable growth.
We should be proud of our health and safety system in the UK. It was born of a political consensus generated by the Robens report and the Health and Safety at Work etc. Act 1974. Its core that those who create the risks are best placed to manage them is indeed central to the issue before us today. Over the years, it has helped save hundreds of lives and hundreds of thousands of people from being injured. It is a tribute to the Health and Safety Executive, local authorities, trade unions and stakeholders such as IOSH, RoSPA, the British Safety Council and others which strive to deliver the message of proportionate risk management. Indeed, it is an approach that helped deliver the extraordinary health and safety outcomes for the Olympics recently.
However, we should not be complacent. Still too many people die or are injured as a result of work. The system is beset by too many myths, sometimes happily perpetuated by the tabloids and politicians. Overzealous application remains a challenge. This is why we must fiercely resist Clause 61 as set out, which would undoubtedly further undermine our health and safety system. It is wrong in terms of parliamentary process, egregious in content and its outcomes would be grossly unjust. It must be removed from the Bill.
Lord Mitchell
My Lords, in putting together any speech I have always tried to be logical. Most of all, I have always wanted there to be a beginning, a middle and an end to what I have to say. In addition, I always try to have a linking theme—but with this speech I am all over the place. The Enterprise and Regulatory Reform Bill is a hotchpotch without any discernible theme. There is certainly no beginning, middle or end. It just feels that everything that defies classification elsewhere has been thrown together and given a fancy name. In vain have I searched for the kitchen sink.
I have chosen to speak on three sections of the Bill: the Green Investment Bank, employment and director’s remuneration. My shadow brief is on SMEs so, where possible, I will refer to this very important sector in our economy.
The Green Investment Bank is a good thing and I must compliment the Government for setting it up, well trailed as it was by the previous Government. Choosing winners is a much discredited activity and we as a nation have had our fair share of companies that have been backed by the Government and subsequently failed. Choosing industries is a different matter. The green sector is one the UK should actively pursue.
The desire to lessen our dependency on hydrocarbons has always been driven by several factors, with the reduction of CO2 emissions being the most prominent. We have only to see the continuing extremes in weather patterns to know that massive forces are changing our climate. Maybe one benefit of Hurricane Sandy will be to drive home to one of the major centres of world finance that these natural phenomena are caused by global warming and the consequences are very painful.
There have also been geopolitical reasons to develop alternative energy. Oil and gas tend to be located in inhospitable locations, often in inhospitable countries. However, suddenly things are changing, as I read that the United States is now expected to become the largest producer of oil and gas in the world by 2020. Due to new techniques in extraction such as fracking, America expects to become self-sufficient in energy very quickly. This will have a major effect on world politics and on the economics of green energy production. Oil prices could well fall and if they do some of the economic incentive for alternative energies will also fall.
Despite that, new companies developing new green technologies are growing at a rapid pace. It is said that in Silicon Valley a third of new investment is being channelled into the green sector. Other countries such as Germany are also pursuing green technologies. The Green Investment Bank will have an initial equity of £3 billion, and we welcome the news that the Government have now obtained state-aid approval for this investment, but the Government have failed to set a date for when the bank will be able to borrow, telling us only that it could be 2015. To be effective we need certainty on this.
Certainty is one of the key components of our economic recovery and there is not much of it around at the moment. Just look at the Government’s reply to the Oral Question asked this morning by my noble friend Lady Worthington. The Government’s reply was all over the place and, even now, I do not know whether they do or do not support onshore wind farms.
As I say, my brief is SMEs. We all know how important they are to our future growth, but also how often they lose out from government initiatives and from public-sector purchasing. The GIB could well be another grand project that will bypass the SME sector. I ask the Minister directly: will the GIB be given a clear directive to direct a certain proportion of its funding towards SMEs?
A year or so ago, a small charity that I was chairman of found itself in a messy employment situation. Without going into the rights and wrongs of the matter, we decided to terminate an employee just a few days over the 12-month period. Predictably, we found ourselves in a grievance situation. We were definitely in the wrong in that we had not followed the exact procedures of employment law to the letter, but we only employed five people and we were, like many charities, living in a hand-to-mouth existence. Money was always short and demands were always great. In common with many small organisations, we did not have a human resources department and our personnel policies were rudimentary. I do not think that we were much different from many other small enterprises.
I am a businessman and my natural instincts are, when faced with a problem, to find a solution quickly and get on with it. It will surprise no one that, in this situation, this course of action was not open to me. We went through the charade of a grievance procedure and the game of issuing letters bound by “Without prejudice” headlines. I found a level of patience within me that I never knew existed.
The worst thing was that in the end we settled with the disgruntled employee by offering him an amount that I had always been willing to pay him right from the start. But we had to go through this convoluted dance to get there. It was a waste of everybody’s time and emotional energy. So I am pleased that, in this Bill, considerable attempts are being made to change employment-dispute procedures. I agree there is an important role for settlement agreements in cases where there is an existing dispute, but we have real concerns that a minority of rogue employers will use the extension of settlement agreements as provided for in this Bill, as a licence to bully employees.
Using ACAS in the initial stages of a dispute must be a good thing and I wish it had been open to my charity when we had our dispute; hopefully it would have been resolved much more quickly. However, I worry that ACAS will be deluged by myriad disputes. Again, I ask the Minister what are the Government’s plans to direct resources into ACAS so that it can be effective in its enhanced role?
I now want to come on to the final part of the Bill which is of particular interest to me: directors’ pay. I might add, with huge relief, that at long last I am no longer a director of anything. I first pay tribute to my noble friend Lord Gavron. He has previously tabled a Private Member’s Bill specifically on this topic. He withdrew it when this Bill was first published because many, although not all, of the clauses in his Bill are now incorporated into this one.
There is always a built-in conflict between shareholders and management and, these days, it seems that management is clearly in the ascendancy. The management team of many large companies tends be a cohesive unit; the shareholders are often disparate. So management, armed with sensitive information, can usually finesse the entitlements of the shareholders. My world is that of the entrepreneur, and my heroes are people who have built up large companies from nothing. Until he died, Steve Jobs of Apple paid himself $1 per year. Jeff Bezos the founder of Amazon has always paid himself an annual salary of $83,000, less than a Member of Parliament receives in this country.
Of course, such individuals are also paid bonuses, but these are real bonuses where, if profits fall, so, too, does the remuneration. To these types of entrepreneurs, the acquisition of personal wealth comes from the capital gain that results from the long-term success of the enterprise; raiding the kitty is not the way to build up a company. It also sets a bad example and creates a precedent that filters through across the organisation.
I am a great supporter of any move that makes directors’ remuneration not only transparent, but also subject to shareholders’ control. Senior managers are adept at finding loopholes, especially where there own paycheques are concerned. I therefore support my noble friend Lord Gavron when he requests that there should be no confusion about management packages: they should include all perks and be signed off in the annual accounts by the company’s auditors. The remuneration committee should present its recommendations every year at the annual general meeting and not every three years.
Many of these masters of the universe believe that they are irreplaceable, that only they can do the job and that that is why they can make such outlandish pay demands. However, it is simply not true: nobody has a monopoly on talent; directors should be much more assertive and not be browbeaten by aggressive senior managers. Sometimes our captains of industry sound like Premier League footballers. My advice is: call their bluff. In the end, business needs to be made more streamlined; red tape needs to be reduced but employees’ rights need to be protected. It is a difficult balance and I hope that, as this Bill proceeds through your Lordships’ House, it will become more acceptable and better understood than it is now.
Viscount Eccles
My Lords, as many noble Lords have done, I am going to concentrate on one part of this Bill—a very narrow part on competition. I am somewhat comforted by the Government’s assurance that the fundamental pillars of competition will remain unchanged, but only somewhat comforted. If the noble Lord, Lord Currie of Marylebone, was in his place, I would be congratulating him on taking on the restructured competition regime which will follow from the creation of the Competition and Markets Authority. However, I will in part be following the noble Lord, Lord Borrie, though I think I have a more astringent view of what is proposed than the noble Lord.
Part 3 is one and a half pages; it is followed by 180 pages to implement the decision made in Part 3 —180 pages out of 260. I am not proposing to talk about the 180 pages today, but no doubt that will follow in Committee. Part 3 provides for the abolition of the Office of Fair Trading and the Competition Commission and the transfer of their functions to the CMA. This was foreshadowed in the Public Bodies Act 2011. The test in the Act of making such a transfer by way of merger is the usual one: efficiency, effectiveness, economy and proper accountability. Arrangements of this nature are to be carried out under Section 2 of the Public Bodies Act—“Power to merge”—and this section cross-refers to the Competition Commission and the OFT in Schedule 2. My one real question to my noble friend on the Front Bench is, when can we expect to see the draft orders effecting these changes under the Public Bodies Act?
More seriously, why are these changes being made? I think naively we could consider from the proceedings on the Public Bodies Bill that it was something to do with saving money. I think that that was probably one of the driving forces in the drafting of that Bill, which of course suffered major changes that were engendered in your Lordships’ House, not least the dropping of Schedule 7. It perhaps started because there was a wish in the Cabinet Office to reduce the number of quangos by one or, as the CMA is to be a non-departmental ministerial office, we may be able to reduce the number by two, but that depends on the classification.
However, much more seriously, the Government have said that a one-stop shop will bring benefits. It will be able to simplify, to shorten and to avoid duplication within the competition regime. But, in order to inspect these rather abstract claims, we need to understand how it is expected that the system will work. What else in Part 4 will affect the answer to the test under the Public Bodies Act? On reading Part 4, in one frame of mind and at first sight, practically none of it needs primary legislation. It could almost all be done by administration. It may be that the removal of the word dishonesty requires legislation, for which there seems to be quite a welcome.
As to how the system of establishing whether a reference should be made about a merger or some market practice, and then when made the reference is investigated, the answer is that there is not to be any change in those procedures. Instead of the OFT and the Competition Commission, we would have phase 1 and phase 2. Indeed, much is made in the literature produced by the Government about the importance of continuity and, as has been referred to in this House today, the high respect with which the competition regime in this country is viewed internationally.
Perhaps at this point I should say that, unlike the noble Lord, Lord Borrie, who was with the OFT, I was for a while a member of the Monopolies and Mergers Commission. That name will tell your Lordships that I am history. Nevertheless, it was a very interesting thing to do and I think that we had, on the whole, very good success under the most brilliant chairman, Godfrey Le Quesne.
As regards the Government’s claims, the first one about the one-stop shop is clearly wrong. It will remain a two-stop shop. If we think about duplication, which has been mentioned, you would have a system for deciding whether to make a reference and then for an investigation. How can people who have been asked to give information to determine whether a reference should be made, and then have to be investigated, expect not to deliver two sets of information? The questions will be different and the information needed for the investigation is bound to be much more complex than the information given in the first instance. I do not believe that duplication will be in any way removed. Since we will still have phases one and two, and some additional powers in this Bill, how will the competition regime be simplified? I do not understand how anyone would claim that it is.
As for the shortening, you can put it in statute that there are different time limits and ask for best endeavours, but noble Lords will also notice that there is always provision for providing an extension. When things get complicated, there will not be much shortening. It is all rather unconvincing that there are benefits from these changes. What evidence have others given? There is no out-and-out enthusiasm for this move anywhere. It has just sort of been accepted. The witnesses to the House of Commons committee pointed out that the two organisations did different things, the risk that their culture would not merge satisfactorily was always there and we would need to wait to see what happened. The chairman of the Competition Commission said that if you are going to subsume—that was his word—that body into the CMA, you had better be rather careful how you do it. The Office of Fair Trading said that the Bill casts a long shadow. It is happy that it will not become effective until 2014. So, where are we? The Government no longer claim that this measure will save money. It might in the long run but in the short run it will cost money.
Finally, in the response to the consultation, which was delphically delivered by the Government, there is a wonderful sentence which says that some respondents questioned
“whether the Government’s objectives could be delivered without institutional change”.
However, we are not told who said that or how much weight we should attach to the evidence given by the witnesses. This is a very risky endeavour. Mergers are always tricky. The Competition Commission has 138 staff and a net expenditure of £17 million. The Office of Fair Trading has 635 staff and a £74 million budget. It is four times the size of the Competition Commission. Somehow the cultures of the two organisations have to be maintained by some sort of Chinese wall between phase 1 and phase 2. However, this is not the experience of most people who have been taken over by an organisation four times their size. We should be in no doubt that this is not a merger but a takeover. I look forward to a much more detailed explanation of the rights and wrongs of this proposal than we have received so far.
Lord Morris of Handsworth
My Lords, in the time available I want to focus on the workplace impact of the Bill and say something about what I think is the Government’s mindset.
The Government claim that the Bill will create the right conditions for economic recovery, strengthen the business environment, reduce regulatory burdens and improve business and consumer confidence. These are worthy objectives and who could possibly oppose them? However, the problem with the Bill is not its objectives but the ideology and mindset from which it springs. These were ably summarised by my noble friends Lord Whitty and Lady Dean, and I share their sentiments.
What we have here is a coalition that is not very well advised about how the real world of industry operates. It appears to have no real understanding about what is holding back the economy. It is simple: lack of demand; falling consumer confidence; and the refusal of the banks to lend to and support UK businesses. The Government do not recognise the dangers posed by cuts that are too fast and too deep, which have taken the economy from growth to double-dip recession. Neither do they seem to be aware of the dangers posed by wage cuts, wage freezes and the biggest fall in living standards for a generation, which, together, have choked off any meaningful recovery.
The coalition clearly believes that growth and recovery will come from taking away the rights of hard-working people and the regulations that give them security. They are eager to dilute employment rights and abolish regulations which prevent accidents and save lives. This Bill is about a dismantling of workers’ rights earned over many years to stop exploitation. It is also about the abolition of the protection which ensures the health and safety of workers. As I understand it, this is not a one-off. It will be complemented by a so-called Growth and Infrastructure Bill where workers will be offered a few IOU shares in return for their employment rights.
The coalition does not seem to understand that workers’ rights can not be bought and sold on eBay. They have to be earned and they have to be respected. In the world of the coalition, basic employment rights are barriers to growth and health and safety laws are burdens on business. In the upside down world of the coalition, they believe the best thing to do with justice and fairness is not to spread it, nor embed it, but to abolish it. That is what the Bill seeks to do.
I know of no credible economic theory which has ever argued that making it easier to sack people will deliver employment growth and prosperity. The reality is very different. You do not boost recovery by making it easier to fire workers. You boost recovery by making it easier to hire workers. Nothing in the Bill will achieve that objective. It is regrettable that there are so many positive steps the Government could have taken to boost growth and jobs and create a totally new industrial workplace environment. Every economics student would be able to say precisely how. But no, instead the Government have opted to attack ordinary, hard-working people. Their rights and their safety are the target of the Bill. It is not only unjust, unfair and unnecessary: it is also unworkable. You cannot rebuild your economy by destroying the morale, commitment and productive capacity of your workforce but this is precisely what happens when workers are treated as liabilities rather than assets.
By any standards of fairness, a large section of the Bill is not just wrong-headed, it is actually self-defeating. It is often said that those who live the longest see the most. Even in my bonus years, which I am very much enjoying, I did not expect to see such an anti-workers Bill. It is a Bill that will undermine the rights of millions of people in workplaces up and down the country. It is a Bill that will undermine the economy, not help it. It is a Bill that says everything you need to know about the way the Government think, just how out of touch they are and the direction of travel for the future.
What is needed, to make a real difference, is a Bill built on fairness, investment and growth.
Baroness Greengross
My Lords, as many noble Lords have spoken about equality and human rights issues, I decided to focus today on other issues and start by declaring an interest as chair of the Associate Parliamentary Corporate Responsibility Group, and also as a vice-president of the Local Government Association. It is difficult to argue with the expressed aims of the parts of the Bill which deal with employment and aim to encourage growth and employment through, where appropriate, the simplification and reduction of the regulatory burden. We know that unemployment is a major issue and it is therefore a major corporate social responsibility issue.
It disproportionately affects the most disadvantaged in our community, whether because of where they live, their ethnicity, their educational background or other socioeconomic characteristics. Businesses of all sizes hold the key to addressing this issue through growth and through the way they recruit, retain and develop staff. Smaller businesses often work in the most deprived communities in our country, and we should all commit to helping SMEs and social enterprises to create jobs, particularly in deprived communities. I am therefore broadly supportive of any legislation that will streamline employment law and disciplinary procedures, particularly for small businesses. At the same time, however, there are dangers that the very same communities may be the most vulnerable to unchecked unethical behaviour. The key will therefore lie in the detail, and I look forward to addressing some of those details in Committee.
Like other noble Lords, I welcome the concept of the Green Investment Bank and its stated purpose. I hope that it will favour SMEs and social enterprises developing innovative products and processes to improve environmental sustainability. Coupled with Big Society Capital, this appears to provide a significant opportunity to channel funds into new sustainable business models. However, I suspect that one challenge may be to find investment-ready business programmes, and I therefore hope that the Minister can assure the House that the Green Investment Bank will work with intermediaries who can help identify and support appropriate businesses and programmes in much the same way as Big Society Capital is doing.
I welcome the principle of reducing red tape to help smaller businesses to grow and to encourage them to be more confident in employing staff. I also welcome, in terms of employment, the move to statutory arbitration as the first step involving external parties. Many disputes, as we know, can be settled through this common-sense and conciliatory approach, to the benefit of both parties, the wider workforce and business. According to the British Retail Consortium, pre-claim conciliation currently resolves 70% of voluntary cases, and the Government’s impact assessment implies 14,500 tribunal cases could be avoided each year. It would also avoid the attendant stress and costs for both parties. Streamlining and simplifying processes, including the use of legal officers in determining low-value straightforward claims should also be helpful. Nevertheless, there is a danger, inherent in judges sitting alone in determining points of law under employment appeal tribunal procedures, that they may be less well placed to understand some of the diversity issues involved, and this could increase discriminatory outcomes. A two-tier system of employment rights might also involve dangers. The emphasis should be on proportionate and outcome-focused legislation, providing a clear framework for all employers and employees, regardless of size.
Regarding competition, I am wondering whether the restrictions on any kind of collaboration, such as that carried out by the water industry on conservation, will prevent action being taken that would actually assist small businesses, deprived communities, and environmental objectives. Some advice from the Minister here would be much appreciated. We know that 4.5 million UK small businesses form the lifeblood of this country, providing goods, services and employment to the majority of our people. I see the Bill as a mechanism to encourage and facilitate larger organisations, especially in deprived communities, to engage with their local small businesses, act responsibly towards them, and advise and help them through working with them to overcome existing barriers to growth. Business in the Community, in its innovative recent series of enterprise inquiries, found that such barriers included access to supply-chain opportunities, procurement processes that discriminate against small businesses, and the prohibitive costs of accessing large contracts because of pre-qualifying requirements such as liability insurance, industry standards and access to affordable finance.
Overall, the BITC inquiries have demonstrated how powerful procurement can be as a source for economic growth at local level. The public sector has set a good example in this by tending to favour SMEs in terms of procurement and I believe that the new public services social value Bill will support this trend further, including its focus on social enterprise, which will maximise the positive social impact of public sector procurement. As part of the scrutiny of this Bill, it would be of great value to spread the practices outlined in the social value Bill to the private sector, including the further development of the principles underpinning values-based procurement.
I welcome the Government's proposal to extend the powers of employment tribunals to require employers to conduct an equal pay audit, if the tribunal finds that they have discriminated on pay. This is welcome and it will introduce a mechanism to deal with potential discrimination that is evidenced by pay gaps, particularly in terms of gender, disability and ethnicity.
I note that the provision in Clause 74, which inserts new Section 139A(4) into the Equality Act 2010, allows Ministers by order to specify further details of the new power, including,
“the content of an audit”,
and,
“the powers and duties of a tribunal for deciding whether its order has been complied with”.
In relation to these points, I suggest that in order for the new power to be effective there needs to be provision for sanctions to apply where an employer does not conduct an equal pay audit, or suitable alternative, and does not implement the action plan following a tribunal order. Implementing and monitoring the necessary changes is one of the most important aspects of an equal pay audit and must be insisted upon. Employers need to be made aware of the expectation to do that within the time limits that will be placed on them and of the sanctions that they will face if the time limit is breached.
There is also a proposal in the Bill to amend the Public Interest Disclosure Act in terms of a public interest test. There are some concerns about this proposal as the purpose of PIDA is to prevent disaster and to encourage workers to speak up when they have suspicions. As many noble Lords have pointed out, issues that at one point seemed trivial may in fact be indicative of underlying problems in an organisation and could be the tip of an iceberg. I believe that a wider comprehensive review of this whole subject is needed. If we do not do that, it will be a missed opportunity to address some of the legal loopholes that exist, which include a gaping hole in the protection if workers are victimised by co-workers for raising a concern; making sure that all workers are adequately covered; clarifying protection for GPs; and ensuring that workers who raise concerns, including the police and professional regulators, are protected.
Finally, in regard to Clause 60, the Bill should ensure that primary authorities and local authorities are not overturned by central government when they intervene in local partnerships by directing councils to follow inspection plans. I believe that central direction may reduce flexibility and innovation at a local level and goes against the localising agenda of the coalition Government.
Baroness Thornton
My Lords, I am very pleased to participate in this Second Reading debate and to be part of my noble friend’s Bill team. We will try to do something useful with what is a pretty terrible Bill. Having worked on the Public Bodies Bill and the health Bill, there is quite a lot of competition for that prize with this Government. As other noble Lords said, the Bill is incoherent. It provides no compelling vision, no consistent message and no connected approach across government to drive growth. That is a shame.
I will concentrate on Clauses 56, 57 and 58, which are no less than a systematic undermining of the UK’s entire equalities infrastructure for what appears to be no reason other than dogma and political spite, which I hope at least the junior partners in the coalition will not support. The clauses relating to the Equality and Human Rights Commission—as even Vince Cable admitted—have no significant impact on business growth. The Government’s own impact assessment states that either they will have a negative impact or they will add nothing to the main purpose of the Bill. So why are they here? There is no tangible, quantifiable, empirical evidence linking the measures put forward in Clauses 56, 57 and 58 to business growth.
Clause 56 covers changes to the Equality and Human Rights Commission’s statutory powers and duties. I beg to differ from what I thought was the rather complacent view of the noble Lord, Lord Lester, about the dangers that face this body. The Bill seeks to amend Part 1 of the Equality Act 2006, which sets out the Equality and Human Rights Commission’s statutory powers and duties. It repeals Section 3, which sets out the general duty of the commission. It repeals Section 10, which imposes a duty on the commission to promote good relations between members of different groups. It repeals Section 19, which gives the commission powers in association with Section 10. It repeals Section 27, which enables the commission to make arrangements for the provision of conciliation in certain non-employment related disputes, and it amends Section 12, which requires the commission to monitor and report every three years on its progress. It reduces from three to five years the frequency with which the commission is required to publish a report on its progress.
These legislative changes should not be considered in isolation. In addition to the proposal to amend the legislative basis of the EHRC, the Government are undertaking a range of actions that seriously threaten the commission’s independence and effectiveness. By 2014-15, the EHRC will have had its budget cut by 62%. It will have lost 72% of its staff compared to when it was established in 2007. These are disproportionate cuts. They will make the EHRC about the same size as the former Disability Rights Commission—just one of the three equality commissions that it replaced.
In addition, the new framework document between the EHRC and the Home Office pays little heed to Part 4 of the Equality Act 2006, which states:
“The Minister shall have regard to the desirability of ensuring that the Commission is under as few constraints as reasonably possible in determining … its activities … its timetables, and … its priorities”.
This has drawn concern from the chair of the ICC, who stated that the new framework document significantly limits the EHRC’s freedom,
“to determine priorities without undue influence by the Government”.
The EHRC works to reduce inequality, eliminate discrimination and strengthen good relations between people. Undertaking these functions effectively requires proper funding of the EHRC, and the retention of its full legal remit and independence. I do not say that the EHRC needs to be funded—in case the Minister is under any illusions—as it currently is. Of course it has to play its part, as do all other government departments. However, the figures that I cited—
Lord Lester of Herne Hill
As the noble Baroness accused me of complacency, perhaps I could ask her to confirm that nothing in these changes will affect the guarantees of independence that together we wrote into the 2006 Act—some of which she referred to—nor the functions on enforcement that I quoted in my speech. The changes deal only with aspirational matters.
Baroness Thornton
I think that the noble Lord is quite wrong, and I will go on to say why. According to the Paris principles, a national human rights institute needs to enjoy financial autonomy that will enable it to determine its priorities and activities. General observation 2.6 on adequate funding, issued by the sub-committee on accreditation of the International Coordinating Committee of National Human Rights Institutions, states:
“Financial systems should be such that the NHRI has complete financial autonomy. This should be a separate budget line over which it has absolute management and control”.
The actions of the Government are undermining the EHRC’s celebrated A status. Is their intention to preside over the downgrading of our national equalities and human rights body so that we can join Sri Lanka, Kazakhstan and the Congo, for example, with a B status, for whatever reasons those countries may have a B status—it could be that they do not have a body or that their body is not independent of their Government—instead of being part of the A status group, which includes most of the western world?
Section 3 of the Equality Act requires the EHRC to encourage and support a society based on freedom from prejudice and discrimination, individual human rights, respect for the dignity and worth of each individual, equal opportunity to participate in society and a mutual respect between groups based on understanding, valuing diversity and a shared respect for human rights. Section 3 provides a guiding vision for the EHRC that unifies equality and human rights, which we discussed in 2006. While it is recognised that improvements are needed in the governance and management of the EHRC, confusing that with changing its legislative-provided remit is unjustifiable. Time should be allowed for the newly-appointed chair to implement the changes she wishes to make before the purpose of the organisation is undermined.
Vince Cable admits that there is no business advantage to be gained from removing Section 3 and terms it simply a piece of “legislative tidying-up”. However, there is a significant risk that removing Section 3 will prove to be a substantial loss. Professor Sir Bob Hepple QC, who I know has been a partner in crime of the noble Lord, Lord Lester, over many years, says that it has the potential to leave the Equality Act rudderless. Can the Minister explain exactly what getting rid of this general duty will do to encourage enterprise and grow the economy, or even what part of this duty puts a bureaucratic burden on business?
As to Section 10 of the Equality Act, which covers the duty to promote good relations, I can only assume that someone got out of the wrong side of the bed in a bad temper to draft this legislation to repeal the EHRC’s duty to promote good relations between members of different groups. That duty has been used in the past to include guidance on tackling political extremism in local elections, the kick racism out of football campaign and work carried out to improve social cohesion following the riots and troubles in Northern Ireland cities in 2001. Without this duty, the EHRC will be concerned only with regulating the vertical relations between organisations and individuals, rather than being able to undertake initiatives aimed at and positively influencing wider public attitudes and improving relations between individuals and groups. We need to keep all of this duty in the original legislation. As I have said, this legislation poses a threat and may lead to the removal of our A-grade status, which is a very serious matter.
I believe that we are at one across the House—many of us are with the noble Lord, Lord Lester—on Clauses 57 and 58. The Government seek to repeal Section 40 of the Equality Act 2010, which makes an employer liable for the repeated harassment of its employees by third parties, including customers, clients and service users. The noble Lord, Lord Lester, eloquently and adequately explained what that means and gave a very good example. There are many more examples, which I am sure will emerge in Committee.
While it may be true that there has been only one case of third-party harassment ruled on by an employment tribunal, it is also true that only four years have passed since the commencement of the provision and repealing it now would surely be premature. The TUC asserts that the introduction of Section 40 in the Equality Act has already led to a step change among employers, with actions undertaken to make it clear to service users that the harassment of their staff would not be tolerated. However—this is something which, I hope, will appeal to the Minister—there may be hidden costs to business of not prioritising action against third- party harassment. Harassment can have a significant effect on the mental and physical health of a workforce and be a major cause of work-related stress affecting performance and absence levels. I would also like to ask the Minister if repealing this provision would leave the UK in breach of EU law—the equal treatment directive 2002/73/EC which refers to the duty of employers to take measures to combat all forms of sexual discrimination, in particular preventive measures against harassment and sexual harassment in the workforce. I should also say that in the Government’s red tape challenge, there was no publicly available evidence of concerns being raised about this issue. When the Government consulted on third-party harassment, of all those who were asked, the vast majority, 71%, said that they opposed the repeal.
I turn now to Clause 58. Again, the noble Lord, Lord Lester, is quite right. Section 138 of the Equality Act 2010 means that a person who thinks that they may have been unlawfully discriminated against, harassed or victimised can obtain information from the person, employer or service provider they think has acted unlawfully against them. I think that the noble Lord, Lord Lester, was one of the authors of this legislation 40 years ago, so why the Government would want to remove it, I do not know. It is completely counterproductive. Some 80% of those who responded to this opposed the abolition of the questionnaire procedure, and there is no evidence to support the Government’s claim. In fact, case law makes it clear that businesses and other respondents find this to be a valuable way of dealing with issues before they reach the law or tribunals because they establish the facts and clarify the issues which are in contention. Indeed, the Government’s own impact assessment failed to provide any empirical support for removing this regulatory burden on businesses. I ask the Minister seriously to reconsider this part of the Bill as we proceed.
The Bill falls far short of the visionary legislation that the Government suggested. It is several Bills rolled into one, which is why a team of us will be dealing with those bits that form parts of our briefs. It has been labelled an enterprise Bill, but I do not think that that is the case. The Government are seeking to make fundamental changes not only to the employment rights of every person in this country, but to change the remit of the body charged with promoting a society free from discrimination. As a result of the changes proposed in Clauses 56, 57 and 58, this House should have very real concerns about the impact they will have on the most vulnerable in our society and, indeed, on our nation’s international credibility.
Lord Sheikh
My Lords, this is a most important and welcome Bill. The Queen’s Speech which promised this Bill enticed us with the words that the Government would,
“create the right conditions for economic recovery by strengthening the business environment, reducing regulatory burdens and improving business and consumer confidence”.
A clearer and more precise definition of the mission for the Government would be hard to find, and this debate provides us with a good opportunity to pause and reflect, not so much on what we have done to date, but what we need to do now to lay the foundations for our future economic well-being. The Government’s record on the macroeconomy has been hard-fought, but we are certainly making tangible progress. As we nudge ourselves out of recession, it is vital that we provide businesses with the tools they need to strengthen the path to recovery. Addressing the microeconomic challenges will enable businesses to make their contribution to our prosperity. As someone with a long career in business, I welcome the Government’s commitment to regulatory reform, but too many important stakeholders such as the CBI and the Institute of Directors have been critical that action has not met rhetoric. However, this Bill provides us with a clear opportunity to provide them with the reassurance that they seek. Business confidence is a crucial element in our strengthening economy.
One of the most important factors which has undermined our commercial environment has been the ebb and flow of confidence of both consumers and businesses. A stable and predictable regulatory environment is important, as is one that delivers the right balance between affording an appropriate level of protection while not obstructing innovation and enterprise.
Consumers need to have confidence to spend and businesses need to be able to find their customers. Small businesses are at a relative disadvantage in the regulatory environment. They are not able to afford large teams dedicated to monitoring compliance, and the proportion of staff time dedicated to regulations is greater than for larger enterprises. Some estimates suggest that the impact of regulations is 30 times as great for a small business as a larger company. Measures in this Bill will take action to address that, which will be most welcome to businesses of all sizes.
I welcome the commitment in the Bill to make it easier for sunset clauses to be included in secondary legislation. I commend the increased use of sunset clauses in regulations. They are very popular with businesses and ensure that regulations that do not meet their objectives have a natural time limit.
The red tape challenge has been broadly welcomed across all sections of our economy and has achieved a great deal to make life easier for businesses, with more than half of the regulations considered to be improved or got rid of. I acknowledge that this Bill provides the first legislative vehicle to deliver on the deregulation that the red tape challenge promises.
We also need to do more on the potential problems caused by excessively obstructive employment legislation. Small businesses can be very anxious about taking on extra employees, but we should want them to feel comfortable in accommodating growth. Most businesses start small, and I know from my own experience that corporate growth increases confidence and improves a company’s contribution to the wider economy. However, many small businesses fear that one mistake on the employment front will affect their business, distracting their focus while they deal with the consequences. Employment law is a minefield, which puts off many small businesses that cannot afford a dedicated human resources department. Making sure that the balance between employee protection and business efficiency is not easy, but I believe that this Bill strikes the right balance.
It is in everybody’s interest that workplace disputes are resolved swiftly. One of the companies that I previously chaired was recently involved in a dispute with an employee. The proceedings were lengthy and acrimonious but the complaint was not justified and the case was decided in our favour eventually. ACAS acknowledges that problems at work can be a barrier to growing a business. The Rapid Resolution Service should increase efficiency, with cases dealt with more effectively, thereby avoiding significant legal fees or the need to attend a hearing.
I also welcome the measures in the Bill that seek to address competition policy, improving the robustness of decisions and strengthening the regime. I support the competition authorities taking forward the right cases, to increase the speed and offer other improvements for businesses. I support the new Competition and Markets Authority, which will dispense with the duplication that currently exists between the OFT and the Competition Commission. This will result in efficiency.
Markets serve the interests of consumers and ensure that the best businesses thrive. Where market forces fail to deliver, it is right that competition authorities step in to act. However, when they do, the investigation can take an incredibly long time to complete—sometimes more than 30 months. By any measure, that is too long and I welcome the provisions in the Bill that will impose time limits on these inquiries. The establishment of a single competition authority should prove an efficient response to this challenge.
I also welcome the proposed changes in some powers and duties of the Equality and Human Rights Commission, and the proposed amendments to the Equality Acts of 2006 and 2010.
Another area where the Bill offers positive prospects for business is in the provisions relating to the Green Investment Bank. I care about the environment; in fact, my maiden speech in your Lordships’ House was on this subject. Increasingly, the world is embracing the importance of low-carbon solutions to our problems. The Bill defines the “green purposes”, but investors are looking for certainty in this area. I congratulate the Government on investing significant sums of money in the Green Investment Bank and I hope that they will allow the bank to borrow further for its well-being in the future. I applaud the fact that the bank will have independence.
I shall make a few observations about the provisions in the Bill relating to directors’ pay. It is right that shareholders should have a say in how a company is run, but we need to be careful that these measures do not lead directors to err on the side of caution at the expense of economic growth. Encouraging shareholders to take a close interest in the performance of their companies is a good thing, but pay should reflect performance and we must be careful that these provisions do not result in shareholders micromanaging as an unintended consequence. I hope that my noble friend the Minister will let the House know how the correct balance will be achieved between improved levels of engagement between companies and shareholders, and the risk of directors being pushed away to less restrictive economies.
As someone who believes in competition, I welcome the clauses relating to cartels. I also welcome the proposals relating to health and safety duties, as these will help to avoid unnecessary civil litigation. In this regard, I declare an interest in that I chair an insurance brokering and underwriting organisation.
This important Bill comes at a particularly critical time for our economy. The needs of businesses are very clear. They want a simple, predictable, reliable and agile regulatory environment. We should do everything that we can to encourage entrepreneurs to start and grow businesses in this country. We need a competition regime which champions competitiveness and opportunity. These are tough asks, but I believe that this Bill will measure up and meet the challenges.
Baroness Brinton
My Lords, as others have already said, this Bill covers a large number of different topics. To mix the metaphor slightly, I shall do a pick-and-mix of some of the areas that my colleagues on these Benches have not covered and a couple that they have. I shall confine my remarks to employment and tribunals, copyright, payments to directors of quoted companies and equal pay audits and a brief comment on the EHRC.
Part 2 proposes changes to employment law and tribunals. We are told that the Bill does not remove any of the existing rights that workers enjoy and that employees remain able to reject proposed compensation offers and to proceed to a tribunal should they so wish. I hope that the Minister can confirm this given some of the comments that we have heard during the debate today.
I also welcome one omission in the Bill: the Beecroft proposals for no-fault dismissals are notable by their absence. I hope that this makes it clear that they have been defeated by the Liberal Democrats in the coalition. In light of various briefings, I hope that the Minister is able to reassure your Lordships’ House that the fears expressed by, among others, the CAB and the TUC regarding employee status are unfounded, and that there will not be any unintended consequences of this legislation.
I welcome the proposal for claims to be lodged with ACAS for early conciliation. ACAS does a very effective job and involving it early will help both parties understand where agreement can be reached early in proceedings. In the past, I have seen cases from both the employer’s and employee’s perspective, and I know of the strain placed on both parties, especially employees and small businesses—which others, including the noble Lord, Lord Mitchell, have spoken eloquently about earlier today.
Anything that can reduce this strain and the number of cases that end at tribunal, but with a fair settlement, will be beneficial to all parties, with the additional benefit of reducing the current cost to the taxpayer. We are told that that was £87 million in the year 2010-11. However, I look for reassurance from the Minister that ACAS will receive extra funding to do this new work, financed—I hope—by some of the savings in the cost of tribunals that the Government talked about. Without those resources, we are setting it up to fail.
I also welcome the proposal of rapid resolution by legal officers, sifting through papers at an early stage, if, and only if, the matters are clear under the law. However, I am concerned that in Clause 11 there appears to be a move to reduce or remove lay members from the tribunal. They have provided a very valuable perspective in the past, so that would be regrettable.
Clause 14 gives the Government the power to fine employers where their actions are negligent or malicious. This will help in cases where employers behave badly. This is a very positive step for employment rights.
Clause 15 changes the rules around whistleblowing to make it plain that protection is given to whistleblowers for issues where there is a genuine public interest in disclosure. When will the Government’s proposals for defining the scope of public interest tests be published? Clarification is fine, but it must not be drawn so tightly as to prevent genuine whistleblowers being given the protection that they need.
Others have referred to the compensation cap. As I read it, the terms in the Bill refer only to the employment decisions of tribunals that are presently capped, not to the current unlimited awards for discrimination. Can the Minister confirm that?
The Equality and Human Rights Commission has had its difficulties in the past, not least in its failure to deliver value for money and have its accounts signed off for three years. I am sure that it is time to review the way that it operates. While Clause 56 reduces its very broad responsibilities to concentrate on its activities in core areas, it is good that no powers and duties under the Equality Act 2006 have been removed. It is vital that we have an EHRC that is fit for purpose, able to deliver its core functions well and can continue with its huge progress in the past few years, including groundbreaking legal cases and inquiries exposing exploitation of migrant workers in the meat-packing industry, harassment of disabled people, discrimination in home care and the finance industry, and equality deficiencies in the Treasury’s 2010 spending review.
Clauses 65 to 69 set out the updating of copyright law to, I hope, bring it into the 21st century a mere decade after it started. While it is vital to protect the rights of and payments to authors and producers of copyrighted material, as my noble friend Lord Clement-Jones outlined, we also need to recognise that users of copyrighted material face difficulties under the present structures, especially universities, museums and libraries. The proposals outlined here will make it easier for them, especially the proposals on orphan works—where it has not been possible to trace the copyright holders—and create a system of extended collective licensing.
I understand that there is a difference of view here. I suspect that much of the time in Committee will be spent trying to balance the two sides in this particular argument, but we need a mechanism to facilitate the use of orphan works. I hope that the Minister can either make it clear that the safety net for authors and creators who cannot be identified has been covered by the creation of the body for orphan works, or will be prepared to consider amendments that would enable genuinely orphan works to be regulated but used and give authors the reassurance that they need that that cannot be abused. We need to ensure that diligent research has been carried out by any proposed user. Payment can be made once an author has been identified, or held by this body until one is.
Clauses 70 to 73 set out changes to payments to directors of quoted companies. The total remuneration packages of company directors, the transparency of that remuneration to the public and the power of shareholders to set effective and realistic pay levels have rightly come under public scrutiny recently and have already been referred to in this debate. I welcome strongly the proposals to give shareholders a binding vote on future directors’ pay at least every three years. I also welcome the support for these proposals from business organisations such as the CBI and the TUC which recognise that change is needed here. This consensus is vital to making it work.
Turning to Clause 74 and equal pay audits, good employers—whether large or small—will already use and have reflected on equal pay, using audits, among other tools, to ensure effective and fair practices with their employees. They are not the problem. All employers should be encouraged to do them. This clause provides significant progress to ensure that companies or organisations which employment tribunals have found in breach of equal pay law must carry out an equal pay audit of the entire company or organisation. It will strengthen the hand of employment tribunals and ensure that companies that favour male over female staff in, say, selectively awarding bonuses, will be brought to task. In the longer term, using the equal pay audit will reduce the number of discrimination cases, because organisations that are serial offenders will have to make it plain in the audit exactly what they are doing, and they will be held to account publicly for that.
This Bill fulfils some of the promises of the coalition, especially introducing the Green Investment Bank—which I welcome—holding companies and directors to account over directors’ pay and equal audit, and the move to the complex issue of copyright in the 21st century. I look forward to the further stages of this Bill.
Lord Monks
My Lords, perhaps the first test of this or any Bill is whether it lives up to its hype. Will its espousal of enterprise inject some much needed dynamism into our struggling economy? Will it encourage long-term growth, as it claims it wants to do? With the interesting exception of the Green Investment Bank, the Bill falls well short of these objectives. It claims to be about enterprise, but its measures are unenterprising, small-scale and modest. Compare it for a moment, as my noble friend Lord Stevenson did, with the recent report of the noble Lord, Lord Heseltine. This started by recognising the stark truth, which I agree with, that we are in,
“the worst economic crisis of modern times”.
We are almost in a war situation. Whether you agree with it or not, that report is ambitious, urgent and seeks to draw some lessons for the UK from the more robust and successful economies on the other side of the North Sea. Importantly, it seeks to build on a national consensus on the way forward. I ask the Government whether this is not the right approach, rather than this modest Bill which fiddles around in so many areas and, I guess, in many cases to so little effect.
Apart from the Green Investment Bank, I welcome one aspect of the Bill: expanding the role of ACAS. It does a good job and can do even more. However, as my noble friend Lord Stevenson, the noble Lord, Lord Razzall, and the noble Baroness, Lady Brinton, among others said, will it have the resources to do the job at a time when nearly everybody is suffering from fewer resources? There could be some very long queues outside ACAS’s doors after this Bill goes through. Even that provision to strengthen ACAS is linked to a weakened entitlement for workers to claim unfair dismissal. That means that the workers’ influence at the conciliation stage will inevitably be weaker than perhaps in the present circumstances.
When we get to employment, this part of the Bill is based on what I regard as a rather tired mantra that reducing employment rights will lead to creating jobs. I and many people not just on this side of the House regard that as the low road to economic growth. It is not a road ever shown to have had any great success. The balance is to be tilted a bit more to employers and away from workers. Could we not have pointed the UK towards the high road to growth instead, towards more investment and fewer debt-ridden companies financially engineering to minimise tax payments and maximise dividends? We should look for more skills for higher productivity and better relationships at work. Instead, under a parallel Bill to which my noble friend Lord Morris referred, rights are to be marketised and sold on. I look forward to seeing a secondary market developing in due course, once the City of London wide boys get their hands on it.
The reality is that rights are under attack. Anyone now pursuing a claim of unfair dismissal has to cope with an increased qualifying period of two years. A possible deposit will be levied and, under this Bill, the scope for levying that deposit will be extended. There will be more freedom for employers to press for compromise agreements. I heard what the noble Baroness, Lady Brinton, said but this last measure is not that far from the no-fault dismissal provision of the Beecroft report, which was so excellently and expertly derided by the Secretary of State. I wonder whether he lost a battle on this provision.
I, like others, want to highlight Clause 61. As my noble friend Lord McKenzie said, this will reverse the Health and Safety at Work etc. Act 1974, which was an all-party measure in which the Conservatives were prominent, by the way. That Act allows claims from a worker for damages for breach of health and safety regulations. Instead, under this Bill, the worker will have to prove negligence so it will not be enough to prove the breach of the statutory obligations. In effect, the burden of proof shifts to the injured or damaged worker. The Government have claimed support for this idea from a recent review of health and safety regulation by Professor Löfstedt, but he did not recommend a blanket removal of employer liability from health and safety law and it really must not be alleged otherwise.
It has been said by many of your Lordships that there was no consultation on this provision. It was sprung at a late stage in the Commons and its promoters apparently include the insurance industry. In the opinion of quite a few lawyers who are looking at this, it turns the clock on health and safety back to 1898. Through our nation’s story, we know that it took tough legislation from this House and determined politicians to improve the appalling health and safety practices of the 19th century. That is what is now being weakened. This small clause cannot be underestimated. The Government are sending out a message that they are easing up on health and safety. That is not a good message. I hope that this House will challenge it and remind the Government that such a weakening is not appropriate—not with 20,000 workers in this country seriously ill at the moment, many of them dying, from a work-related illness or injury and 176 workers having been killed in workplace accidents last year. Clause 61 should, frankly, be dumped.
Finally, I have two questions. First, are the Government going to move on the proposal of the noble Lord, Lord Heseltine, to assert the public interest in mergers and acquisitions, especially where foreign takeovers are concerned? I am not opposed to foreign takeovers but the UK needs to get more on jobs and investment than is currently the case and not be so,
“timid in engaging with potential investors in … key sectors”,
words, by the way, that come from the Heseltine report. Secondly, on Part 6 of the Bill, given that chief executive officer pay and benefits in major companies went up on average by over 10% in 2012—a year when, as we know, growth was generally negligible—how do we check that excess? Will it be enough to rely on shareholders when, as has been said in the House today, many of them, particularly the institutional investors, are in the same circle? Will the Government change their mind and agree to insert employee representatives on to remuneration committees and so interrupt their current, cosy boardroom practices of mutual back scratching? This is not a matter on which to be timid either. We have a duty to improve this Bill. I hope that we can take it vigorously and with both hands.
Lord Mawson
My Lords, I want to focus on Part 1 of the Bill concerning the Green Investment Bank. The Americans have a polite expression that denotes deep scepticism. The phrase is “horse feathers” and it may replace a less polite phrase of which your Lordships might officially disapprove. I come to this issue as someone who has been involved in finding and making common ground between the Government and social action as we have attempted to apply business principles to challenging social issues. I am aware that there is a lot of equine plumage around. I hope not too much in our case.
My record and that of my colleagues has been founded on taking a different approach. The result has invariably been less talk, more action and more money in the bank for everyone, including the most disadvantaged in our society. I recognise a familiar danger in all our talk of global warming and climate change. There are many out there who would sceptically use “horse feathers” to describe it. Such scepticism is serious but there is one horse that is totally featherless and I want encourage your Lordships to think of it as a runner, although perhaps not a dead cert.
If we cannot make money out of saving the planet then it is not going to be saved. The business of saving the environment has to be our business and it has to be a commercial enterprise or it will mean nothing to many. We are in danger of running scared at the awful vision that researchers, scientists and climate change experts confront us with daily. We are tempted to pour our money on to catastrophes in some kind of ritual gesture in the sad hope that this will absolve us of responsibility and they will disappear.
However, there is an alternative, practical solution. A host of companies is already making the running. The horse feather merchants have long disappeared. Among the survivors is one very interesting firm called Solarcentury. Its chairman is Jeremy Leggett. He is an ex-oil man. He was once full of the jet-setting, can-do romance of the industry, especially in its cutting-edge research capability. Then he saw what the oil world was doing to the natural world so he changed businesses. He is now a leader among many private companies researching and installing solar energy. The account of what he has done in a comparatively short timeframe is impressive.
Solarcentury began with domestic installations and these now number 9,000. It has recently begun much more ambitious commercial schemes such as on the Co-operative Insurance Tower, a skyscraper in Manchester, where it developed solar cladding to replace the old conventional cladding. Those who know that rain-kissed city will acknowledge that this is a serious challenge to the notion of solar power. The company has also developed a vast solar-powered waste disposal plant in Waterbeach in Cambridgeshire and its Blackfriars Railway Bridge project will see the bridge become Britain’s biggest solar bridge with more than 4,400 photovoltaic panels. Solarcentury has been in profit since 2006 and has created charities in Africa which use solar power for schools, community centres and clinics, creating a clean environment and new jobs.
These are one company’s achievements. The approach of this and many other companies is to be both creative and sustainable. We need to be creative. We need to make changes in directions that now seem unimaginable. These firms are in the business of imagining the future. That future needs to be sustainable; we must use the vast resources of the market to find out who is doing what, how well they are doing it and, above all, at what price. In the area of solar power there are many firms doing good business or going broke on our behalf. They are finding out what does and does not work.
Somewhere in the background I hear somebody growl, “subsidy”. There is no such thing as an absolutely free lunch, but this one is as free as makes no difference. The companies find what works for us and are making it happen. If it does not work, then they go bust.
My final point is best illustrated by a story; apologies to those who have heard it many times before. A man in New Jersey spent his days raising money to spend on gambling. The game was bent. A friend said to him, “Why do you do this? The game is rigged.” The gambler replied, “I have to do it. It’s the only game in town.”
However, this is not the only game in town. Thousands of firms worldwide are pursuing the challenge of climate change. For example, the recent environmental conference in Rio de Janeiro was described as a damp squib: the usual shed load of talk followed by no action because there was no public money available. But 1,500 business people turned up; whereas, previously, almost nobody from the commercial sector had bothered. According to New Scientist,
“some 1500 business leaders had attended the summit, and had stumped up half a trillion dollars of corporate cash to fund various UN agendas … Among the new corporate actors at the heart of UN policymaking on the green agenda is Chad Holliday, chairman of the Bank of America and former president of DuPont. He is now also co-chair of the Sustainable Energy For All initiative”.
We might well ask, “Does Chad Holliday know something we don't know?” What kind of dark future in oil product is DuPont betting on?
My intention has emphatically not been to argue about climate change figures. It has been to show that business people of some importance have made a serious commitment to the climate change challenge. In the case of Jeremy Leggett of Solarcentury, that commitment has been radical. In the case of Chad Holliday, the head of the Bank of America, the change is conventional but significant.
Climate change is an idea whose time has come. The Government should take the courage to act in good faith. So if the proposed UK Green Investment Bank is to play a role in all of this what should it be looking out for? First, the Government need to be clear from the outset with this bank and must not keep changing the goal posts. Continuity is the name of the game, and businesses soon lose interest if they doubt your credibility and commitment: game over. Secondly, do not try to oversell it. If the terms are not better than those commercially available, do not pretend that they are: get real.
Thirdly, this bank needs to be run by practical people. We can set up whatever legislation we want, but the bottom line will lie with the individual who is in charge of this bank. Practical people are not yes men. If an idea does not work, they are not afraid of changing the design. Do not make the mistake that is so often made by government and invest in spin: in someone who looks and sounds good to the media. Get an awkward customer, who can bend this bank into reality and make it credible. That is my advice.
Fourthly, what is going to be the attitude to risk of this bank? Will this Green Investment Bank be encouraged to take risks and back business entrepreneurs and social entrepreneurs? What will be its policy on SMEs? Will innovation be smothered because an SME lacks a strong asset base? Can the Minister tell us in his summing up what is to be the attitude of this bank to failure and risk? If we are not planning for failure, we will not be taking risks. Fifthly, is this fund going to be run by entrepreneurs who understand green energy, or by banks that understand liquidity and protecting capital? Actually, both are needed but can the Minister tell us who will call the shots?
I could draw an analogy with housing. We now have so many constraints on housing. Houses need to be very energy efficient, include renewable energy, pay Section 106 contributions, have lots of parking—or no parking, depending on the local authority—be accessible, 25% affordable, and so on. There are now so many constraints that very few homes are built at all. Houses that are built are mostly cheap, unimaginative and small because it is the only way to square the circle. It is the law of unintended consequences. All the requirements individually are perfectly reasonable but, collectively, they have a disastrous effect that nobody planned.
Some of us in life are tasked with doing. We sometimes wonder whether the real purpose of government is an existential experiment: are you in the business to discover whether the number of hoops that a project has to jump through before it can start is finite or is it, in fact, truly infinite? We in your Lordships’ House, I suspect, sometimes unwittingly add to this number ourselves. Will the Minister please tell the House how many hoops will be embedded into the operation of this bank? How will he ensure that they do not grow exponentially? If this green debate is for real, then we must get intensely practical. This bank now has to put its money where its mouth is.
Baroness Turner of Camden
My Lords, the Minister will not be surprised to learn that I find much of this Bill quite unacceptable. The section dealing with employment is apparently based on the notion that employment rights are responsible for the lack of employment opportunities. I believe this to be untrue. Such evidence as there is appears to indicate that unemployment is due to a lack of growth. The interesting report from the noble Lord, Lord Heseltine, which has already been mentioned, refers to the need to balance our economy and, in particular, the need for support for manufacturing industry. The Bill does nothing to address these important economic problems.
Making it easier to fire workers—which is part of the intention of this Bill—will not create more jobs, but will increase the feeling of instability among those in jobs. The Government have already introduced regulations requiring a tenure of two years in a job before action for unfair dismissal can be attempted. This already makes it impossible for many women in part-time employment, most of whom do not have a two-year tenure in a job, to utilise the procedures anyway. The Bill lays down procedures involving ACAS mediation, including reference to a conciliation officer, and the emphasis is on a settlement rather than process to a tribunal, which apparently—according to the Government—must be avoided. A certificate will be required before the employer can take the next step; then a legal officer has to be involved before the tribunal can consider the case. If the employee eventually makes it to a tribunal, the hearing is by a judge alone —not the current set-up involving lay-people with some knowledge of working practices. There is also a charge to the employee in order to get his case heard. There is a great deal more complication set out in the Bill and all of it is clearly proposed in order to make it as difficult as possible for an employee to activate rights for which many of us fought hard in the last century.
There are further problems for employees. Health and safety at work regulations are to be amended. The Government claim that this will cut down spurious personal injury claims, but it should be remembered that the Health and Safety Executive figures for last year show that 173 people died in workplace accidents and 22,433 sustained serious injury. The Government’s current proposals would involve less attention paid by employers to workplace safety and greater expense to the taxpayer through NHS costs and welfare payments to workers who have been injured.
Many workplaces are inherently unsafe. Some industries like construction have many accidents, but the workers who do this necessary work have the right to maximum protection and employers have an obligation to provide as safe a working environment as they possibly can. There has already been some reference by my noble friends to Clause 61, which was introduced at a late stage in the House of Commons. It would radically change the way injured workers claim compensation from their employers. If an employer breaches health and safety regulations and injures an employee, that employee will no longer have a consequent right to compensation. He or she will have to prove negligence and the burden of proof will transfer to the injured worker, who will find it harder to claim compensation as a result. Litigation will be more protracted and costly.
What about insurance? When I was much younger, I worked in the accident claims department of a major insurance company. I saw little evidence there of so-called compensation culture; on the contrary, getting compensation was pretty tough. I remember often feeling sorry for injured workers who, in those days, had to fight very hard to get any compensation at all. Because they needed the money, they often settled for much less than the injury was worth. It seems to me that what is clear is that this legislation, if it reaches the statute book, will result in increased insurance premiums.
The sections of the Bill to which I have referred relate to improvements over the years intended to benefit the workforce. At a time when poorer households are already being hit by rising food prices, soaring gas and electricity bills, and stagnant wages, the removal of employment rights are bound to be deeply resented.
I hope that the Government can be persuaded to reconsider some of the provisions in the Bill. If not, we shall have to attempt amendments in Committee and on Report. It should be understood that in this country we have, I regret to say, a low-wage environment. An employer who profits from employing low-paid workers benefits from subsidies from the taxpayer via the benefits system. Landlords, in London particularly, charge enormous rents for one-bedded flats also are subsidised by the taxpayer via housing benefit. But it is always the worker who is described as a scrounger and is told that he or she is lucky to have any sort of job, and not to expect any employment rights either.
In the mean time, as my noble friend Lord Gavron indicated, senior executives in large companies are helping themselves to large salaries and even larger bonuses. In my view, the answer should be a collective one—trade union organisation—and the right of employees to representation. That is not envisaged in the Bill but it should be.
Lord Young of Norwood Green
My Lords, I congratulate the House on the number of people who have participated in this debate. I admit that we had some concerns about it being on the day before a recess. To paraphrase the saying that goes around in other industries, we wondered whether it might be POET’s day today—push off early, tomorrow’s recess. However, I am happy to say that that did not happen and that we have had a very wide-ranging and forensic debate.
I made a few notes and this Bill was described as a hotchpotch, a patchwork, incoherent, good, bad and ugly. I do not know how to add to that. I also looked at the better descriptions, one of which was that it was wide-ranging. As someone who presided over the Digital Economy Bill, I cannot criticise it for that. If I had to find a phrase, I think that the Bill is a curate’s egg, which is a bit of a cliché but appropriate. As a number of my noble friends have said, it is good in parts. I will cover the parts that make a positive contribution. I join others in welcoming the Minister, the noble Lord, Lord Marland, to the sheer delights of this wide-ranging Bill.
The criticism of many of my noble friends is that the Bill will not do what the Minister says that it will do; namely, encourage growth and investment, and create a fair environment. Indeed, it is incoherent. I noted carefully the points made by the Minister. He said that it will deal with the fear of employment tribunals, which is what some employers say and, of course, what Beecroft said. The Minister said that it will streamline directors’ pay and that it will deal with the gap between pay and performance.
However, he did not say whether it will deal with the ever-increasing gap between the pay of the directors and the average pay of those workers who carry out the work in the company, to which I will return. Although there are some good bits of this Bill, overall, we do not believe that it will make a contribution to growth and investment or have a positive impact in terms of reducing regulation in a way which would be fair to all concerned. I will say why that is so in my contribution.
There was one aspect that the Minister did not cover, or if he did I missed it—it must have been a low-level whistle blow—but there have been plenty of contributions on that particular matter so I am sure that he will deal with it in his response. My noble friend Lord Stevenson rightly criticised the Bill for having no overall vision. Business leaders have told the Government that they are unimpressed with its lack of a clear and coherent growth strategy. My noble friend rightly said that this is a Beecroft-like Bill and gave the first warning that a lot of the changes and recommendations are not based on evidence. Along with many of my noble friends, he referred to the recent report of the noble Lord, Lord Heseltine, on growth. I welcome the Minister’s response on that issue.
As regards the Green Investment Bank, I am looking round the Chamber but cannot see the noble Lord, Lord Smith—somebody I met in a previous incarnation as a BBC governor—but I am sure that he will bring a lot of experience to this matter. For us the concern about the Green Investment Bank is the fact that it is not actually a bank, as the Minister told us. But putting that to one side for a minute, when will it be allowed to borrow? Will it be a lender of last resort and what will be its impact on lending to SMEs? Those questions have been raised in the debate.
We have heard some fascinating comments on the Equality and Human Rights Commission. As one of the architects of the legislation behind that, the noble Lord, Lord Lester, brings a wealth of experience to that matter. He criticised Clauses 57 and 58 on third-party harassment and vulnerable minorities. A clear difference of opinion has emerged on this issue. I and my noble friends are worried about the general remit of the Equality and Human Rights Commission. I take this opportunity to welcome back the noble Baroness, Lady Campbell. I congratulate whoever it was behind the scenes in the House who assisted her to make a full contribution. It is great to see her back making that contribution. We share her concern about the general remit. A number of noble Lords made very powerful contributions on that issue, not least the noble Lord, Lord Ouseley, who also brings a wealth of experience to the debate. He asked where the evidence was with regard to third-party harassment. Noble Lords asked about the evidence time and time again.
I turn to directors’ pay. I pay tribute to the noble Lord, Lord Tugendhat, for his contribution. I hope it does not blunt any career chances or capacity to act with the Government that he might have had. My tribute is sincere because he made a careful analysis of directors’ pay based on experience and evidence. The noble Lord mentioned a two-thirds vote, transparency, bonuses being linked to the short term, the consultants’ remuneration merry-go-round whereby they all keep rewarding each other, and last but by no means least, the bit that the Minister did not address: that is, not just the gap between pay and performance but the really worrying gap between the pay of directors and the pay of median workers in a company.
The other major contribution in that debate—and that is not to denigrate any one else who contributed on that particular area—was from my noble friend Lord Gavron who brings a wealth of experience: 29 years as a CEO and he is wearing incredibly well. I like the phrase “being a connoisseur of mistakes”. I suppose we all are in one way or another in organisations that we have taken part in. He made a powerful point about the directors of public companies whose pay has increased 50 times in comparison to that of their median workers. The question of dividends and bonuses was raised and last, but by no means least, the impact on motivation and performance. We recognise that the Government have gone some way to addressing the concerns about directors’ pay. However, there is a wide-ranging view—I do not know whether it is a consensus—that the Government have not gone far enough. We will probe this with further amendments in Committee.
I will return to the contributions from my noble friend Lady Ford and the noble Lord, Lord Bates, in my conclusion. In their different ways they gave us a different analysis which is worth addressing. There are some areas that I will not cover, given the time available, as I want to be swift. I welcome and congratulate the noble Lord, Lord Currie of Marylebone, on his appointment and wish him well. He gave us a very wide-ranging and balanced analysis of business, consumers and competition which was exceedingly interesting.
There were a number of very powerful contributions on health and safety and whistleblowing. My noble friend Lord MacKenzie of Culkein reminded us, as did the noble Lord, Lord Low of Dalston, how important whistleblowing has been in exposing some really serious injustices and bad practices in a wide range of industries, not least in the health service. Upsetting the balance in that particular piece of legislation is a real worry and I hope the Minister will address it.
My noble friend Lord MacKenzie of Culkein, with his particular experience in health and safety, pointed us to the dangers of Clause 61 and the fact that hundreds of lives have been saved by health and safety legislation. The Parliamentary Under-Secretary of State for Skills, Matthew Hancock, said, on 16 October:
“We all have different reasons for coming into politics. When I was growing up, I had one of the experiences that brought me to this place, concerning the over-burdensome intervention of health and safety officers. I worked in a family computer software company when an over-long health and safety investigation took place, which took up huge amounts of time for the officers and senior management. The only result at the end of it was the recommendation that some bleach in a cupboard must be labelled correctly. After a sign was put up saying, “There is bleach in the cupboard. Please do not drink it,” the company was passed under the health and safety regulations”.—[Official Report, Commons, 16/10/12; col. 191]
That is a Minister showing what I can only describe as contempt for something that is fundamentally important. Does he really believe that that is the only thing you are doing when you carry out risk assessments? If we were living in a society where there were no deaths or serious injuries due to industrial accidents we might have cause for such complacency. However, testing electrical equipment and doing fire risk assessments are not overblown requirements of the Health and Safety Executive. Perhaps the Government think that attitude is the right approach to health and safety.
I only have a few minutes left so I return—with apologies to a number of my noble friends for not referring to them—as I said I would, to the interesting debate involving my noble friend Lady Ford about the purpose of this legislation. How would it really assist growth in the economy? She drew our attention to the concern of SMEs and the fact that they are looking for investment and finance. Those are what they need in their businesses. She drew our attention also to another piece of legislation that is coming along and invites workers to trade their rights for shares in the company. That was an analysis of what business really required to grow.
The noble Lord, Lord Bates, told us that it was all about the wealth creators and getting the Government off their back. That did not acknowledge the role of the workers as wealth creators in those companies as well as the role of the people who own the companies. He talked about big companies making mistakes by employing the wrong people. This is what worries me about this whole piece of legislation. It suffers from what I call DDA, dysfunctional displacement activity, inasmuch as it seems to come from the belief that if you signal to employers, “If only we make it easier for you to get rid of people, it will solve your problem”.
It was my noble friend Lord Monks who said that there is a low road and a high road. A lot of the Bill is about the low road, rather than the high road of investing in skills. If you wanted to send a message to companies about how to look after their employees who, after all, are the most valuable part of their company, it surely would be about training and investment. I heard an interesting statistic from the Chartered Management Institute, which said that only one in five managers get any training at all. If you wanted to send a positive message, rather than a lot of the negative messages in the Bill, that is one that I could recommend.
I am conscious of the time. I apologise to my noble friends and others whose superb contributions I have been unable to address. I look forward to the Minister’s response.
Lord Marland
My Lords, I thank all noble Lords for this excellent debate. I am very grateful to the noble Lord, Lord Young of Norwood Green, for his cheerful and genuine support on the Bill. I am also grateful to my noble friends Lord Gardiner of Kimble and Lady Stowell of Beeston who have been extremely supportive throughout, and to our officials who have had to endure a six-and-a-half-hour marathon. There is much to digest, and this is clearly not the point where we go into hand-to-hand combat on some of the key issues. That is for Committee, and I look forward to it.
I have been in business all my life. The Bill redresses some of the imbalances that have developed, particularly in the area of employment, and it comes as no surprise that Members who have had affiliations with the trade union movement feel strongly about these issues, which they take seriously—as indeed do we. I respect their views, but we must remember that workers have rights and, of course, so do the employers. This is what this Bill sets out to do.
The noble Baroness, Lady Ford, said that in her working life she never came across issues of health and safety. I do not think that she has been talking a lot to other business people if that is what she thinks, because to many companies the health and safety issue is becoming really strangling, as are the tribunals, the long process and the time that it takes up.
Baroness Ford
Perhaps I may gently say to the noble Lord that I was aware that he was taking a comfort break during most of my speech. I never said any such thing and I suggest that he looks at Hansard to see what I actually said.
Lord Marland
I apologise. I am happy to accept that, but I thought I heard her say what I suggested, and I was there when she said it.
Business must be allowed to develop without unfair burdens. I totally agree with the noble Lord, Lord Mitchell, who said that red tape needs to be reduced, but it is a difficult balance. That is what we are trying to do here—find the balance, because that is the key to prosperity. If we take the view that none of the Bill is acceptable, we are not starting from a point of view of balance. The Bill aims to be fair for growth and enterprise and to protect workers’ rights and those of employers. It also allows small and medium-sized enterprises, unlike large companies, to develop without some of the impositions that can be absorbed by big companies but that cannot be absorbed by small ones. I congratulate the noble Baroness, Lady Greengross, on saying that employers have to be confident in employing their staff, and this Bill provides for that.
In the short time available, I shall rattle through a number of points. I apologise in advance for not speaking too substantively on them because we will do that in Committee. The noble Lord, Lord Stevenson of Balmacara, made various points. He thinks that the Bill is in bad shape, but he must remember that it is this Government who have taken on the issue of directors’ pay, not the previous Government; it is this Government who are delivering on the Green Investment Bank; it is this Government who are getting to grips with copyright and the Intellectual Property Office; and it is this Government who are getting to grips with the heritage issues, to which the noble Baroness referred. This Government are undertaking those important forward steps, although the previous Government had the opportunity.
My noble friend Lord Razzall asked a number of questions, but a key one was asking me to confirm that the cap on unfair dismissal awards will not apply to race and sex discrimination. I can assure the noble Lord that any change that we make to the cap on unfair dismissal compensatory awards will not affect the awards made in respect of any discrimination claim. I hope that deals with a number of issues raised by noble Lords.
I was very grateful to see the noble Lord, Lord Smith of Kelvin, and I wish him every success with the Green Investment Bank, and I thank him for all he is doing to get that initiative off the ground. He will take that over with his management structure. It is important to remember that it will be independent of government.
A number of noble Lords asked about whether the bank should be allowed to borrow. They also asked whether the Green Investment Bank will be a lender of last resort, and I was delighted that the noble Lord, in his excellent speech, said that definitely it will not be a lender of last resort. We in Government very much agree that the bank’s ability to borrow will be critical to its long-term success. That is why the Government are fully committed to providing the bank with the funding that it needs to become an enduring green financial institution. It is also important to recognise that any borrowing by the bank will score against the national debt targets. We have given the commitment that the Government will seek state aid approval in respect of borrowing from the European Commission before the end of this Parliament. The level of bank borrowing will need to be agreed by the Government as it is part of our future spending plans. I hope that deals with that issue for the moment.
My noble friend Lord Tugendhat and the noble Lord, Lord Gavron, make a formidable team and have raised some important issues with which I totally agree. I would like to read out some things about which I wrote to the noble Lord, Lord Gavron, on 8 November, after a very constructive meeting that we had. One of his points was that companies should disclose an audited figure for the total remuneration of each director. I am pleased to say that in future all remuneration reports will have to include a single figure for the total pay awarded to each director and that will be subject to audit. He also asked me the frequency of the new binding vote on remuneration policy. The binding vote on future pay policy will happen annually, unless companies choose to leave their pay policy totally unchanged. I think there will enormous shareholder pressure on companies that continue to leave their policy unchanged.
The noble Lord, Lord Gavron, and my noble friend Lord Tugendhat were concerned to ensure that companies cannot make payments to directors until they have been approved by shareholders. I can confirm that that will be the case under the Government’s proposals. The noble Lord made the point that shareholders should approve the specifics of pay and not just the general policy. The draft regulations which we have published will require companies to set out clearly and succinctly what type of payments directors are entitled to, how pay links to the company’s’ strategies, how performance will be assessed and how that will translate into awards under different scenarios. Even before coming to the House, we sat down and had constructive discussions which I hope noble Lords agree have made fruitful progress.
The noble Baroness, Lady Warwick of Undercliffe, gave a very good speech about orphan works. There is a lot of good stuff in the Bill about that issue.
My noble friend Lord Lester of Herne Hill has been described as the grandfather of human rights. It was interesting that there were cross-party differences on a number of things that the grandfather put forward. I do not for one moment think that the noble Lord is complacent about anything he does. I compliment him on the clear way in which he let the Government know how he felt about some of these issues. Through discussion, we will try to find a way to mitigate his concerns—and indeed the concerns of all noble Lords. However, as I said, I do not want to go into hand-to-hand combat with him or with other noble Lords at this point.
My noble friend Lady Buscombe talked passionately about the creative industries. I have just returned from Hong Kong, and the opening of the great creative campaign. In the past 18 months I travelled with representatives of the creative industries to China and Brazil. The creative industries are absolutely fundamental to the prosperity of this nation. A lot of the work that we in government are doing will support them.
I welcome back the noble Baroness, Lady Campbell of Surbiton; it was a joy to see her again. I am not entirely sure that I welcomed many of her remarks, but that is the fun of the fair. I am so glad to see that the system worked and that she was able to make a very moving and impassioned speech.
The work at English Heritage of the noble Baroness, Lady Andrews, is of the highest quality. We are very grateful for everything that she does. She has offered to correspond on a number of issues. Of course, we will take that correspondence extremely seriously, as she deserves.
I compliment my noble friend Lord Lucas on a marvellously brief speech and thank him for his support for our copyright initiatives. We want more speeches like his—although I am afraid I will have to disabuse any noble Lords who thought that I myself would be making a short one.
I had the pleasure of one-to-one meetings with the noble Lord, Lord Borrie. We discussed many issues that he spoke about today. He asked for reassurance that Citizens Advice and trading standards would be adequately resourced to take on additional consumer functions. This matter was raised by a number of noble Lords. Of course, it is absolutely fundamental that all these things are resourced properly. The Government will give the new National Trading Standards Board £9.7 million this year, with an indicative increase to £11 million next year, to help local trading standards target high-priority enforcement cases for consumers. Citizens Advice will receive £1.5 million of government funding for its consumer education role from April 2013. I look forward to further dialogue with the noble Lord, who is expert on the CMA and related issues. His input will be invaluable.
The noble Lord, Lord Low, was kind enough to give me advance notice of a question that he asked. I reassure him that we do not intend to use Clause 66 to narrow or remove the exceptions for visually impaired people provided by the Copyright (Visually Impaired Persons) Act 2002. The Government recently consulted on whether to widen these exceptions so that they would benefit more disabled people. We will issue our response to the consultation soon. The Government strongly support international negotiations on a treaty of copyright exceptions for visually impaired people, which we hope will be agreed by 2013. The noble Lord referred to the views of the General Counsel of the EHRC, John Wadham, on abolition by stealth. I will counter that with a quotation from Mr Wadham, who stated:
“This Bill reduces our powers and our remit, but not in a way that we are overly concerned about”.
So there.
The noble Baroness, Lady Ford, talked about fairness in the workplace, and about health and safety, which we have already discussed. She is completely right that there should be fairness in the workplace. The Bill does not hamper that; it creates fairness for both sides.
The noble Lord, Lord Bates, referred to the importance of small and medium-sized enterprises. I agree with him totally. The work that he does in the north-east is extremely valuable and we are very grateful for it.
It is difficult to cope with the noble Lord, Lord Clement-Jones, because he does not seem to agree with anything we are putting forward despite the fact that I and my officials have had exhaustive meetings with him over a period of time. He has a great passion for and knowledge of the subject. I have discussed many of these issues with him and we will carry on our discussions. We recognise what he is saying: we do not agree with a great deal of it but there is a way through this. I hope that he will acknowledge that from the discussions we have had so far and look forward to further discussions. I have a feeling that the noble Lord is going to get to his feet.
Lord Clement-Jones
I thank the Minister for that. I know that it is very difficult to deal with the questions raised during the debate, particularly in the area of copyright where a number of technical questions have been raised by myself, the noble Baroness, Lady Buscombe, the noble Lord, Lord Grade, and others. Will he undertake to write in response to some of the questions raised during the course of the debate?
Lord Marland
It is not that I am not prepared to write—I am always prepared to write and to get engaged in dialogue—but there a number of things are happening on the intellectual property front at the moment. I have been made recently the Government Minister responsible for it and I am holding an up-and-down review of the Intellectual Property Office as we speak. I can tell the noble Lord that a number of changes will be made, which I do not want to enunciate now. However, during the progress of the Bill I will be able to help in that regard. I am also sitting on a document about modernising copyright with a modern, robust and flexible framework. It will be my bedside reading today and tomorrow, and Government Ministers will know what a joy that is. It is big enough to fill the Red Box on its own. So, if the noble Lords, Lord Clement-Jones and Lord Grade, and the noble Baroness, Lady Buscombe, will allow me, I will deal with this in Committee. During the process I will be happy to engage in one-to-one conversations with them as it happens.
I have enjoyed greatly working in the past with the noble Lord, Lord Whitty. I am not sure I am going to enjoy the “The Good, the Bad and the Ugly”, although it is quite a good film. So far the noble Lord has always fitted in the good category as far as I am concerned and I hope he is not moving into the bad or ugly bit. I am sure he will not.
I congratulate the noble Lord, Lord Currie of Marylebone, on his important new role and on his excellent speech, which set out, in a way that I could not possible have done, the excellent work that the CMA will do. As my noble friend Lord Eccles said, it is one thing to have an inspiration to merge things but, in practical terms, it is a big task to achieve to achieve it. However, in my view, it could fall to no greater man.
The noble Lord, Lord Clinton-Davis, will be a challenge because there are many things that he does not agree with.
A number of noble Lords referred to the report by the noble Lord, Lord Young of Graffham, Common Sense. Common Safety, and the report by Professor Löfstedt, Reclaiming Health and Safety for All. We are taking on board many of the matters they have written about and produced evidence for. A great deal emerges from that and no doubt we will debate these issues more aggressively in the coming months.
The noble Baroness, Lady Dean of Thornton-le-Fylde, asked a number of important questions, but perhaps I may respond to only one of them in the time that I have available. She said that the change to the public interest test on whistle-blowing will make employees think twice about whether they should blow the whistle. We disagree with that. Where the employee has a reasonable belief that disclosure is in the public interest they will be protected. It is not a difficult evidential hurdle to satisfy. I hope that that deals with some of the points, but obviously a number have been raised.
I am grateful for the support of my noble friend Lord Teverson on the Green Investment Bank. The noble Lord, Lord MacKenzie of Culkein, quite rightly said that whistleblowing takes courage. It most certainly does, and none of what we are trying to do here seeks to prevent it. We are trying to allow people to have the courage to do it, and I think that his were wise and bold words which we agree with. The noble Lord, Lord Touhig, talked about the public interest test. It is absolutely fundamental that we get this right in the debate.
I have only two minutes to speak so I shall be very quick. The noble Lord, Lord McKenzie of Luton, shares a commonality of theme with the noble Lord, Lord Ouseley. I have referred to some of the points made by the noble Lord, Lord Mitchell, in what I thought was an excellent and balanced speech. The noble Lord, Lord Morris of Handsworth, has clearly shown a long-term interest in the rights of workers, and as I said earlier, this is all part of trying to have the rights of workers protected. I am grateful to my noble friend Lord Sheikh for mentioning sunset clauses. I am also grateful to the noble Lord, Lord Monks and my noble friend Lady Brinton for their comments about ACAS resources. It is absolutely fundamental that ACAS is properly resourced and there is a Government commitment that it will be. It is a fine service and I am glad that everyone thinks so. We will do all we can to make sure that that happens. Questions were put about Heseltine, but the Government’s response will not be ready until a bit later so I will not deal with it now. The noble Baroness, Lady Turner of Camden, again feels strongly about certain employment issues, and I look forward to her debate. I am also grateful to the noble Lord, Lord Mawson, for his view on the Green Investment Bank.
There were a number of questions about the Equality and Human Rights Commission. It is absolutely fundamental that it should retain its A-grade status and the Government are committed to that. However, it is quite difficult when an organisation does not fulfil its audit commitments and does not manage its finances as well as it should. The commission is in the position it is not as a result of government interference, but through the organisation itself. I think that under the leadership of the noble Baroness, Lady O’Neill, it will be in a very good place.
I thank all noble Lords for their contributions. This House is marvellous at revising and improving things. I know that because I have already taken a Bill through it. In the past it has been a pleasure to co-operate with noble Lords. I hope that I am thought of as a reasonable man to create a dialogue with. I am prepared to listen and we are prepared to have discussions as this complicated and complex Bill with its wide-ranging bandwidth goes through the Lords. I am looking forward to the Committee stage. I respect the views of everyone in this Chamber, as is only right. My door will always be open, as will that of my officials, to listen and provide as much information as possible.