Business Contract Terms (Assignment of Receivables) Regulations 2018

Baroness Burt of Solihull Excerpts

Wednesday 17th October 2018 Grand Committee

[Baroness Burt of Solihull (LD)]

My Lords, these regulations address a problem that I did not know existed. The colloquial expression for “assignment of receivables” is factoring, and that is what I know it as. Why would companies build these terms into contracts, with the exceptions permitting, unless there was a question mark about their payment? I will be interested to hear the Minister’s comments about that. It seems unjustified. I understand the importance of being able to get hold of money for your contract early on, but if companies paid in a more timely way, factoring would perhaps not be necessary. Those are just a couple of comments, but I wholeheartedly welcome the regulations.

Will the Minister explain paragraph 10.13 in the Explanatory Memorandum? It is headed “Additional Exclusion”. It states that contracting parties need to be certain that they are dealing with each other rather than an assignee. Does the Minister understand that to mean subcontracting? If he does not, are there other examples of what could be meant by that? Other than that question, I welcome this legislation.

[Lord McNicol of West Kilbride (Lab)]

I am grateful to the Minister for the introduction to this SI. This is my sixth week in your Lordships’ House and it is a pleasure to be speaking on my first SI. If I make any procedural or other errors, please forgive me. I am still learning and have a long way to go.

Invoice financing as set out in paragraph 7 of the Explanatory Memorandum is one way of securing working capital. More simply, it is the ability to borrow money against unpaid invoices to improve cash flow. We on this side agree that invoice financing has its place, but it is not always the solution to the problem. When laying these regulations, Her Majesty’s Government have missed a great opportunity to sort out the wider issue, which the Minister touched on, around payment culture. The recent consultation on prompt payment received some very good responses on the wider issue of late payment which simply must be addressed soon. In excess of £2 billion a year is owed to SMEs in late payments—payments past the agreed invoice payment date. Does the Minister agree that this is a far larger and more easily solvable problem?

I was general secretary of the Labour Party before coming here. The Labour Party led on this by example and had 30-day payment terms. More widely, there is the absurdity of having a voluntary prompt payment code. Many large firms are signatories but there is no enforcement, so in real terms the code is worthless, especially as many companies have 60-day terms.

What if a company breaches those terms? Let us not forget that Carillion was a signatory but then went on and changed its payment terms to 120 days. Does the Minister agree with me that a sensible term for the code, even in its voluntary state, would be 30 days? Why has the prompt payment code not been made compulsory? Why has consideration not even been given to making it so? These reforms would help to solve the problem that IF looks to solve.

The correspondence with the Secondary Legislation Scrutiny Committee touched on the question of implementation dates. I note the Government’s response supporting the status quo, but do they still believe that there is any point in having common commencement dates? The CCDs of 1 October and 6 April each year are introduced to help businesses to plan for new regulations and increase awareness of the introduction of new or changed requirements, yet these regulations are to be introduced 21 days after they are passed. As the correspondence with the Secondary Legislation Scrutiny Committee reveals, it is not as if there has been a great rush to get these regulations in. As we can see from the Explanatory Memorandum, the first discussion paper was published in 2013, so I am sure that another few months’ delay to ensure better regulation would not have hurt.

I congratulate the Business, Energy and Industrial Strategy team on their detailed and helpful work on the impact assessment and the Explanatory Memorandum. Having said that, I think the committee has done a brilliant job of sorting out the documents before us and holding the Government to account for a certain amount of confusion. It might have taken time, but I believe it would have been better if the Government had issued new documentation following the consultation. As the Minister said, substantial amendments to the regulations were made, so was the impact assessment carried out after they were made or before, in 2013?

I turn to the substance of the regulation. Could the Minister satisfy me that no problems or unintended consequences of these regulations may arise in the accounting treatment following the introduction of these regulations? I am thinking particularly of when income from invoice financing is to be recognised in the accounts of a trading company when that is not done through factoring. If the Minister is unable to give me a direct answer today, I am more than happy for him to write to me.

Paragraph 7.4 of the Explanatory Memorandum states that this regulation will help diversify finance markets and encourage competition. Could the Minister expand a little on how exactly that will happen? The bit that confuses me is the exclusion of large companies from IF. Could the Minister explain why they have been excluded, especially as paragraph 10.7 of the Explanatory Memorandum, as he touched on earlier, outlines the problem with large commercial contracts, not large commercial companies or businesses per se? Paragraph 10.8 then outlines the solution of banning large companies from IF. This appears to be a completely different answer to a completely different question. Maybe the Minister could explain what the persuasive arguments by the legal profession were and how these led the Government to exclude large companies from IF.

In the Explanatory Memorandum, under the heading “Territorial Extent”, the paragraph following Paragraph 10.14 is labelled 10.1. I think that this is just a typographical mistake but it should be picked up on. The serious point here is that the regulations appear to interact with powers devolved to the Scottish Parliament. Is that right? If so, did the Government consider seeking a legislative consent Motion? If not, why not?

As I said at the start, the Opposition will not oppose these regulations on invoice financing, but it is a shame that the Government missed the opportunity to bring forward legislation to improve invoice payment practices within these regulations.

Prompt Payment Code

Baroness Burt of Solihull Excerpts

Thursday 10th May 2018 Lords Chamber

Asked by

[Baroness Burt of Solihull]

To ask Her Majesty’s Government what is their assessment of the effectiveness of the Prompt Payment Code.

[Baroness Burt of Solihull (LD)]

My Lords, I am very grateful for the opportunity to raise this issue, which is arguably the biggest threat to small and larger businesses’ ability to thrive in the UK today: late payment. I thank the SEC Group, the FSB and the AAT for their extremely useful briefings.

Much has been said about the demise of Carillion, but many noble Lords may not be aware that Carillion was signed up to the prompt payment code. The code is a voluntary code of practice run by the Chartered Institute of Credit Management with the backing of the Department for Business, Energy and Industrial Strategy. Members promise to pay their suppliers on time, give clear guidance to suppliers and encourage good practice in their supply chains. These members undertake to pay their suppliers within 60 days and work towards adopting 30 days as the norm. Nevertheless, Carillion, like many other companies, was using money belonging to its suppliers to shore up its own cash flow.

There are plenty of ways in which the big suppliers exploit their supply chain today. Long payment periods are, of course, the obvious one; there are others that I do not have time to include here. During 2017, Carillion’s average payment delay was 43 days, and 5% of its contracts took 120 days to be paid. Its collapse left 30,000 small firms unpaid, with creditors only expected to cover less than 7p of every pound that they spent. Most suppliers to Carillion were not insured against it collapsing, and insurers are expected to pay out only about 3% of the total losses.

Why has the prompt payment code not solved some of these issues? Because it is a voluntary code of practice, it has largely failed to protect supply chains from late payment; it needs to be given more teeth. The AAT comments that the code has been undermined by the fact that the signatories to the code basically fall into two categories: those who already took this issue seriously and those who believe that, as it is voluntary, it does not have to be taken seriously. Carillion falls into the second of those categories.

The situation with public sector contracts, through which suppliers are contractually obliged under the Public Contract Regulations 2015, is quite dire. Under these regulations public bodies have a statutory duty to ensure that all subcontracts and sub-subcontracts contain 30-day payment clauses. Needless to say, Carillion did not have these clauses in its contracts and, as far as I know, no one picked it up on it. Unfortunately there is no effective enforcement mechanism under which to complain, except for the anonymous mystery shopper scheme. Even anonymously, in construction most will not complain because of the climate of fear existing in the industry.

However, there is a ray of hope in the form of payment practice reporting. From this April, large businesses must provide details every six months of their standard payment terms, how they resolve payment disputes and the percentage of payments they make within 30 and 60 days. It is naming and shaming and shines the harsh light of reality on what has been going on below the surface for many years. Of those businesses that reported in December 2017, before the statutory requirement to report came into force, only 52% of invoices were paid within 30 days; and nine of the 10 largest companies that reported their practices paid fewer than 10% of their invoices on time. Reporting is beginning to reveal the scale of the problem but we wait to see whether businesses will change their practices as a result of being shamed.

Tangential to the code, but nevertheless crucial, is the issue of retentions. These can be withheld from construction companies for many years and can often get caught up in insolvencies further up the supply chain. It is estimated that Carillion owed about £800 million in retentions alone. The Government have held a consultation on retentions and we look forward to receiving their conclusions—soon, I hope. Perhaps the Minister could indicate how soon.

A practical and realistic option has been presented in Peter Aldous’s Private Member’s Bill, which receives its Second Reading on 15 June. It seeks that when a cash retention is used it should be ring-fenced within a deposit scheme. This will protect it from insolvencies and incorporate a standard payment process, ensuring no unnecessary delays or time-consuming chasing. The Construction (Retention Deposit Schemes) Bill is supported by 120 cross-party MPs and over 350,000 companies. Could the Minister indicate whether the Government are minded to support it?

I recommend to the Minister a number of options that can deter large companies from paying their subcontractors late and protect small businesses when large contractors fail. First, the Government must be prepared to enforce the Public Contract Regulations so that recipients of major government contracts pay their suppliers within 30 days. I welcome the news last month that the Government will exclude suppliers from major government contracts if they cannot demonstrate fair and effective payment practices with their suppliers. However, we have yet to see the detail and I would appreciate the Minister providing more detail on how this will work, either in his response or in writing.

Subcontractors need to have the confidence to speak out, so I welcome the Government’s announcement that they will have greater access to buying authorities to report poor payment performance.

My second recommendation is that the Government should either accept Peter Aldous’s Private Member’s Bill or introduce something similar on retentions.

Thirdly—and, for the construction industry, arguably most importantly—project bank accounts should be introduced for all public sector construction projects over, say, £2 million, which is already the case for Northern Ireland, Scotland and Wales. PBAs could be used to ensure that payments are made within 30 days by holding the funds in a central, ring-fenced bank account. Highways England uses them, and third-tier subcontractors are paid within 18 days of the evaluation of the work under the main contract. No more Carillions would then be able to exploit their supply chain, using their money and pushing them over the financial edge into liquidation.

Finally, the Government should consider how to give the prompt payment code more teeth. Perhaps all listed companies, or those with turnover over a certain amount, could be required to sign up to the prompt payment code. It could levy fines for poor compliance, which could be used to fund its administration and support subcontractors in distress.

Getting paid fairly and on time will always be an issue for some companies, but these four measures combined would make a significant impact on poor payment practices, which would provide a legacy of which this Government could be proud.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, I am grateful to the noble Baroness, Lady Burt, for securing this debate and for all the expertise and advice that has come from all other noble Lords who have spoken in it. I think particularly of the noble Lord, Lord Palmer of Childs Hill, and his account of some of the bullying practices used by some of the larger clients. I heard his desire that we should be not just naming and shaming but actively broadcasting the behaviour of some payers. These matters can certainly all be taken into account in the various consultations and decisions that we have to make in the future. As I said, I am grateful to all noble Lords for speaking, but I am sorry that we have lost my noble friend Lord Cope, who felt that he must be dragged away for another debate. I well understand that it was right that he should not speak if he was speaking in another debate.

As I hope to set out, we are actively taking steps to make the United Kingdom’s payment culture fairer while simultaneously providing a base of support for all our small and medium-sized businesses, which are the backbone of our economy. It is right that I should start with remarks about the Prompt Payment Code, the voluntary attempt by which the Government started the process of trying to ensure that companies should lead by example in paying their suppliers promptly and fairly. I am a great believer, as the Government are, in always trying a voluntary approach as a first step. We should not make a point of rushing into legislation but there are occasions, and enough examples have been given to me by all noble Lords in this debate, where the behaviour of certain companies—that of Carillion has been highlighted—leads us to a view that further action possibly needs to be taken. That will be considered and I hope I can set out just how we are going to consider all that.

However, I certainly take on board, for example, everything that the noble Lord, Lord Mendelsohn, said about these matters and what we ought to do in this field. I will certainly look at his Bill when he introduces it in due course; I cannot comment on it in advance of that, just as I would not want to comment in advance on what our attitude is to my honourable friend Mr Peter Aldous’s Bill. But any measure that is introduced to address the unjustified late payment or non-payment of retentions needs to be simple, consistent and transparent. It is premature to commit on those things but we will consider them in due course, as we will consider all the points that noble Lords have made.

I am grateful to the noble Baroness, Lady Burt, for highlighting the fact that there was Carillion. I rather expected that she would raise it and that if she did not, the next speaker would—and if not the next, then another. In fact, I think that nearly every speaker raised it.

[Baroness Burt of Solihull]

I am conscious of the fact that I talked quite a lot about Carillion. I restrained myself from naming and shaming any companies that are currently working still but there are plenty more that could have come under the aegis of this debate.

[Lord Henley]

The noble Baroness knows that she has considerable freedoms in what she can say in this House because of the various protections that she has. Perhaps she ought to take advice from her noble friend Lord Palmer of Childs Hill about not necessarily naming and shaming but broadcasting these points. I merely make that offer to her. My point was that I was pretty sure that Carillion would be mentioned because when one has a code of this sort, it is rather embarrassing that a large company which the Government have made use of, even if it no longer exists, quite obviously signed up to that code without—I will be polite—thinking about the consequences of what it had signed up to.

The fact is that we have a code and it performs a function. We should think about that function and not necessarily completely dismiss it as it is. We know that signatories to that code must pay 95% of invoices within 60 days, in all but exceptional circumstances, and work towards 30-day payment terms as the norm.

In recent years we have strengthened that code and all the Government’s strategic suppliers have signed up to it, as well as some of the UK’s largest businesses. That represents the 2,000 signatories that the noble Lord mentioned; as I understand it, that includes most of those that the Government deal with. This is an important step in moving towards a gold standard across the largest businesses in the United Kingdom, and I hope it will assist us in getting into the position that the noble Lord, Lord Aberdare, talked about, in being in a better state than other countries. If a business believes a signatory is not complying with the code it can challenge its status, and the compliance board will take that into account. I think that I have dealt with the point that the noble Baroness made about Carillion.

The Chartered Institute of Credit Management, which administers the code on behalf of the department, works with all the signatories and challengers to recover payment debt and educate businesses of all sizes on the importance of good credit management and a positive payment culture. The principles of the code are effective only if taken seriously both by signatories and by the suppliers of signatories, which is why we are now exploring how the code can be strengthened and enforced. The noble Lord, Lord Stevenson, and others were looking for more teeth. That is why we will be inviting views on this, as well as on wider payment matters, within the forthcoming call for evidence on unfair payment practices. The code is an important tool for setting best practice, but it is just one of the measures that the Government are using to promote fair payment.

In April last year we introduced a statutory duty for the UK’s largest businesses to report on their payment practices, policies and performance so as to increase transparency and provide small business suppliers with better information about those they intend to trade with. So far some 1,500 reports have been submitted on GOV.UK, and can be accessed easily by the public. Small business suppliers, journalists, academics and others can use that data to compare and contrast, and to hold large businesses to account for their payment practices.

As the noble Baroness and the noble Lord, Lord Aberdare, will be aware, we launched the Small Business Commissioner in December last year, following the appointment of Paul Uppal in October. I realise that the noble Lord, Lord Mendelsohn, had a debate on this subject in January, and I think I am right in saying that he has visited Paul Uppal and discussed these matters. Mr Uppal has an important role in supporting small businesses to resolve payment disputes with larger businesses, providing advice, and helping to bring about a culture change in payment practices and how businesses deal with each other.

The commissioner considers complaints by small businesses against their larger clients, but we also encourage businesses to report poor payment practice and cases of late payment in public sector contracts, including late payment through the supply chain, to the Cabinet Office’s mystery shopper service to investigate. I think that it was the noble Lord, Lord Aberdare, who referred to that. That service provides a further route for suppliers to raise concerns about public sector procurement issues, including payments. It works closely with all public sector contracting authorities to broker a resolution to cases, and makes recommendations to improve procurement. I can assure the noble Lord that the mystery shopper service has handled some 1,300 cases since it was established in 2011, and is widely used by small businesses.

The Government are alert to the specific difficulties, particularly in certain sectors: construction has been named. In October last year my department published two consultations on payment practices within the construction sector. We are actively considering the responses and options for future policy. We are also consulting on how we should exclude suppliers from major government procurements if they cannot demonstrate fair and effective payment practices with their subcontractors. The consultation, to which I believe the noble Baroness, Lady Burt, referred, will close early next month, on 5 June. The noble Baroness asked in her usual optimistic manner when we would respond to it, and I will give the usual response: we will respond shortly. I want to make it clear that we will consider the responses very carefully, and will respond in due course.

We believe that the voluntary approach is a good one, but sometimes it does not work as it should. The recent collapse of Carillion has shown there is still more that needs to be done to protect small businesses. It is with this in mind that a call for evidence is being launched by my department on how we can eliminate the continuing problem of unfair payment. The call for evidence will build on the Government’s existing late payment policies to drive an end to all the unfair payment practices that the noble Lord, Lord Palmer, highlighted when he talked about invoices and cheques being “in the post”, or getting lost in the post, or whatever.

All the steps I am announcing amount to a package of measures that will ultimately strengthen, as we need to, support for small and medium-sized enterprises. It is important, as we all agree, to do what we can to enable them to grow and create jobs by providing an environment in which they can flourish. I am grateful, as are the Government, for all the suggestions from those who have taken part in this short debate. Those suggestions too will be fed into the process. I hope that I have answered all the questions—or at least, I cannot answer them all, because these are matters that need to be considered. What I can say is that we accept that the voluntary approach is the right one to pursue, but it does not always get quite as far as it might, and there may be occasions when we have to look into taking things further in the future. I hope that that deals with all the points that have been made, so I will end my speech.

Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2018

Baroness Burt of Solihull Excerpts

Tuesday 1st May 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, these changes will extend the Government’s powers to intervene in mergers that might give rise to national security implications. The powers to make this secondary legislation are found in the Enterprise Act 2002.

The changes contained in the instrument will amend the share of supply test to allow the scrutiny of more mergers in three areas of the economy: military and dual-use technologies, and two parts of the advanced technology sector encompassing computing hardware and quantum technologies. Subject to parliamentary approval for this affirmative procedure statutory instrument, a second negative procedure statutory instrument will be laid to amend the turnover test to allow the scrutiny of more mergers in the same three areas of the economy.

Before I explain the changes in detail, I will say a few background words about the Government’s position relating to national security and mergers. The United Kingdom economy is open to the world. Core to our economic approach is to trade with and invest in other countries, and to welcome foreign investment into our economy. To facilitate this open economy, our framework of laws and policies on protecting national security and on the conduct of mergers must be continuously reviewed and updated. This tradition of periodic refinement has enabled the United Kingdom to remain a place where people can invest with confidence.

The Enterprise Act 2002 is the key legal means for the Government to examine mergers for the purposes of national security and other specified public interest criteria. In the light of technological advancements, economic developments and changes in the national security threat, it is now time for reform. Last year we set out a two-stage approach, beginning with action through this instrument and the proposed related instrument amending the turnover test.

I will briefly expand on the amendments. The changes made by this order and the proposed order amending the turnover threshold relate to mergers involving businesses active in three areas of the economy. First, the instrument covers businesses that produce military and dual-use technologies. Military technology includes such items as arms, and military and paramilitary equipment, while dual-use technology could have both military and civilian uses. These items can pose clear and immediate risks to the United Kingdom, our people and society. Furthermore, the acquisition of items that provide the UK with its military advantage can raise significant national security concerns. The instrument ensures that businesses involved in the development or production of goods that form parts of the UK’s export control regime will be in scope.

Secondly, the instrument addresses the risks created through advances in computing hardware, which now mean there are ubiquitous goods with the potential to be directed remotely should a hostile actor obtain access or control. Thirdly, it will bring quantum technology within scope. The huge technological potential offered by this area also presents national security challenges.

As a result of the changes made by the instrument, the Government will be able to intervene if the target business in a merger has a share of supply of at least 25% before the merger. The acquiring party will not need to have any share of the supply of the same goods or services for the test to be met.

We are making these changes because we are concerned about possible scenarios whereby a business with no existing share of supply in the UK buys a business in one of these three areas of the economy. Such a merger would not result in an increase in the share of supply in the UK and, therefore, the current share of supply test set out under the Enterprise Act would not be met. The changes will apply only to the areas of the economy that I have set out.

The amendments made by the second, negative statutory instrument will mean that the Government are able to intervene in a merger if the target firm or business being taken over has a UK turnover of more than £1 million, rather than the Act’s current £70 million threshold, in the same three areas of the economy covered by the first instrument. Microbusinesses are excluded from the scope of the revised thresholds, ensuring that the Government take as proportionate and focused an approach as possible to delivering our policy intention.

We have incorporated the constructive feedback from our consultation last October into the substance of these reforms. We have published an impact assessment and guidance to provide greater clarity to businesses and investors.

We will continue to assess risks in other sectors. If there is evidence to suggest that the Government should take action in additional areas of the economy, they will bring forward further legislation. In the longer term, the Government will bring forward primary legislation to make more substantive changes to how they scrutinise national security implications of foreign investment. We consulted on the proposals and are analysing the responses. A White Paper will follow in due course. I commend the order to the House.

[Baroness Burt of Solihull (LD)]

My Lords, as the Minister said, the United Kingdom prides itself on having an open economy—open to trade and open to takeover and mergers, in the UK as well as overseas.

However, in some areas, mergers may be open to threats to our national security in the fields referred to in this order of dual-use military technologies, computing hardware and quantum-based technology. Examples of such threats might be espionage, disruptive or destructive actions, or exploiting investment as inappropriate leverage in other negotiations. I therefore understand why the Government might want to strengthen their powers to scrutinise mergers and takeovers which fall into these areas.

However, I hope that the Minister will forgive me if I express a few concerns, and a number of questions are worth putting to him. First, some of the responses to the Government’s consultation were quite hostile. Why did the Government reject the opinion of several legal firms that the proposals were “inappropriate” or “disproportionate”? Why is the special public interest regime, meant to deal with mergers below the £70 million threshold, considered inadequate? Why have the Government decided on these three sectors specifically? Why does the order not cover other sectors that could have national security implications?

While the Government are not doing it at present, we need to be wary of significantly expanding the national security grounds for intervention because they could be used spuriously, as we see President Trump doing. We need to ensure that Parliament can keep the Government accountable for this power. We are currently far from the situation that exists in the USA, with President Trump using national security concerns spuriously to protect US economic interests, but will the Minister commit to coming to this House regularly, as the Secretary of State has done in connection with GKN, so that Parliament can hold the Executive to account for how these powers are used? In addition, we have been calling for a public interest test that could widen the grounds for ministerial intervention. However, this is controlled at EU level so would require EU agreement or would need to be done post Brexit. Does the Minister agree that the grounds for ministerial intervention in corporate takeovers, particularly by foreign companies, need to be expanded? For example, would he be prepared to work with the EU to consider the case for intervention in mergers to ensure that the UK’s research and innovation capacity is not restricted? I look forward to hearing what he has to say.

Brexit: Employment Protection for Women

Baroness Burt of Solihull Excerpts

Thursday 8th March 2018 Lords Chamber

[Lord Henley]

My noble friend makes a very good point. There was an intervention in the debate on Monday from the noble Baroness, Lady Crawley, when she asked exactly this point about why we could not meet European standards and so on. She ended up by citing me and saying that I had replied,

“that the Government would take note of what the EU does in the future but that the whole point of Brexit was that we could make our own decisions”.

She went on to say:

“That is exactly what many of us are extremely concerned about”.—[Official Report, 5/3/18; col. 949.]


But as my noble friend has made clear, it is a matter for the United Kingdom Government and for the United Kingdom Parliament to decide these matters in the future.

[Baroness Burt of Solihull (LD)]

My Lords, we have listened with varying degrees of patience to the Government’s assurances that they have no intention of diminishing the rights of women post Brexit. I understand what the Minister says with regard to our current level of provision. Nevertheless, the Government have built a get-out-of-jail—through the back door and without primary legislation—Henry VIII card into the EU (Withdrawal) Bill. Will the Minister guarantee that such power, should it ever pass in your Lordships’ House, will never be used to diminish the hard-won rights of women either in EU legislation or elsewhere?

[Lord Henley]

Surely the noble Baroness accepts my right honourable friend’s statement that we will continue to maintain rights. Thereafter, it will be a matter for the United Kingdom, and for the United Kingdom alone, to decide on these matters. That is what we are going to do. Surely, the noble Baroness accepts that that is far better than these matters being decided elsewhere.

Small Businesses: Retention

Baroness Burt of Solihull Excerpts

Wednesday 21st February 2018 Lords Chamber

[Lord Henley]

My Lords, I am not going to comment on the first part of my noble friend’s question as that is obviously a matter for the official receiver and the legal authorities more generally. On his more general points about retention moneys, we believe they have negative impacts. We want to consider the right way forward, and will then take action.

[Baroness Burt of Solihull (LD)]

Retention has been described by the Federation of Small Businesses as a total scam. Now industry is coming together to abolish retention, to have project bank accounts to manage large procurement projects, and to remove the incentives for late payments and bad cash-flow practices by the Carillions of this world. I understand what the Minister said about considering the consultation, but will the Government join in and implement project bank accounts for large government projects?

[Lord Henley]

Again, my Lords, I am not going to make promises at this stage about what we will do because, as I made clear, we want to consider the consultation. We have also made clear that we recognise that retention, which is common in the construction industry, can have negative impacts. That is why we set up the Small Business Commissioner to assist on late payments. As the noble Baroness will be aware, we had a debate on that matter only the other day. Things are happening. Things will continue to happen. We will continue to look at that consultation and we will then take action.

Small Business Commissioner

Baroness Burt of Solihull Excerpts

Monday 22nd January 2018 Lords Chamber

[Baroness Burt of Solihull (LD)]

My Lords, we have had a good and knowledgeable debate. I, too, congratulate the noble Lord, Lord Mendelsohn, on securing the debate tonight.

Our Small Business Commissioner starts at a difficult time. This debate takes place on the day when Jaguar Land Rover has announced that it will reduce some of its production at Halewood, blaming, among other things, the increasing uncertainty we face with Brexit. A number of noble Lords talked about Carillion, to which the Government gave contracts despite its terrible reputation. I know that Paul Uppal, the ex-MP for Wolverhampton, would know Carillion well, because it operates in that area. Unfortunately, this fact bolstered confidence among small businesses to trade, and, sadly, they suffered arguably the most.

The noble Lord, Lord Cope, mentioned that Carillion eased its cash flow on the backs of small business, and the Federation of Small Businesses has reminded us that a third of payments to small businesses are late. According to the federation, this has been unchanged since 2011.

We see poor payment practices such as supply-chain bullying, retrospectively changing payment times without notice, querying payment on the very last day, so that the payer has another full period before they need to pay up, and long pay periods. Today I heard a new one: when a supplier queried non-payment, the company said, “It’s 90 working days, not calendar days”.

My noble friend Lady Maddock talked about the plight of small builders. I very much appreciated her constructive—if your Lordships will pardon the pun—suggestions, such as, for example, breaking contracts down, and other useful ideas. She also talked about the importance of small businesses being at the very heart of our communities. What would they be without small businesses?

The noble Lord, Lord Rock—or is it the noble Baroness, Lady Rock?

[Lord Taylor of Holbeach (Con)]

Lady Rock.

[Baroness Burt of Solihull]

I am so sorry. My sincere apologies—I am blushing. The noble Baroness talked about finance and other initiatives, and about female-led businesses. I would add the importance of diverse businesses generally, which look like the communities they serve. I totally agree with her on the importance of getting talent and the assiduous use of the visa system to ensure that where we do not have the talent to hand in this country, we do not cut off our noses to spite our faces by not importing it.

The noble Lord, Lord Popat, talked about the obstacles and how poorly our performance compares with other countries in the EU. He told us all about Africa and some of the opportunities that exist for us outside Brexit. He is absolutely right; we must get out there and use the talent that we have. The Government are clearly already employing diverse talent, in the form of the noble Lord himself, to go out there and talk to African companies. He also talked about regulation and the one-in, two-out mantra. Let me say to him: be careful what you wish for because one in, two out is more difficult than it looks. The vast majority of regulation is put there for a purpose and, very often, it is for the protection of business.

It is not all gloom and doom. I would like to mention the late payment Act, as another noble Lord did, and the ability to charge interest on late payments. However, so many small businesses are too reticent to do that because of the potential loss of good will and future business. The Prompt Payment Code was mentioned, which is very good as far as it goes, but because it is voluntary it tends to be only the more conscientious companies signing up to it. However, the new duty to report introduced in October 2017 on payment practices and performance will make a difference. One big construction company that I spoke to today said that it had caused that company to look carefully at its payment practices, a lot of which were down to systems and not to a deliberate desire to delay. The company is fundamentally changing the way it conducts its payment systems.

The noble Lord, Lord Cope, reminded us that this provision applies only to the private sector. Yes, I think the Small Business Commissioner probably has enough to cope with in the private sector, without having to try to take on what happens in the public sector, which aspires to have commendable payment periods but falls down in some departments.

I very much welcome Paul Uppal to the role of the Small Business Commissioner. I knew him when I was a Member of Parliament in the other place but he needs a great deal of support. One really good aspect is the fact that he will not divulge the name of a complainant, except with the specific permission of the complainer. That will very much strengthen his hand. In our debate last year the noble Lord, Lord Mendelsohn, talked about the commissioner’s operating costs being only £1.4 million. He queried how far that would go in terms of the commissioner’s ability and efficiency in the face of tackling a huge problem. Will the commissioner have enough leverage to make a difference?

The Small Business Commissioner’s job seems a little restricted, a point I think the noble Lord, Lord Mendelsohn, made. Yes, he is handling complaints but he is potentially in quite a powerful position. I hope he will use that position to promote changes and recommendations to government policy—and make a big noise, because small business in this country has never needed a Small Business Commissioner more than it does today.

Brexit: Women in the Workplace

Baroness Burt of Solihull Excerpts

Tuesday 16th January 2018 Lords Chamber

[Lord Henley]

My Lords, I am aware of Professor Minford’s report and I have taken note of it. But the important point in relation to this Question is what the United Kingdom Parliament can do, and the important point to remember is that these will be matters for the United Kingdom Parliament and Government to decide.

[Baroness Burt of Solihull (LD)]

My Lords, I was very glad to hear the Minister say that the Government will not roll back EU rights for women in the workplace. This year the European Commission introduced proposals for a directive on work/life balance for parents and carers, which would provide for four months’ paid non-transferable leave for fathers. Will Her Majesty’s Government commit to keeping pace with the EU regarding equality and employment rights, including this directive?

Parental Leave: Statutory Pay

Baroness Burt of Solihull Excerpts

Tuesday 9th January 2018 Lords Chamber

Asked by

[Baroness Burt of Solihull]

To ask Her Majesty’s Government what plans they have to equalise statutory pay received for shared parental leave by people of any gender.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, shared parental leave and pay are provided to enable working couples to share childcare responsibility in the first year. The scheme was introduced by the coalition Government for the parents of children who are due or placed for adoption from April 2015. We will evaluate its effectiveness this year.

[Baroness Burt of Solihull (LD)]

I am grateful to the Minister for that Answer. The shared parental leave rights, which were introduced under the coalition Government, as the Minister says, allow fathers to switch childcare duties with the mother during that first year. However, fathers get the basic maternity pay but, with only a few notable exceptions, not the enhanced maternity pay that the mother is entitled to. Unsurprisingly, take-up by fathers has been less than 1%. Will the Minister have a look at this, especially in light of the court case, Snell v Network Rail? Dads are being discriminated against, and they deserve equal rights too.

[Lord Henley]

My Lords, in the main, the pay and leave are both set at the same rate. Obviously, mothers get a slightly higher rate in that they are in receipt of statutory maternity pay for the first six weeks at that higher rate. Understandably, fathers, not being mothers, are not eligible for that SMP. But other than that, the leave and the pay are equal for all. As I said, we will evaluate the scheme later this year and come to conclusions. As regards the take-up rate, we are not entirely sure exactly what it is but we think it is broadly in line with the estimates that were made at the time of its introduction.

Businesses: Start-ups

Baroness Burt of Solihull Excerpts

Monday 20th November 2017 Lords Chamber

[Lord Henley]

My Lords, I was not aware of those figures but if the noble Baroness is correct, they obviously give us some concern. It is not for the Government to create new businesses—as I said earlier, it is for the Government to create the right environment in which businesses can start up. However, if 93% of them seem to be male led, we should look at that to see what is happening and whether, in creating the right environment, there is anything that the Government can do to make sure that women feel they have an opportunity to create their own businesses.

[Baroness Burt of Solihull (LD)]

I endorse the comments of the noble Lord, Lord Campbell-Savours. Many of these start-ups represent self-employed people using contractor payroll and virtual office solutions. The FSB says that small business confidence has plummeted since the Brexit vote, with rising inflation and a weakening domestic economy. Therefore, if the Government want to help businesses, large and small, will they provide some certainty on where Britain is headed—remaining in the single market or going over a hard Brexit cliff?

[Lord Henley]

Again—dare I say it?—I think that the noble Baroness is being overcynical. All the figures, from wherever they are taken, show the same trend—that business start-ups are at an historic high. Perhaps not all of those businesses will go on to flourish, but the trend is in the right direction and I think that the noble Baroness ought to welcome that.

Race in the Workplace: The McGregor-Smith Review

Baroness Burt of Solihull Excerpts

Monday 24th April 2017 Lords Chamber

[Baroness Burt of Solihull (LD)]

My Lords, I add my congratulations to the noble Baroness, Lady McGregor-Smith, on her excellent report. It is full of wisdom and practical recommendations to change the culture and practice of encouraging diversity and inclusion in British business. It is a shame that the Government have refused to accept the necessity of a strong steer in implementing the recommendations. As the report says:

“Daylight is the best disinfectant”.


It recommends that companies with 50 or more employees should report annually on the ethnicity of their workplace by salary band and produce aspirational targets every five years. I was quite shocked by the figures on ethnic representation in the workforce—the loss of energy and talent, which, if properly harnessed, could increase Britain’s GDP by £32 billion a year.

You would think that there should be no need to legislate and that businesses would see the wisdom of encouraging diversity within their workforce. That certainly seems to be the Government’s point of view. However, just as with women on boards, and just as with the wage gap between men and women, it sometimes takes more than common sense for companies to act in their own best interests. It took a threat such as that made by Business Secretary Vince Cable in the previous Government about the underrepresentation of women on boards, and it took legislation to tackle the inequality of women’s pay, but the strongest language used in the Government’s response to this excellent report is “encourage”. “Encourage” means nothing, especially if you do not even realise you are discouraging and excluding some of your employees from being promoted or even not selecting them in the first place.

We are all guilty of unconscious bias. We all unconsciously favour people like us—people with the same background, the same skin colour, the same sex and even the same sense of humour. The noble Lord, Lord Griffiths, gave us an eloquent explanation of his exposure to unconscious bias training and of what happens when unconscious bias is not challenged. The noble Baroness, Lady Bottomley, rightly commended the work the Government, as an employer, are doing on racial diversity, but there is nothing to impose what she termed “excessive rules and regulations on business”. I do not think that any of the rules and regulations here are excessive. The noble Lord, Lord Kirkham, wants us to achieve culture change through marketing messages and to use schemes such as the Duke of Edinburgh’s Award to help life chances, but does not want legislation. He cited the example of “Clunk Click Every Trip” on seatbelts, but it is illegal not to wear your seatbelt. I am confused about which he feels should come first: legislation or attitude change—the chicken or the egg. Why not legislate? We will achieve change even faster. The noble Baroness, Lady Bertin, rightly pointed out the contribution that disabled people can make and the shocking loss of the talent they could bring. The noble Baroness, Lady Finn, spoke about the conflict between rhetoric and reality—between warm words and what actually happens in the Civil Service. I commend the work that is being done in the Civil Service. The noble Baroness, Lady McDonagh, talked about a scheme that started out of social conscience but made a fantastic contribution because of the diversity and talent it brought.

I agree with all the recommendations of the noble Baroness’s report but I want particularly to mention those on procurement. I agree entirely with what the noble Baroness, Lady Royall, said. To me, it should be a moral as well as a business imperative for government to procure from people who look like the people we serve, whose money we are spending, but I saw in the Government’s response to my own report on diversity and inclusiveness for women-owned businesses, the Burt report, that there was a reluctance on the part of government to use its most persuasive tool—procurement—to encourage women-owned businesses to pitch for government business and grow, which is just the effect that legislation on procurement from women-owned businesses in America has achieved. We have had the argument over women. We know that women have at least as much talent as men, but they still fail to get promoted, often by men.

You have to act to tackle unconscious bias. “Encouraging” is not enough, and we do not have years to wait. Let us not just “encourage” business to measure its performance and to plan for a more diverse, inclusive and thus successful company. Let us not just “monitor developments”. Let us ensure that companies understand what unconscious bias is. Let us ensure that they measure their performance. Let us applaud the best, most successful companies. In the post-Brexit world, we will need the talents of everyone to make our way and to succeed in the diverse global economy that we will face.