Baroness Hayter of Kentish Town
Main Page: Baroness Hayter of Kentish Town (Labour - Life peer)Small Business, Enterprise and Employment Bill
Baroness Hayter of Kentish Town Excerpts
Baroness Hayter of Kentish Town (Lab)
My Lords, I shall add a few words about this because we are talking about the products and services that very small businesses buy not on a regular basis or within their main business. In the next amendment, we will come to the Government’s welcome attempt to encourage the growth of home businesses, but in other ways aid that could be given is strangely absent from the Bill.
As my noble friend Lord Mendelsohn said, we argued that the Consumer Rights Bill should cover micro-businesses for things bought outside their main area of business. We can all give examples of this, such as when an employee gets married and the boss sends a bouquet of flowers, except that it never arrives; or a sole trader suddenly needs some cleaning done because of an unexpected leak but the dry cleaner damages the chair cover; or a book-keeper needs a new kettle, a radio or a Hoover, but finds she or he will have none of the new protections provided in the Consumer Rights Bill; or, similarly, a charity orders sandwiches for a farewell lunch for a volunteer which fail to turn up.
There is no good reason for those people in such circumstances not to be treated as normal consumers. Unless this amendment is accepted, they lose those rights simply because the cheque is made out on a business account. As my noble friend reminded us, in Committee on the Consumer Rights Bill the Minister told me that such consumer rights for small businesses were best covered in this Bill, but these rights are not there. This is surely the time to add them.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
My Lords, I thank the noble Lord for his amendment about treating small and micro-businesses as consumers. I welcome the opportunity to return to this issue. I am very glad to welcome back to the debate the noble Baroness, Lady Hayter. She reminded us of the good and graphic examples she always brought to the Consumer Rights Bill, which is very nearly on the statute book.
Since Committee, we have been giving this issue considerable thought. I remain concerned about the potential consequences of introducing such a wide-ranging measure in primary legislation. As I set out in Committee, we simply do not know the costs it might impose against the benefits which are assumed. The Government of course recognise that these concerns may not be realised, but nevertheless they, and the assumed benefits, require exploration.
Uppermost in my mind is the importance of small and micro-businesses to the UK economy, which the noble Lord, Lord Mendelsohn, rightly emphasised. As we know, these businesses make up 99% of all businesses in the UK and total 5.2 million businesses. Of these, 96% are micro-businesses, which in aggregate employ 8.3 million people and have a turnover of £655 billion.
The Government believe this underscores the need to move carefully. The Bill is designed to support small and micro-businesses and put in place the conditions for them to prosper. The unintended consequences of sudden changes in regulation have the potential to undermine these efforts. We do not know what the impact would be here. We only know that some business groups have concerns, which I will come on to in a minute, especially about the blanket application of consumer rights. This arises, I think, mainly because a protection for small businesses when buying could be a cost for such businesses when selling to others. The worst-case scenario would be where a small business buys an item from another small business and the item fails and causes a significant loss. The purchasing small business seeks to recover that loss from the supplying small business and, as a consequence, the supplier goes out of business. Currently, the businesses could agree in their contract to a reasonable limitation of this type of liability, whereas under this amendment they would not have scope to do so.
Since we last debated this issue, officials in my department have met business representatives and leading academics. As a result of these conversations, I am confirmed in the view that the issue is not straightforward. The British Retail Consortium considers that that the question of small business protection needs detailed consideration before any action is taken. For example, it raised concerns that the measure would remove businesses’ ability to reasonably limit liability in dealings with other businesses, and the possibility of this leading to significant claims for loss of business earnings.
Baroness Hayter of Kentish Town
I am sorry to intervene, but that suggests that the Minister is referring to things which are integral to the business. The example we gave in Committee was hair-dryers bought by a hairdresser. Of course if they failed that would create difficulties, but we are not talking about such things. We are talking about things that are not key to the core business, and therefore any failure would not lead to business interference.
Baroness Neville-Rolfe
I thank the noble Baroness for her clarification. The problem is that both the items she has described and other items might be covered, but perhaps I could make a little more progress.
I accept that the issue should not simply be dismissed for exactly the kind of point that the noble Baroness, Lady Hayter, has made. There are various points that need to be explored, so in the spirit of collaboration the Government consider that a possible way forward is to hold a public call for evidence, which we need. If the noble Lord will agree to this and withdraw his amendment, I propose that my department publish a call for evidence before the end of this Parliament so this can be taken forward. As I have said previously, small businesses and micro-businesses are not unprotected at the moment. There are protections in the existing law and these also allow businesses to enter into flexible transactions. All businesses need the freedom to contract for their particular requirements, which the current framework allows.
The call for evidence—if this seems a positive way forward—would ask whether these current arrangements offer sufficient protection or whether a gap in the law exists. If such a gap was found to exist, it would enable the Government to better assess whether this could be addressed by extending some of the consumer protections in what should shortly become the Consumer Rights Act to small businesses and micro-businesses, or through other options if they seem better.
I wish to thank the noble Lord and the noble Baroness for the commitment they have shown to this issue. I know we share the same objective of ensuring small businesses and micro-businesses are well supported. I hope that on this basis he will feel able to withdraw his amendment.
“( ) In considering what is reasonable for the purposes of subsection (4), a court shall have regard to all relevant factors including but not limited to the following—
(a) the nature and location of the premises;(b) the nature of the business and the extent to which the activities of the business are comparable to activities carried on at home which are not business activities;(c) whether the business requires any structural change to the premises comprised in the tenancy;(d) the number and frequency of visitors likely to come to the premises in connection with the business;(e) the number and frequency of deliveries and collections of goods likely to occur at the premises in connection with the business;(f) the amount of any noise or other environmental impact likely to arise from the business;(g) the likely effect of the business on the parking of vehicles in the vicinity of the premises; and(h) the proportion of the property used for the business. ( ) Where a dwelling-house is let under a tenancy to which subsection (2) applies, the landlord and tenant may agree in writing under the terms of the tenancy or in any other document signed by them—
(a) that a particular business, or(b) that a particular description of business,if carried on in the premises, shall be a home business for the purposes of this Part of this Act.( ) Any such agreement shall be binding upon the parties.”
Baroness Hayter of Kentish Town
My Lords, Amendment 26 stands in my name and that of my noble friend Lord Stevenson of Balmacara. It deals with the issue of home businesses which take place in rented homes.
At present, any landlord who lets residential property to tenants who then also use their homes for business finds that the landlord runs the risk that they will claim security of tenure as business tenants under Part 2 of the Landlord and Tenant Act 1954. Therefore, to protect themselves from that, very often within the tenancy agreement landlords prohibit any use of the residence for business. However, should the landlord in some way acquiesce to such a business, the tenants get security under the 1954 Act, regardless of any wording of the agreement.
Clause 35 would therefore allow that where a home business is carried on by a tenant, it would not qualify for security of tenure under the 1954 Act, and landlords can accept some working at home by tenants, who have only normal residential security of tenure. The clause also allows that where, in breach of any prohibition against business use, a tenant carries on such a “home business” and the landlord gets to know about it, effectively acquiescing in it, that would not in future give the tenant statutory rights.
We support the intention of this clause, but we are concerned about the woolliness of its wording and fear that it will deter the objectives set for it, because the clause does not say what a home business is. It says:
“A ‘home business’ is a business … which might reasonably be carried on at home”.
That caused my legal friends some amusement. The lack of clarity means that the issue will be fraught with uncertainty, which means that it is less likely that landlords or tenants will make the most of this opportunity.
Whether a tenant’s business can reasonably be carried on at home will depend on many things, which relate both to the physical building and its locality, but also to the work undertaken. We all know of a range of businesses that could happen at home: the office work that probably most of us do, catering, music teaching, tutoring, web design, computer programming, repairs, hairdressing, jewellery-making, fine art, journalism, counselling, physical fitness, accountancy, and the favourite of both the Minister and myself—dressmaking.
What can be done in the back yard of a remote cottage is a bit different from what can reasonably be carried on in a third-floor flat. Therefore, the problem is that without some guidance on what a court might take into account when deciding what a home business is, our fear is that landlords will be reluctant to venture this way. The Minister, the noble Lord, Lord Ahmad of Wimbledon, was very helpful in the meeting he had with me on this, and in his subsequent letter. However, I am afraid that that letter betrayed a slight lack of appreciation of how easily disputes can occur over whether a business is a home business, and disputes such as that can end up in court because of the lack of any sort of clarification of what is meant by a home business.
Baroness Hayter of Kentish Town
I mean it sincerely when I thank the Minister, but I think she has fundamentally misunderstood. She says that my amendment would restrict and narrow the scope, but it is exactly the reverse. My fear is that, without certainty, landlords could still ban—I think she used the word “ban”—all businesses. My fear is that they will keep doing that because of the uncertainty. I think she has misunderstood what I was trying to achieve. The lack of certainty will leave many landlords banning, restricting or forbidding proper businesses because they will not be confident that it really will be a home business as opposed to someone starting a business and then saying, “Well, actually, this is a proper business”.
She also asked why a tenant should not be treated the same as the owner. The reason is that there is a third party, the landlord. The owner already has security of tenure because he owns his house, but tenants can get that extra security by taking it from a landlord. It is a different relationship. The question of why they should be the same as owners has not really been answered.
I accept that secondary legislation is possible. The Minister said it could be used to restrict use, I think, but it is the other way around. I want to enlarge the scope, so that landlords can do this safely, without automatically giving that extra security to the tenant. I have clearly failed to convince the Government. I am sorry about that because Clause 35 is important, and my fear now is that it will not be used as much as they would like. With those comments, I beg leave to withdraw the amendment.