Small Business, Enterprise and Employment Bill

Baroness Neville-Rolfe Excerpts

Wednesday 7th January 2015 Grand Committee

[Baroness Wheatcroft (Con)]

My Lords, I take issue with these amendments. What we do not need is another report into the problems that small businesses face. There is no shortage of information on these problems, not least from the Federation of Small Businesses, to which the noble Lord referred. We know what the issues are. There is not enough finance available for small businesses. One of the things that this Bill attempts to do is make access to finance easier. It also includes lots of measures that will help small and medium-sized businesses. However, what those businesses need is action now, not another delay while another report is produced. As we get regular feedback on what the legislation does, that will become more than apparent. Organisations such as the federation will not hesitate to make clear what they think about what the Government are doing. This would be just another bureaucratic exercise when what we need is action.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, Amendment 1 asks that we report on the long-term needs of small and medium-sized businesses. In moving it, the noble Lord, Lord Mitchell, touched on the wider issues surrounding small business. I do not want to give the Committee another Second Reading speech. A lot of the issues that the noble Lord raised will come up on the various amendments that we discuss today, but I feel that we have done more to help small business than any Government before. This Bill is the latest evidence of that process.

In particular, I refute the claim that the Government are not doing enough to increase lending to small businesses. While the annualised figures remain negative, the tide is turning and there is a significant upward trend. According to the SME Finance Monitor report of November 2014, 71% of all loan and overdraft applications within the previous 18 months were successful. We support small business in many ways. Of course, a recovering economy—which this demonstrates—after probably the worst recession in history is a very important way to help entrepreneurs.

Turning to the amendment, first and foremost, through our industrial strategy the Government are working in partnership with industry to understand the future needs of all businesses and to set the long-term strategic direction. In each of our sector strategies we have joined forces with industry to set ambitions for the sector and our commitment is to invest in helping firms—including small firms—to access finance, skills, innovation and export opportunities so that we can compete internationally. I share the noble Lord’s aspirations for international success.

As well as engagement, we undertake in-depth research and analysis every year to fully understand small and medium-sized business needs. I draw attention in particular to the Small Business Survey, BIS’s flagship annual research project. Results from this are used to develop our business support policy and are also published so that private sector organisations working with small businesses can benefit from the insights. The survey is considered the country’s foremost source of knowledge about small business needs and is widely referenced.

Amendment 1 refers to specific areas of policy relating to small business. This is a good list and I take this opportunity to reassure the noble Lord that the Government are already researching and reporting on the needs of small businesses in these areas. I will give some examples. Last year, the British Business Bank published its strategic plan, setting out a long-term vision for the organisation that will deliver for smaller firms. Only last month, the bank published its first report on trends in business finance markets. The market gaps identified through this in-depth market analysis are feeding into the bank’s product development process. Important and interesting conclusions include the following: more businesses will seek finance for growth; a more diverse and vibrant supply of finance is needed—this Bill helps with that; and awareness and understanding of the range of finance options is not yet comprehensive enough. I am placing a copy of the report in the House Library. We expect future reports to be published on an annual basis.

Secondly, last year, UKTI published Britain Open for Business, an update to its five-year strategy for providing practical help to exporters. UKTI last year worked with 42,684 SMEs to provide a range of services designed to help companies enter new markets. This hands-on relationship allows UKTI to understand and catalogue the needs and challenges faced by these companies and to develop specific programmes to overcome perceived barriers to exporting. Last year, this included a first-time exporter’s package, a medium-sized business programme and an e-exporting initiative.

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[Lord O'Neill of Clackmannan (Lab)]

Does this website cover the plethora of information sources which the noble Baroness has spent the last six or seven minutes identifying? In some respects, the report is just another tome gathering dust, but if we can have a website that is regularly updated and is accessible to the general public, as it were, perhaps that would go some way towards creating a report by other means.

[Baroness Neville-Rolfe]

I thank the noble Lord for his helpful intervention. Indeed, like him, I feel that we need greater awareness of the potential of GOV.UK and the internet for communicating with business, especially small business, in a much simpler and easier way. That is exactly Matthew Hancock’s intention. The plan is that this website, if it does not do so already, will cover all the sorts of things that you are talking about. Do have a look at it and if you feel there are other things that we should do, I am sure that we can. I am sorry about the parliamentary impropriety of referring to the noble Lord as “you”.

That brings me to a couple of final points. Just last month, which is a year since the publication of Small Business: GREAT Ambition, we announced that we had met a large commitment in that document by launching the Business Growth Service, joining up all of our support available for those businesses that have the right level of ambition, capability and capacity to improve and grow. So we are making progress with this overall and trying to bring together the offer for small business, which I feel is a theme that we will probably agree on in the course of this Committee.

The House can look forward next month to a report by my noble friend Lord Young of Graffham, the Prime Minister’s adviser on enterprise, who will produce his definitive paper on what impact the last five years of government work has had on small businesses in this country. I will ensure that interested Lords receive a copy.

Therefore, while I fully agree with the intention behind the amendments, I agree with my noble friend Lady Wheatcroft that we have enough reports. I do not believe that it is necessary to achieve the outcome that the noble Lord seeks in the way that he has proposed. I hope that he has found some reassurance from my lengthy explanation and is willing to withdraw the amendment.

[Lord Flight (Con)]

My Lords, I first declare an interest as chairman of the Enterprise Investment Scheme Association. This issue falls under the Treasury rather than the BIS, so it often gets ignored in terms of its crucial importance in raising equity capital for small businesses. Once you have the equity capital, you can gear up with borrowing. EIS, under Governments of both main parties, has raised more than £12 billion since it started; over the past three years, the amount raised has doubled in each of those years and is now well in excess of £2 billion for the current year. When the present Government came into power, one of the constructive things that they did was to go back to negotiate with the EU to widen the parameters of the EIS, which had been unhelpfully narrowed during the previous Labour Government. Equity finance for small business is almost more precious than debt finance, and there is a wider range of providers of debt finance now increasingly available. I want to register the point on a BIS Bill in a BIS debate today that the Treasury and the EIS is crucially important for small business.

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Finally, all this is intimately linked with a problem that we are soon to discuss—late payment of money owed to small businesses and the effect it has on liquidity. I hope that the Minister will see our improvements to that part of the Bill as part of a package that would improve credit conditions and cash flow circumstances for small businesses, and ease the difficulties that many of them have recently experienced. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I was glad to hear of the experiences of the noble Lord, Lord Mitchell, and his success in running a business. Let us hope that there will be success for others in that direction as a result of the changes that we are making in the Bill. Having been brought up on a farm, which I suppose is the ultimate small business—and one that, I am afraid, failed, which is also a relevant experience—and shared a small garden company, I know exactly what the noble Lord is saying about the availability of finance, funding and cash flow. These are always incredibly important issues for small companies.

Turning to Amendment 2, I have some sympathy with the noble Lord’s proposal and general stance, and I should like to reassure noble Lords that the Government are currently consulting on this very issue.

The purpose of our clause is to make it easier for businesses to access invoice finance, which I agree is one of the most important sources of alternative finance around. The effect of the clause is to create a power for the Secretary of State to make regulations which can invalidate contractual barriers that inhibit small businesses’ use of invoice finance in the way that larger companies are able to operate. The Federation of Small Businesses, the IoD and the Asset Based Finance Association have all expressed support for this measure.

In the consultation, the Government outlined their preferred option for using the power, which is to nullify a ban on invoice assignments outright with some exceptions. The Government also requested views on how this measure would interact with supply chain finance, commercial confidentiality, financial services and land interests.

Clause 1 as currently drafted gives sufficient flexibility to allow the draft regulations to be adapted if the consultation provides strong evidence that in some situations an assignment can lead to unintended consequences. Conversely, if we accepted this amendment today, we would remove one possible way of dealing with anti-assignment clauses before having had the opportunity to consider the evidence from the consultation on the best way forward. Our consultation will close on 16 February and a summary of responses will be provided shortly after.

I hope that the noble Lord feels that his probe has been effective, that he finds the explanation reassuring and that he understands that we are on the case in consulting not only in writing but by having stakeholder discussions. On that basis, I hope that he will withdraw his amendment.

[Lord Mitchell]

I thank the noble Baroness for her reply. Of course, this report will come before the Report stage of the Bill, so we can come back to it as necessary. Again, I thank her. I think that most of her response was reassuring and I beg leave to withdraw the amendment.

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[Baroness Neville-Rolfe]

My Lords, I thank noble Lords for their amendments and for providing the opportunity for us to debate this important matter of late payment. The Government are taking action to change the culture of late payment, but we know that there is still more to do. It is helpful to have the experience of noble Lords, including that of the noble Lord, Lord O’Neill, of how this has been working. We are serious about changing the culture and it is good to have my noble friend Lady Harding here to bring her experience of culture change. My right honourable friend Matt Hancock has made our intention very clear on a number of occasions and we are busily working on this, as I will explain.

Through the measures in the Bill, large and listed companies will have to publish information about their payment performance and practices. We are also strengthening the prompt payment code, which commits signatories to pay within agreed and clearly defined terms. I agree with the noble Lord, Lord Stoneham, that we have to be careful about not overregulating small business, but action is necessary in this area.

I will take each amendment in turn. On Amendment 3, it is common when introducing new regulations through a power to use the word “may”, but I can reassure noble Lords that the Government are fully committed to introducing a reporting requirement on payment practices. That is why we are already consulting on draft secondary regulations.

Turning to Amendments 4, 6 and 7 regarding the payment performance reports, the noble Lord, Lord Mendelsohn, raises a good point, and I am pleased to be able to reassure him that the clause as already drafted enables these matters to be dealt with by way of secondary legislation as far as they relate to information to be reported. In our current consultation, we are seeking views on many of these issues, for example on the enforcement regime. We will be considering carefully the arguments made, both here in this House and through our consultation, before deciding how best to proceed.

Our consultation document, Duty to Report on Payment Practices and Policies, published on 27 November, merits perusal. We are very open to comments and ideas, and noble Lords will see that good and bad supply practices would become public, company by company, every quarter in a preordained format on each company website. This transparency will change the culture in a way in which earlier measures have not succeeded in doing. We look forward to the responses and, as the noble Lord, Lord Mendelsohn, suggested, we will make sure that we look at who the responses are coming from, because obviously there are different interests here. We will publish a detailed summary of responses, once the consultation is closed, before the end of this Parliament.

To complement the consultation on paper and the discussions here in the House, we will hold a number of consultation round tables, which Matt Hancock will lead. We are having meetings with stakeholders, which will include small business groups and large business groups, and business representative bodies. The meetings will start next week and will run until 2 February, when the consultation closes. They will look at specific subjects of interest to the stakeholders who are gathered together, and will include the content and scope of reporting requirements, enforcement and monitoring of those requirements, supplier lists—an issue that has been mentioned—and how invoice dates should be tackled.

I am grateful to my noble friend Lord Flight for tabling his Amendment 5, and to him and my noble friend Lord Cope for their comments. Our prompt payment consultation also seeks views on which companies should be subject to the reporting requirement. We propose to exclude small and medium-sized companies from this obligation, using the definition in the Companies Act 2006. We chose this definition as businesses will already be familiar with it, making it easy for them to comply with it. Stakeholders advise us that if instead we relied on the definition used for research and development tax relief, as my noble friend proposed, it would reduce the number of companies in scope from around 18,000 to around 15,000.

My noble friend Lord Flight also mentioned Amendment 25, which relates to the definition of small and medium-sized businesses used for the credit data provision. I understand that that proposed definition is the one used by Her Majesty’s Revenue and Customs for the purposes of the research and development tax credit. We were planning to talk about this under Amendment 25. My noble friend Lord Newby hopes to be here for that, but he is detained on the Pension Schemes Bill; he has a rather awkward situation today, boxing and coxing with the other Bill on the Floor of the House today, as I hope the Committee will understand.

To conclude on Amendment 5, mandatory company reporting requirements are drawn largely from existing company legislation. This is why our starting point was the precedent that UK companies will be familiar with. In addition, given the scale of the problem—I think somebody mentioned £46 billion a year—and the relatively low estimated cost of this measure, at £33.8 million over 10 years, the Government think that it is important that as many companies as is proportionate should be required to report on payment terms. We are consulting on the issue and will consider all alternative proposals. In the mean time, it would be premature to accept the amendment.

On Amendment 9, many respondents to our 2013 discussion paper felt that introducing further penalties would be unlikely to tackle the problem of late payment. The Government also consider that the amendment could lead to wholly undesirable consequences if businesses lengthened their payment terms to avoid paying interest. In the other place, the Government committed to holding a round table on automatic payment of interest to test our current assumptions. We will report back on that issue before the end of March. In any case, by forcing companies to publish comparable information on their payment practices as I have described, we will put pressure on them to improve those very payment practices.

On Amendment 10, late payment legislation already sets a maximum 30-day period to quibble after the receipt of relevant goods and services. Stakeholders to whom we have spoken are unsure that additional legislation would achieve real change, but we will consult stakeholders to understand any concerns around quibble times.

As for unilateral changes to payment terms, it is poor payment practice to ask suppliers to accept blanket changes to payment terms, but in practice such requests are of course not imposed unilaterally. Rather, they are changes made with the agreement of both parties, even if the smaller party may feel that they have no option other than to agree. That was the problem described earlier. I am afraid that a ban as proposed in Amendment 10 would probably not prevent the practice, but we agree that more must be done to tackle exploitation of small suppliers. As I said, our current consultation proposes that companies should report on whether standard and maximum payment terms should be amended during each reporting period to help shine a light on such behaviour. I emphasise that that is out for consultation.

The practice of large companies asking existing suppliers to pay to join or remain on a supplier list, mentioned by the noble Lord, Lord Mendelsohn, is deeply concerning. As a result, we are currently consulting on the issue to understand how widespread concerns are about this and whether action should be taken. Obviously, a ban would apply economy-wide, because that is the nature of the provisions that we are debating today. It is imperative that any actions that we take are targeted and do not inadvertently prohibit the use of supplier lists, for example, where they are mutually beneficial to both parties. I can see circumstances where that might be the case.

Finally, turning to Amendment 11, while we already have a prompt payment code, we can and must do more to strengthen it. We have appointed an advisory board made up of code signatories and business representative bodies to steer this important work. We are currently surveying signatories and non-signatories to the code to test our initial proposals for strengthening its enforcement mechanisms, and considering whether it should have a maximum payment term. Introducing a maximum payment term would be a significant shift for the code. It is right that we use this consultation period to understand how all the options would work in practice.

I turn now to the proposals regarding writing to FTSE 350 companies. Perhaps I may mention that my right honourable friend made a commitment in the other place to write to all those companies to ask them to join the code. I just want to say that he will fulfil this commitment before the end of this Parliament, and of course I will be happy to write to noble Lords to inform them when that has been done.

I hope that the noble Lord feels reassured that we are making a lot of changes and that we are proceeding, albeit by secondary legislation, to do many of the things that have been discussed today. I hope also that he will agree that the amendment should be withdrawn.

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[Lord Flight]

My Lords, I am not quite clear what the Minister was actually offering here, but I should stress that it is clearly completely inappropriate to treat companies with a turnover in excess of £25 million and more than 250 employees as large companies, which is what the Bill presently does. These small and medium-sized businesses are as much the victims of late payment as smaller companies. It is clear—and I trust that both sides of the Committee would agree—that the definition needs changing to an appropriate size, whether by using the R&D definition that fits reasonably well and on which Grant Thornton has done the research, or another definition. However, the SME definition is clearly inappropriate. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I have already responded to my noble friend Lord Flight. This matter will be discussed again, not least under some later amendments. We have listened to what he said but, at this point, I would ask him to withdraw his amendment.

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Moved by

[Baroness Neville-Rolfe]

8: Clause 3, page 4, line 40, at end insert—
“( ) Until section 85(2) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 comes into force, in subsection (7)(a), “a fine” is to be read as “a fine not exceeding level 5 on the standard scale”.”

[Baroness Neville-Rolfe]

My Lords, this group of amendments makes a number of consequential and technical changes to the penalty levels set out in the Bill. The Legal Aid, Sentencing and Punishment of Offenders Act 2012 includes a provision that, once commenced, will remove the upper limit on all fines of £5,000 and above in the magistrates’ courts. The Act also provides a power by order to increase the amounts of maximum fines at levels 1 to 4 available to magistrates for less serious offences.

The Bill was drafted on the assumption that both the £5,000 limit would have been lifted and levels 1 to 4 increased by the time it received Royal Assent. As this is not yet the case, it is necessary for some of the penalties provided by the Bill to be amended to operate satisfactorily whether or not the changes have come into force. The amendments ensure that the penalties in the Bill work whether or not the changes have taken place, without the need for further amendments to the Bill. This future proofing will apply in respect of a penalty for non-compliance with the proposed reporting requirement on payment performance, which we have just discussed.

We have considered carefully the appropriate level of penalties in the Bill. As the majority of the penalties are in Parts 7 and 8, I shall concentrate my remarks on these parts. The penalties in Parts 7 and 8 are designed to be consistent with the level and approach of existing Companies Act penalties. For example, the failure by a company to make its register of people with significant control available for inspection in new Section 790N(2) is subject to a level 3 fine. This is consistent with the existing penalty in Section 114 of the Companies Act for failure to make the register of members available for inspection.

I now turn to Amendments 45, 46, 57 and 58, which affect Schedules 3 and 5 to the Bill. Schedule 5 provides an option for private companies to keep information about their members and company officers on the public register at Companies House instead of having to keep registers containing this information. This option will also apply to the new register of people with significant control in Schedule 3. A company that takes advantage of this option must still keep precisely the same information on the public register as it would keep on its own register. It must keep the information up to date in the same way as it must keep its own register up to date. The aim of the offences and penalties in the new provisions is to mirror the offences and penalties for not adequately maintaining the information required in each company register.

During our review of the penalties, we discovered that there are a couple of instances where the penalties do not mirror each other. Amendments 45, 46, 57 and 58 correct this to ensure that the penalties are consistent. For example, the fine for not keeping a register of members is set at level 3. As currently drafted, the penalty for a company that chooses not to keep a register of members and does not provide Companies House with information about its members is set at level 4. Amendment 58 replaces this with a level 3 fine to ensure that the penalties are consistent. I very much hope that noble Lords will support these essentially technical amendments. I beg to move.

[Lord Bach (Lab)]

My Lords, I thank the Minister for explaining these government amendments so clearly. She will be relieved to hear that we will not seek to oppose them.

Of course, the Minister is right because, more than 32 months after the LASPO Act received Royal Assent, the Government have not got round to implementing Section 85 of it. That Act was a terrible piece of legislation but the one exception to it was Part 3—in which Section 85 is to be found. While I would very much welcome the chance of explaining to the Committee why it was such a dreadful Act, I will resist that temptation this afternoon.

Part 3 deals with sentencing and punishment of offenders and was widely supported across both Houses. I have two questions for the Minister—I am sure they are both quite easy ones for her. First, why have the Government not acted sooner to implement Section 85? It has been almost three years now and the changes required statutory instruments which have just not been brought before Parliament. An explanation would be welcomed by the Committee. Secondly, what are the Government’s proposals now to bring forward those statutory instruments, and will they be completed by the time that Parliament prorogues for the general election? If the noble Baroness is not in a position to answer those two questions now, she can write to me in due course.

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[Baroness Neville-Rolfe]

My Lords, I am grateful to noble Lords for their support for the government amendments. The regulations in question relating to LASPO were laid on 17 December. They are necessary to accompany the commencement of the unlimited fines provision, and before they can be approved, they of course need to be debated in both Houses of Parliament. We hope that unlimited fines can be brought into force before Parliament is dissolved in March.

Amendment 8 agreed.

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[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord for Amendment 12 on the important matter of retention payments and for initiating an interesting and important debate. Although his proposed new clause is very widely drafted, it is clear from our discussions that the focus is actually on the construction sector. The Government are clear that there are a number of issues with the payment culture in the construction industry. I am also grateful to the noble Baroness, Lady Donaghy, for adding her reflections. Retentions are clearly part of that wider culture. We believe that we are most likely to make progress by dealing with the wider picture rather than focusing on specific details; namely, looking to address the cause rather than the symptoms. That is why we are working with the industry on a number of fronts.

These include the Housing Grants, Construction and Regeneration Act 1996, as amended in 2011, which sets out a statutory framework governing contractual terms on payment. This introduces some basic rights such as the prohibition of so-called “pay-when-paid” clauses and the right to adjudication; that is, a contractual dispute resolution process, which I think we have agreed in other debates in this Room is very important. Recognising the importance of Government in this game because we are such a big customer, as the noble Lord, Lord O’Neill, mentioned, we are using procurement to introduce innovative new practices in our own operations such as the use of so-called “project bank accounts” which will change the payment dynamic on construction projects by facilitating payments directly to sub-contractors. These are a form of escrow account which holds the money that is used to pay sub-contractors as work is completed and is not dissimilar to the trust idea mentioned by the noble Lord, Lord Stevenson.

We are also working with the industry through its Construction Leadership Council and the Institute of Credit Management to implement a payment charter that contains 11 commitments, including one specifically to remove the need for retentions. As we have heard, Amendment 3 aims to introduce a power to impose a reporting requirement on the narrow practice of retaining money, mainly because of concerns about the construction industry. We do not believe that this is necessary. The Government are already able to include a new obligation to report on retention practices through the powers we are taking in this Bill. That deals with the reporting part.

I turn now to the underlying substance of retentions. We are also working with industry through the Construction Leadership Council to move to a position where retentions are no longer necessary by 2025, which is of course an end date. I am sure that noble Lords will agree that removing retentions needs to go hand in hand with defect-free work, particularly on one-off contracts.

Supply arrangements in construction are often project based, frequently short term and can involve payments for partially completed and therefore hard to value work. Clients need some sort of guarantee that, should defects emerge within a reasonable period—and it can be as much as 12 to 24 months, although on one’s own private building work at home it is usually about six months—there has to be some remedy. Retentions were the way devised for dealing with this, and to move forward a workable alternative has to be found. I suspect that that may be something to do with the long timescales that we see here. Moreover, we are seeking evidence on the prevalence of this issue in other sectors beyond construction—but also in construction itself—in the stakeholder groups and on the payment terms consultation that I mentioned in the previous discussion. So we will have a better idea of what the current situation is and how the changes that we propose on the reporting of payment terms and timescales will affect matters, not only in construction but elsewhere. That will help to establish the need for further government action. On this basis, I would ask the noble Lord to withdraw his amendment.

[Lord O'Neill of Clackmannan]

The Minister made the point that, as the main customer, the Government have started a number of projects with project bank accounts. Before we get to the next stage, could she provide us with an indication of which departments are entering into this? My understanding is that it is fairly patchy and that some departments—for example, the Ministry of Defence—have been somewhat less than enthusiastic about changing their procurement practices. It would be helpful if we could get a picture of what is actually happening. I know that it is limited and I am not going to criticise the Government for the size of the operation; it is about the number of departments that are willing to participate. That is as important as anything. Some of them seem to be enthusiastic while others are a bit less so. It would be useful to find out, and it might even help if we named and shamed them.

[Baroness Neville-Rolfe]

My Lords, one of the pleasures of this Bill is that I already deal with eight government departments. This will increase the list, and I shall certainly take away that request and write to the noble Lord.

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Moved by

[Baroness Neville-Rolfe]

27: Clause 7, page 9, line 29, leave out “, or” and insert “in the course of a business,
(b) ”

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[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord for setting out his thinking on these amendments. I shall comment in turn on the two amendments, taking Amendment 31 first.

The powers in Clause 11 are deliberately drawn as widely as possible to enable UK Export Finance to provide wide-ranging and flexible support, and to respond quickly and imaginatively to changes in market conditions. Our intention is for UK Export Finance to have the widest possible ability to support UK-based firms in their involvement with exporting, whether these firms are existing exporters, those in exporting supply chains or aspiring exporters.

The current requirement for a connection between the department’s support and an actual or contemplated export has made it difficult for the department to respond to the needs of exporters in certain cases, especially in relation to support for the general business of an exporter or a supply chain company. We share the aim that has been expressed today of maximising government support for exports and of maximising the awareness of that support among UK businesses. However, by delaying commencement, this amendment could serve to delay the introduction of new facilities for UK businesses to seek new opportunities and win export contracts that would help us increase UK trade, the aim set out in the Britain Open for Business update announced by the Prime Minister last year.

In view of the points that were made earlier by the noble Lord, Lord Mitchell, I should say that when it comes to promoting British exports, this Government have done an enormous amount. I pay tribute to my noble friend Lord Popat, who is playing an important part in the passage of this Bill. It was on his recommendation that your Lordships’ House established a Select Committee under the chairmanship of my noble friend Lord Cope, who spoke earlier, examining the ways that the Government could support and encourage SMEs to export. That was a very valuable initiative, which reported in March 2013. The Government accepted all 23 of its recommendations, including measures on credit risks for SME exporters and better publicity for services provided by the Government.

We are absolutely committed to increasing British exports to rebalance our economy. As recently as the Autumn Statement, the Chancellor outlined a £45 million package to increase exports, including £20 million for first-time investors. That is in addition to work to increase UKTI’s presence in emerging markets and our work since 2010 to put a much greater emphasis on trade and economic growth in our diplomatic relations. The additional funding that this Government have provided for UKTI has allowed it to double the number of businesses helped since 2010, and we are on track to support more than 50,000 businesses this year. I echo the points made by my noble friend Lord Leigh of Hurley about the export effort for SMEs that he observed on his trip to China with the Prime Minister. Less glamorously, I saw the results for myself on a week’s visit to China in September. I was impressed both by the programme and performance of UKTI and by the scale of business involvement. Again, it was a mixture of SMEs, larger businesses and legal experts.

UK Export Finance is referred to several times in these amendments. In 2011, the Government reintroduced, after 20 years, UK Export Finance support for goods usually sold on shorter terms of credit—mainly those supplied by smaller companies. So far in this financial year, around 120 companies have benefited from direct UK Export Finance support, and almost 80% of them are smaller firms. Companies in the supply chains of exporters benefit indirectly from UK Export Finance support. We want them to benefit directly, hence the provisions in the Bill. UKEF is keenly aware of the need to improve awareness of it among smaller exporters. Last year, the British Exporters Association scored the product range of UK Export Finance at nine out of 10, while the Global Trade Review voted UK Export Finance the world’s best export credit agency. So we are making progress. Awareness of UKTI has also increased significantly over four years, from an average of 51% in 2010 to 65% now.

The noble Lord spoke at greater length to Amendment 32, touching on a very important area. It is of course government policy, informed by an extensive public consultation conducted in 2009-10, that UK Export Finance will comply with international agreements which apply to export credit agencies. UK Export Finance complies with the OECD common approaches, which set out how export credit agencies should undertake due diligence on the environmental and human rights impacts of projects falling within their scope. The OECD common approaches make reference to the UN guiding principles. In undertaking environmental and human rights due diligence in line with the common approaches, it is the practice of UK Export Finance to apply the 2012 performance standards of the International Finance Corporation. These are recognised as comprehensive standards. UK Export Finance is taking an active and leading role in further OECD consideration of human rights issues, which will inform possible changes to the OECD common approaches, should they be agreed.

I pause to comment on the example of fossil fuels given by the noble Lord, Lord Stevenson. UK Export Finance has not supported any transactions in violation of the coalition agreement’s pledge to support green technologies rather than invest in dirty fossil fuel energy production. The Secretary of State made it clear in a Written Ministerial Statement in July that “dirty fossil fuel” should be taken as referring to projects that produce pollution in excess of international environmental standards. The practice of UK Export Finance is not to support such projects.

As I have already said, UK Export Finance complies with the OECD common approaches and has a dedicated environment advisory team that reviews the environmental, social and human rights issues of projects covered by the common approaches prior to the department agreeing to provide support. I hope that gives some comfort. Against this background, the Government consider it neither necessary nor appropriate to impose a statutory duty on the Secretary of State to have regard to only one set of principles—which are, in any case, already taken into account through UKEF’s adherence to the common approaches.

On the second part of the amendment, the common approaches set out how export credit agencies such as UK Export Finance must take account of environmental, social and human rights issues. In line with this, UKEF requires that projects with significant ethical risks are subject to a full impact assessment and that international standards regarding environmental, social and human rights issues are complied with before it provides export credit finance support. UKEF will also monitor these issues throughout the life of projects where relevant, sometimes over periods as long as 10 years.

I was glad to hear the noble Lord, Lord Stevenson, make reference to various changes and improvements made in recent years, including the Bribery Act. That has been pivotal in clamping down on corruption. UK Export Finance also conducts due diligence on the contracts it supports to ensure that they are not tainted by corruption and that the risks associated with dealing with the parties are acceptable. This includes but is not limited to warranties from exporters and checks against prohibition lists maintained by multilateral development organisations such as the World Bank.

The Secretary of State also benefits from the advice of the independent Export Guarantees Advisory Council, whose remit is to advise on UKEF’s application of its ethical policies. The annual report of the chair of the Export Guarantees Advisory Council is published alongside UKEF’s own annual report, which lists the transactions supported by UKEF each year.

I hope that noble Lords are reassured that UKEF takes appropriate consideration of ethical issues in its decision-making and therefore will agree that it is not necessary to place a new statutory requirement upon the Secretary of State. On that basis, I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her very expansive response. I appreciate the effort that went into it. I know it is not her direct area of responsibility and I am sure that she received assistance from others. They put together a good response and I appreciated listening to it. I was also remiss in not paying tribute to the work of the noble Lord, Lord Popat, which has been referred to in the Committee before and is worthy of further comment. His is a terrific initiative and is doing well. The noble Lord, Lord Livingston, and his predecessor have also done a terrific job, which we support. The export champions, many of whom sit in this House, do a great job right across the world.

We are all on the same side here. Obviously, we recognise that we need more exports. We cannot become the nation that we want to be or enjoy the economic success that we all think we should have if we do not radically increase the amount and volume of our exports. We can take that as common ground. But—there is always a “but”—while I agree that we need to maximise support for exports and we accept that there is a long way to go, it does not have to be a zero-sum game. It is possible—many countries do this—to have regard to the terrible impacts of extractive industries, the difficulty of ensuring responsible trading and the respect for human rights in all aspects of activity, and not to be guided always by, in some senses, the lure of more arms sales. Of course, we have special regimes for them, but it is still very difficult to get a proper sense of what is happening there because they tend so much to dominate the work of both UKTI and UKEF.

Issues were brought up by my brief example, and there are many others. I accept the fact that since 2012, although that is not a long time ago, UKEF has not been involved in supporting the export of dirty fossil fuels—although I note that the quotation we were both referring to states that the situation is that it has not publicly financed new coal-fired plant overseas,

“except in rare circumstances in which the poorest countries have no feasible alternative”.

That seems to me to be a large door through which many rather undesirable practices may have taken place, but I have no evidence of that. However, it makes the point again that it may be that how we are interpreting things is good at the moment, but without statutory underpinning, how can we give sufficient support to people in order to ensure that good practice continues in the long run?

The proposals set out in Amendment 32 are not onerous. The Minister said that she felt that the amendment simply sets out what is common practice now in relation to promoting UK government adherence to the UN guiding principles. That is fine, so why not let us have that in legislation and all agree on it? Further, preparing a report for both Houses of Parliament might well be a way of bringing up some of the issues that do bear on this debate: for example, what exactly is the interaction between the moral and ethical standards we are looking at on the one side and the success or otherwise of exporting around the world?

However, I hear what has been said and I know that this is a complex and difficult area. The work that is going on in government is in some sense at the right level and indeed is of a standard that the rest of the world could easily emulate. However, we must not lose sight of this because it is important and it will have long-term consequences, both good and bad, if we do not get it right. With that, I beg leave to withdraw the amendment.