Enterprise Bill [Lords]

Debate between Bill Esterson and Alan Brown

Wednesday 9th March 2016 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Will the hon. Gentleman give way?

[Bill Esterson]

I am not going to take any more interventions at the moment. We have not got very long, because the Minister took so much time, and a lot of Members want to speak.

The Minister claimed that the Bill would help workers, but 91% of shop staff oppose longer Sunday opening hours and only 6% want more hours on Sundays. Listening to the Minister in Committee, we might have been forgiven for thinking that the figures were the other way around. The Minister says that he is improving workers’ ability to opt out of Sunday working. Let us just go through some of what happens now. Staff who apply for jobs with some retailers are asked whether they will work Sundays. Failure to say yes can mean no interview. Staff who are still in their notice period who try to opt out of Sunday working can and do lose their jobs. Staff who try to opt out of Sunday working can and do lose hours. Staff who want to opt out come under pressure from managers and colleagues not to do so. The reality is that staff already have to work on Sundays in too many large retailers when they do not want to, when they would rather spend more time with their children or—as most people want to do on Sundays—enjoy leisure time or rest. What happened to the family test?

Enterprise Bill [ Lords ] (Eighth sitting)

Debate between Bill Esterson and Alan Brown

Thursday 25th February 2016 Public Bill Committees

[Bill Esterson]

I beg to move, That the clause be read a Second time.

We debated some elements of the Groceries Code Adjudicator as part of our lengthy discussions about the creation of the small business commissioner a long time ago—two and a bit weeks ago, at the start of our proceedings. There is a great deal of overlap in the nature and aims of the adjudicator and the commissioner. Both were created to give a voice to smaller suppliers in their dealings with larger companies and both were designed to address the imbalance in those relationships.

New clause 15 seeks to acknowledge that there will be considerable concern about the Groceries Code Adjudicator, which was set up in 2013, and the small business commissioner, when it is established, presumably later this year, and the extent of their powers, the breadth of their remit and the teeth they have to deliver in their sectors. I appreciate that the general review of the Groceries Code Adjudicator is expected this year. We are asking in the new clause for a specific investigation of the adjudicator’s role, which is particularly relevant to the Bill because of the relationship with the small business commissioner. The review we are asking for is to learn from the first years of the Groceries Code Adjudicator so that we can apply those lessons to the post of the small business commissioner. The new clause is a simple way of saying that we did not get it quite right in 2013 and that we have an opportunity to learn valuable lessons now. We ought to ensure that those lessons are taken on board at the appropriate stage, which is in this Bill.

On confidentiality, we have said repeatedly, here and in the Lords, that if small businesses complain about big businesses that are their customers, they risk damaging their business relationships. Now, the Groceries Code Adjudicator has said that a lack of trust is a barrier to suppliers who might have complaints. Lord Mendelsohn cited that as a key area of concern. Without robust provisions for confidentiality and without learning from the experience of the Groceries Code Adjudicator, we will be doomed to repeat those deficiencies with the small business commissioner.

When it comes to providing greater powers for the commissioner, we can learn lessons from the Groceries Code Adjudicator. In January 2015, the then coalition Government announced that they would give the Groceries Code Adjudicator the ability to fine supermarkets 1% of their annual turnover for serious breaches of the grocery code. This was a recognition that the adjudicator needed to back up their influence with greater powers, but it took almost two years after the creation of the post to ensure that those powers were available. The new clause would avoid repeating that delay as we create the post of the small business commissioner. It would ensure that the commissioner’s office has the powers needed to do the job from day one by learning from the experience of the Groceries Code Adjudicator.

When the position of Groceries Code Adjudicator was created, concerns were raised about its ability to fulfil the Government’s ambitions for it, because it was given too few staff and resources to deliver effective change. Let us remember that the Groceries Code Adjudicator works only three days a week and has only five staff, who are responsible for 7,000 direct suppliers and a further 300,000 indirect suppliers. As we have pointed out, it is clear from the Australian model that this could well be a cause of problems in the UK. The Groceries Code Adjudicator is another reference point from which we can learn, as she is an adjudicator working part-time with five staff responsible for so many suppliers. With the small business commissioner, we are looking at a similarly small team taking responsibility for an estimated 390,000 disputes from 70,000 businesses.

We had an impact assessment for the creation of the small business commissioner. It is a shame, is it not, that we did not have one for Sunday trading. The impact assessment for the small business commissioner estimated that the commissioner’s team would deal with only 500 complaints out of the estimated 390,000 disputes every year. From the experience and comments of the Groceries Code Adjudicator, we know that she is understaffed. She has made it clear that she was given a small office and spends much of her time just explaining what she can and cannot do, and is left with little time to actually deliver. That is why there has been only one investigation in two years, as good as that investigation clearly was. She has made it clear that she cannot cover the suppliers in the supply chain.

As it stands, we will be putting more pressure on the small business commissioner, because the volume of potential activity is even greater. We need to learn the lessons and that is what the new clause is about. If the Government will not change the Bill, we should at least try to speed up the process of evolving the role to meet the challenges that the small business commissioner will face. I hope the Government will learn and apply the lessons from the first years of the Groceries Code Adjudicator. Throughout the process, we have called for the remit of the small business commissioner to be broadened and for the commissioner to have the resources at his or her disposal to fulfil the ambitions that we all have for the post. We want the commissioner to be given the powers to deliver real change to the crippling culture of late payments and poor business practice.

We have repeatedly used the example of the Australian small business commissioner, because it is a good model and we stand to learn a good deal from it. New clause 15 is an attempt to make sure that the powers that we believe ought to be put in place now are at least fast-tracked for the small business commissioner, by keeping a weather eye on and learning from the experience of the Groceries Code Adjudicator.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Sir David, in this last sitting.

My thoughts are broadly in line with those of the hon. Member for Sefton Central. As we know, this Bill introduces the small business commissioner, which obviously has cross-party support. Amendments have been tabled that we thought might give the office of the small business commissioner more teeth, to allow it to work more efficiently on behalf of those it will represent. Obviously the amendments have not been accepted today, but hopefully the Government will consider that in future.

In thinking about the office of the small business commissioner, it certainly makes sense to think about the office of the Groceries Code Adjudicator. Given that this is a wide-ranging Bill anyway, it makes sense to use it as an opportunity to review the powers and purpose of the GCA and to learn from its short history.

When the GCA was created in 2013, my SNP colleagues gave their support at that time, but my hon. Friend the Member for Banff and Buchan (Dr Whiteford) urged the Government to give the GCA enough power to address two key issues that she raised then. First, she highlighted the underlying problems caused by the concentration of power in the grocery supply chain due to the dominance of a handful of large supermarkets. We are well aware of the recent issue of Tesco breaking the code of practice and abusing its market position to prioritise its cash flow and finances over those of their suppliers. It was often excessively late with its payments. Tesco did that, but what was the outcome of the case? Yes, Tesco was named and shamed, which was good—the matter has been highlighted and Tesco has said it will not do it again—but the GCA, Christine Tacon, was unable to impose a fine, because she was only given the power to impose fines in 2015, two years after the establishment of her office.

The second issue that my hon. Friend highlighted was about sustainable food production and the ability of non-direct suppliers to supermarkets to make complaints that the GCA can investigate and follow through on. Recently we have seen evidence that this issue is rearing its head again, with the dairy farmers and the price they receive for milk. A stronger GCA may have been able to intervene and take greater action in support of the farmers or those at the end of a supply chain, who we need to survive in order to get the end product, provide local employment and have a greener product as a result of a smaller carbon footprint. Also, my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr) has called for the GCA to have greater powers over labelling, to make the supply chain from source to product much clearer.

Overall, the position of the GCA is welcome, but there are still imperfections. The new clause could allow some of them to be smoothed out. I support the new clause and certainly agree with the principle behind it.

[Anna Soubry]

It is obviously a pleasure, Sir David, to serve under your chairmanship in our final sitting.

In short, the Government are already committed to reviewing the GCA after next month. That commitment is in the Groceries Code Adjudicator Act 2013, so this very review is going to happen; it is in statute. Yes, we are looking at the terms of reference. We are preparing them to make sure they include all the things we want the review to look at, so we are looking at consideration of the remit and the powers of the GCA being part of that review.

The review will cover the period up to 31 March, so we will begin the public consultation shortly after that date, as part of the review, providing an opportunity for everyone to input their views. As I say, it is all there already in the 2013 Act. The new clause is just not necessary, because all these points are covered already.

Enterprise Bill [ Lords ] (First sitting)

Debate between Bill Esterson and Alan Brown

Tuesday 9th February 2016 Public Bill Committees

[Bill Esterson]

I thank my hon. Friend for that point: we might almost think that the Government had designed it so that that would be the consequence.

Many small businesses find trading with the public sector very different, because of late payment and retentions in the construction sector, and because of the arrangements for contracting, procurement and tendering. Given that the public sector is such a large part of the trade of small firms and one of their biggest markets, it seems odd that the small business commissioner is not going to be constituted in a way that will allow support to be provided when the public sector is involved. That is the point my hon. Friend made. In fact, the issues of late payment and retentions, contracting, procurement and tendering are the same whether the business being contracted for is with the public or the private sector. The imbalance in the relationship between large and small is the same in both sectors, and the need for a level playing field is the same.

Public sector organisations that buy from the private sector should treat large and small businesses equally, yet many of the complaints from small businesses suggest that large firms have the advantage in tendering and other contractual matters in their relationships with both public and private sectors. Certainly my own experience in business was that it was almost impossible, as a small business, to get anywhere in tendering or even in getting past the pre-qualifying questionnaire. I know that that is a complaint often made by small firms: there seems to be an automatic decision to choose the larger firm when it comes to contracting.

If we want the small business commissioner to be as effective as possible, we should enable and, indeed, encourage him or her to explore and address the challenges where they lie and where small business wants support and advice. It makes sense for small businesses to have one place to go to for help, no matter the cause of complaint. If what the Government want the small business commissioner to address late payment as a priority, it makes sense for the commissioner to address late payment, not just some late payment. Whether a small business has difficulty being paid, progressing with tenders or developing its business with large customers, many of the same difficulties of anonymous organisations present themselves. The idea of a one-stop shop seems to make a lot of sense, and this group of amendments is an attempt to give teeth to the commissioner from the outset and not to limit his or her remit.

In the Lords, the Government said they did not want to include the public sector because there are other arrangements for complaints against the public sector, and for mediation. The obvious answer is that the difficulties that small businesses face are such that the existing arrangements are not sufficient, just as the existing arrangements are not sufficient in relation to late payment and other relationships between large and small firms in the private sector.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Sir David.

The hon. Gentleman makes a valid point. I agreed with what he said earlier about the relationships between businesses and their clients in the public sector. He pointed out that the current arrangements do not work. There is also a risk associated with Government cuts in the public sector, because one of the easiest places to make cuts is in the backroom staff who process invoices and so on. If the current system is not working, there is a risk that things will get worse for small businesses. It is really important that the public sector is included along with private businesses, so that the small business commissioner can hold them to account.

[Bill Esterson]

That is an excellent point, because it highlights the fact that when Ministers and Government MPs say that cuts can be made in administration or in non-essential roles, there are consequences. As the hon. Gentleman says, one of the consequences is in accounting departments, and there is a potential knock-on effect of the late payment of small businesses. One reason why it would be a good idea to include the public sector is that the commissioner could shine a light on some of those problems, gaps and staff shortages. They could say to the Government that they should rethink the scale of cuts in the public sector, that the consequences of those cuts also have an effect on the private sector and the wider economy, and that perhaps those Treasury decisions should be reconsidered. Of course, that is much harder to do if the commissioner is part of the Department and owes his survival in post to the Secretary of State.

The Groceries Code Adjudicator was set up, albeit on a limited scale, and we could learn much from that experience when considering how best to set up the small business commissioner. When I say “a limited scale”, I mean that a three-day-a-week adjudicator with five members of staff is responsible for 7,000 suppliers with 300,000 indirect suppliers that are not even part of her remit.

The Groceries Code Adjudicator was set up to address the imbalance between large supermarkets and their suppliers, because there had been a long-standing problem. There is also a long-standing problem in how many small businesses are treated by some public sector organisations, and the creation of the small business commissioner is an opportunity to address problems for small businesses, regardless of where those problems originate. That includes working with the Groceries Code Adjudicator.

One learning point from the Groceries Code Adjudicator, by the way, is that she has spent much of her time explaining to suppliers and others what her role and remit are, leaving her much less time to devote to addressing the concerns of the industry, which was why the office was set up in the first place. Maybe that is one reason why, after two years, she has held only one investigation, welcome though that investigation of Tesco is. We should take that experience on board.

The adjudicator has raised concerns about suppliers’ reluctance to complain and difficulties in ensuring confidentiality in the complaints process. We will move amendments on those points later in our discussions. Hopefully, we can learn from the Groceries Code Adjudicator to ensure that the small business commissioner is as effective as possible, as early as possible.

On the relationship between small businesses and the public sector, there are sometimes supply chain situations in which a small business supplies goods to a private sector customer, who in turn contracts with the public sector. My hon. Friend the Member for Wakefield made that point earlier. Construction is a good example; we will come to the issue of cash retentions in the construction industry numerous times in our deliberations.

If a small business is not paid by a larger customer, which in turn is struggling because of delays by a public sector organisation, I can see how the small business might approach the small business commissioner for help but be told that the complaint is beyond the scope of the small business commissioner due to the involvement of the public sector. The simple answer to that and other disputes with the public sector is for the small business commissioner to be able to intervene in all cases brought to him or her by small businesses. As the Minister did not respond earlier to the point made by my hon. Friend the Member for Wakefield about supply chains involving the public sector, perhaps she will do so this time.

The amendment also address the fact that most small business trade is with other small businesses; again, larger firms and the public sector are often somewhere in the supply chain. I believe that such disputes are also excluded from the small business commissioner’s remit, unless the Minister tells us otherwise. There is a wider business environment, and for the small business commissioner to deliver, it needs to be able to do so regardless of the nature of the parties involved.

During the debate in the other place, I noticed that there was discussion of how late payment could not be considered in isolation. It was suggested that to address late payment effectively, the small business commissioner would also have to consider commissioning and operations. As hon. Members will know, payment in business is due only if a contract has been properly agreed and completed to the satisfaction of both parties. There are legal definitions of what constitutes the completion of a contract, which go beyond my limited knowledge of the law. The argument was made in the Lords that late payment is often the result of disagreement about contract matters and about whether a product or service has been delivered as agreed. As a result, it is difficult to see how the small business commissioner will be able to consider late payment in isolation.

The point was also made in the Lords that if small businesses want help with late payments or anything else and are told that the Government have set up a wonderful new service, but are then told that the small business commissioner is not allowed to help with their particular problem, they will feel let down by the Government. It will reinforce the impression that the Government are not really interested in helping; that they are not really on their side; that they stand up for some groups, but not others; that they are there for the Googles and tax havens of this world but not for small businesses. That impression already exists through measures such as the introduction of quarterly filing of tax returns, the scrapping of the growth fund and business accelerator and the movement from grants to loans for small businesses. The creation of the small business commissioner is an opportunity to put some balance back, but only if it is done in the right way. That means not restricting where the small business commissioner investigates. It should be able to look at other elements of the business relationship, including commissioning, procurement and operations, and its remit should include the public sector and other small businesses.

The Government want the small business commissioner to concentrate on late payments. Given the scale of the problem, we do not object to that, although it is not the way in which the Australian commissioners have been set up. The advice from Australia, from the excellent Mark Brennan, has been that having late payments as the commissioner’s main focus might limit the role, because late payment is about a lot more than the immediate issue of whether a particular invoice is late. The commissioner could and should be able to do a lot more, and should have an important role in improving the wider business environment for small business and the economy as a whole. Better information is an important part of having a successful economy, with low barriers to entry, that encourages and supports the growth of businesses or all ages and sizes. Having the appropriate regulations to ensure fair competition is another important element.

It is clear from the successful work of Mark Brennan that there is an opportunity for our small business commissioner to provide information and work towards the right kind of regulation that ensures a fair economy. On Second Reading, the hon. Member for Huntingdon (Mr Djanogly) raised concern about the narrow remit of the small business commissioner, and I agree with him that it lacks teeth. There is an opportunity for the commissioner to do much more than look at 500 late payments a year when there are 5 million small businesses. That sounds like just scratching the surface.

Lord Mendelsohn made the point that the small business commissioner could look at so much more, including

“access to information and education; advocacy to government; investigation of small business complaints and business behaviour; facilitating the resolution of disputes, including and especially through mediation; influencing small business-conscious government and other key stakeholders, including regulators, media and the business community; and ensuring that such a commissioner would operate with an attitude of being concerned with substance rather than technicality and a dedication to resolving disputes by encouraging commercially realistic attitudes”.—[Official Report, House of Lords, 25 November 2015; Vol. 767, c. 733]

He also made the point that an effective small business commissioner should be expected to help the wider business environment and the economy as a whole, as his or her role is to ensure fairness, not to see one party succeed at the expense of another.

The Lords were also concerned that a mediation role was to be excluded from the function of the small business commissioner. In Australia, the ability to resolve disputes through mediation and direct involvement has been one of the reasons for the success of the office across the country and in a number of different states. Mediation has meant the commissioner working with large businesses as well as small and has enabled the small business commissioner to build profile, credibility and influence. In Australia, if a large firm refuses to take part in mediation with the small business commissioner, that can be taken into account when costs are being considered during court action. The Australian small business commissioner has teeth—very sharp ones—and it is a great shame that ours appears to be lacking in bite. The small business commissioner’s ability to direct small businesses to another organisation that may be able to help clearly has value, but in some cases the commissioner may well be best placed to help and, as in Australia, may be more effective in a wider sense. The purpose of the amendments, which relate to the public sector, is to give a wider sense of how we can build on the commissioner’s initial role of tackling late payments.

Enterprise Bill [ Lords ] (Second sitting)

Debate between Bill Esterson and Alan Brown

Tuesday 9th February 2016 Public Bill Committees

[Bill Esterson]

I beg to move amendment 47, in clause 4, page 4, line 25, at end insert?

“or is made by a small business (“the complainant”) which has an agreement to supply, or has supplied or may supply, goods or services to another small or medium sized business (“the respondent”), which has the same meaning given by section 7(1) in the Small Business, Enterprise and Employment Act 2015.”

This amendment would extend the Small Business Commissioner’s remit to complaints made by an SME against another, to which it is providing goods or services.

One day, someone else will be moving an amendment, but not today. Amendment 47 is about the remit of the commissioner and the ability to consider complaints made by one small business against another, which can be due to supply chain issues. Behind a problem in payment from one small business to another, there often lies a chain in which larger businesses and, indeed, the public sector are the real problem. A small business cannot pay another small business if it is owed money itself. That was addressed in detail in the Lords. In Grand Committee in the Lords, we found out that 70% of small businesses trade with other small businesses.

The amendment is an attempt to unpick some issues and challenges that enable the commissioner to be as effective as possible. It would protect small and medium-sized businesses and enhance competition, creating a fairer environment for all businesses. Government involvement in small business matters should aim to ensure that prospective and ongoing small businesses have sufficient knowledge to make informed business decisions. Although any business has a fundamental right of control over positioning and maximising its business opportunities, that right does not extend to engaging in unfair business practices. This is not just about situations where small businesses cannot pay; it is also about situations where they choose not to.

I could not understand from the explanatory notes why the Government have not included complaints made by small businesses in the remit of the small business commissioner. The amendment would set that straight.

[Alan Brown]

I echo what has been said. The amendment seems to be a logical extension. Earlier we supported the extension to public bodies, which I thought would strengthen the Bill, and I think this amendment would too. Fellow SMEs should be protected as well. There should not be a loophole. We do not want to get to a stage where there is an argument about what constitutes an SME. All businesses should be treated equally, and this simple amendment would allow that opportunity.

[Anna Soubry]

This is why we have done it in this way. As we see from the clause, the commissioner will handle complaints by small business suppliers about payment-related issues with larger businesses—that is, any medium-sized or large business. The intention of all this legislation is to help small firms where they suffer from the imbalance in bargaining power. I have referred to the words of the noble Lord Mendelsohn about asymmetry. We know that smaller firms, by virtue of their smallness—especially microbusinesses—are at a disadvantage, especially against medium and larger companies. We believe that that is where the real problem is, and that is what we particularly want the small business commissioner to address.

That is not to say that if a small business is in dispute with another small business, it will not have access to all the sorts of dispute mechanism that we have heard about, but we do not believe that is where the real problem is, or the real imbalance of power. That is why we have specified businesses of fewer than 50 employees. They are disadvantaged by their size against medium and larger companies. We know that such businesses often feel unable to challenge contract terms proposed by larger businesses, as I think we have all agreed and mentioned, because it could breach or damage existing or potential commercial relationships with those companies.

Smaller businesses may not have the time, money or expertise to take a legal challenge, which is another consideration. However, as we know, sometimes it is because they are simply frightened that if they take any form of legal action—even something like mediation—it will completely thwart the future commercial relationship between them. They are in a much weaker position by virtue of their size, so that is where we are putting all the emphasis. Their big problem is medium and larger businesses. That is why I resist the amendment.