Small Business Commissioner (Scope and Scheme) Regulations 2017

Lord Henley Excerpts

Tuesday 12th December 2017 Lords Chamber

Moved by

[Lord Henley]

That the draft Orders and Regulations laid before the House on 1 November be approved. Considered in Grand Committee on 6 December

Motions agreed.

Better Regulation

Lord Henley Excerpts

Thursday 7th December 2017 Lords Chamber

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

My Lords, I join the noble Lord, Lord Mendelsohn, and other noble Lords in offering my congratulations to my noble friend on securing this debate. As others have made clear, she brings much experience to this field, having served as a civil servant on the better regulation unit with our noble friend Lord Heseltine, in the private sector and as a Minister. I welcome this opportunity to discuss a topic that continues to be a high priority for the Government. It is one in which my noble friend has a long interest.

I am new to this subject but I am grateful for the accreditation that I got from the noble Baroness, Lady Donaghy, who described me as “a gentle soul”—at least I think those were the words she used. She tells me she said “a gentle creature; “soul” is probably too generous a word. As a gentle creature, I hope that I can at least bring the appropriate steel to these matters where necessary. I stress that I am new to the better regulation portfolio. I have yet to meet Anthony Browne, the incoming chair of the Regulatory Policy Committee, but I hope to do so shortly—possibly next week, depending on his and my diary commitments. However, I certainly pay tribute to the outgoing chair, Michael Gibbons, who has done an excellent job for the committee since its inception in 2009. He has completed two stints, serving for eight years, and I and the rest of the Government pay tribute to him for that.

I also completely understand that regulatory reform has become a much more sensitive and emotive issue in the light of the Grenfell tragedy. In due course we will certainly want to reflect on the current inquiries, but at this stage I do not want to say anything that might pre-empt or second-guess what might come out of them. We obviously await the outcome with concern and interest, but at this stage the Government are looking anew at regulation and considering in this Parliament what the better regulation framework should look like.

I also make it clear that our regulatory reform agenda does not come at the cost of people’s safety, and nor would it ever do so. Our aim is to deliver smart, proportionate and balanced regulation, while ensuring that essential protections are retained. The noble Lord, Lord Whitty, preferred the word “proportionate”; my noble friend used the word “balanced”. I agree that words are important but I believe that both “balanced” and “proportionate” can be used. It is important to make it clear that we want to have the appropriate regulation while ensuring, as I said, that essential protections are retained. Regulation should also be proportionate to achieve the outcome required and at an appropriate cost to the business that bears it; this provides an environment that supports the generation of growth, competitiveness and jobs, as my noble friend alluded to.

It is also appropriate that we make it clear that we will decide in due course, in this Parliament, how the better regulation system will operate. The noble Lord, Lord Haskel, referred to the work of the Secondary Legislation Scrutiny Committee, an important committee that does very useful work in this field. My first experience of any committee was the Joint Committee on Statutory Instruments. I think the noble Lord has also served on it and, as he will remember, it had no role in looking at the merits of secondary legislation; it could look only at its vires and so on. In that sense, it sometimes felt like an outer Siberia of committees. The Secondary Legislation Scrutiny Committee has a more effective role in this area. We would certainly want to make sure that not just that committee, but Parliament as a whole, has a proper role to play. However, I think the Government can provide the appropriate assurance that this will not be achieved through reducing necessary public protection.

As we consider how the better regulation system will operate, we will continue to discuss these matters. We have discussed them before and will continue to do so with others in due course. I give an assurance to the noble Baroness, Lady Andrews, that we have discussed such changes with various business groups, despite what she said. Officials have met the key business groups over the last two months. Only last week I attended a meeting with the FSB, the CBI, the EEF and the IoD, and I understand that the de minimis rule was mentioned following recent conversations. I seek to reassure business that any changes that we allow will also allow closer scrutiny of the most important measures.

[Baroness Andrews]

The Minister has answered my question in part, but does that mean he will reconsider establishing a call-in process? Business is most concerned that these measures will fall under the barrier of £5 million and will not be looked at.

[Lord Henley]

Final decisions have not been made; the noble Baroness will have to be patient in these matters. She referred to a letter from me to colleagues in government, but obviously we will not comment on leaked documents.

[Baroness Andrews]

My Lords, the letter came to me in good faith by mistake. It was not a leaked document.

[Lord Henley]

I do not know how the noble Baroness received it, but she will be aware that it was an internal letter from me to colleagues within government. As far as I am concerned, that amounts to a leaked document.

[Lord Haskel]

I can shed a little light on the subject. The letter was from the Minister to the Public Accounts Committee in another place.

[Lord Henley]

I think the noble Lord is referring to another letter. The postal service has been quite busy. I will come to the comments of the Public Accounts Committee in due course. I am referring to what amounts to a leaked document.

[Lord Stunell]

The Minister talks about coming back to this in due course, but I understand that the new regime is in place now. Is there a hiatus between the new regime and him coming back to consider matters?

[Lord Henley]

The noble Lord is correct that the new regime is in place, but that does not mean that all proposals are finalised; these matters can always be considered in the light of representations made, even by the noble Lord. He and I were in the coalition Government together; we worked together in the past. I am sure we can take account of comments made here, and I would be more than happy to listen to him.

I want to make it clear—not commenting on leaked documents—that our proposals actually increase scrutiny by bringing significant deregulation measures into scope. They focus the system on measures with large impacts. This brings me to the Public Accounts Committee, whose recommendations it is worth commenting on. The 2016 report said:

“The Better Regulation Executive’s rules for assessing and validating the expected impact of a regulation are the same, regardless of the scale of the regulation’s impact. The Better Regulation Executive … has established a complex bureaucracy across Whitehall that diverts departments’ resources away from potentially more productive efforts … Of the 95 regulations that the Regulatory Policy Committee has scrutinised during this Parliament, 64 of them have an individual expected net impact of less than £5 million”.


The committee then recommended that we should change the rules to allow a more proportionate approach whereby significantly more effort can be applied to the assessment and validation of the small number of regulations with the greatest impact. That is what we are doing with the de minimis rule.

That is why we took this action and why I wrote to the Public Accounts Committee only last month to inform it that we intended to follow its recommendations and adopt a more proportionate and efficient better regulation system by introducing that threshold. Obviously, we can always reconsider those matters, but that is why I wrote. It will allow the RPC to focus on the measures that matter most. If it had been in force in the last Parliament, 90% of the costs would still be subject to independent scrutiny.

It is only right that regulation should be kept under constant review as products and technology change. Where regulatory requirements are not clear or easily understood, it can lead to confusion and potentially an increased risk to the public. Over the last 20 years, Governments have been working on getting the delicate balance or proportionality right and the costs and benefits of regulation right. That has included the establishment of the Regulatory Policy Committee, as I mentioned earlier, which gives independent scrutiny of the evidence for regulatory changes when they are debated in Parliament.

There were previous government initiatives to review the stock of legislation. Going back to the beginning of the coalition Government, which the noble Lords, Lord Stoneham and Lord Stunnell, will remember, there were the Red Tape Challenge and the cutting red tape reviews. The noble Lord, Lord Stunnell, took credit for introducing the one-in, one-out measure, which I think he accepted served a useful purpose in encouraging the process, even if another noble Lord—I think it was the noble Lord, Lord Whitty—did not like the idea and said that it led to getting rid of something purely for the sake of it. But it encouraged the others and served a useful purpose.

Those reviews sought views from the public to help identify outdated, unnecessary or overly complex legislation and led in due course, as both noble Lords and others will remember, to the Small Business, Enterprise and Employment Act 2015. My noble friend will remember that because she took the legislation through the House. It introduced a requirement for the Government to set a business impact target, focused on the economic impact of regulatory change on business activities, and the need to report annually on its achievements against that target.

These initiatives have delivered some real improvements in how people, businesses and public bodies are regulated, and have also encouraged a cultural shift in government departments towards more appropriate and smarter regulation. The one-in, one-out or one-in, two-out proposals played a part in that. For example, my own department’s business perceptions survey last year showed a decline in the proportion of businesses that believed that the overall level of regulation in the UK was an obstacle to their success. It went down to 49% in 2016, from 62% in 2009.

As I said earlier, the Public Accounts Committee produced a number of recommendations about how we can further improve our regulation system, following the report from the National Audit Office last year. We have been reflecting on those conclusions, including ideas about how to make our approach more proportionate.

[Lord Mendelsohn]

Will the Minister clarify the changes to the RPC that are in effect? Is he suggesting that the change to the regime is more permissive, less permissive or exactly the same as what stood before? To be clear on the purpose, is he saying that the changes were directly as a result of those suggestions from other committees? Were some of the changes requested by departments to have freedom and flexibility, or were they in any way related to the pressures in the system as a result of the EU exit?

[Lord Henley]

My Lords, I do not accept that the EU exit has led to those changes. I said that the Public Accounts Committee had made some recommendations. We considered those and brought in the de minimis rule. We are not bound to keep that. We could change it if necessary, but it gives the RPC a freer hand in what it does and allows it to focus its efforts more appropriately on the job that it does very well.

I can also give an assurance, since there was some criticism of our attitude to the RPC, that we are still committed to it and its work. We are making sure that it has the appropriate number of members. It currently has eight members and it will continue to have eight members. Announcements will be made in due course as to whether some members have been reappointed, or where necessary new members will be brought in, so that it can continue to do its work.

I am beginning to run out of time and I do not want to deprive my noble friend of the chance to say a few words at the end of the debate. However, I should like to deal with one or two of the other questions that have been raised.

I think I have more or less touched on it, but the noble Lord, Lord Haskel, referred to the letter from my noble friend Lord Trefgarne, the chair of his committee, about the threshold. We acknowledge the good work of the committee and I am aware of the letter from my noble friend. I think that it was received in the department on 28 November and I intend to respond to it shortly. I can reassure the noble Lord that the department will continue to provide appropriate analysis of its policies to the committee.

Perhaps I may also give an assurance to my noble friend Lord Altmann on pensions auto-enrolment. As a former member of the Department for Work and Pensions, where I have also served, she will know that auto-enrolment has been a great success. Some 8 million people have now enrolled and the Government are conducting a review to build on this success and make sure that the programme works in the long term. The review will be led by the Department for Work and Pensions supported by an external advisory body. I am told that it will report by the end of 2017, so my noble friend does not have to wait for long because that really does mean pretty soon.

Concern was expressed by my noble friend Lady Neville-Rolfe and the noble Baroness, Lady Andrews, about the RPC’s processing not applying to tax or the national minimum wage. I can give them an assurance that HMRC has a separate body, known as the Administrative Burdens Advisory Body, to consider reducing the burden of tax administration, so there is a role for it which provides scrutiny.

Lastly, the noble Lord, Lord Stoneham, was concerned about what plans we have for EU exit. This is a concern that comes up in every Question and debate in the House. We have made it quite clear that the withdrawal Bill will be designed to ensure that EU exit will take place with certainty and that we maintain continuity and control. The Bill will help to maximise certainty for business on what regulation will apply on exit and to maintain important protections for consumers.

As always, I apologise for the fact that I have not been able to address every point that has been put before me, but again as always I promise to write to noble Lords on any issues that I have not addressed. I end by thanking my noble friend once more for introducing this debate.

Small Business Commissioner (Scope and Scheme) Regulations 2017

Lord Henley Excerpts

Wednesday 6th December 2017 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Small Business Commissioner (Scope and Scheme) Regulations 2017.

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

My Lords, the purpose of the statutory instrument before us today is to establish further detail about the Small Business Commissioner’s complaints scheme, as well as which small businesses qualify to use the complaints service.

Late payment remains a significant issue in the United Kingdom. According to data on business population estimates published by my department in October 2016, 99.3% of the 5.5 million private sector businesses were small businesses and 99.9% were small or medium-sized businesses.

Latest BACS Direct Credit figures report that the overall level of late-payment debt owed to small and medium-sized businesses stands at £14.2 billion. This is completely unacceptable for the small and medium business sector in the UK, which we all rely on for jobs, goods and services. There is no place for this sort of unfair payment culture in a well-functioning economy.

Provisions in the Enterprise Act 2016 established the Small Business Commissioner. I take this opportunity to welcome Mr Paul Uppal into the role as the United Kingdom’s first Small Business Commissioner, following the announcement of his appointment by my right honourable friend in another place the Secretary of State, Greg Clark, on 2 October this year.

Mr Uppal’s role will be crucial in supporting small businesses to resolve payment disputes with larger businesses and will help drive a culture change in payment practices and how businesses deal with each other. The commissioner will provide general advice and information to small businesses, delivered through the commissioner’s website, signposting businesses to existing support and dispute resolution services.

The website has been specifically developed so it is fit for purpose. My department has received positive feedback that it meets an information and service need currently not met. I can report that development work on the website was completed yesterday and the website will be launched alongside the rest of the Small Business Commissioner’s service before the end of this calendar year, subject to the proceedings before us today. Since the debate in another place on 21 November, the Small Business Commissioner and his team have also begun their programme of stakeholder engagement and have begun recruiting additional staff who will provide support on complaints casework.

The commissioner will be able to consider complaints from small business suppliers about payment issues with their larger business clients and make relevant recommendations. We are aware that small businesses may refrain from making a payment-issue complaint about a larger business for fear of it being detrimental to their relationship—for example, resulting in a threat to terminate their contract or similar bully-boy tactics. The regulations therefore ensure that the commissioner is not required to name the complainant to the respondent. They also allow the commissioner to disapply the condition that the small business making the complaint must talk to the larger business about the complaint before coming to the commissioner, where the commissioner considers that to do so would have a significant detrimental effect on the commercial interests of the small business making the complaint. The Act makes it clear that, in any report on complaints, the commissioner cannot name the complainant unless the complainant agrees to being named.

The commissioner can accept and consider complaints that relate to matters which occurred in the period between 6 April 2017 and the formal launch of the complaints service, as well as those relating to matters occurring after the launch date. This broadens access to the complaints service and will help the Small Business Commissioner gain impetus as soon as the office is officially open for business. The complaints service will launch as soon as possible following Parliament’s approval of these regulations, as has already happened in another place.

The Enterprise Act 2016 sets out the broad framework for the Small Business Commissioner. These measures apply to the whole United Kingdom. These regulations provide further detail about what a small business is for the purposes of qualifying for the commissioner’s services, including the complaints service. The regulations also provide further detail about the complaints scheme itself.

The regulations set out that a business must have a headcount of fewer than 50 staff on one of the assessment dates or during one of the assessment periods to qualify to use the commissioner’s services. They also set out the requirements that must be met before presenting a complaint; the requirements as to the form and content of the complaint; and the time limit for presenting a complaint, and the power of the commissioner to fix and extend time limits and to dismiss complaints. They also set out the matters that the commissioner must take into consideration when determining whether an act or an omission complained about was fair and reasonable, and the factors to be taken into account when deciding whether to identify a respondent in any report of any complaint.

My department consulted on how the Small Business Commissioner would handle complaints between 13 October 2016 and 7 December 2016, and published draft regulations in February this year. We understand that the key message from respondents to the consultation was that the regulations should be simple so that the Small Business Commissioner’s services are as efficient and effective as possible.

The regulations before us will enable the Small Business Commissioner to accept complaints on payment matters from small business suppliers about their larger clients. This is an important part of the Small Business Commissioner’s role in supporting small business. I commend these regulations to the Committee and I beg to move.

[Lord Jones (Lab)]

My Lords, I thank the Minister for his pithy introduction. The regulations surely have to be welcomed. It must be good news to many thousands of SMEs. I refer to the register of interests: I am president of Flintshire Business Week and Deeside Business Forum, which sits across the England/Wales border and has some 9,000 jobs. It is based at Deeside Industrial Park, which has 260 companies at least, most of which are SMEs. There is considerable interest from companies such as these in the regulations. Do we yet have a commissioner’s name in mind? Who shall choose? Shall it be salaried? What salary might it be?

--- Later in debate ---

[Lord Mendelsohn (Lab)]

My Lords, I am absolutely crestfallen that the noble Lord, Lord Cope, has found the thing that I was going to start my contribution with, which is the phrase in the notes that the regulations will not affect business. My fear is that this is not a statutory instrument that will do the job in the way we hope it will. I want to preface my remarks by saying how nice it is to see the noble Baroness, Lady Neville-Rolfe, in her place. During the passage of the relevant provisions for the Small Business Commissioner in the Bill, she said at one point that she might even consider the role herself. I am pleased that she is still in this House campaigning on many issues, and I have to say that she has been saved by the appointment of an excellent candidate. I welcome Paul Uppal to his role as the Small Business Commissioner. He will make an excellent commissioner because he has great attributes for the role, given his background and approach. I congratulate the Government on securing such a person.

My only fear is that this statutory instrument is an illustration of why the Government are humbling the role before it has a chance of success. No matter what the quality of the person, I see tremendous difficulties ahead in being able to make any meaningful change. Yet again we have gone for a system where we have decided to invent a wheel that has four sides. My concern is that this does not work in any established model or precedent. It does not have any behavioural testing or pilots to demonstrate that it can achieve any of the outcomes. I will go through some of the policy issues and then through the statutory instrument.

First, I was really impressed with the department for its policy background in the Explanatory Notes because this is a huge exercise. The department is to be given huge credit for finding the lowest possible estimation of late-payment debt available in this country. It is certainly true that the BACS survey has far and away the lowest estimates of it for small businesses, by saying that it is just over £14 billion. In fact the average of all the surveys which I found was the Zurich survey, which had £44 billion for SMEs. Why have the Government therefore chosen the veracity of the BACS report? Would the Minister like to tell me, for example, the survey size of that report? I happen to know the answer but I would be keen to hear it from him. Of all the 14 available surveys that I found of late payments, none had a figure as absurd as that. Where does the survey fit in on a sample size—is it at the top, the middle or the end? Can he also tell me for how many years BACS has conducted a survey and what was the methodological change this year to have come out with such a figure? Seeing this figure alone, my concern is that I do not feel that the Government are taking this problem seriously. This will also affect the estimates to come thereafter of what the Government think will be necessary to do this.

Secondly, yet again, I understand the Government’s desperate desire not to do too much and to believe that cultural change, in and of itself, will make a huge difference. I know they will say that the Prompt Payment Code is causing all sorts of wonderful cultural changes that are making a huge difference. We may have that code but I would like to ask a few questions. Can the Minister give me any evidential base whatever to suggest that the Prompt Payment Code has made any change, apart from a Minister who I have found saying, “I’ve spoken to some people and they say they like it”? Can he give me anything with any independent foundation for doing it? Can he demonstrate any example, among the many identified in government reports or in the press, where a company that is a problem late payer and a member of the Prompt Payment Code has been disciplined, chucked out or taken to task for anything that it has done? It is a pretty hard case to make but I would be interested to hear his reflections on that.

It is a shame that the public sector is not included in this provision. I understand that there is a different commissioner and that the argument has always been that because there are definable terms of 30 days, it is not necessary because there is a different mechanism. But I think the overall success of the Small Business Commissioner will be through its ability to get underneath the issues that lie behind problems of late payments. That includes issues around the public sector and its suppliers, where there is a supply chain. It should be able to make the right sort of assessments of that sector. Taking the sector away humbles the Small Business Commissioner’s capacity to take an overall view of late payments. Those are all significant concerns.

I return to the issue about size because it is relevant. I think it is anticipated that the Small Business Commissioner will have establishment costs of £1.1 million and is meant to have a running cost of £1.4 million. I would be grateful to have a breakdown of the staff who comprise that £1.4 million and therefore how many hours of investigative time we think we will have. I also understand that the Government—on the basis of an utterly ridiculous figure of £14.4 billion, but that is another matter—say that the estimate is that 70,000 companies will be referring just under 400,000 disputes, of which 500 will result in full-blown complaints. While I am tempted to ask the Minister what percentage of the overall disputes will therefore result in a full-blown complaint, I can tell him for the benefit of time that it is 0.125%. Can he explain how the Government match that level of complaint to the staffing and what they are required to carry out through the statutory instrument? I have tried on the back of an envelope—in fact, multiple envelopes because it took so long to do the maths—to see how you can spend the amount of money involved in the establishment of it and end up with that number, and I just cannot do it. I would be very grateful if the Minister, on the basis of the bogus number, will tell us how this is meant to operate, how much time is allocated to each dispute, and how that will work. That would be very helpful indeed.

Unfortunately, I have some other issues with the actual drafting of the statutory instrument. I agree with the noble Baroness, Lady Neville-Rolfe, that brevity and simplicity are wonderful. There is nothing like brevity and simplicity and this statutory instrument is nothing like brevity and simplicity. I am tempted to say that I worry when a Government overregulate. This is an example of overregulation, when better regulation would be much more judicious.

The biggest problem I have with the statutory instrument is that fundamentally it regulates the size, not the activity. I talked this through with a lawyer and said, “If I am a big company, how do I change this? I just move the dispute that I have to a small company and I am no longer on the hook for it”. The ability to drive a coach and horses through this and to avoid any form of dispute or mediation or any cost by changing the structure or who holds the debt or who holds the activity is easy within these terms. Which lawyers reviewed this? Which scenarios did they plan for? Did they understand the opportunity to game it? This is important. As we have seen with the application of the role of the Pubs Code Adjudicator, a coach and horses has been driven through that one and absolutely nothing has happened. I would rather the Government were realistic at the very beginning about what was likely to happen.

As we all know, there is always the law of unintended consequences in these matters. In relation to the size, does the Minister think there will be any unintended consequences of setting a number? Will that exclude certain disputes that should be part of it? Should there be provision for the Small Business Commissioner to be able to apply discretion in certain circumstances, rather than it being as prescriptive as it is?

Then we move to the issue in Regulation 3, which is titled, “Requirements before presenting a complaint to the Commissioner”. It says that in order to pursue a complaint,

“the person making the complaint must … communicate the substance of the complaint to the person against whom the complaint is made; and … give that person a reasonable opportunity to deal with it”.

The definition of “a reasonable opportunity” is quite difficult. In truth, it is a payment that is late. We say that we have a condition for late payment, rather similar to that in the public sector, of days on which you can apply interest, and we then specify a reasonable opportunity to deal with it. If it is late, it is late. Again, we have created a huge opportunity for a sense in which a complaint can now be a reasonable complaint and you can probably delay to the average number of days. Whether you believe the bogus BACS survey which said it was 72 days, I think, or the other average that most others identify, which is 90 days, you can still extend much further on the basis of what is a definably reasonable opportunity to deal with it.

Then we have the wonderful paragraph (2). This is always the issue. The Minister correctly identified the problem of a company which may face adverse commercial consequences from raising the issue. It says here:

“The specified circumstances are where the Commissioner considers for this particular complaint, there is sufficient information to suggest that communicating it to the person against whom it is made would have a significant detrimental effect on the commercial interests of the person making it”.


Will the Minister please define for me in detail what this “sufficient information to suggest” is? I think that is a remarkable thing to put down and, again, it fetters the Small Business Commissioner’s scope.

I could go on but I will cut out a few comments because the point is being made. I could go on about the time limit for presenting a complaint. For example, when you are dealing with a company such as Amazon, which many of our small businesses do, it has a procedure which takes a year in the first place. Are we out of scope from the time you make a complaint to when it is defined? Again, it fetters the Small Business Commissioner in a much more serious way. In particular, Regulation 5(4) says:

“Where the complaint or part of the complaint is not made within the time limit set out in paragraph (1), the Commissioner must not entertain the complaint”.


By the way, in this context I am absolutely shocked to see—having had many a debate with the noble Baroness, Lady Neville-Rolfe, on this matter, with huge arguments over “may” or “must”—the remarkable number of times “must” appears in relation to the Small Business Commissioner. Again, he,

“must not entertain the complaint”.

That is also a huge mistake.

On the power of the commissioner to fix time limits, again, we have here perhaps the best powers given to the Small Business Commissioner, which are discretionary. I would like to see an awful lot more of those. On the power of the commissioner to dismiss a complaint, again a charter is given for people to be able to suggest that the complaint can be reasonably dismissed, and there are now eight headings that qualify the decision of the Small Business Commissioner on whether to dismiss a complaint. I spent time with my lawyer, and as a big company you could pull a case together on pretty much half of these anyway, on almost any circumstance. Therefore the Government have now given an ability to argue the case and to create a legal obstacle for the Small Business Commissioner to take up the issue in the first place.

These are huge mistakes. I could go on about the notifications and how overly problematic they are. My basic point is that we will have to pass these things—that is the natural course of things in this place—because we need the Small Business Commissioner up and running. But they are deeply flawed, as they were from the time we tried to raise these issues during the passage of the Act up to now, when they are being put forward in a statutory instrument. The only assurance we can get, apart from some reasonable answers to not unreasonable questions, is on what the mechanisms will be to review it early—not late, as we faced with the Pubs Code Adjudicator, where problems are now faced because we have a restrictive three years for review—more seriously, quickly and appropriately, to ensure that we can adjust the scope and role of the Small Business Commissioner to adequately deal with these issues. I hope that that may mean that there is a new role for the noble Baroness, Lady Neville-Rolfe.

[Lord Henley]

The noble Lord throws a bit of a dampener on the proceedings, which were going quite well before that stage. I will comment on what other noble Lords had to say before I deal with some of his complaints. I am not sure that I will deal with all of them; I will probably write to him in greater detail afterwards. Since he accepted that these regulations will go through, that the Small Business Commissioner has a role and that we have to get him on the move, the sooner we can do that, the better. I will go back to those noble Lords who at least welcomed the regulations—I think he did, but he then took them to pieces and, as I said, threw something of a dampener on the proceedings.

I will start off with the noble Lord’s friend, the noble Lord, Lord Jones, who, as I said, was much politer and kinder about the regulations. I am grateful for that, and I give him an assurance that we have now appointed Mr Paul Uppal—the announcement was made a few days ago—who is a former Member of another place. The post was advertised in the usual way and will be salaried. I am afraid that if my noble friend Lady Neville-Rolfe was looking to get that job, she will have to wait a little while before it is vacant again. As I said, it was advertised in the usual way. I cannot specify exactly why he was chosen as opposed to any others, as that would be invidious and not right, but he was selected after due process and we are grateful to him.

My noble friend Lady Neville-Rolfe also regrets the length of this regulation; it is always difficult to get these matters right. On many other occasions I have moved that various orders be agreed and people have complained that there is not the detail in them. Unfortunately, the point behind regulations of this sort is that one can get into the details that one cannot get in the parent legislation. My noble friend is aware of the parent legislation; she took it through this House, and the noble Lord, Lord Mendelsohn, dealt with it from the Opposition Benches. They know full well that it is not right and proper to get that sort of detail into the original primary legislation, and the point behind these regulations is to get the detail in. I hope that we normally get it about right, but my noble friend Lord Cope teased me over the fact that the Explanatory Memorandum—which I stress is not, I think, part of the regulations, although I can never quite remember what its status is—states that the regulations will have no effect on business. We would obviously all like to make sure that it has an effect on business—and a beneficial effect.

I turn to the comments of the noble Baroness, Lady Golding. I am grateful for her welcome, but one cannot think of passing the Enterprise Act and creating a commissioner as a magic wand that will solve all problems. This is also the general remark I would make to the noble Lord, Lord Mendelsohn, in relation to his various comments, one or two of which I will deal with in greater detail. I can think of very few occasions when legislation can solve problems overnight. There was one Bill with which I had some involvement, the Scrap Metal Dealers Bill, which did quite a lot of what it was targeted to do in the area of metal theft.

In the main, legislation can only do so much. We hope that the Enterprise Act and these regulations will make a big difference. As with so many of these things, however, it is a matter of changing people’s behaviour and the culture of the bigger businesses so that they realise what damage they are doing to others. Legislation can do a certain amount and we have provided the appropriate resources for the commissioner; at least, I think they are appropriate. The figures I have—I think these are the figures that the noble Lord, Lord Mendelsohn, asked to be confirmed—are that the set-up costs are in the order of £1 million and the annual running costs will be roughly £1.4 million, most of that going on staff costs. These must be guesses but it is estimated that there may be 390,000 enquiries and 500 complaints. We think that is adequate for the commissioner at the moment but there is scope for the Secretary of State to increase the resources available to the commissioner if appropriate. He will obviously take advice from the commissioner about what he does and try to make sure he gets it right.

I make one more remark on the commissioner and the work he has already done. My noble friend Lord Cope commented on the website, suggesting that it was not clear enough and should do more, including cross-referencing with other bodies. I am sure that the commissioner will be grateful for my noble friend’s suggestion and that it will be looked at in due course. It is always difficult to get your website exactly right; some are better than others. One can take advice, and I am sure that the advice of my noble friends will be listened to by the commissioner in due course.

[Baroness Neville-Rolfe]

Before my noble friend sits down, I reiterate that I very much support the regulations. I also asked, I think, what arrangements there were for review, because this is a new commissioner. I expect that the department has some standard review provision for looking at how it works, and I am interested in that.

[Lord Henley]

I can give my noble friend an assurance that I was not about to sit down—unless others are desperate to get on to the other instruments—because I still had a certain amount to deal with from the noble Lord, Lord Mendelsohn, who would probably be upset if I left him at this early stage. I can, however, assure my noble friend that we will keep this under review. As I made clear, we are thinking of about £1.4 million as the budget being given to the commissioner for the annual running costs. My right honourable friend can keep that, and the size of it, under review. It is not just about money but about how they are getting on. The department will continue to keep these matters under review.

The noble Lord, Lord Mendelsohn, started off his throwing-a-dampener-on-it speech by questioning why we would use the BACS survey and saying that we should have used another survey that gave a higher figure. I will not go into details about which survey will be the best and which had the largest number of people involved in it to get the right figure. I do not know whether there is necessarily a right figure. All we can agree on is that £14.2 billion is a very high figure. The figures that the noble Lord quoted from other surveys are equally high and worrying. The important point is that something ought to be done to assist small businesses to ensure they do this properly. It is clear that the Government are taking this issue seriously from the fact that we sought parliamentary approval for the Enterprise Act and that, under that Act, we are now doing various things, of which the Small Business Commissioner and his staff are one small part. I do not think the noble Lord can accuse the Government of not taking this seriously. The important point is: we have put some resources in; we have appointed a good person to be that commissioner; and he will continue to pursue the appropriate measures available to him.

The noble Lord made the usual complaints people do about the drafting. He said it was too detailed and then that there was not enough—I was rather lost on that. The drafting went through the usual process. We consulted on it as we should. Generally, other than from the noble Lord, we have had a fairly favourable response to the drafting. I am sorry if he finds it overly legalistic. That is just the way things are drafted.

The noble Lord then asked me a rather extraordinary question: what are the unintended consequences of these regulations? If I knew what any unintended consequences were and that they would be detrimental to one or other person, or to the small business sector as a whole, I would not be moving them. I am afraid the noble Lord will have to accept that I do not have the wisdom of prophecy that he seems to think Ministers should have. I will try to improve. If I knew what the unintended consequences were, I would do something about them. We feel that the regulations will have a good effect and be one small step in helping small businesses. They will try to improve their lot and cut down the very large figure of £14.2 billion, or whatever larger figure the noble Lord would like to have.

Turning to another matter that I suppose is faintly relevant to what we are dealing with, the noble Lord asked about the evidence of the impact of the Prompt Payment Code. I can tell him that we actively monitor and enforce it. It has been successful in assisting business to recover debt, but also in highlighting best practice. That again is important as part of the necessity for the change of culture.

I appreciate that the noble Lord had other questions and that he would like further details on why we wanted BACS—

[Lord Mendelsohn]

I will now try to give the Minister some sense of why I invested in him the powers of prophecy, as well as suggesting that rather than my being a complete dampener on this, he should look to scale the heights to deal with this issue. My question about unintended consequences comes down to this simple point. If there are 500 cases, you are talking about dealing with £35 million-worth of disputes, tops. Does he believe that the figure is £14.2 billion? The sample size was 304, which is below the statistical level on which we are meant to judge any survey with any certainty; in any serious form, no one would ever consider anything under 500. This is good enough for a press release, but why the Government suddenly believe that it is worth putting in a policy framework is another matter. From surveys that are robust, £44 billion is the SME number. Does he think that trying to tackle disputes relating to £35 million is sufficient to create cultural change? The unintended consequence of this statutory instrument is that late payments will get higher if you do not have the resource to challenge the right level and number of disputes. When I said “unintended consequence” it was all about that.

With his hand on his heart, is the Minister able to say that he feels that this statutory instrument has sufficient scale to make a meaningful difference in culture or any other practice? That is the key.

[Lord Henley]

Genuinely, hand on my heart, in every possible way I honestly think this will make a difference. Changing that culture is the most important part of what we need to do. A commissioner himself can by his actions do a certain amount, by dealing with those 500 complaints a year, or however many there are; as I said, that is just an estimate, and we can increase resources if we need more. However, it is the existence of a commissioner—of the website and everything else —that can make the biggest change. That is why I gave assurances to my noble friend Lord Cope about getting the website and the advice right, which is so important.

Hand on heart, I believe that we can make a difference. I hope that that will be the case and that, in a year’s time—perhaps privately outside somewhere, or in debate on some other matter—the noble Lord, Lord Mendelsohn, will be kind enough to join his noble friends and say how well we are doing on this. We occasionally get praise from him, and I look forward to that. An unintended consequence of this debate would be his coming back to me with a degree of thanks.

Motion agreed.

Unified Patent Court (Immunities and Privileges) Order 2017

Lord Henley Excerpts

Wednesday 6th December 2017 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Unified Patent Court (Immunities and Privileges) Order 2017.

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

My Lords, the draft order was laid before the House on 26 June. It confers legal status on the Unified Patent Court, as well as providing a limited set of privileges and immunities to the court, its judges and its staff. They are necessary to ensure the effective and proper functioning of the court, and were agreed in the international agreement establishing the Unified Patent Court and its Protocol on Privileges and Immunities.

In its current form, the patent system across Europe is fragmented and expensive. Businesses must maintain a bundle of patent rights, each covering a single country. They must also enforce each patent separately in the national courts of each country. That is costly and burdensome. The Unified Patent Court will offer a way for innovative businesses to enforce or challenge patents in up to 26 European countries with a single court action. That ability to obtain a single judgment is potentially significant and valuable for patent-intensive industries. For example, independent research shows that around a quarter of all patent cases heard in United Kingdom courts were also litigated in other European jurisdictions between the same parties. That is why a single Unified Patent Court is so welcome.

Even better, an important division of the court dealing with disputes in the field of pharmaceuticals and the life sciences will be based here in the United Kingdom. This cements the United Kingdom’s global reputation as a place to resolve commercial legal disputes and reflects this country’s strong role in this important field. It will also generate considerable work for, and help to enhance the global competitiveness of, the United Kingdom legal services sector.

British businesses will still be able to choose national patents and litigation in national courts should they wish, but they will now have the option to use this new court structure, with all the benefits I have described. Being part of this international court will allow us to ensure that it meets the needs of our own innovative businesses, which will be able to use it in the other contracting states. That is why the Government are carrying out their commitment to proceed with preparations to ratify the international agreement that sets up the Unified Patent Court. That commitment should not be seen as pre-empting the negotiations on leaving the EU. Although the UPC is not an EU institution, our future relationship with the UPC will be the subject of negotiations as we leave the EU. Our efforts will be focused on getting the best deal possible.

The Unified Patent Court was established by an international agreement which the United Kingdom signed on 19 February 2013. The Protocol on Privileges and Immunities was adopted in June 2016 and the UK signed it on 15 December 2016. A preparatory committee of the signatory countries to the UPC agreement was established in 2013 and is nearing completion of the work needed to bring the court into operation. The main steps towards UK ratification have already been completed. The changes to our patent law to implement the UPC agreement were made by an affirmative order which was approved by both Houses in 2016.

The draft order is part of the UK’s ratification process. It confers legal capacity on the Unified Patent Court and gives effect to the Protocol on Privileges and Immunities. The draft order provides for immunity from legal process for the court—with some exceptions—and its judges, registrar and deputy registrar. This immunity is also provided for the representatives and staff of the court, but is restricted to the exercise of their official functions. This immunity can be waived by the UPC. The judges and staff of the court will be exempt from national taxation on their salaries and from national insurance once the court applies its own equivalent tax and puts in place its own social security and health system. However, neither exemption will apply to court staff who are British nationals or permanent UK residents. Finally, the draft order provides that the court is exempt from direct taxation in relation to its official activities, as is the case for other international organisations based here, such as the International Maritime Organization.

The draft order applies to the whole of the United Kingdom but some provisions do not extend to or apply in Scotland. Articles 1(3) and 1(4) clarify which provisions do not apply there. A separate order was passed in the Scottish Parliament in October this year which dealt with provisions within its legislative competence.

The draft order confers only those privileges and immunities on the new court, its judges and staff that are necessary for the organisation to conduct effectively its official activities. They are in line with those offered to officers in other international organisations of which the United Kingdom is already a member. Innovative businesses have waited for more than 40 years for a patent system that helps them protect their inventions across Europe in a streamlined and cost-effective way. Moreover, the Government’s industrial strategy emphasises our commitment to fostering innovative businesses. The Unified Patent Court will be integral in achieving that goal. The draft order will enable the Government to be in a position to ratify the UPC agreement and make the court a reality. I commend the draft order to the Committee.

[Baroness Wilcox (Con)]

I stand here as a part of history. When I was Minister for Intellectual Property, we went to the European Community to try to get it to understand that the Chinese and Americans could have patents overnight but we were still, after 40 years, having to translate over and again the members of the European Community at that time. We worked very hard during that time. I thought we had eventually got there but it sort of floundered for a while. I am delighted to see it written down that we are going to ratify the Unified Patent Court.

Intellectual property is very important for us. It is an area in which we are recognised worldwide as doing the right thing. We have allowed the French, the Germans and the rest of them to choose which bits they would like to have a go at. At the end of the day we have come up with something that works very well. Given that we are working so hard on Brexit—I work on the European Union Select Committee, which is looking at all the Brexit paperwork—it is important that we are actually seeing something coming through. It is nice and clear, we can all hear it; we are all going to do it. This is one thing that is not going to cause us any difficulty over the next few months.

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Minister will be grateful to know that the shadow cast upon the previous debate does not extend this far. I will be a ray of sunlight in his life and he will emerge, if not hopping and skipping, possibly with a little spring in his step at the pleasure we express and the way in which this piece of legislation is coming forward.

In passing, it was unfortunate that the Minister caught what appeared to be a full blast from both barrels from my noble friend. He should have seen him in the earlier stages of that Bill, when the hapless victim was the noble Baroness, Lady Neville-Rolfe. The full wrath that my noble friend Lord Mendelsohn could express at the whole approach that the Government were daring to take to this important area was expressed in many amendments that we had to discuss. The Minister got off lightly; he may not feel that. We certainly look forward to his letter when it comes.

I am going to say absolutely nothing about the substance of the statutory instrument because we agree with it and are happy for it to go through. It shines a light on the way some people manage to live their lives—in tax-free environments, free of all exemptions and penalties; some people have all the luck—but nevertheless that is the way it is done. I am glad that it is coming forward.

Like the noble Baroness, Lady Neville-Rolfe, whose work on this I salute—as well as that of the noble Baroness, Lady Wilcox, who preceded her—I am interested to learn a little more about what is actually happening on the ground. There are rumours of premises having been secured and buildings having nameplates attached to them, and so on. It would be nice to know what exactly is going to happen and what the timing is, if it is possible for the Minister to tell us.

The other thing that might be interesting to find out is whether there is yet any feel for whether there will be a sufficient caseload to warrant other centres being opened. During the passage of the original Bill we talked about the possibility that the Court of Session’s responsibility for patent determinations in Scotland might be echoed by having a similar court based there, if there was sufficient casework, because there is expertise and knowledge in Edinburgh in this area, and it would be sad if those were not able to be expressed. But these are matters that the Minister may not yet have the detail on and I am happy to have that at a later stage.

As I said, I am a ray of sunlight. We support this statutory instrument.

[Lord Henley]

I am not sure that I will necessarily be able to help the noble Lord; I might have to write to him. I am grateful for that ray of sunlight on this issue, even though he took a slightly “It’s all right for some” attitude to the idea that some of those lawyers and others involved with the courts would not pay UK taxes. However, it is always open to him to requalify at this stage in his life and seek to become one of the judges working in that court. I understand that they think that there might be up to six part-time judges there; that is all I can say. I say to my noble friend Lady Neville-Rolfe that I do not know where the court will be and when the doors will open. But again, if there is further information, I will let them know in due course.

There is one further process after the order leaves here, which is that this matter has to go to the Privy Council. I think it has missed the next meeting, so it might not be until the new year. At that point, we will have a better idea as to when, as I said, the doors will open and where it will be. If I have any further knowledge about what the caseload is likely to be, I will write both to my noble friend and to the noble Lord.

I am grateful also to have the support of both my distinguished former colleagues in this role, both of whom dealt with intellectual property when they were in that department. I am obviously not considered bright enough to do that, and they have taken that bit away from me. For all I know, it might be a gender issue—one of those things that mere men cannot do. I simply do not know. However, both my noble friends brought great distinction to that office, I am grateful for what they did, and I thank them—in particular for their warm welcome for this order.

Motion agreed.

Designs (International Registration of Industrial Designs) Order 2017

Lord Henley Excerpts

Wednesday 6th December 2017 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Designs (International Registration of Industrial Designs) Order 2017.

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

My Lords, this order modifies the Registered Designs Act 1949 and the Registered Designs Rules 2006, and is an essential step in the United Kingdom’s ratification of the Geneva Act of the Hague Agreement for registration of industrial designs.

The Hague system for international registration of industrial designs provides a means of obtaining protection for designs in multiple countries, or with intergovernmental organisations, through a single application filed at the World Intellectual Property Organization—the WIPO. Membership of the treaty is becoming more popular, and recent signatories include Japan, the United States of America and South Korea. There are currently 66 members, including 18 EU member states, and the EU is also a member in its own right.

The Government want the UK to be the best place in the world to do business. The promotion of strong and effective international IP regimes can reduce the risks of trading internationally for UK businesses and create further export opportunities. UK designers and design-led business are part of a global industry and, as such, it is essential that they have the option to protect their IP cost effectively when trading abroad. Equally, UK membership of the Hague system will allow non-UK owners of designs to register their rights in the UK, thereby encouraging the manufacture, distribution or licensing of their designs in the United Kingdom.

Ratification of the Hague system forms part of a raft of measures to modernise the design framework, including the criminal offence for the intentional copying of registered designs and the reduction of design fees. I know from speaking to designers about the importance of design to the economy. A Design Council study found that the design economy generated £71.7 billion in gross value added. By joining the Hague system, UK businesses, especially SMEs, which wish to have designs registered across multiple countries will have a simpler, more cost-effective method for obtaining and managing their rights. Businesses will be able to save money on design registrations and protect their intellectual property with greater administrative ease.

UK businesses have been able to access the Hague system since January 2008 by virtue of EU membership. The UK has been planning to join the Hague system since 2011 to provide users of the international system with the option to designate the UK directly, rather than under the broader umbrella of an EU designation. By joining the Hague system, UK businesses will continue to have access after the United Kingdom leaves the EU, regardless of what is agreed during exit negotiations. This order will come into force when UK ratification of the Hague agreement with the World Intellectual Property Organization is complete.

In conclusion, this order is essential to make the required modifications to the Registered Designs Act 1949 and Registered Designs Rules 2006 to give effect to the Hague agreement in United Kingdom law. Ratification of the Hague system forms part of a broader designs modernisation portfolio, intended to refine and streamline the designs legal framework so that the UK can provide a first-class, fit-for-purpose system for our design-led companies. We are committed to ensuring that United Kingdom businesses continue to have access to the international system once the UK has left the EU. Joining the agreement is essential to ensure that we achieve just that. I beg to move.

--- Later in debate ---

[Lord Stevenson of Balmacara]

That is very good news indeed. If it is moving in that direction that picks up the point I am making. There is an unexplored case for more work here, which will bring benefits to UK plc in time.

As I was saying, I was going to grandstand a little on the instrument to ask a couple of questions that I am very confident the Minister will not be able to respond to directly. I am happy to have a letter on them. The first is specifically on the consultation exercise. The Minister touched on this in his opening speech. The comment is made that the UK does not need to keep its own register of registered design rights because after we accede to the Hague agreement, which is what we are doing today, it automatically confers protection on the UK because the UK signed up to the Designview database, operated by OHIM. However, what is the mechanism under which we will continue to have access to it after Brexit? If it is in any way tied to membership it will raise, as the noble Lord, Lord Clement-Jones, said, considerable difficulties in negotiating a fair price and the conditional arrangements. If there are to be cost barriers that will further diminish the pressure on people who wish to register designs. It is important and clearly a useful tool for protecting design rights, but if it is inaccessible it will obviously not be of any value. WIPO and the role it plays are very valuable. The IPO does not have much of a role in this. It again seems a slightly missed opportunity to beat the drum for registration, but if the connection is directly to WIPO and we are to be affected by Brexit, clearly that is a problem.

Secondly, the Minister may be aware of a Supreme Court decision in the Trunki case, PMS v Magmatic. It raised the interesting question of whether one could register or even protect shapes of articles. In this case, the well-known Trunki is a small ride-on suitcase that children use rather irritatingly, at speed, in airport lounges, which my ankles have felt over the years—not my children, I confess; there were third parties involved. The case raised the interesting issue that our systems do not allow anyone who has a visual representation or design representation to register it. As I understand it, the Hague agreement has some flexibility about what can or cannot be registered. It would be interesting to get a sense from the officials in due course about whether they think it would be possible to use the flexibilities in the Hague agreement to allow those talented members of our design profession who design representation to register those designs. I look forward to hearing from the Minister in due course.

[Lord Henley]

My Lords, I am grateful to the noble Lords, Lord Stevenson and Lord Clement-Jones, for their responses. As they said, it will be important that I write with a little more detail on this. I certainly promise to do so. The noble Lord, Lord Clement-Jones, was alarmed about the visibility of the Intellectual Property Office and of these matters more generally.

[Lord Clement-Jones]

I am a huge fan of the IPO. I merely say that it has reduced the fees for registered designs. That made me even more of a fan, but I am concerned about the visibility of the Hague system.

[Lord Henley]

I am grateful that the noble Lord said that because I was going to refer to the exchange between my noble friend Lady Neville-Rolfe and the noble Lord, Lord Stevenson, on the Intellectual Property Office, which showed that it is doing a good job. One should give it credit for that, but I take the noble Lord’s point that this is really more about the visibility of the Hague system. I am not sure there is much we can do other than to continue our engagement with business representatives about these matters to promote the importance of Hague and designs in general. We will continue to do that.

As the noble Lord, Lord Stevenson, asked, we will also continue to promote the benefits of registration. We know that registrations with the UK IPO are rising. Since we reduced the fees in October 2016, as referred to in the most recent intervention by the noble Lord, Lord Clement-Jones, we have seen an increase of more than 100%. There is always more to do to raise awareness, and we will do what we can through programmes of business outreach. We want to get over the message that it is important for businesses to register when it would be of benefit to them, and we will continue to do that.

As I have said, I would prefer to go into greater detail on these matters in a letter to both noble Lords, but I am grateful for their general support and recognition that we want to approve the order today and see how we get on thereafter.

Motion agreed.

Energy: Home Battery Storage

Lord Henley Excerpts

Monday 4th December 2017 Lords Chamber

[Baroness Jones of Moulsecoomb]

To ask Her Majesty’s Government what assessment they have made of the potential for home battery storage to change the dynamics of energy supply and demand.

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

My Lords, the Government and Ofgem published a smart systems and flexibility plan in July 2017, which outlines a series of actions to support the transition to a smart energy system. They include an assessment of changes in our energy system and measures to address the barriers to storage, whether in the form of home batteries or the range of grid storage technologies.

[Baroness Jones of Moulsecoomb (GP)]

I thank the Minister for his reply. I am sure that the Government have thought this through—or not—but as nuclear subsidies increase and the cost of national grid electricity rises, more people will move to solar and domestic storage of energy. That means that people still using the national grid will be the poorest in society because they cannot afford all these extra measures. Have the Government thought through how the poor will be relieved of paying for very expensive electricity?

[Lord Henley]

Obviously there will be changes as more people make use of storage. That will have an effect on the grid because if some people increase their use of storage, they may even be able to go off-grid in future. The noble Baroness is right to draw the House’s attention to that issue. That is a matter for Ofgem; it can certainly look at that to make sure that it can create a level playing field for all consumers.

[Lord Howell of Guildford (Con)]

My Lords, I declare my interests in energy, as in the register. Is my noble friend aware—I am sure that he is—that offshore wind producers are now saying that they can produce electricity at £62.50 per megawatt hour? Of course, commercial storage will make it considerably lower, if we go for it. Does that not cast a shadow over the costs of the contract at Hinkley Point C, which are for £92.50 for the next 35 years, indexed? Is it not time to question some of these lavish expenditures, which are having very little effect on carbon reduction and greatly increasing the charges to poor consumers?

[Lord Henley]

My Lords, at this stage, I do not want to get into the wider question of Hinkley C costs. I think it would be rather dangerous for me to go down that route. My noble friend is right to say that increased use of home battery storage, possible greater use of batteries in cars as a means of storage in years to come and greater use of other forms of storage, which the noble Baroness and my noble friend referred to—he is probably aware that we already have about 5 gigawatts of storage in the system, which is mainly pumped hydroelectricity—have implications for costs throughout the grid, which will need to be addressed.

[Lord Campbell-Savours (Lab)]

Has an audit been carried out of lithium resources worldwide or has it all been left to market forces?

[Lord Henley]

My Lords, so far, we have seen the cost of lithium-ion batteries drop by some 50% over the last five years, since 2012. That implies that resources of lithium are more or less okay and that market forces are driving costs down. I do not have the figures on long-term estimates of quantities of lithium, but that will be taken into account by the market in due course.

[Lord Broers (CB)]

My Lords, with respect to the previous question, would it not be a good idea for the Government to follow that issue rather carefully, so that the consumer can have a realistic price? Solar cells and storage batteries are expensive, and people selling them do not always give straightforward information. It would be a good idea, would it not, for the Government to look at this in some detail, so that consumers can be given reliable advice on the cost of such storage?

--- Later in debate ---

[Lord Henley]

My Lords, as I said in my answer to the previous question, the cost of lithium-ion batteries has come down considerably—by 50%. Batteries are still expensive but it is in the interests of some consumers to buy them to even out their use of electricity and make savings. Obviously, any advice that they can get, which was partly behind the Government and Ofgem’s smart systems flexibility plan, would be of use to those consumers.

[Baroness Maddock (LD)]

My Lords, the more smart meters are installed in our homes, the more potential there will be for battery storage. Will the Minister assure us that the promise the Government made of 26,000 smart meters in our homes before 2020 will really happen?

[Lord Henley]

My Lords, we are on track for that. As the noble Baroness will be aware, legislation dealing with this is coming forward. I hope we will get there; I see no reason why not.

[Lord Hayward (Con)]

My Lords, does my noble friend not agree that one way to change the dynamics of our energy supply would be to approve the Swansea tidal lagoon as quickly as possible, a decision on which has been pending for rather a long time?

[Lord Henley]

My noble friend makes a very interesting point. No doubt that will be addressed, but it is somewhat wide of the Question relating to battery storage. It obviously will have an effect on our production of electricity overall.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, given the performance review in the summer and the driverless and electric vehicle charging point Bill currently in the House of Commons, why is there so little in the Bill to incentivise people to purchase batteries?

[Lord Henley]

My Lords, I do not think there is so little. There is quite enough to encourage people to buy batteries. That is why they are and why we have seen a reduction in their price.

Whistleblowers

Lord Henley Excerpts

Monday 27th November 2017 Lords Chamber

[Lord Cromwell]

To ask Her Majesty’s Government what assessment they have made of the effectiveness of the processes in place to enable whistleblowers to come forward without adverse personal consequences.

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

My Lords, individuals should be able to report malpractice in the workplace without fear of reprisal. The Employment Rights Act 1996 provides employment protection for workers in all sectors who have blown the whistle. It enables them to seek redress if they are dismissed or suffer detriment at the hands of the employer because they have made a protected disclosure about wrongdoing that they have witnessed at work.

[Lord Cromwell (CB)]

I thank the Minister for his reply. As he knows, in putting down the Question I had in mind a specific example. The whistleblower concerned, who is from the UK banking sector, asked me in due course not to name them for fear of persecution. Will the Minister agree to meet me and the organisation Whistleblowers UK to review the shocking evidence that, far from being respected for their bravery, whistleblowers are frequently made unemployable or impoverished, and many are driven into mental illness? Does he also agree that the FCA should do a great deal more as a regulator to support them, particularly in their legal costs? Finally, what message does he feel we send to those who expose wrongdoing if in America they are rewarded, whereas in this country they pay such a terrible price for doing the right thing?

[Lord Henley]

My Lords, I thank the noble Lord for his Question and the supplementaries. I am grateful that he did not raise an individual case, because obviously I would not be able to comment on that. However, I am more than happy to make arrangements to meet him and Whistleblowers UK to discuss that case. I note what he says about the FCA. I am sure that he is aware that the FCA is looking at its procedures and will conduct a review, as I think my noble friend Lady Williams made clear during the passage of another Bill earlier this year. The possibility of following the American route is interesting, and the review could certainly look at it. The review that the FCA conducted in 2014 concluded that introducing financial incentives was not likely to increase the number or the quality of disclosures, but it will certainly look at that again in its review in early 2018.

[Lord Howarth of Newport (Lab)]

My Lords, do the Government have plans to ban gagging clauses—the practice whereby individuals who are aware of failures or malpractice within an organisation are paid to leave on the basis that they keep quiet about what they know? Will the Government ban this practice of bribery and conspiracy of silence?

[Lord Henley]

My Lords, I would be more than happy to look at that matter. Of course, as I made clear, the FCA is conducting a further review, but there are the protections within the Employment Rights Act 1996, as amended—as the noble Lord will be aware—by the Public Interest Disclosure Act 1998. Whether under those two pieces of legislation gagging orders would be prohibited or would in fact apply needs looking at.

[Lord Skelmersdale (Con)]

My Lords, I urge my noble friend to have some caution in this area. It is one thing to concentrate on whistleblowers as result of activities at work, but we have seen recent cases—not least in that of a former Prime Minister—where a whistleblower has cost the police vast of amounts of money to no effect whatever, as far as I can see.

[Lord Henley]

My noble friend makes an interesting point which goes slightly beyond the Question, but we should bear it in mind. We are looking here at the protections offered by the Employment Rights Act 1996, as amended by the Public Interest Disclosure Act.

[Baroness Kramer (LD)]

My Lords, will the Minister resist this negative connotation of whistleblowers? This summer I met whistleblowers whose lives are in complete ruins. The example given by the noble Lord, Lord Cromwell, is one of very many. The regulators have a long history of being totally passive, of providing no protection and often of being gratuitously suspicious of whistleblowers. In the United States, not only is there compensation for a life damaged and ruined but there is an Office of the Whistleblower—a concept that we attempted to get into the then Criminal Finances Bill—which provides appropriate protection from a significant, senior and high level.

[Lord Henley]

My Lords, I do not believe that we are taking these matters lightly. I know that the noble Baroness has considerable concerns about this matter. She raised them during the passage of the Criminal Finances Bill, enacted in 2017, and many of them were dealt with by my noble friend far better than I could do in the brief time I have available at the Dispatch Box. I could quote at length the answers that my noble friend gave the noble Baroness on that occasion, but suffice it to say that we note her concerns. The FCA is looking at this issue and conducting another review, and no doubt the noble Baroness will take a look at that when it comes out next year.

[Lord Touhig (Lab)]

My Lords, I introduced a Bill to protect whistleblowers but it did not succeed. Later, my Conservative colleague and friend Richard Shepherd succeeded with the then Public Interest Disclosure Bill. It was a great step forward but no longer protects whistleblowers as it should. It should be revised. Why will the Government not do so?

[Lord Henley]

My Lords, as I have made clear, it was revised in 1998—by the Government of whom the noble Lord was a very keen supporter. I also made it clear that the FCA is looking not necessarily at amendments but at further adjustments that can be made. I commend the noble Lord on all that he did on that occasion. I am sorry that his Bill did not succeed but others did and legislation is now in place. That legislation was amended by the party opposite—again, with support from all sides of the House—and we should see what the FCA can do in the future.

Industrial Strategy

Lord Henley Excerpts

Monday 27th November 2017 Lords Chamber

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

My Lords, with the leave of the House, I shall now repeat a Statement made by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy:

“With permission, Mr Speaker, I would like to make a statement on the Industrial Strategy White Paper which we are publishing today. Today, at one of the most important, exciting and challenging times in our history, the future is unfolding before our eyes. New technology is creating new industries, changing existing ones and transforming the way we live our lives. We need to ensure that we are well prepared to prosper in this future. The decision to leave the European Union makes this even more important. More decisions about our economic future will be in our own hands to take, and it is vital that we take them well.

We start from a position of strength. We are an open, flexible economy, built on trade and engagement with the world. We have earned a reputation as a dependable and confident place to do business, thanks to our high standards, respected institutions and the rule of law. We have achieved higher levels of employment than ever before in our history. We are known for our innovation and discovery, with some of the best universities and research institutions in the world, which produce some of the most inventive people on earth. We have commercial and industrial sectors—from advanced manufacturing to financial services, and from life sciences to the creative industries—which are among the best in the world.

Our industrial strategy will build on these strengths, but it will also address weaknesses. We need to do more to make the most of our untapped potential. As the Chancellor said in last week’s Budget, although we are proud of our strong record of high employment, our average productivity—output per hour worked—is less than it could be. Productivity might not be the most exciting term, but what it does really matters. For people all around the UK, higher productivity means greater earning power and better-paid jobs, and for our country it means more money to spend on our public services.

Today’s Industrial Strategy White Paper starts with the five foundations of productivity: ideas; people’s skills; infrastructure; business environment; and the importance of every place in the country. For each, we are clear about the kind of economy we need to be. Our vision is that the UK will be the world’s most innovative economy, have good jobs and greater earning power for all our citizens, and make a major upgrade to our infrastructure, be the best place to start and grow a business and have prosperous communities all across the UK. It is a long-term strategy, working to make changes now but looking to the future, and we are taking action to realise it.

Take research and development. Our reputation is as one of the best countries in the world for science and research, but we cannot take that reputation for granted—we must reinforce it. So last week we announced an increase in public investment in R&D, with the aim of reaching a combined public-private spend up from 1.7% to 2.4% of GDP by 2027 and to 3% thereafter.

I strongly believe that there are few problems which cannot be solved by the innovation and ingenuity of British business and science. History has shown that partnerships between business and government can work, from outstanding collaborations in areas such as automotive and aerospace to recent partnerships on the creative industries.

Strategy has to be for the long term; a short-term strategy is, after all, a contradiction in terms. Other countries have benefited from establishing policies and institutions which can endure. That is why, through the consultation on the Green Paper, we have worked with business, industry bodies, investors, trade unions, universities, colleges, research institutions and many others to establish a shared commitment to the actions that we will take now and in the future.

After our consultation on the industrial strategy Green Paper, we saw an overwhelming response to the question we asked on whether we should pursue sector deals, as industries came forward with plans for their own future. Today, we have struck ambitious sector deals with four sectors—life sciences, construction, artificial intelligence and automotive—and I welcome the huge interest from other sectors coming forward with plans.

There are still those who hear the words ‘industrial strategy’ and associate them with the mistakes of the past, shielding incumbents and continuing the status quo. This is not the approach that we will take. Our modern industrial strategy is not about protecting the past; it is about taking control of our future.

So our industrial strategy sets out four ‘grand challenges’, identified on the advice of our leading scientists and technologists. They will be supported by investment from the industrial strategy challenge fund and matched by commercial investment. The challenges are: artificial intelligence and the data-driven economy; clean growth; the future of mobility; and meeting the needs of an aging society. Whether we like it or not, these challenges are sweeping the world. If we act now, we can lead them from the front, but if we wait and see, other countries will seize the initiative.

For each of these challenges, our industrial strategy sets out how we can seize the opportunity. From using artificial intelligence to raise productivity in all sectors to making energy-intensive industries competitive in the clean economy, and from supporting the transition to zero-emission vehicles to harnessing the power of big data to diagnose illnesses earlier, we can improve the quality of life for so many people in this country.

Britain needs to be a leader, not a follower—a country which is ahead of the curve, not behind the times. So let us rally around this industrial strategy, raise our productivity and build a country which is fit for the future. I commend this Statement to the House”.

My Lords, that concludes the Statement.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, I draw attention to the interests registered in my name. Like the noble Lord who has just spoken, I am pleased that the words “industrial strategy” are coming from the Government’s lips. In the life-cycle of an industrial strategy, we are perhaps at the most optimistic bit before cynicism and despair begin to set in. I shall try not to hasten us down that curve but there are some points that we should perhaps bring out today. It behoves me most of all to point out that the reference to Brexit, made as an aside in the Statement, clearly indicates the effect that the Government believe it will have on our industrial capability—and it is not positive.

This should be set into the context of the OBR’s recent forecast which downgraded GDP by £45 billion by 2021. That is around £700 per person. We would have valued a sense of urgency in the report but there has not been any. It has been a long time in the making. The Minister pointed out that we have been through a long consultation and a long Green Paper, which was almost a year in the cooking. I acknowledge that we need a long-term strategy but, because it is a long-term strategy, that does not mean it needs such a long-term gestation.

For us, the most important part in this—it has received few column inches despite the font size and photographs, as pointed out earlier—is the implementation side. Without implementation, this is just another brochure; another tour of the industrial landscape. It is right that it falls to a Cabinet committee, chaired by the PM, to drive this issue forward. I would welcome the Minister’s comments on how often the committee meets, how much energy we can expect from it and how often Parliament will receive a progress report from it.

Like the previous speaker, we also welcome the establishment of the industrial strategy council—or we think we do because there is so little detail it is almost impossible to know what it is, what it is for, how it will be resourced, how it will be staffed and to whom it will be answerable. Like the previous speaker, we would welcome answers to those questions.

Then we come to the grand challenge. There are noble Lords on many Benches who think this is a rehash of picking winners. I know the Statement went out of its way to decry that view but, however one looks at it, there is an element of picking sectors that we think are needed and can be successful, and investing in them. One can call that something else or picking winners. I urge the Minister to ensure that we are not cutting out funding into the wider exploration and seeking of knowledge because, without investment in that kind of research, graphene would never have been discovered. We still need to seek out the unknown unknowns in order to advance our science and keep us moving forward.

Perhaps I may add another warning on DARPA. This is not a DARPA process for one important reason—there is not the money that DARPA has to throw at these challenges. There is not the huge industrial military complex that sits behind it, which has itself enormous US Government funding for these initiatives. We should be careful when we bandy the word DARPA around.

That said, overall the topics that have been chosen for the challenge are broadly welcome. I note the inclusion of clean growth, which was hardly mentioned in the Green Paper and not at all in the consultation. It was mentioned extensively in the Lib Dem response to the consultation so I shall claim that as a Lib Dem win. However, the Government’s record casts doubt on their commitment to clean growth. They have scrapped subsidies for solar and offshore wind and cut funding for carbon capture and storage—even though we know that kind of support works—and, further, they have sold off the Green Investment Bank. This announcement is either a damascene conversion or just more paper.

I have just one question on the life sciences strategy. The Government commit the NHS to its role in the life sciences strategy: what extra resources will be given to the NHS in order for it to take up the research role it has been set?

The Government want to increase research and development spending to 2.4% of GDP by 2027. That of course is only the average, as has been pointed out, and a more ambitious target would be more sensible. However, there is not very much new money. If you do the maths, you will find that it is about £0.4 billion on top of what has already been announced. Certainly that is what has been said in the other place. The £2.5 billion investment fund to be created by the British Business Bank was not costed in the Red Book, raising questions of where the money will come from. Perhaps the Minister can enlighten us. These commitments are inadequate compared to what is being lost—the £2 billion provided by the European Investment Fund for start-ups and the €3.6 from Horizon 2020, which will disappear after that time.

Catapults are important and I am pleased they have been mentioned. I have two points. The paper mentions that there are poorly performing catapults. Can the Minister enlighten us as to how many are performing well and how many are not? Secondly, I note that the highly-regarded CEO of Innovate has just stepped down. Perhaps we can hear what that is about.

We on these Benches have said before that we will need the right people to implement this strategy. There has to be a joined-up national skills strategy.

[Lord Henley]

I thank the noble Lords, Lord Fox and Lord Mendelsohn, for what I take to be their general welcome of the industrial strategy. The noble Lord, Lord Fox, claimed that parts of it were in response to comments from the Liberal Democrats in their response to the Green Paper. He claimed that there was a lack of urgency, but when one publishes a Green Paper in January, as we did, to produce a response of this kind by December is doing pretty well. If we had produced it any faster, the noble Lord would accuse the Government of hurrying their response. He cannot have it both ways and my right honourable friend has got it just right. I am grateful that I joined the department only four weeks ago, so came in at the tail end of the development of this response, but I can assure the noble Lord that we have been busy these last four weeks going through draft after draft of the White Paper to produce this document, which went to the printers only last night.

The noble Lord, Lord Mendelsohn, worried what the size of the document compared to the Green Paper indicated about productivity gains. He noted that it was so many pages longer than the original Green Paper but then said that the font was larger, although he did not point out that the pages were smaller. I will have to take advice on whether there are more words in this document, when the pictures are taken out, than there were in the Green Paper. All I can say to both noble Lords is that it has been a very considered process with, as I say, some 2,000 responses that had to be carefully considered. We had to talk to many people and develop our policies, as well as take it the whole way around the Government.

I am grateful to the noble Lord, Lord Fox, for emphasising the role of the Prime Minister. It is important to make it clear that the Prime Minister is fully committed to the strategy, as are all members of the Government. If this was a Business, Energy and Industrial Strategy document coming merely from the department, it would be nothing. The fact is that it reaches out to all other departments, which have all played their part and helped to produce it. As we implement the ideas behind it, other departments will contribute, be they the Department of Health, as mentioned by the noble Lord, or education and so on. The point is to get beyond the siloisation that we have seen on many occasions in different Governments of all persuasions; we want to bring a truly cross-government feel to this.

Both noble Lords asked a number of questions, which I will try to address. I hope I can provide responses that will satisfy them, but if not, I will be more than happy to write in due course. The first point made by the noble Lord, Lord Mendelsohn, was that he felt that the White Paper does not deal with regional imbalances. I assure him that this matter is of great concern to me more than most. He will know how activity can vary a great deal across the regions. If he looks at the north and the Midlands, he will find that productivity can be 9% to 14% below the United Kingdom average. We had quite a few speakers from Wales earlier today; productivity in Wales can be around 19% lower than the United Kingdom average. We want to reach out to the regions, to Wales and to Scotland, to ensure that we bring them up to higher levels of productivity. If we fail in that, we will have failed in all other ways.

Both noble Lords also asked about the industrial strategy council and wanted assurances that it would be independent. I can give that assurance and that it will include business leaders and experts. We will be able to give further details about the council in the coming months.

I was asked about British Business Bank investments. I can give an assurance that £2.5 billion of new funding is on offer and that further announcements will be made in due course. I was also asked about what further investment was required and how much new money there is. I have given the figures for what we are seeking to do on research and development so that we get that up to at least the OECD average by 2027. Importantly, that is just the initial target; we would like to get it up to 3% in the longer term. Going back to the question about infrastructure as a whole, we are looking at £31 billion in the pipeline for the future.

The noble Lord, Lord Mendelsohn, asked about measuring our goals and how we will seek to assess the success of the industrial strategy in due course. At the highest level we have a set of goals relating to productivity. We believe that it will be for the industrial strategy council to assess progress on those goals and the others outlined in the strategy.

I am beginning to feel that I am using up time that I should not, but perhaps I may turn to one or two of the questions asked by the noble Lord, Lord Fox, particularly on NHS funding. I refer him to what the Chancellor announced in the Budget when he referred to new funds. The noble Lord also asked about clean growth and whether the Government are cutting funding for renewables. I assure him that we have particularly fast growth in renewables and that we are still committed to a further £557 million for new contracts for different renewables such as offshore wind. We are seeing growth in that area.

As my right honourable friend said in another place, in the Statement and in response to questions, the industrial strategy sets out the long-term strategy that we hope to see. We hope to see developments continue in the manner made clear by my right honourable friend. I thank the noble Lords, Lord Mendelsohn and Lord Fox, for what I think was their cautious welcome. I hope that, as the strategy develops and we continue to bring it forward, that welcome will also continue.

[Baroness Blackstone (Lab)]

My Lords, can the Minister address the question of skills? There is very little in the Statement about the urgent need for more skills training. I am sure he will agree that we will not achieve greater productivity, or be able to implement this industrial strategy, unless we can greatly improve the level of skills among the workforce. That is particularly the case in construction, where Brexit will certainly be damaging. We will have fewer European workers able to operate in this field in the UK, or indeed be likely to be willing to do so. We need some realisable targets, to use the expression of my noble friend Lord Mendelsohn, for skills. We also need a timetable, and some urgency should be attached to this. Unless that happens, all the Minister’s brave words about the desirability of an industrial strategy in the areas he has identified are unlikely to be implemented; nor will we address the housing crisis or achieve the investment in infrastructure that he has just referred to.

[Lord Henley]

The noble Baroness is quite right to address skills. I think she was my successor in the Department of Education many years ago, back in 1997. I refer her to the chapter on people, which starts on page 92. There she can see all we have to say about looking for further apprenticeship starts by 2020, along with the improvements we want to see to A-levels and the improvements we have been seeing. She will also see what we have to say about our approach to that. She will note the information about the new T-levels that are being introduced. We want to see a further 50% of our 16 to 19 year-olds increasing their training. There have been increases in the study of maths, again referred to by the Chancellor in the Budget. I could go on, but I refer her to the White Paper and the ideas behind it. The White Paper can be divided into five simple parts: ideas, people, infrastructure, the business environment and places. The part on people relates to skills. I think she will find it very good reading indeed.

[Lord Hennessy of Nympsfield (CB)]

My Lords, perhaps I may say how pleased I am to see the noble Lord back on the Government Front Bench, although I miss the noble Lord, Lord Prior, who was always so helpful when he was on the Front Bench. I also welcome the White Paper, which is so critical to the nation’s fortunes, and I hope it will find a very high level of consensus across the party Benches. In this period of continuous political gloom, as it often seems, it is a reason to be cheerful; it is Ian Dury country. I welcome the industrial strategy council, which is an idea that your Lordships’ Select Committee on Science and Technology pushed very hard for. I am very pleased that it is in there. I ask the noble Lord for his individual judgment on which section of the White Paper he thinks is critical to the success of the rest of it and which phrase he hopes will cling to the Velcro of collective memory.

[Lord Henley]

My Lords, I thank the noble Lord for his welcome and for his very kind words about my noble friend Lord Prior. I would be very grateful if my noble friend was still here doing this, because he played a much larger part in the development of the White Paper than I did. I came somewhat late to it.

If the noble Lord would like me to identify one area, I go back to the five principles that I iterated to the noble Baroness: ideas, people, infrastructure, business environment and places. When the White Paper was developed, I played a small part in its redrafting and in our vision as set out on page 13. I was rather anxious to get the first five points at the top of that page into short, easy, memorable sentences. That is why we talk about a vision for the world’s most innovative economy, good jobs and greater earning power for all, a major upgrade in the UK’s infrastructure, the best place to start and grow a business, and prosperous communities across the UK. I can assure the noble Lord that he will find the whole of the White Paper very good reading. I will have a word with him tomorrow or perhaps the day after and test him on it to make sure he has fully grasped all of it.

[Lord Wigley (PC)]

My Lords, I draw attention to my registered interests. The document is certainly strong in aspiration, which I welcome, but perhaps lacking in some of the detailed pathways to delivery. The Minister referred to Wales and Scotland. When will this be taken forward with the devolved Administrations? How will that happen with sector deals for the creative sector and the very welcome proposed food and drink sector, where so many of the responsibilities are devolved? Will the responsibility for their running be with the devolved Administrations? Will they have the resources to do the job?

[Lord Henley]

When a similar question was put to my right honourable friend in another place, he made it clear that he had very recently spoken to his opposite number in Wales. That process will continue in Wales and Scotland. My right honourable friend and other Ministers, as appropriate, depending on who is where at any given time, will talk to all Ministers in the devolved Administrations in Wales, Scotland and Northern Ireland. I will certainly play my part as much as possible in that. There will also be adequate resources for the devolved Administrations from their own budgets to do this as appropriate. Whether the noble Lord will consider that adequate is obviously another matter, because no doubt he will be screaming for more—but then he would say that, wouldn’t he?

We will continue to talk with our opposite numbers in the three devolved Administrations. I am sure they will want to make a success of this just as much as we do. That is why I pointed out that we have problems with productivity imbalances between our UK averages and those of other parts of the United Kingdom. It would be right to try to address those imbalances.

[Lord Blunkett (Lab)]

My Lords, I draw attention to my registered interests related to education, skills and employment. I welcome this substantive document, not least because Friedrich von Hayek will be turning in his grave due to government being part of the solution, rather than always being the problem.

Will the Minister be willing to have a word with his opposite numbers in the Department for Education? Following on from my noble friend’s question, I am deeply concerned about the capacity to meet the apprenticeships and skills challenge and to provide the wherewithal to match the desirable input into employment. Because he is new to his post the Minister will not know that, following the Green Paper and a meeting earlier this year of representatives of all the major infrastructure projects, the decision was taken to make a joint submission drawing attention to the need to map where skill shortages will occur and how they could be met by putting forward passportable skills, and to ensure we draw people back into the labour market. Will he ask his ministerial friends in the Department for Education to kindly invite representatives of those major infrastructure projects to what is being described as a skills summit on Thursday, so we can get it right for the future?

[Lord Henley]

My Lords, I am fully aware that a great many noble Lords want to come in with questions on this Statement, so I will try to keep my answers short. I am aware of what the noble Lord had to say, and I am certainly aware of the need to make sure we continue to talk to our colleagues in the Department for Education. I am also aware that those colleagues were present when the Statement was made in another place, as were colleagues from other departments. We will certainly make sure that they are aware of the noble Lord’s concerns and that they take appropriate action.

[Lord Prior of Brampton (Con)]

My Lords, the reports after the Budget by the IFS, the Resolution Foundation and the OBR posited or forecast stagnant productivity for the next 10 years, following the stagnation of the last 10 years, which is a truly frightening prospect. Only one other country in the world, Japan, has been able to cope with that level of stagnation for so long, and it has a very different society from ours. The industrial strategy should be seen in that context. If we do not move the dial on productivity, the implications for our society and the kind of democracy we have will be profound. In that context, does my noble friend agree that the four grand challenges we have identified are fundamental to getting ahead in the fourth industrial revolution? If we fail to do that, we will fail to address this underlying productivity problem. Does he agree that the DARPA-lite approach we are taking to these four grand challenges is fundamental?

[Lord Henley]

I am most grateful to my noble friend, who played a considerable part in helping to put this industrial strategy together. I am grateful to him for reminding the House of the need to move the dial on productivity, as he puts it, and for underlining the fundamental nature of those four grand challenges. That is repeated again and again in the White Paper, and the Government are committed to it.

[Lord Shipley (LD)]

My Lords, I welcome the industrial strategy, which, like my noble friend Lord Fox, I think is extremely helpful in the most part. I want to ask the Minister about inclusive growth. One of the foundations of the industrial strategy is places. What consideration has been given to the level of intervention required for large towns, as opposed to cities, that have very low productivity rates, often because they have no university nearby? How local will the local industrial strategies be? I hope they will not simply be at the level of the local enterprise partnerships, which often cover a very large geographical area.

[Lord Henley]

My Lords, the noble Lord speaks with great knowledge of the north-east, I believe. I know the north-west—or rather, the north-north-west—pretty well, and I know the sort of problems he is talking about, not just in the cities but in the large towns. We see them in my part of the world in west Cumberland, in Workington and Whitehaven. We certainly need to look at what we can do. The noble Lord also spoke about LEPs and the role they can play, and on some occasions it is more than what the LEP can do. I hope that the noble Lord, in welcoming the White Paper, will accept that the important point is that one of the five ideas behind it is identifying the importance of place. That is why, particularly in relation to productivity, again, I wanted to re-emphasise the fact that there are regional imbalances and that they need to be addressed. LEPs can play a very valuable part, but there will be more that can be done, and I hope that the industrial strategy sets that out.

[Lord Birt (CB)]

My Lords, the UK’s poor record on productivity is not a new discovery. We have lagged behind our major industrial competitors for many decades. There are many reasons for that. Some have been mentioned already. One is skills, and another is infrastructure. We led the world in infrastructure in the 19th century, but in the 20th century we spent a smaller proportion of our GDP on infrastructure than any other major industrial country. We have overcongested roads; noble Lords should try going from Liverpool to Leeds on a slow train; and why is it taking us so long to sort out Heathrow? On that particular matter, has the Minister anything to tell us about when a decision on Heathrow will finally be made?

--- Later in debate ---

[Lord Henley]

My Lords, I will not be tempted on that final question to make an announcement on Heathrow. The noble Lord mentioned our poor record on productivity. I accept that we have a poor record on productivity, but against that one should remember that we have a good record on employment. If one looks at countries that sometimes have a better record than us on productivity but a worse record on employment, I think most people would prefer to be employed rather than unemployed in that respect. It is worth remembering that those who are not employed are not going to figure in productivity. So there are swings and balances in this respect. All I can say to the noble Lord at this stage is that we have recognised our poor record on productivity, and that is why the White Paper seeks to address it and puts it as one of the fundamental things we have got to do. We have a poor record not only on productivity but on the imbalance in productivity across the regions.

[Lord Lea of Crondall (Lab)]

My Lords, the Minister has just made a very interesting point about the interaction between employment levels and productivity levels. In a static world, you could have more employment, very low levels of pay and very low levels of productivity. In a macroeconomic sense, the measure of productivity is simply the output of the economy divided by the number of people at work. Within the firm, how—unless I have missed something—are the Government proposing to engage workers’ representatives in improving their world market share? There are targets—such an unfashionable word now, it is almost the same as saying Gosplan—but are we not missing out on some notion that we have to raise our sights in terms of targets for world market share and targets within the firm? The only targets there seem to be in the firm at the moment are to increase the share price and the distance between the board of directors and the average worker. Will the Minister say a little more about how he sees improved consultation and decision-making and joint work between the management, senior boards and shop-floor workers, whether in manufacturing, services or any other part of the economy?

[Lord Henley]

I am glad the noble Lord recognises the success of our policies in encouraging improved employment levels. That is very important. I was stressing the importance of improved employment levels only in relation to productivity. As the noble Lord will recognise, the simple fact is that we could have higher productivity but higher unemployment. One of the downsides of our growth in employment has been that weakening in productivity. We are seeking to address that. That is what the White Paper is all about. As regards relations between employers and management, that is a matter for companies themselves to look at in their own light.

[Lord Elystan-Morgan (CB)]

My Lords, the Minister may be aware of a discussion between Her Majesty’s Government and a Minister in the Welsh Government on the massive disparity between productivity in Wales and the United Kingdom average. I would like to probe a little on this matter. How meaningful a discussion was there? Was an agenda drawn up? Were minutes of that meeting kept? Was there a meeting of minds at all or was it something utterly cursory and cosmetic, as has happened so often in the relationship between Her Majesty’s Government and the devolved Administrations?

[Lord Henley]

My Lords, I simply reject the noble Lord’s allegation that discussions between Ministers of this Government and the devolved Administrations are in the manner that he described. I pointed out earlier in answer to another question from across the Floor that there have been discussions between my right honourable friend and Ministers in the Welsh Government because my right honourable friend mentioned that in another place only this afternoon. There will continue to be discussions between Ministers within the department, Ministers throughout government and Ministers in the devolved Administrations in relation to this White Paper.

Businesses: Start-ups

Lord Henley Excerpts

Monday 20th November 2017 Lords Chamber

[Viscount Ridley (Con)]

I beg leave to ask the Question standing in my name on the Order Paper, and in doing so I declare my interests as listed in the register.

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

My Lords, the Government are working hard to ensure that the United Kingdom is the best place in the world to start and grow a business. While there is no single source of data on the start-ups, the Government agree that the numbers engaged in enterprise is at a historic high, which shows that entrepreneurship is thriving in the United Kingdom.

[Viscount Ridley]

I thank my noble friend for that reply. Is he aware that there was a record number of start-ups in 2015 and 2016 and that, according to the Centre for Entrepreneurs, there is likely to be another record in 2017; that we are third in the world for start-ups, second only to Silicon Valley as a centre for the tech industry; and that we have three times as many unicorns—that is, $1 billion start-ups in tech—as Germany? However, while this entrepreneurial revolution is a welcome result of government policy since 2010, does my noble friend agree that what is needed now are policies to help small acorns grow into big oak trees without selling out too early? In that respect, will he perhaps look at Rishi Sunak MP’s proposal for a retail bond market for SMEs?

--- Later in debate ---

[Lord Henley]

I am grateful to my noble friend for quoting all the figures that I would have wanted to put before the House, and I thoroughly endorse his doing so. I am also grateful to him for bringing the attention of the House to Rishi Sunak’s report, A New Era for Retail Bonds, which I am aware of. He would not expect me to comment on it in detail at this stage, but it is certainly interesting and the Government will certainly want to have a look at it.

[Lord Campbell-Savours (Lab)]

My Lords, is not reference to 660,000 start-up companies and this entrepreneurial revolution peddling a myth when a large chunk of that number is made up of personal service companies, the objective of which is to save tax and save on national insurance contributions? Why peddle these myths?

[Lord Henley]

The noble Lord is overcynical. It is quite obvious from all the figures we have, whether we take them from Companies House or wherever, that a large number of new companies are coming into existence. My noble friend quoted the other figures, which show just how well they are doing, and how well compared to other countries throughout Europe. The noble Lord should welcome that and be grateful that entrepreneurship flourishes in this country because the Government create the right environment for it.

[Baroness Lane-Fox of Soho (CB)]

My Lords, publicly available data shows that 93% of funding goes to male-led start-up businesses and that one in 10 people making decisions in financial institutions is a woman. Do the Government track this data, and what are they planning to do about it when so many people are being left out of the entrepreneurial revolution?

[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.

[Lord Flight (Con)]

My Lords, do the Government accept the enormous help provided to entrepreneurship by the Government’s EIS scheme, which I think has raised some £16 billion of risk capital? It is the envy of Europe. I declare my interest as chairman of the Enterprise Investment Scheme Association.

[Lord Henley]

I welcome what my noble friend has to say and I hope that noble Lords on the other side of the House take note of it.

[Lord Mendelsohn (Lab)]

My Lords, as welcome as the rise in numbers is, is it not the case that under close examination the data shows some very worrying trends? Professor Mark Hart of the Enterprise Research Centre, one of Britain’s leading academics on this matter, points out:

“Too many of these businesses do not create jobs or do anything for UK productivity”,


and that our entrenched problem is,

“turning start-ups into high growth companies”.

Can the Minister confirm what proportion or number of start-ups in these figures was for structuring purposes—holding companies, special purpose vehicles, personal service companies and partnerships—and can he set out the Government’s plans to reverse the decline in the three-year company survival rate, the falling number of high-growth companies and the proportion of start-ups that scale?

[Lord Henley]

The noble Lord asked quite a number of questions and I will restrict my answers to two. He is right to express concern about productivity. This is something that we will want to address, and I hope that he will be ready for the Statement on the industrial strategy that I hope will come out later this month. He also expressed concern about companies progressing from small to medium and medium to large. That is why we made an announcement in last year’s Autumn Statement about patient capital and why we announced a review into it. We are waiting to respond to that in due course.

[The Earl of Erroll (CB)]

Given the last question, will the Minister look at a lighter touch, particularly in employment law? A lot of this is very onerous for small businesses and, if certain things happen, they can easily get bankrupted. Small businesses need a lot more flexibility in the laws as they apply to them. Until you employ a lot of people, you cannot handle some of the provisions around employment law, and I think that the Government should look at that closely.

[Lord Henley]

The noble Earl is right to express concerns about the regulation that faces business, particularly small businesses. We obviously want to reduce the regulatory burdens on businesses wherever possible and wherever it is right to do so, and we will certainly continue the work that we have done in this field.

Fourth Industrial Revolution

Lord Henley Excerpts

Wednesday 15th November 2017 Lords Chamber

[Lord Holmes of Richmond]

To ask Her Majesty’s Government what cross-government work they are undertaking to maximise opportunities from the fourth industrial revolution, particularly in terms of digital skills, artificial intelligence, machine learning and distributed ledger technology.

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

My Lords, we recognise the huge benefits of the fourth industrial revolution and are working across government to exploit them. The digital strategy outlines ways to make Britain the best place to start and grow a digital business, trial new technology or undertake advanced research. We are working closely with industry, considering the recommendations of two major government and industry reviews on digitalisation and artificial intelligence.

[Lord Mendelsohn (Lab)]

My Lords—

[Lord Holmes of Richmond (Con)]

My Lords, I thank my noble friend for that response. There are some excellent initiatives in various departments, not least the use of blockchain in the Department for Work and Pensions to greatly empower benefits recipients. Does my noble friend agree that all the advantages of the fourth industrial revolution will be realised only through a connected, collaborative approach across the whole of Whitehall? Otherwise, the opportunities before us will not be fully utilised and realised and we will fail, fast.

[Lord Henley]

My noble friend is right to say that there are great opportunities ahead of us. He is right to stress the need to work across government. There will be no silos in government, as far as we can make clear. BEIS and all other departments will work together on this. I merely mention BEIS because that is where I happen to be at the moment—I am sorry; I could have expressed that better. The other point to make to my noble friend is that we want to work with industry and all those outside to make sure we receive the benefits of the change we are seeing with the fourth industrial revolution.

[Lord Mendelsohn]

My Lords, I apologise to the House for my enthusiasm. I also apologise to the noble Lord, Lord Holmes—a great ally on many issues—for getting up far too early.

Although the fourth industrial revolution is a recognisable force that promises great GDP growth and the transformation of the world of work and production, the greatest risk to economic efficiency is that income and wealth will be ever more skewed. A weight of reports, including an excellent one by UBS Investment Bank, warn that inequality will be greater and the benefits will accrue to fewer and fewer people. As part of their work on the fourth industrial revolution, will the Government establish not only new measures to track this issue, but appropriate targets to ensure that its economic benefits fall to all in society?

[Lord Henley]

My Lords, I welcome the noble Lord’s enthusiasm for these matters. I think the House is grateful for his very prompt intervention.

The noble Lord recognises, as I do, that changes are coming and that we must accept them and work for them. He will have seen the Made Smarter Review that we commissioned, published only a week ago by the chairman of Siemens, and I think he would accept that we will see many more jobs; I think the review estimated this could create something in the order of 135,000 new jobs. In terms of what he was saying about greater inequality, which I do not accept, there are estimates that the fourth industrial revolution will not only create new jobs, but create them faster and create better-paid jobs. That is something we need to look at. I will certainly look at the other reviews he mentioned, but there are challenges that we must accept. These changes are happening and we must work to ensure that they happen to our best advantage.

[Lord Fox (LD)]

My Lords, I am delighted that the Minister has mentioned the Made Smarter Review, which highlights that the UK is slow in adopting digital technology compared with our industrial competitors. One of the things it proposes is to run an adoption pilot scheme and to use the north-west of England as the location for it. Does he agree that we need to hurry up the adoption of a digital strategy and that a pilot in the north-west of England would be a good way of moving that forward?

[Lord Henley]

My Lords, I shall not make any firm commitments about that review, which was published only at the beginning of the month. Noble Lords will know that we have already had a Question dealing with it. I confessed that I had not yet read the full 246 pages of the review, but I am making progress under the advice of the Leader of the Opposition, who recommended that I read it with a mug of cocoa. I will look at all recommendations. I will not make promises about the north-west of England but the noble Lord will know I have a particular interest there. I would welcome going back up there as often as possible.

[Baroness Lane-Fox of Soho (CB)]

My Lords, arguably the biggest challenge facing Governments globally at the moment is the disconnection between policy, legislation and the pace of technological change. Will the Minister give the House a sense of how the Government are approaching closing that gap and, to use a trendy tech word, disrupting their own policy-making processes to keep abreast of developments?

--- Later in debate ---

[Lord Henley]

My Lords, it would be wrong for me to make any promises regarding legislation as I have the beady eye of the Chief Whip on me. This House and another place will be fairly busy with what we will be doing over the coming year, but I certainly take on board all the noble Baroness’s other suggestions. We welcome what she has to say.

[Lord Hamilton of Epsom (Con)]

My Lords, does my noble friend accept that inequalities have very much been caused by central banks printing money, which the European Central Bank continues to do? This finds its way into assets, so those who own assets get richer while those who do not stay where they are. Does he not agree that if the Labour Party’s principle is that it should print more money, that situation will get worse, not better?

[Lord Henley]

My noble friend makes a very good point.

[Lord Grocott (Lab)]

My Lords, as we are referring to the fourth industrial revolution, is this not a timely occasion to remember the first Industrial Revolution and its birthplace, Telford in Shropshire, particularly in view of the fact that the Iron Bridge is currently being refurbished? Any support for that would, of course, be much welcomed. It is also home of the world-famous Ironbridge Gorge Museums. I might also mention the Telford Steam Railway, of which I am president.

[Lord Henley]

I am very grateful that I do not have to deal with the second and third industrial revolutions, but I thought that someone in this House would want to mention the first. I did not think anyone would be able to remember the first, but the noble Lord pays a valid tribute to his former constituency. We recognise that and hope that the Iron Bridge in Telford gets well soon.

[Baroness Benjamin (LD)]

My Lords, I draw the attention of the House to the Lords Communications Committee’s report Growing Up with the Internet. Of course we have to maximise the opportunities of the digital revolution, but how are the Government planning to protect society—especially our children—from the ethical and moral implications, and long-term consequences, of artificial intelligence and machine learning?

[Lord Henley]

My Lords, I was not on the Communications Committee when it considered and produced its Growing Up with the Internet report—I think that the noble Baroness was. Since I left the committee, I believe that the Department for Digital, Culture, Media and Sport has responded to that report and I refer the noble Baroness to the letter of response.