Financial Services Bill

Debate between Lord Hodgson of Astley Abbotts and Lord De Mauley

Wednesday 25th July 2012 Lords Chamber

[Lord De Mauley]

My Lords, I cannot answer that here and now, but I will write to my noble friend on that point.

Meanwhile, I assure my noble friend Lord Hodgson that while staffing is not a matter for the Bill—as the noble Lord, Lord Tunnicliffe, suggested—we regard it as absolutely key for the regulators themselves to consider. On this understanding, I ask him to withdraw his amendment.

[Lord Hodgson of Astley Abbotts]

I am grateful to my noble friends Lord De Mauley and Lady Noakes and to the noble Lord, Lord Tunnicliffe, for their support. Inevitably, we get down a bit to motherhood and apple pie on these things. However, I say to my noble friend on the Front Bench that the reputation of the regulators will be made quite early on, because the firms will say, “Are these bodies with whom we can have a sensible, grown-up, informed, well judged set of discussions, or have they sent boys to do men’s jobs?”. If they send boys to do men’s jobs, the relationship will never recover, because the regulated firms will not feel that the regulators have the capacity, ability or knowledge to be able to make the informed judgments that this Bill expects of them. I will withdraw the amendment; however, my noble friend must emphasise to the regulators that this will be a once-in-a-lifetime opportunity. If they get it wrong, their reputation will be damaged from the start.

Community Interest Company (Amendment) Regulations 2012

Debate between Lord Hodgson of Astley Abbotts and Lord De Mauley

Wednesday 18th July 2012 Grand Committee

[Lord De Mauley]

My Lords, the community interest company form was introduced by the Companies (Audit, Investigations and Community Enterprise) Act 2004 and the Community Interest Company Regulations 2005. The legislation created a new type of company tailored for social enterprise that wanted to use the familiar company form but with the assurance that assets would be used primarily for the benefit of the community. The new form was intended to complement existing and well established forms such as charities and industrial and provident societies which are also commonly used in the social enterprise sector.

Since July 2005, when the legislation came into force, over 6,700 social entrepreneurs or social enterprises have chosen to register as community interest companies. CICs—I shall resist the temptation to call them “kicks”, although I think it is a fairly widely used expression—carry out a wide range of activities taking in sectors such as health and social care, retail, manufacture, the environment, business support, working with young people not in employment, education or training, older people, addressing cultural needs and running community cafés and centres. The Regulator of Community Interest Companies, Sara Burgess, is an independent regulator for this legal structure.

The regulator discharges its responsibilities by ensuring CICs comply with a community interest test on registration. They are then monitored and supported to ensure that they continue to operate in the interest of community benefit and are transparent in the way they do this. A statutory asset lock ensures that there is limited or no private gain. The community interest company report is a key feature of the model. The directors of a community interest company must produce a report annually to show to the public and the regulator that the community interest company is continuing to meet the community interest test and engaging appropriately with stakeholders.

When the relevant aspects of the Companies Act 2006 were implemented, they made a number of changes. Unfortunately a gap was created, so that although all CICs have to prepare an annual report, not all of them have to file it. Filing the report is optional for small companies that benefit from certain accounts and reporting exemptions, when it was always intended that it should be compulsory for all community interest companies. The vast majority of community interest companies are small. I am delighted to say that I can reassure your Lordships that in practice CICs have filed reports. However, it is important to put the point beyond doubt, and indeed Parliament imposed a duty on Ministers to do this.

The regulations will make provision requiring the directors of all community interest companies to submit a copy of the annual community interest company report to the Registrar of Companies together with the community interest company’s annual accounts as a package. Placing the report on the companies register should be compulsory for all community interest companies, even for those that are small. CICs are subject to a light-touch regulatory regime to minimise burdens for them, and the report is therefore one of a very limited number of means by which stakeholders and the regulator can check that a community interest company is complying with relevant rules. The report contains important information on the impact of the community interest company’s activities, directors’ remuneration, the payment of dividends to shareholders and the consultation of stakeholders.

The regulations will, as always intended, apply late filing penalties if the package is received after the filing deadline, address the gap created in the implementation of the Companies Act 2006 and ensure that the transparency offered by the submission and publication of the CIC reports continues as it was intended. I therefore commend the regulations.

[Lord Hodgson of Astley Abbotts]

My Lords, I will make a comment or two. The CIC is a very valuable corporate form and has enabled the development of the social enterprise sector. The asset lock has proved valuable and a good way of developing an alternative to the purely charitable structure. I therefore fully agree with my noble friend that we need to close this loophole. However, when I read in the Explanatory Memorandum a government department using the words, “to minimise the burden” it is like the letter I get from my power supplier or my mobile phone company saying, “We are going to introduce some changes, which are going to improve the service we are providing you”. You know immediately that the service is going to deteriorate considerably.

What the Explanatory Memorandum is trying to parade here is the idea that this is somehow helping CICs. In fact, this measure is helping the CIC register and Companies House, because the memorandum states that,

“it has been decided that the directors of a CIC should be required to deliver the annual community interest company report to the Registrar of Companies together with CIC’s accounts and reports”.

It might be that a CIC would find it more comfortable not to do this—it might want to send it a different time of year. However, this is designed to help the regulator by making the CIC send the two reports at once. All I am saying to my noble friend is that it is sophistry to pretend that this is minimising burdens. If his department would like to minimise the burdens, it could quite quickly arrange for Companies House and the CIC registrar to agree one form that combined the two. You could have a CIC company reporting form that included both parts of what a normal limited company would provide as well as the particular assurances for the CIC.

Employment Tribunals Act 1996 (Tribunal Composition) Order 2012

Debate between Lord Hodgson of Astley Abbotts and Lord De Mauley

Monday 19th March 2012 Grand Committee

[Lord Hodgson of Astley Abbotts]

My Lords, the point about speeding up refers to speeding up the process as a whole. I agree with that point but if the Minister’s department can spend some time trying to make the wheels of justice grind faster, it would be very helpful. Small firms find this long elapse period very debilitating.

[Lord De Mauley]

I am most grateful to my noble friend for that point and we will certainly bear it in mind. As regards the point made by the noble Baroness, Lady Gibson, about one person being better than three, her noble friend Lady Donaghy said that the Government’s support for lay members rings hollow. But I assure noble Lords that we value lay members, as do employment judges, as the noble Baroness, Lady Gibson, and others have said. Judges will sit with lay members where they add value. Judges are expert in employment law and they see cases every day. But, as the noble Lord, Lord Jones, said, value for money is important.

The noble Baroness, Lady Drake, said that the industrial jury concept should not be disturbed and suggested that the tripartite panels give confidence, legitimacy and authority to the tribunals. In common with all other types of complaint that might be heard by an employment judge sitting alone, the judge will have, as I have said several times, discretion where he or she thinks it necessary to choose to sit with lay members. Despite the scepticism of the noble Baroness, this discretion, alongside the professionalism and expertise of employment judges, which stakeholders from all perspectives have recognised, should mean that all users maintain the same high levels of competence in the system as now. Civil courts up and down the land have lone judges making decisions and that is not just in criminal cases, as the noble Lord, Lord Jones, mentioned.

The noble Baroness, Lady Drake, also suggested that the potential benefit may not be worth it. Predicting what savings will be made across the 10,000-plus unfair dismissal complaints heard each year is difficult, given the need for judges to exercise discretion and assess what cases might require full panels. The savings, which were conservatively estimated in our impact assessment, might not be considered significant but as a Government we must take all measures to ensure that taxpayers’ money is used to best effect.

The noble Lord, Lord Lea of Crondall, who quoted the impact assessment, asked why we are legislating now rather than waiting for the Underhill recommendations. The terms of reference for the Underhill review relate clearly to procedural rules. The constitution and composition of the tribunals, as distinct from the procedural rules, particularly given the resource implications associated with judicial and member sitting, is a matter properly for Ministers and for Parliament. Furthermore, there is no reason to await the outcome of the Underhill review when the Government have concluded that there is a case for change.

The noble Baroness, Lady Turner, asked about fee charging in an employment tribunal. Although this is not one of the matters we are principally discussing today, let me say that most people will never use an employment tribunal in their lives; yet the taxpayer funds the system at a cost of £85 million. The objective is to transfer the cost burden from taxpayers to the users of the system.

I appreciate the points that have been raised. I will go away and reflect on them carefully. Certainly, if there is anything on which I have not responded, I will write to noble Lords.