Unpaid Internships

Debate between Lord Hodgson of Astley Abbotts and Lord Henley

Tuesday 12th March 2019 Lords Chamber

[Lord Henley]

I note that the noble Lord says that his policy is to legislate in this area. He quoted Matthew Taylor, who made it quite clear that:

“There have been calls for a separate ‘intern’ status in employment law but we believe this is unnecessary. We believe that the law is clear as it currently stands. If a person is obtaining something of value from an internship, they are most likely to be a worker and entitled to the National Minimum or Living Wage”.


We do not believe it is necessary to legislate. I will certainly look at whatever research we are doing in this area and let the noble Lord know.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, in any action my noble friend takes, will he bear in mind the impact on the charity and voluntary sector? A lot of charity and voluntary groups like to take on interns, and do so to the mutual benefit of both sides, but not all charities—especially smaller ones—can afford to pay.

[Lord Henley]

I note what my noble friend says and that he feels that charities might not be able to afford to pay, but if people are offering something that amounts to work, the simple fact is that the law says that they should be paid. That is where I stand.

International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019

Debate between Lord Hodgson of Astley Abbotts and Lord Henley

Tuesday 12th March 2019 Grand Committee

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

My Lords, these regulations, which were laid before the House on 31 January, aim to address failures of retained EU law to operate effectively in the field of accounts and reports of UK corporate bodies. They also address certain other deficiencies arising from the UK’s exit from the EU.

The international financial reporting standards, abbreviated to IFRS, are a set of international accounting standards used by multinational companies to produce their annual accounts. They are required or permitted in over 125 countries, including all EEA countries and 15 of the G20 countries.

EU Regulation 1606/2002, known as the IAS regulation, requires that all publicly traded companies in the EU use IFRS, as endorsed and adopted by the EU, when preparing their consolidated accounts. In the UK, the Companies Act 2006 also permits other UK companies to produce their accounts in accordance with these standards. In total, approximately 15,000 companies in the UK use IFRS.

Once the UK leaves the European Union, the EU framework for adopting IFRS will no longer apply. These regulations provide for the continued use of IFRS by implementing a national framework that provides continuity and clarity to UK business, and they aim to provide such continuity and clarity by bringing the European framework for adopting IFRS into UK law. This will ensure that UK-registered companies will not have to change their processes for preparing annual accounts.

The powers to endorse and adopt these international standards for use in the UK will be transferred to the Secretary of State. These transferred responsibilities will be bound by process and scrutiny. Furthermore, assessment criteria consistent with those in the European regulation will apply to all new endorsement decisions in the UK. They are that the standards provide a “true and fair” view of an undertaking’s financial position and that their adoption is conducive to the,

“long-term public good in the United Kingdom”.

The regulations also specify that, for all new endorsement decisions, the Secretary of State must consult stakeholders with an interest in the quality and availability of accounts, and that the final decisions will be published. The Secretary of State will be required to lay a report each year before Parliament detailing the carrying out of his responsibilities.

Further, the regulations provide for subdelegation of the endorsement and adoption powers to a designated UK body. A subsequent affirmative SI will transfer these powers to a new UK endorsement board. We currently expect this board to be hosted by a subsidiary of the Financial Reporting Council. As such, it will benefit from the FRC’s existing operational processes, such as HR and premises. The FRC’s role will be limited to monitoring governance and due process of the endorsement board. It will have no role in the process for adopting standards.

As the Committee will be aware, a comprehensive and detailed report of the independent review of the FRC, making 83 recommendations, was published in December. The Government welcome and share the review’s vision for a new regulator with a new mandate, new leadership and stronger statutory powers, and will take swift action to deliver that. The FRC’s role in relation to the endorsement board will be transferred to the new regulator once it is operational.

Throughout the development of these regulations, the Government worked closely with businesses and regulatory bodies. Informal consultations were carried out with companies, their advisors and investors. In addition, a dedicated stakeholder group also helped inform decisions about these regulations. Stakeholders were strongly in favour of both establishing a UK framework for the continued use of IFRS and the requirement for consultation before an international standard is adopted for use in the UK.

The regulations also make amendments relating to societas Europaea companies, or SEs: a Europe-specific type of public limited liability company that will not be able to register in the UK after EU exit. Regulation is already in place to convert automatically existing UK entities on exit day into a new corporate form—a UK societas—to ensure that they have a clear legal status. The amendments in the regulations relating to these entities do three things. First, they preserve a particular employee involvement provision to maintain employment rights wherever practicable. Secondly, they apply the Overseas Company Regulations 2009 to SEs registered in other member states. This will ensure that UK branches of entities registered in other member states are treated in the same way as UK branches of any other overseas company. Finally, they make a number of minor consequential amendments to other legislation, such as replacing references from SEs to UK societas to ensure that the UK has a functioning statute book on and after exit day.

A de minimis impact assessment of the regulations estimated low overall costs to business. The IFRS-related changes were estimated to have an equivalent annual net direct cost to business of £2.4 million per year. The estimated impact for the SE-related changes was £10,400 per year. Both figures are under the £5 million threshold necessary for a full impact assessment.

I commend these regulations to the Committee and ask the Committee to support and accept them. I beg to move.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I begin by congratulating the Minister’s team—it is always said that the British Civil Service is the best in the world. They must have realised that their Minister might take a bit of incoming over the FRC tonight, as they produced this headline for the front page of the Financial Times: “FRC to make way for stronger accounts watchdog after a string of audit failures”. To get that on the front page of the FT just as we are to discuss the FRC as a possible delegated body is above and beyond the call of duty.

I need to declare some interests. I have served in the City for most of my life and remain a director of a number of limited companies, which are listed in the register of your Lordships’ House. I am also a member of Sub-Committee B of the Secondary Legislation Scrutiny Committee, which considered these regulations. I am coming back to have a second bite at the cherry, having had a go under the noble Lord, Lord Cunningham.

I will make a couple of points. It is easy—my noble friend, in his emollient style, flows so easily over the issues—to think that accounting standards are humdrum and commonplace. In fact, their exceptionally wide-ranging implications are felt in every part of our corporate system. They have an impact on directors and their boards and companies; if you serve as a company director, the two great things your lawyers and accountants always tell you about is trading while insolvent and maintaining capital. Failing to do that exposes you to some nasty and unpleasant risks and penalties—quite rightly. On the other side, they are for investors who need a clear basis on which to decide whether to invest their money in a particular venture.

Years ago, I was sitting where the noble Lord, Lord Stevenson of Balmacara, is now sitting, leading the Opposition on what became the Companies Act 2006, to which my noble friend referred in his opening remarks. We spent quite a bit of time on the Section 393 “true and fair” view, which is a statutory requirement. If there is to be a clash between international standards and UK law, UK law must prevail because it is the law of this country. In those circumstances, how will we determine the final arbiter of what is true and fair?

I will give the Committee a brief example because although it may seem quite simple to decide what is true and fair, it is exceptionally difficult. Revenue and recognition have been a problem behind a number of companies recently—notably Carillion—where you have a long-term contract with an assured client, perhaps the Government. Let us say it is a 10-year contract. You will have to put in some additional work in year one to provide the systems that are going to last the 10 years. Boards and auditors will argue fiercely about how this should be done. Some people would say that to show that you would make a loss in the first year of a 10-year contract, when you will make additional profits in the next nine, is not a true and fair view from the investor’s point of view. A true and fair view can be conservative and restrictive, or neutral, or positive and expansive. Of course, in the case of Carillion, it was positive and expansive and they recognised too much revenue early on.

These concepts go to the heart of our corporate governance and systems—and the public trust in and have confidence in those systems—so these are not just economic decisions; they have big political implications. I would argue that while the Secretary of State may appropriately delegate some of the detailed powers, he or she needs to retain an overarching power to ensure that the system works properly. Noble Lords on the Committee will have seen the ABI briefing, which says:

“We disagree that the Secretary of State should delegate all his functions to the Endorsement Board. Firstly, we think it would be counterproductive and secondly, we think it inconsistent with the aims of the Withdrawal Act … We strongly urge that, in the House of Lords debate on this SI, assurances are sought from the responsible minister that the new SI will provide for active political oversight of the Endorsement Board by the Secretary of State”.


If these matters are to be delegated in their entirety, this country will lose part of its political influence in international negotiations surrounding changes in these worldwide standards. That will impede the UK Government in ensuring that future IFRS continue to reflect the interests of UK companies. That would be a strange decision for us to take in the light of us looking to hew a more independent line, post Brexit. I hope that my noble friend can reassure me and the Committee that there is a real understanding of the political implications that overarch the accounting technical implications of this statutory instrument. That is my first point.

My second point concerns the body to which any delegation may be made. I do not want to dance on the grave of the FRC, but some of the reports to which my noble friend referred in his opening remarks are absolutely devastating. The points include that the FRC,

“is not fit for purpose”,

and that it,

“has serious problems in how it recruits top staff”.

Another point states:

“A new body should have statutory funding and a clearer remit”.


Another states:

“The watchdog needs some new powers”.


One wants an assurance from the Minister that this unfortunate body, which has undergone regulatory capture in the views of many, will not have anything other than a passing interest in the establishment of the body that will enforce the regulations in the future.

It would be helpful if my noble friend could give the Committee more detail on how we will move forward. When his department wrote to the Select Committee of the noble Lord, Lord Cunningham, on which I sit, it said:

“The Department is currently working with the FRC to build capacity to set up the new Endorsement Board (EB) in time for EU Exit”.


We must be quite well on in that process, since we are only 10 or so days away from it. The Committee was also told:

“In addition, stakeholder input helped us define the extent of the FRC’s role in relation to the new Endorsement Board”.


It is important that we get some clarity on where we are in that process. We really do not want stuff to be set in concrete at this point. We need to know how the FRC will slide away and how the new endorsement board will be set up in the next two or three weeks.

Inevitably, particularly tonight, our focus is on Brexit and associated issues. However, this statutory instrument and its successor, which will bring the endorsement board into being, will have serious long-term implications for our corporate governance, the way our companies operate and the confidence of investors in our corporate system—all of which have come into question in recent years over a series of failures and scandals. We need to learn from that and plot a better course for the future. I look forward to hearing from my noble friend how the Government anticipate that being done.

--- Later in debate ---

[Lord Henley]

My Lords, I thank all three noble Lords for their interventions, which were based on considerably more expertise than I have. I hope they will be tolerant of my response. If I fail to answer any questions I might have to write to them.

It might be helpful if I remind them of the purpose of these regulations. As usual they have the words “EU exit” in them. They are designed for a no-deal exit and ensure that the IFRS can continue to be endorsed and adopted for use by UK-registered companies after exit from the EU. They are laid using powers under the EU withdrawal Act 2018. It is again worth reminding noble Lords of the constraints within that Act and that the powers within it would not allow the Secretary of State to go wider into some of the other matters that are of concern to all three noble Lords. That is why, as I made clear earlier, that there will be a further SI later on.

We have been talking about Kingman who, as we know, published his report on 18 December. We also know that my right honourable friend the Secretary of State issued his initial consultation on the recommendations on that only yesterday and that the closing date for responses is 11 June. No doubt all three noble Lords have copies of that. I think I saw a tweet from the noble Baroness, Lady Bowles, on it today, so I presume she has seen a copy. I regret that we are not in a position to debate it today, but there will be many other opportunities to debate it and to feed in responses in due course.

To some extent, that deals with the initial concern from the noble Baroness about whether the FRC is a suitable body to host the new endorsement board, in light of Sir John Kingman’s report and the response that will have to be made to that. As I said, there are the constraints of the EU withdrawal Act. My right honourable friend is trying to deal with the deficiencies so that we can get on with the eventualities, should there be a no-deal Brexit.

I shall say something about the consultation on the Kingman review. It is important and we are grateful for the very comprehensive review he gave. We think the recommendations are well-considered, far-reaching and transformational. As noble Lords know, the Government published our initial consultation on those recommendations, highlighting our approach in taking forward the review’s recommendations. The Government welcome and share the review’s vision for a new regulator with a new mandate, new leadership and stronger statutory powers and intend to move as fast as possible on this. I would say move swiftly, but the noble Lord will have to be tolerant because the process to implement reforms and overhaul the sector must be gone through. In the interim, until the new regulation is in place, the Government will work with the FRC to take forward 48 of the review’s recommendations, including addressing issues such as lack of transparency and shortcomings in the enforcement activities. Further detailed consultation on those measures will follow.

[Lord Hodgson of Astley Abbotts]

One of the words that worries me is “hosting”; this relates to the question raised by the noble Baroness, Lady Bowles. Are we just getting a defective organisation—Sir John Kingman’s review makes it clear that it is defective—to be the handmaiden or midwife of this new organisation? What does hosting mean? Does it mean that all the staff are the same? Will there be an independent unit within the FRC? This may be too detailed for this discussion and I would be perfectly happy if my noble friend wrote to us. However, for the reasons we have explained, and in order to have the public’s trust, it is important that it must be seen to be independent and not infected with the problems of the FRC.

[Lord Henley]

I take my noble friend’s point. In my opening remarks, I tried to make clear that the FRC would host it purely in terms of human resources and other such matters. It will be an independent body to which my right honourable friend can delegate powers. Some noble Lords—I think it was my noble friend and the noble Lord, Lord Stevenson—asked about this. My right honourable friend will retain overarching power to ensure that that endorsement function operates well. If he retains that overarching power, he can revoke designation and retain overall control.

The endorsement board will be required to report annually to the Secretary of State on carrying out its functions. Sitting with the FRC is a matter of convenience in terms of HR and such matters, but it does not mean that its staff has to come from there. If there is anything more I can say, it might be best if I wrote to my noble friend and copied the letter to other noble Lords. I want to make it clear that the board will be made up of independent members. Its chair will be independent and it will not be part of the FRC. Having used the word “hosting”, I am trying to think of some appropriate metaphor but I cannot offhand. I hope that my noble friend will understand what I am getting at.

Protection of Freedoms Bill

Debate between Lord Hodgson of Astley Abbotts and Lord Henley

Tuesday 8th November 2011 Lords Chamber

[Lord Henley]

My Lords, it was a real anger and it was quite right that something should be done about it. I think he is wrong, though, to imply that people welcome more and more cameras on every single occasion.

Obviously, we have got to get this right, so I was very grateful that the noble Baroness, Lady O’Loan, for example, welcomed the fact that we were going to have a code of practice and a new commissioner. Again, she said it was important that further things should happen. I think she saw that there was insufficient provision for complaints to be made and she also suggested that there was not—I think I have it right—sufficient oversight. I will certainly look at that, and these are obviously matters that we can examine in Committee.

The last point that I should pick up on is that made by my noble friends Lady Miller and Lady Doocey, and the noble Baroness, Lady O’Loan, when they talked about the number of commissioners and considered whether there could be a merger of commissioners. I appreciate that the number of commissioners seems to be growing, but their roles are distinct. Again, that is a matter of detail that we should be able to consider in due course in Committee.

Turning to powers of entry, my noble friend Lord Goodhart, who generally welcomed the Bill, for which I was very grateful, raised the issue that it includes a number of Henry VIII powers. Whenever that expression is mentioned, I think back to what was almost the first Bill that I handled at this Dispatch Box, which related to statutory sick pay, which was one of the earliest modern reintroductions of Henry VIII powers. I remember the savaging that I received from the then good friend of the noble Lord, Lord Goodhart, Lord Russell, and the problems that we had with the Bill. When I die, no doubt Henry VIII powers will be found engraved on my heart. However, the noble Lord accepts the fact that it is possibly appropriate here, in removing powers of entry, to use those Henry VIII powers. I stress—in particular, to my noble friend Lord Selsdon—that that power is only for the repeal of powers of entry. Clause 41, which allows amendments to be made to powers of entry, makes it quite clear that those powers can be used only where they do not reduce the protection for the individual. Again, I pay tribute to all the work that my noble friend Lord Selsdon has done over the years in trying to reduce the number of powers of entry. In due course, I will write to him with further details on the code of conduct.

Turning briefly to wheel clamping, that is a matter for Committee on which I know that my noble friend Lord Attlee, who has great expertise in the area, will be able to deal with it. As my noble friend Lord Bradshaw said, this is something that we need to look at with very great care, especially access to the DVLA database. I shall also consider, as the noble Lord, Lord Kennedy, said, what we need to do about ticketing and abuse in that area. I have also noted what the noble Baroness, Lady Grey-Thompson, did not have to say about the abuse of blue badge parking, which concerns all of us and which we should address. However, clamping in a disabled parking area is not the solution to that problem, because once you have clamped a vehicle in that area, you cannot use that area. There are other, better ways to deal with that problem.

Moving to counterterrorism and the questions raised about the reduction to 14 days, I note that most noble Lords are happy with the reduction from 28 days to 14 days, but I note the concern about the measures that would have to be used to raise that 14 days to 28 days if we were in a difficult situation where we needed to do that. The noble Lord, Lord Kennedy, was very honest when he said that it was difficult to see how we could get from the 14 days back to the 28 days. We have to look at that. At the moment we have Clause 58 and the powers in the Bill as set out, but certainly we will want to look at those again very carefully. I note what the noble Lord, Lord Armstrong, had to say, that he thought that we had not gone far enough in what we were doing, and that it would be too difficult to do it. He would certainly want to try to extend Clause 58, as I understood him, to allow the Home Secretary to extend the period in other circumstances where appropriate. I was grateful that he made it quite clear that he hoped she would never have to make use of any of those powers.

I come now to vetting and barring, and again that expression I used at the beginning about getting the balance right is more important here than in virtually any other field. Of course, as the noble Baroness, Lady Grey-Thompson, put it, our first priority must be the protection of children and young people, and that will remain our priority. However, we obviously have to have the right balance, as was stressed by my noble friend Lord Hodgson, though others thought that we had got this wrong and thought more protection ought to be brought in. As I said at the beginning, I want to stress that if you bring in too great a control and too great protections, there is the danger of encouraging a tick-box mentality, which might not provide the better protection for children and young people that we want. Again, I will look at that as we discuss these matters in Committee.

I would say to my noble friend Lord Addington, and the noble Baroness, Lady Grey-Thompson, but more particularly to my noble friend Lady Heyhoe Flint, who all spoke about sporting issues, that I would be more than happy to see a delegation of sports bodies if she would like to bring them to see me in due course.

I would also like to suggest to the noble Lord, Lord Harris, who said that he was not happy about what might happen to volunteering and the risk to volunteers, that he look at some of the briefing provided by Volunteering England, which states:

“However, we would not want to see this wording tightened up by use of terms such as ‘close’ or ‘constant’ supervision, as has been suggested by other organisations, because it could further restrict the involvement of volunteers. If the requirements for supervision are too prescriptive, organisations may be put off from involving volunteers and potential volunteers deterred from volunteering”.

[Lord Hodgson of Astley Abbotts]

Will my noble friend give way momentarily? One of the questions now is: what is “frequent and intensive” when dealing with children and vulnerable adults? Are we going to have a new definition of it, and if there is a new definition of it, will it be available for discussion in Committee? Clearly, there is a wide range of opinions around the Chamber about how we should tackle that.

[Lord Henley]

How you would interpret those words is really a question of fact and degree. I will have a further look before we get to Committee to see whether I can write in greater detail on that. If I cannot, I am sure that it is something that we would want to discuss in greater detail in Committee and at later stages.

Finally, I come to freedom of information and data protection in Part 6. I will touch on this only very briefly because I understand the concerns expressed by my noble friend Lady Hamwee, the noble Lord, Lord Bew, and the noble Baronesses, Lady O’Neill and Lady O’Loan, about the publication of research, particularly early publication. I accept that there is a genuine concern coming from Universities UK.