Green Investment Bank

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Tuesday 1st November 2016 Lords Chamber

[Baroness Neville-Rolfe]

In addition to the special share, which will protect GIB’s green mission, the Government have asked potential investors to confirm their commitment to the GIB’s green values and its investment principles, and explain how they propose to protect them. Green investment is, of course, what the GIB does—it is in its DNA. Investors will buy into its reputation, its green business plan and forward pipeline of projects, all of which are focused on the UK, although there could be international potential as well.

[Lord Mendelsohn (Lab)]

My Lords, we welcome the appointment of the trustees to ensure the Green Investment Bank will retain its green mission under new ownership, and we warmly applaud the appointment of the noble Lord, Lord Teverson. The crucial ability of the trustees to exercise this vital role now depends on the contracts and corporate arrangements between the buyer and seller. Will the Minister confirm that the trustees will have access to the transaction, contract and documents, and some funds for expert legal advice, to ensure that they can do the job this House voted for?

[Baroness Neville-Rolfe]

The trustees will have all they need to do their job, but the noble Lord will of course recall from our lengthy and useful discussions during the passage of the Bill that their role relates to the articles of association, ensuring that the green purposes of the bank are maintained. That is where they come in: they are not envisaged as a management board for the GIB, whether in its current state or whatever. They have an important role to play.

Trade Union Bill

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Tuesday 3rd May 2016 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, never has my appearance been so welcome. Government Amendments 7A to 7F mark significant movement from the original provisions in the Bill. I associate myself with the masterly summary, as presented by the noble Lord, Lord Burns, of how these amendments meet the requirements of the amendments passed in this House, and are consistent with the requirements of the manifesto but with the removal of the most egregious and deficient elements. These changes are a result of hard work carried out by the members of the Select Committee, led ably by the noble Lord, Lord Burns. The committee’s recommendations on opting in received cross-party support and support from the Benches of no party. I thank the Select Committee members and the noble Lord, Lord Burns, again for their efforts, which have contributed to the progress we see today.

The debates that we have had in this House on Second Reading, in Committee and on Report, as well as the establishment of the Select Committee and the debate on that committee, demonstrated the very wide agreement that these provisions needed some change. The Select Committee has achieved that job very capably. Indeed, both the debate today and its tone demonstrate how this House has done a great service to everyone in ensuring that these measures were brought forward.

I also note that a great majority in the House was in favour of such a provision. That is an important distinction in many debates that take place, but this one had such a broad consensus that it really was a full expression of the whole House. I thank the Ministers—the noble Baroness, Lady Neville-Rolfe, the noble Lord, Lord Bridges, the noble Earl, Lord Courtown, and Mr Boles in another place—for the way that they considered, engaged with and were very open to the discussion and debates that we had.

I have one particular observation in relation to the process. The Select Committee report was extremely impressive, and introduced elements which added to the debates of this House and another place. Indeed, it identified some of the deficiencies in the original impact assessment. In particular, the use of behavioural economics and behavioural psychology to try to understand what the likely consequences of such a provision would be was extremely useful. I hope that the Minister will consider using that sort of insight much more widely in impact assessments, so that we can properly judge what the consequences of measures are likely to be.

It will come as no surprise that we on these Benches thought the Bill should not have contained any of these measures in the first place. However, we recognise that the Government’s new proposals are a substantial improvement from where we were just a few weeks ago. We hope that the other issues raised by the Select Committee, including the issue around cross-party talks and party funding reform, are not ignored and are taken up swiftly, and that we can move beyond using democratic power for narrow party advantage, which usually comes with terrible unintended consequences, and build a stronger political system with greater participation and confidence.

[Baroness Neville-Rolfe]

My Lords, I recognise the emotions that this Motion has elicited, and that opinions are divided, but take the opportunity to thank noble Lords from all sides of the House for the support that they have given me personally. It is a pleasure, sitting on the Front Bench, that occasionally you get support from all sides, including today from disappointed friends such as my noble friend Lord Robathan. I hope we have found a balance that allows us to move forward, as we have managed elsewhere on this contentious Bill. In particular, I am glad that when an individual joins a union they will have to be made aware of any political fund and give their consent to paying into it. When we did our research, which we shared with the committee, we were shocked, as my noble friend Lord King said, at how untransparent some unions were on the possibility of opt-out.

The Bill has been amended to reflect the Select Committee’s recommendations on opting in. The amendment in this place was, as has been said, carried by a majority. My noble friend Lord Cormack mentioned this, but the majority against the Government was 148—320 to 172—so I would say in response to my noble friend Lord Forsyth that I was not very persuasive. Our manifesto undertook to ensure that trade unions use a transparent opt-in process for union subscriptions. My honourable friend Nick Boles made it clear in the other place last week that the revised provision meets that commitment. I have nothing to add to what he said about the suggestion that these final changes reflect wider considerations. As far as I am concerned, we are adopting the proposals of the Select Committee. We have listened to common sense, including the comments made by my noble friend Lord Forsyth in January about how the opt-out would be unfair to the Labour Party, and the current clause meets our manifesto commitment.

My noble friend Lord Leigh and, on the other Benches, the noble Lord, Lord Richard, emphasised the point about compromise. In future, all new trade union members will have to make a transparent and active choice to contribute to the political fund through an opt-in. Over time, with membership churn and evolution, opt-in will become the norm. On a point of detail, I acknowledge that the spirit of the Select Committee’s recommendation was to extend annual reminders to all members, and we have not gone as far as we might have done in that respect. The statutory requirement in the Bill extends to new members only, but I expect and hope that unions will communicate with all their members at the same time. I agree with the noble Lord, Lord Burns, that the best way forward is to provide guidance on best practice and to encourage unions to ensure that their annual communications on rights to opt in and opt out are sent to all members.

I am always glad to hear from my noble friend Lord King. He has helped me through some very difficult moments on the Bill. Of course, the King-Murray agreement is still in place for existing contributors to political funds, and the TUC has issued guidance to all unions. This should mean that all unions will remind those currently contributing to political funds that they have a choice about contributing to the union’s political fund. I do not know what the TUC reply would be, but the guidance about good practice proposed by the noble Lord, Lord Burns, should obviously help to address the issue.

I hope that noble Lords will recognise the co-operation we have had on the Bill across the House and how accommodating the Government have been in responding to the Select Committee’s recommendations on opt-in. I hope this will be remembered should future Governments turn their minds to matters of party-political funding.

The noble Lords, Lord Tyler and Lord Whitty, raised the wider issue of party-political funding. The Government have a separate manifesto commitment relating to such funding, and we remain open to constructive debate and dialogue on how we can further strengthen confidence in our democratic process and increase transparency and accountability. However, this Bill is about trade union reform, and party funding is not in scope. I must therefore return the debate to the issues of this Bill.

Wherever noble Lords stand on trade union reform, I hope that they will recognise that the principle of the Select Committee’s recommendations has been taken on board. We are nearly at the end of the Bill process and approaching the end of the parliamentary Session with a number of Bills still outstanding, and I hope the House will feel able to bring this particular issue to a conclusion today.

Enterprise Bill [HL]

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Tuesday 19th April 2016 Lords Chamber

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

My Lords, this Bill will strengthen the UK’s position as the best place in Europe to start and grow a business, and make sure people who work hard can succeed. When the Bill left this House for the other place, the noble Lord, Lord Mendelsohn, whom I see in his seat, rightly said that it was,

“certainly a better Bill than the one that arrived”.—[Official Report, 15/12/15; col. 1985.]

Today, we welcome the Bill back to this House with further improvements and amendments.

Let me begin with the pubs provisions—always a favourite subject, since the men in my family love a pint. As part 2 of the government consultation on the Pubs Code confirmed, we do not intend to frustrate access to the market rent only option. Amendment 28 improves Clause 33 on the MRO by amending Section 43 of the Small Business, Enterprise and Employment Act to put beyond doubt that MRO will be available at rent assessment, irrespective of the level at which the rent is set. This has now been reflected in the draft Pubs Code regulations, which were laid on 14 April. These also satisfy the concerns and commitments relating to pubs made during the passage of the Small Business, Enterprise and Employment Act and at earlier stages of this Bill.

In particular, on parallel rent assessment, tenants can consider tied and MRO offers in parallel. Further, we have retained all the conditions in the Act that would entitle a tenant to request the MRO option. We said we would exempt genuine franchises from MRO, and we have done just that. Similarly, we have exempted tenancies at will and other short agreements that cumulatively last for no more than 12 months from most of the other provisions of the code, including from MRO. We have enabled pub-owning businesses and tied tenants to agree to defer for up to seven years the point at which MRO is available at a rent assessment and renewal, where the pub-owning business makes a significant investment. The minimum threshold for a significant investment is set at 200% of the pub’s dry rent.

Amendment 29 tidies up Clause 34, which addresses concerns that pub companies were changing their practice to avoid application of the pubs provisions in the Small Business, Enterprise and Employment Act. These amendments make it clear: first, that potential unfair business practices occurring since the Small Business, Enterprise and Employment Act was passed in March 2015 are covered; secondly, that the adjudicator will report on avoidance of both the Act and the Pubs Code; and, thirdly, that territorial extent is in line with the SBEE Act pubs provisions.

The new Pubs Code Adjudicator, Paul Newby, has now been appointed and will take up post on 2 May, ahead of the Pubs Code coming into force. Mr Newby brings great experience of the sector and a reputation for professionalism. Let us give him the opportunity to show his worth.

I am very pleased with the progress that we have made on pubs in both Houses and, particularly, by working with stakeholders through the Pubs Code consultation. I look forward to a final discussion next month on the draft regulations, as Parliament considers the details of the code via the affirmative procedure.

The amendments in this group relating to Wales have been developed in agreement with the Welsh Government and will allow Wales to benefit from further or extended regulation-making powers in devolved areas in respect of the Regulators’ Code, the primary authority scheme and business rates.

Lastly, we come to the amendments to the extent and commencement clauses. I hope noble Lords will accept my assurance that these amendments are technical and need no further debate.

I commend all these amendments to the House and I beg to move.

[Lord Mendelsohn (Lab)]

My Lords, I thank the Minister for the progress we have made in matters relating to pubs. Throughout the Bill’s progress, in both Houses of Parliament, we have seen the reversion of the original intention in the small business Act and have reinstated the parallel rent assessments; legislated for additional checks to ensure that pub companies do not game the code; reversed the decision to offer MRO conditional on there being an increase in rent; and ensured protection for tenants being offered investment in turn for opting out of MRO. I am tremendously grateful to the Minister for dealing with this extremely well and making sure that these amendments properly express what this House intended when it passed that amendment. I also congratulate the officials in the department, who have done a terrific job in restoring the balance that we hoped had been struck in the small business Act and making sure that these provisions are adequately catered for. We are tremendously grateful for that.

We welcome these amendments, but I will raise just a couple of technical issues on which I seek some clarity from the Minister. For the draft Pubs Code that has now been published, Regulation 3 states that every time a pub tenant wishes the adjudicator to be appointed to arbitrate on an MRO dispute, they must pay a fee of £200. Also, when an arbitration goes forward, there is the possibility of costs of up to £2,000 being awarded against tenants. We understand that this is to discourage vexatious complaints, given that tenants’ conduct could result in an unreasonable increase in the costs of arbitration. However, I want to raise a couple of issues on that.

First, for tenants who are unfamiliar with how the code operates, it will be very useful to get some understanding of how it would apply to a tenant calling who lacks understanding about how this is done. Is the £200 fee an automatic charge, or is there some discretion available to the Pubs Code Adjudicator on how that might be levied for any inquiries? Certainly, given the lack of full understanding of how this code works, it would be extremely unwelcome if the fee stopped tenants coming forward with legitimate concerns.

Secondly, in relation to managing some of the issues around the code, obviously most tenants could not take reasonable legal advice or pay the costs of other sorts of advice. It is entirely plausible and possible that they may well add to the complication of the arbitration because they are not sufficiently skilled or sufficiently well resourced to add to the expertise that would be required to make sure that the costs can be minimised. We would hope that the Pubs Code Adjudicator would do some of those things. It would be useful, therefore, to have some sense of how these costs may act fairly rather than just as an impediment to tenants coming forward with complaints.

Finally, within six months of being established, the Pubs Code Adjudicator must issue guidance on the criteria that the adjudicator intends to adopt in deciding whether to carry out investigations and on the practices and procedures that the adjudicator intends to adopt when looking at investigations. I would be grateful if the Minister could come back to this House, either in her response or in writing, about what input the Government will or could have, or what input this House could have, in this process. If there are any issues of concern with the procedures that are developed, what checks are in place to discuss and revise them, if necessary, after the Pubs Code Adjudicator delivers them?

[Baroness Neville-Rolfe]

I thank the noble Lord for his very constructive response and reiterate my thanks to all noble Lords who have engaged in this. I look forward to our further debate.

On fees, the adjudicator has a power to give advice, so that will not have a charge. Once a referral is made, a fee of £200 is due. I will look further at the detail of what the noble Lord has said, in case there is something I can add. I will also write on the point that he raised about the detail of the adjudicator, so that that is entirely clear as well.

I believe that the changes that we have made, as I think the noble Lord has said, to the SBEE Act legislation and to the draft Pubs Code regulations should mean that all concerned can support these measures as a balanced package to deliver greater fairness—a word that he used—in the relationship between tied pubs and the pub-owning businesses. I very much hope that the industry and the tenants can look forward to a prosperous future.

Trade Union Bill

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Thursday 25th February 2016 Lords Chamber

[Baroness Neville-Rolfe]

As I have said, we are planning ongoing discussions with the Certification Officer, and it will be sensible to revisit that point. But this is the way that we see it in the light of practice in other regulatory areas. I add, if I have not said it already, that enforcement decisions will remain subject to appeal. I suppose that that was the point the noble Lord was making—we have to be careful with systems of appeal.

The Certification Officer reports on the complaints he or she considers in an annual report, which is submitted to Parliament. His or her activity and decisions can therefore be the subject of public scrutiny.

The setting up of a separate body to oversee the Certification Officer’s work would, I believe, create additional costs and increase legislative complexity. It could slow down action, allow genuine complaints to go on for longer without being addressed, which is the last thing we want, and go too far in the regulatory direction—noble Lords will be glad to hear me say that.

We will be discussing the levy on a later amendment, but—to respond briefly to the noble Baroness, Lady Donaghy—there is no intention to penalise anyone. The system simply has to recover the costs of its constituent expenses. The Bill provides scope for regulations to provide for different amounts to be charged. This will be deployed if the proportion of functions provided by the Certification Officer to certain organisations is different. That is proportionate and fair, and in line with Treasury guidance. Whether the regulations will specify that different amounts are to be charged in these circumstances will be subject to the outcome of consultation, which seems the right approach. I believe that setting up an entirely separate body to oversee the Certification Officer’s work would be unnecessary.

I have managed to get through my speech without another Fisherman’s Friend, and I ask the noble Lord to withdraw the amendment.

[Lord Mendelsohn]

My Lords, let me deal first with the two chinks of light. The first was that the Minister said that the Government will look at the arrangements where the Certification Officer absorbs all the investigatory and adjudication roles. Secondly, her case against having someone to look independently at adjudications as a means of oversight—the case against the enforcement of human rights—was that it was too regulatory. That breaches the principle that she is espousing in the first place. I do not think that the case has been made for regulation, and I do not really understand the architecture for the regulator. I do not understand the model or where we are going on this. I do not think the Minister has made a case for where there are comparable institutions or why, just because this impacts on the public realm, this is a proportionate role and one with any appropriate objectives.

The noble Lord, Lord Flight, tried to make a case for regulation—bizarre as I felt it was. We believe in better regulation—sometimes less, sometimes more— but there has to be a case for it, and there is not for this measure. The point about why this is different from general consumer or other rights matters was extremely well made by the noble Baroness, Lady O’Neill, who has made it before. We are dealing with fundamental rights, which are vastly different to the other sorts of rights that the noble Lord was addressing. I do not think that the Government have taken that point on board at all.

I am very concerned about this extension, because it cuts to the heart of our debate. It is not really about members who are not getting the right service and ensuring that unions are operating properly within the rules. We just have to read the impact assessment, which, it is now apparent, was written long after the Bill was published, without consulting any expert and with no real evidence. It identifies, as does the Bill, the particular areas that it covers as: political fund rules, political fund ballots and expenditure on political objectives. Then there are the areas that the Minister was prepared to address: union mergers, internal elections and other such things. It is absolutely clear that this is targeted at political matters.

The Minister has not addressed the warnings that came from the Certification Officer. In his same evidence to the Select Committee—we could almost recite his entire evidence and ask the Minister to respond to it—he talked about the growing uncertainty caused by the legislation:

“In my experience, uncertainty gives way to litigation, and there are a number of issues that could give rise to uncertainty. It is not only members who can complain to me about these things; anyone can raise them with me. Given the political nature of the subject matter, which is likely to be highly contentious, and the fact that what is reported to me is likely to be forensically examined, I can see many more issues being brought to me about what is reported”.

The nature of trying to open up all political matters provides a completely different sense of what the Government want the Certification Officer to do. It is about the regulation of people’s free right and ability to join together and have political views, and they want third parties to be able to intervene on them. That is wrong.

The noble Lord, Lord Stoneham, made exactly the right point about the cases raised in the Certification Officer’s report. There were 19 complaints, and four declarations were made that a union had breached or threatened to breach its rules. What were those issues? The cases of note that the Certification Officer addresses are: case 1, union disciplinary procedures; case 2, internal disciplinary procedures; case 3, the elections for general secretary and issues relating to members in long-term arrears; case 4, internal disciplinary procedures; case 5, internal disciplinary procedures; and case 6, a removal from office of an official. All of a sudden, every third party is now going to have a chance to raise issues on every political matter. That is just not credible.

[Baroness Neville-Rolfe]

My Lords, I have dealt with the issue of vexatious claims. Whenever you try to modernise a regulator—and this is a regulator, albeit not the Financial Conduct Authority—the people who are regulated obviously have concerns. We are debating those concerns, but that does not mean to say that the extra regulation we are bringing in, which does not seem nearly as wide-ranging as everybody is suggesting, is unnecessary. Noble Lords should remember that the accuracy of trade union membership registers affects the results of ballots and other very important things. These matter to the economy.

[Lord Mendelsohn]

I accept the last point, but the report itself demonstrates that there are no problems with that. What is the case for any additional intervention? Can the Minister present me with evidence of any particular case or circumstance—anything, a report or a press cutting? I shall go on for a bit longer to give her the chance to respond on that point.

[Lord Mendelsohn]

That is another extremely good point from the noble Lord, Lord Stoneham.

[Baroness Neville-Rolfe]

The truth is that at the moment the only people who can complain are the members. We are not hiding the fact that there is a change here, so you might have extra complaints, but I think that that is right if we are going to get this regulatory area correct, because of the wider point I was making. I have to say, I do not think we are going to agree on this issue. I look forward to hearing the noble Lord’s final comments, as we have a number of other amendments to move on to.

[Lord Mendelsohn]

I thank the Minister for asking me to hurry up, but I am going to take my time in addressing this, because this is our main opportunity to deal with the major points of principle—although, as I said, we will get on to some more technical matters. She has not made a case or provided evidence, and it is worth continuing to probe these issues. The evidence is there in the Certification Officer’s comments that at this stage, in their obligations to collate that material and in the penalties and breaches available, unions are not transgressing and there is no such case. That is a very important principle. She raised a series of issues, and I am very happy to receive a letter establishing that they warrant the grounds on which the regulation of penalties on such measures can be extended, and include political matters. The key point is that it is not just about the regulation of those matters; she is trying to regulate the ability to have a political view together, and to associate. That is the fundamental difference. It is not about regulating other things or about the ability of a board of directors to have a particular view; it is just about trade unions. That is fundamental and really important.

Turning finally to the important issue of costs, the Minister is not on the same page as the Certification Officer, but I will be happy to receive a letter about that, as I am sure other noble Lords will be. The impact assessment refers to the great benefits—including the fine revenue and the levy revenue, although it does not give a figure for the investigation cost levied on trade unions—and identifies extra costs that are much lower than those identified by the Certification Officer: much lower even than if you established the nature of the cases and the type of evidence she is now expecting unions to pay to assemble, to their detriment. It is very important that she understands that my fundamental problem with how the cost-benefit analysis is presented is that at the very end it says, under benefits, that members of the public will benefit from a strongly regulated regime. Members of the unions will not—they will be burdened by the shackles of cost and by a greater interference from vexatious claims, and probably ministerial interference or direction from the Certification Officer. It is not clear that there is a public benefit at all. We will certainly come back to this issue on Report, and I ask her to think again very carefully about it. I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Mendelsohn]

I want to raise a couple of quick questions which I hope that the Minister will be able to respond to. I am speaking in support of the amendments and to seek clarity on some of the questions which have been raised by my noble friend Lady Donaghy in her amendments. We have debated provisions that place in our view an unnecessary burden and level of regulation on trade unions. Clause 6 places an obligation on unions to report to the Certification Officer in their annual return the details of any industrial action taken, while Clause 11 places an even heftier duty on unions to include details of political expenditure exceeding £2,000 in their annual returns.

Clause 16 gives the Certification Officer quite a bite to ensure that unions abide by these obligations. The Certification Officer will now be able to declare an “enforcement order” against any union which does not follow these measures. Noble Lords will recall how earlier in Committee we debated the concerns expressed by smaller unions that would not have the resources to comply adequately with such regulation. Will the Minister consider any allowances or safeguards where small unions genuinely do not have the manpower to abide by these provisions?

This clause further enhances the role of the Certification Officer by giving the office the same consideration that a court would be given. New subsection (12) indicates that:

“An enforcement order made by the Certification Officer … may be enforced by the Officer in the same way as an order of the court”.

This seems a little extreme and I would be grateful for any examples the Minister could provide on similar bodies which have the powers of the court.

I should like to make a brief comment in relation to Amendment 109, which would remove new subsection (13). The central argument for doing so is because it just does not make sense. I would be grateful if the Minister could explain it to me.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Baroness, Lady Donaghy, for her commendable honesty. I will seek to provide some reassurance on this, which is essentially a technical discussion. I think that there is a reasonable explanation; let us see how it goes.

In the current legislation a union member—so it is a member—can apply to the court to ensure that a union complies with an order of the Certification Officer. That is a long-standing provision of the current legislation, which we heard about. However, to reflect the Certification Officer’s investigation powers we thought it would be helpful when drafting the legislation to remove any doubt that his own orders may also be enforced, as an order of the court, by the Certification Officer. In doing so, the drafting of the Bill reiterates the existing rights of the applicant member and other members mentioned in relevant sections of the current legislation. The words in Clause 17 that the noble Baroness seeks to amend simply refer to those existing provisions. I do not have any examples, but I will see whether we can find one. The main example is that that is existing practice, but I will look at other regulators and add it to my letter.

I am sure that noble Lords would agree that, if the Certification Officer had found that a union was not compliant with its obligations and it did not rectify the situation, it must be right that a union member should continue to be able to take action to protect their interests.

I hope that that provides some reassurance and that the noble Baroness will feel able to withdraw the amendment.

[Baroness Neville-Rolfe]

My Lords, my understanding is that the orders of Certification Officers are already enforceable as an order of the court under the 1992 Act, so we are just continuing that position.

[Lord Mendelsohn]

To clarify, the Bill gives over the powers of the Certification Officer. His order can be enforced without going to court.

[Baroness Neville-Rolfe]

I do not think that that is right, but perhaps I can write and clarify in the follow-up if I do not receive advice quickly.

On small unions, details of the application of financial penalties, including the maximum level of penalties available to the Certification Officer, will be set out in regulations. Of course, they will be subject to the affirmative resolution procedure, as we discussed. In setting maximum amounts in the regulations it will be possible to take into account the type of breach and the size of the union.

I will write to confirm that the answer to the noble Lord’s point is no and that it requires an application to the court.

--- Later in debate ---

[Baroness Neville-Rolfe]

I do not know the answer this evening. I am not sure I am going to give way on this point. We are setting up a modern regulator and a modern regulator needs appropriate penalties. We can argue about the exact detail of the penalties and I am going to come on to say something of a listening kind.

The range of the penalties that we propose mirrors that available to bodies that I see some parallel with, such as the Electoral Commission, which has a maximum of £20,000 in relation to the civil penalties that it can impose; I think it does criminal penalties as well. The national minimum wage regime also provides for penalties of up to £20,000 per worker. Our general approach is that a strong civil sanctions regime is an effective way of ensuring rapid compliance. That is why we do not think that the amendment, which seeks to reduce the fine to £5,000, would be sufficient.

We want to get this right. As the noble Lord, Lord Dykes, said, we are trying to listen during Committee. Obviously, we will consider and reflect on the debate in the House before bringing forward further details, particularly of the application of these penalties and how they would work. I ask the noble Lord to withdraw the amendment.

[Lord Mendelsohn]

I thank the Minister for that reply. I think the noble Lord, Lord Stoneham, has really put his finger on it. The issue here, which we think is of considerable concern, is that there is no evidence that actions are not complied with or such orders are not dealt with adequately. It is certainly true to say that the Government are extending this significantly and placing potentially terrible burdens on smaller organisations, which may have tremendous problems with them.

As we move to Report, the Government have to make a better case than they have made thus far. They say that it is important to restore public confidence. I think this is setting people up for a fall and that is not how you instil public confidence. To me, it is more like the action of a bully and I regret it. I hope the Government come back with a much better justification.

[Baroness Neville-Rolfe]

I have already said in a previous discussion that we very much understand the point about small unions. I reiterate that. In the interests of brevity, I have not repeated it under this heading. We are looking to get the detail of this right and look forward to further discussions on the subject.

--- Later in debate ---

[Lord Mendelsohn]

My Lords, Clause 18 gives the Secretary of State power to make affirmative regulations to provide for trade unions and employers’ associations to pay a levy to the Certification Officer. The amendments in this group attempt to remove any ambiguity over how a levy would be imposed on the trade unions and limit vast increases in the cost of the Certification Officer. These are probing amendments to try to establish where we are. I must say that the powerful speech by the noble Lord, Lord Oates, was significant, and I share his sentiments.

The impact assessment on the levy states that membership size and income will be taken into account, without giving any detail of how it will be calculated and how the costs will be shared between unions. As matters stand, there is no indication as to how the levy might be applied in practice: whether larger unions would have to pay more than small unions, how it would work, what the impact would be on union finances or how the future of the Certification Officer’s resources is established. All those areas are far too ambiguous.

The Bill also fails to require either the Government or the Certification Officer to consult stakeholders before determining the level of the levy. By contrast, in an area of which I am aware, the Financial Conduct Authority’s board is under a statutory duty to consult key stakeholders on fees policy and rates. Indeed, it carries out two consultations: one on policy changes and one relating to fee rates. The amendments simply ask the Certification Officer to carry out the same level of consultation with trade unions and employers’ associations before determining any levy.

I raise this matter because there has to be some operating mechanism and some sense of how it will operate. There must be a view on what should be the limits in any year of the Certification Officer’s growth and how they will be applied. If circumstances require additional staff, does that have to conform to pre-agreed boundaries? How are we to ensure that this onerous system remains logical and can be applied in any manner that can be described as fair? The Bill must give adequate protection to trade unions that the costs will not continue to spiral in the same way as they tend to in a variety of other places.

The amendments are necessary to inform trade unions how any level will be calculated and at what cost. Without a guarantee that stakeholders will be consulted on the setting of the levy or limit to future costs, the trade unions will be very much in the dark over how much the Certification Officer will cost initially and in future. What is being presented to the trade unions is an endless bill and the potential for the Certification Officer to run up an expensive tab. This is not a deal which you or I would enter into willingly, and is one which all trade unions and employers’ associations should be protected against, not least because it is their members who bear the brunt of it.

I am trying to clarify the position. The Minister is held in very high regard in the House, and rightly so. Frequently in this House, we have exchanges where we can disagree on a variety of matters either on the application—how something will work—or the foundation or principles behind it. I am not of a trade union background. I am a businessman, I have never been a member of a trade union, but I sit on the Opposition Benches, so it is entirely logical that someone might say: “You are likely to say that, are you not?”. During Second Reading and in Committee on the Bill, we have heard contributions which I hope have given the Government a sense that it is time to pause and reflect very carefully on what has been said.

The noble Lord, Lord Dykes, made a very interesting intervention. There is a certain mood attached to this Bill. The Bill is not worthy of where we are, and I am more than aware that the Minister on previous occasions has been very flexible and thoughtful in considering contributions from this House. I am also aware that there are difficulties in trying to convince those in another place that there is any reason, rationale or desire to make any changes, and that just as a bit of political yah boo sucks they continue in that fashion. I dearly hope that the Minister can use her good offices to convince others. Frankly, over the entirety of this period we have seen the flaws in this Bill and we know that it does nothing for trade unions, employers, our economy or our public services. It also does very little for our politics, and I hope that there is a chance that at the end of this Committee stage the Minister will give us some comfort that we might see some changes on Report, and that it will not be a continuation of an appalling form of politics that we should eschew.

[Baroness Neville-Rolfe]

My Lords, I thank all noble Lords who have been engaged in this very long debate today. On the final point that the noble Lord made, clearly, this Bill brings together a number of provisions that were promised in our manifesto, on which we were elected last year. There are important changes here but, as I said at Second Reading, and as I have reiterated over these four days in Committee, we are listening. We may be able to make some changes—this is very much a listening part of the process.

This clause provides a regulation-making power to enable the Certification Officer to charge a levy to recover the cost of his or her expenses. It is only fair that the cost of the regulatory functions provided by the Certification Officer fall on those who are regulated rather than on the taxpayer. We are, of course, applying this reform to employers’ associations as well as trade unions.

Trade Union Bill

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Thursday 25th February 2016 Lords Chamber

[Baroness Neville-Rolfe]

I think check-off existed for a number of years at Tesco, long before I arrived. We had the partnership agreement to which the noble Lord refers in the late 1990s, and I was involved in that. Check-off is part of the arrangements. In the Bill, we are not seeking to regulate the private sector; we are talking about the public sector, and there is a cost which is set out.

[Lord Mendelsohn (Lab)]

The Minister has been very clear about the notion that there is evidence of the direction of travel. Is she suggesting that the direction of travel—meaning that more people use internet banking, perhaps on their phones, or direct debit—is the introduction of technology, and therefore it is just the direction of travel of technology that is being raised here? There has been a massive expansion in the use of payroll deductions for a variety of things from bicycles to charitable donations. Does that indicate another direction of travel—the velocity of the things that have been introduced? What is the particular evidence that there is a direction of travel which is unique and distinct and obviates the opportunity for choice to be exercised?

[Baroness Neville-Rolfe]

The noble Lord is right in saying that the direction of travel is driven by digital change—I am not disputing that—and that a fair number of things are deducted at source. However—and I am trying to find my notes—they nearly all have tax or national insurance involved.

--- Later in debate ---

[Lord Mendelsohn]

I am finding difficult the suggestion that there is now some prescription that direct debit is the only method that should be used. Putting aside the issue of choice and the fact that direct debit does not appear at all in the Bill as a solution, I would like to give an example and get the Minister’s view on the following: in the Government’s evidence about the propensity of people to use payday lenders, one of the extraordinary features of those people who have very little who use payday lenders was that they remove direct debits from their bank account so as not to suffer the penalties as a consequence of it. Many of those were low-paid workers and will have been in the public sector. In those circumstances, where it is better to have this deducted at source when the money comes in rather than having an impact on their bank account where there may be a detriment, should those people not have a choice as to where and how they should be able to pay their union deductions?

[Baroness Neville-Rolfe]

My Lords, the noble Lord makes a fair point. Having said that, the growth of direct debit in lots of areas has continued. As I have said, I do not think we are ruling out a union accepting cash or alternative payment arrangements. We are trying to make a change of direction here within the public sector.

I was going on to say that we debated Clauses 12 and 13 earlier this week, and I indicated then that I would go away and think about concerns relating to which organisations would be in scope of the facility time regulations, so I will not seek to delay the Committee by trying to answer all the related questions that have been asked today in that area.

I should, however, turn to Amendments 94 and 97, both of which seek to limit the employers within scope of the regulations. Amendment 97 in particular would carve out our largest public sector employer, the NHS, plus local authorities, thus excluding large swathes of the public sector. Obviously, that would not deliver on our commitment to ban check-off. As I said earlier in the debate, we are looking at the impact of the skeleton regulations that we sent to noble Lords earlier this week.

Trade Union Bill

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Tuesday 23rd February 2016 Lords Chamber

[Baroness Neville-Rolfe]

This amendment, which I received late last night from the noble Lord, Lord Kerslake, seeks to require a Secretary of State to conduct a review of facility time, involving the collection of a significant amount of additional data and estimation. The list is long and includes a cost-benefit analysis of facility time, as well as data around tribunal cases, dismissal cases, voluntary exit rates and workplace injuries. Some of the information in the noble Lord’s list would be available through the transparency requirements proposed in the Bill but much of it would not. My concern is that the collection of this long list of data would create a significant burden on both employers and government departments.

Of course, the Government would consider several of these elements—for example, the total cost and total hours used for facility time—if the reserve powers were ever required, although it is by no means certain that they ever would be. We would consider all relevant—

[Lord Mendelsohn (Lab)]

I am grateful to the Minister for giving way. This is an interesting point and it is important to look at the costs and benefits. Great store has been set on the benefits attributable to opening up transparency in this measure. The impact assessment talks about the figures, which have been much paraded, relating to the benefits for the Civil Service of transparency on facilities. It explicitly says:

“While it is not possible to prove how much of this fall of 0.19 percentage points of the Civil Service pay bill … is directly attributable to the increased transparency resulting from reporting time spent, this increased transparency is likely to be a key factor accounting for at least some of the reduction”.

If there is no clear evidence that there are significant benefits, I think that that speaks ever more clearly for the point that the noble Lord, Lord Kerslake, makes in his amendment. I do not think that it has been established that there are clear benefits to it.

[Baroness Neville-Rolfe]

The noble Lord makes a fair point. As I have said, we would consider all relevant factors before using the reserve powers, and our impact assessment addresses some of those. If you are looking to use a reserve power, you obviously look at both sides of the argument.

I have not had time to do much about this amendment and I am not promising a concession but I would be very happy to meet the noble Lord and other interested noble Lords to discuss further the concerns around the amendment. In the mean time, I ask the noble Lord to withdraw the amendment.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I know this has been an emotional debate but I believe strongly that the power of sunlight needs to be introduced to facility time in the wider public sector. On the back of important manifesto promises, this and the back-up power that we debated in the previous group of amendments was of course accepted without amendment in the other place, despite the modest increase in regulation they represent. As my noble friend Lord King said, to use the power, we would have to carry an affirmative order in both Houses.

I set out in the debate on the previous clauses the reasons why the Bill introduces requirements on public sector employers to publish information on facility time. It will be for public sector employers, not the Government, to manage the amount of time, if efficiencies exist, having had regard to the information that is published under Clause 12. However, it is only fair to the taxpayer that a reserve power exists should employers choose not to limit facility time to a reasonable amount.

Contrary to much of what we have heard, Clause 13 does not seek to ban facility time. That is a misconception that has been repeated, perhaps outside the Chamber, but it is not our intention. I say on the record that it is very much a power of last resort. Only if publication and the proper monitoring and recording that follow do not achieve the aim of having reasonable levels of facility time will it be necessary to consider the imposition of a cap.

[Lord Mendelsohn]

I am just troubled by this notion of reasonable time. I have one particular question, although the Minister will probably not be in a position to answer at this stage and may have to go away and look at it. The Sentencing Council’s Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences Definitive Guideline establishes a very high level of fines for breaches of it, which apply to the public sector as well. Removing facility time which would remove any health and safety cover which currently exists would put any such offence into the high culpability level. That would engender fines for any organisation with a turnover of over £50 million up to a level of £6 million; for anything over £1 billion, it would be substantially more, now that we have had case law from the Supreme Court. By introducing this power over facility time, have the Government not considered that they are risking a huge amount for other public bodies, and even causing difficulties for Ministers themselves? By imposing restrictions on the health and safety cover or arrangements that have previously been available, are they not changing the terms here? Have the Government taken advice on how this will affect the application of these relatively new sentencing guidelines, and would she consider doing that if she has not already?

[Baroness Neville-Rolfe]

I will certainly look at the sentencing guidelines. However, we looked at health and safety under the last amendment and noted that health and safety duties applied notwithstanding what we are discussing here.

It is particularly important to monitor the cost of time taken for trade union activities, for which there is no legal right to paid time off work, unlike union duties, for which reasonable paid time off is a statutory right. I think I already said, in response to the noble Lord, Lord Kerslake, that we will look very carefully before using the back-up power. Points were of course made about what cap might be appropriate and indeed the point was made, I think by the noble Lord, Lord Harris, about the lapse of time before the power might be used.

The noble Baroness, Lady Hayter, argued that the cap was open-ended and could interfere, I think, with the freedom of association rights under Article 11. If the need arose to use the reserve power, it would be exercised in a way that took full account of Article 11 and relevant ILO conventions. It is an entirely legitimate aim for the interests of trade unions and their representatives to be balanced against those of taxpayers, who ultimately fund the use of facility time. In addition, regulations under this power can be made subject to exceptions where necessary—for example, we sometimes do that to ensure compliance with EU obligations—and these regulations are subject, as has been said, to affirmative resolution.

The noble Baroness also mentioned the power to impose contractual changes. I think she was concerned about the right to respect for possessions under A1P1. Any impact on existing contractual entitlements will apply only prospectively; that is, from the date when any regulations are brought into force under the clause. We respectfully suggest that A1P1 has no application here. It protects existing possessions; it does not extend to a right to a guaranteed income in future.

The noble Baroness also asked about the impact assessment and the basis of the £100 million figure. As she may know, the figures are based on the Civil Service experience, where these transparency measures reduced the expenditure on facility time to 0.07% of the pay bill from a previous figure of 0.26%. The National Audit Office reports that the annual pay bill for the public sector, excluding the Civil Service, is £153 billion, so a reduction similar to that seen in the Civil Service would provide savings of more than £100 million. Of course, this can only be an estimate, and we are introducing the publication requirement precisely because there is no up-to-date information—I accept the noble Baroness’s point—on the cost to the taxpayer of facility time subsidies.

Amendment 90A would remove local authorities in England, the GLA and the NHS from the scope of the reserve powers. More transparency from those bodies has revealed that some local authorities spend twice the percentage of their pay bill on facility time as others, and where such discrepancies are revealed, taxpayers deserve that, ultimately, there should be a power in place for such spending to be managed.

Trade Union Bill

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Monday 8th February 2016 Lords Chamber

[Baroness Neville-Rolfe]

I think I used the phrase “effectively monopolies”. The point is that the degree of choice is very limited. Since the noble Lord has mentioned London buses, at the beginning of 2015 London bus drivers commanded the support of just 21% of members but Transport for London reported that 7.5 million journeys were affected by the strikes. People needed to make alternative arrangements for travel to work or to important appointments on those days. To return to another point, I am sure that the drivers did not get a round of applause from the frustrated passengers on those occasions either. I agree that the situation might be different outside London, where the bus routes are more disaggregated.

It cannot be right that strike action that causes such widespread disruption can take place on the basis of the support of a small proportion of union members. I know myself just how difficult it can be to make arrangements when tube staff and school teachers go on strike. That is why we have introduced an additional threshold to apply to important public services. I just do not accept the argument—

[Lord Mendelsohn]

There is a difference between “any” disruption and the situation the Minister talked about earlier, where there is a monopoly, so there is complete disruption. Is she making the case for “any” disruption? Is this lowering the threshold?

[Baroness Neville-Rolfe]

I do not entirely understand the question. I think the thresholds are clear. We are proposing the thresholds and debating them.

[Lord Mendelsohn]

I am happy to clarify. The Minister made the point that where a particular service is a monopoly—that is, where the impact of having a monopoly means the withdrawal of such a service—you are forced into not having a reasonable range of alternatives. “Any” disruption is where there are alternatives, so you can choose other things, but you will be disrupted. She has made the argument for any disruption being a reason to have these thresholds, rather than her original test, which was about monopolies. That distinction between those two levels of disruption is quite significant. Is her case about absolute disruption, where your options are narrowly limited and likely to be restricted, or is it about any disruption?

[Baroness Neville-Rolfe]

I still do not really understand the point. I shall come on to give some examples that may be helpful in explaining the thinking. This part of the Bill is quite straightforward because, as several people have told us, it implements a particular wording in the manifesto. I am trying to explain the background to that.

I cannot accept the argument of the noble Lord, Lord Wallace of Saltaire, although it is very good to have him involved in this debate since we worked together in the coalition. There is no parallel between our recent parliamentary elections or the matters mentioned by the noble Lord, Lord Oates, such as the EU referendum, and the proposed thresholds. In addition to the excellent points made by my noble friends Lord King and Lord Balfe, it is just not a fair comparison. It is right that strong support be required for strike action ballots, because strikes can affect large numbers of the public who do not get a say in the ballot and are dissociated from the relevant trade dispute. In contrast, the public are able to participate in elections and have a democratic say in the outcome. As my noble friend Lord King said, they do not face a binary choice and are choosing between a range of candidates. It follows that the successful candidate may have a smaller share of the overall vote.

I also realise that noble Lords are concerned that the treatment of abstentions, which I think is what the noble Lord, Lord Oates, was getting at, would make the thresholds harder to meet. Our objective is to ensure that strikes can only ever be the result of a clear, positive decision by union members, because the action can go on to cause widespread disruption for the public. Union members are free to abstain from voting, but this is not a positive vote. It is only fair that it does not count towards the threshold.

Recent events show that the threshold can be achieved when union members feel strongly about the issues that are relevant. For example, last year, RMT members were balloted on the night tube, resulting in a turnout of 53% and support of 48%. That means that 91% of voting members supported industrial action, surpassing the thresholds and putting beyond doubt the legitimacy of the ballot mandate.

Trade Union Bill

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Monday 8th February 2016 Lords Chamber

[Baroness Neville-Rolfe]

If the noble Baroness will let me make a bit of progress, I am going to address the difference in good order. Obviously, avoiding malpractice and fraud is absolutely critical. I will explain why. There are many respectable organisations that were mentioned this evening, such as the National Trust, that choose to use electronic means to capture votes. However, strikes have a huge effect on our public services and can cause enormous problems for hardworking people. We heard a number of examples at Second Reading.

The public sector strikes in 2011 closed 62% of the schools in England and led the NHS to cancel tens of thousands of operations. We therefore need people to have confidence both in the way the ballot is conducted and in the outcome obtained. Thresholds will provide the level of confidence we need in the outcome that is currently lacking, but the method of voting is a separate matter. Postal ballots already provide appropriate confidence in the way the ballot is conducted, though there have been comments today about them. I note what the noble Lord, Lord Collins, said about postal voting, but the Government recognise this, which is why we do not object in principle to electronic balloting.

John Cridland, the then director-general of the CBI, spoke to the Public Bill Committee, which discussed this matter at some length, as I am sure you know. On thresholds, he said:

“I think the provisions in the Bill that are of most concern to businesses are those that ensure that where there is strike action … it reflects a significant voice from the workforce … In principle, I think these are the right provisions”.

On e-balloting, he said that,

“we do not think at the moment the evidence is there that e-balloting can be secure and effective. We do not have a problem in principle with e-balloting, but it is probably premature to have it available … The need to protect the privacy of an individual trade-union member voting is important to their employer, and we would want more assurance that that could be effectively conducted”.—[Official Report, Commons, Trade Union Bill Committee,13/10/15; col. 6.]

Perhaps this is the point at which I should respond to the noble and learned Lord, Lord Brown of Eaton-under-Heywood—

[Lord Mendelsohn (Lab)]

John Cridland did make the point that he was unclear that there was sufficient assurance that the personal details could be maintained, although all companies now put their individuals’ records in electronic form. He never explained any of the duality of that particular point, nor did he go into detail as to why they were more at threat than any other form of individual record. By way of contrast, at the same committee, Dr Marshall from the British Chambers of Commerce said this matter could be dealt with, so I was very dubious as to the evidential basis of John Cridland’s comments. Can the Minister shine any light on that, rather than just quoting his opinion?

[Baroness Neville-Rolfe]

I think different people have different opinions on this matter; as the amendment of the noble Lord, Lord Kerslake, recognises, there are issues that need to be looked at.

I think there is recognition on all sides of the House that checks and safeguards are essential to any electronic balloting process. The noble Lord, Lord Balfe, made this point admirably in his amendment. It is clear from today’s debate that noble Lords have given this issue very serious consideration. I have listened very carefully to the points that have been made, and in particular to all the ideas that noble Lords have put forward from all sides of the House. They have expressed their concerns on how to conduct safe and secure electronic ballots for trade unions. I will take a little time to reflect on these points.

In saying that, I want to be clear that it is modernisation of voting systems to which we have no objection in principle. As a Digital Minister, I can say with conviction that online is the way forward, but I agree with my noble friend Lord King of Bridgwater that workplace balloting would be a regressive step. We must not lose sight of the fact that, however well supervised the ballot, people still need to get to it. That, unfortunately, provides scope for them to be under pressure of influence or intimidation.

Therefore, while we are keen to explore how to make electronic balloting work, we are not convinced that we could provide, especially in high-profile ballots, sufficient protection for employees voting in the workplace—that is, the protection of privacy and from the risk of intimidation or other influence, be it from the employer or the union.

The noble Lord, Lord Monks, was concerned that the practical effect of the thresholds would stop strikes taking place, and that results of other ballots in different areas would not have been legitimate had these thresholds been required. He quoted elections from the other place and, of course, those of the police and crime commissioners. However, the important point relating to all the examples given by noble Lords is that this is not a fair comparison. Everyone could participate freely in these elections and have a democratic say on the outcome. By contrast, only union members are eligible to vote in ballots for strike action and large numbers of people who do not get a say are affected by the outcome. It seems right that stronger support is required for strike action.

Enterprise Bill [HL]

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Tuesday 15th December 2015 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, I put on record my thanks to all those who supported the rapid passage of the Bill through our House. I begin by thanking the Lord Speaker and all Deputy Speakers, as well as the clerks, the doorkeepers and our skilful reporters in Hansard. I thank the hard-working members of the Bill team, helped by our able apprentice, and the officials from the four departments and from the Law Commission who assisted our debates.

The Bill covers a lot of ground. We have jointly crossed a varied and complex landscape—some parts verdant and others rather rocky. Our travels have taken us from the Small Business Commissioner, via the Primary Authority and the Green Investment Bank, to the exit payment cap. Thanks to the noble Lord, Lord Whitty, we even ventured on to the cricket field, and although I was rather disappointed with the noble Lord’s assessment of my batting, I am holding on to the fact that he credited me with a strong defensive game.

I thank all noble Lords for their contributions. We have heard a range of expert voices from the opposition Benches. I am grateful particularly to the noble Lord, Lord Mendelsohn, and to the noble Lord, Lord Stevenson, who I am pleased to see looking so well again. I am grateful to the noble Baroness, Lady Hayter, as well as the noble Lords, Lord Stoneham and Lord Teverson, and the noble Baronesses, Lady Burt and Lady Sharp, as well as the noble Earl, Lord Lytton. I thank them all for their always constructive—and always challenging—approach and for working with me and my officials outside the Chamber. I thank the noble Lords, Lord Smith and Lord Curry, who gave us the invaluable benefit of their experience in chairing the Green Investment Bank and the Better Regulation Executive respectively. It is always good to have people who are engaged in matters contributing in the House.

Finally, I thank my noble friends Lord Younger, Lord Gardiner and Lord Sherbourne, who have so expertly assisted me at the Dispatch Box, as well as my many noble friends who have supported the Bill from the government Benches, especially my noble friends Lady Wheatcroft, Lord Hodgson, Lord Borwick, Lady Brady, Lady Harding, Lady Noakes, Lord Leigh, Lord Flight, Lord Cope and Lord Baker—a cornucopia of talent. I thank all your Lordships.

[Lord Mendelsohn (Lab)]

My Lords, I also place on record our thanks to all noble Lords for their contributions. The Bill that now passes to another place is certainly a better Bill than the one that arrived, which reflects the role of your Lordships’ House and the constructive discussions that we have had with the Government and others. On behalf of these Benches, I thank the Bill team for its hard work and its readiness to engage in detailed discussion. I thank in particular a member of the small business team, who made a welcome return to finally sort out a few issues that we had with pubs. Our Benches have been very ably supported by the quite outstanding Nicola Jayawickreme, and I put on record my thanks to her.

Our debates have certainly been wide ranging, covering many detailed issues. Of course on our Benches, my formidable noble friends Lord Stevenson and Lady Hayter have made quite outstanding contributions and taught me everything that I know. It has been exceptionally helpful to have many colleagues from outside add some quite outstanding contributions and raise issues which have helped our discussions—including my noble friends Lady Donaghy, Lord Snape, Lord Whitty and Lord Wills. I also pay tribute to the noble Lords, Lord Stoneham and Lord Teverson, and the noble Baroness, Lady Burt, on the Liberal Democrat Benches. We found a very good way of working with them and with the Government to improve the Bill in relation to a number of measures.

Across the House, the noble Earl, Lord Lindsay, has always been an expert on regulation; the noble Earl, Lord Lytton, made some outstanding contributions on non-domestic rates; the noble Lord, Lord Aberdare, raised retentions very ably; the noble Lord, Lord Low, dealt with public sector exit payments and matters relating to whistleblowing. Many other noble Lords contributed, too. I place on record my deep thanks to the noble Lord, Lord Hodgson, for at least agreeing with me once during the course of our discussions.

Finally, I pay tribute to and thank the noble Baroness, Lady Neville-Rolfe. It is always a pleasure to engage constructively with her. She is someone with whom you can always find at least some ground to work with, even when her hands are tied firmly behind her back by those in the Treasury and elsewhere. She is extremely inventive and courteous, and we thank her for the way in which she has handled this measure.

Enterprise Bill [HL]

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Monday 30th November 2015 Lords Chamber

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

My Lords, the Government have brought forward this amendment because we want to ensure that UK Government Investments Ltd—UKGI—can carry out its important work, which is managing most taxpayer stakes in businesses, running most corporate and financial asset sales, and providing corporate finance advice across government to ensure value to the taxpayer from publicly owned assets.

The Chancellor announced the creation of UKGI in May this year and it will open for business from next April. UKGI will bring together, into a single company, the Shareholder Executive from BIS and UK Financial Investments Ltd from the Treasury. The move will provide UKGI with additional independence and a corporate governance structure, allowing it to provide impartial expert advice to its customer departments.

The Chancellor of the Exchequer will be the Minister responsible for the company. It will remain focused on its core activities. It is not a company that we intend to privatise in whole or in part; it will bring together expertise from the private sector with that of civil servants.

The work to facilitate the transfer of functions and operations from the Shareholder Executive into UKGI is well under way. The issue of funding powers has been identified in recent weeks, hence its late introduction into the Bill. The 1932 concordat between Parliament and the Government, now reflected in the Treasury’s manual, Managing Public Money, requires there to be specific statutory authority for significant items of ongoing government expenditure. The Government intend that UKGI will be directly funded by its parent department, HM Treasury. This is necessary to cover UKGI’s running costs in providing a service across government. The amendment is an administrative measure to enable the Shareholder Executive’s ongoing work to continue after its functions transition to UKGI and ensures that a specific funding power is in place in line with the 1932 concordat. I beg to move.

[Lord Mendelsohn (Lab)]

My Lords, I thank the Minister for sending a very useful letter on this amendment. It was a late addition to the Bill and we were not entirely clear about its full purpose, so I am very grateful that she wrote to us as she did.

It is fairly standard for machinery of government changes to be announced in this way, but it gives us our first opportunity to ask a series of questions about how the change is likely to work. First, we understand that the amendment establishes powers to enable the Treasury to pay the bills of the new body and underwrite its liabilities. It can provide loans or grants to these entities as it wishes. We would be grateful if the Minister could give us some idea about the combined costs of UKGI and whether there are cost savings as a result of merging the two entities. What is the anticipated run rate over the next few years of UKGI?

Naturally, the argument for removing the Shareholder Executive from the Department for Business, Innovation and Skills and establishing it as a separate company with UKFI is, in essence, that the Shareholder Executive proved useful beyond the Department for Business, Innovation and Skills and now works across government. It should therefore go to the Treasury to ensure that it can work better with all departments and be much better utilised in government. Accordingly, it needs a degree of independence, which will be enshrined in its governance arrangements and its board duties. So, across the areas, perhaps I may ask the following questions.

On the suggestion that this structure allows it to attract top talent from the private sector and the Civil Service, was there an assessment of the existing Shareholder Executive and where it had failed to recruit staff of a sufficient quality, or where there were gaps in its current operation that this structure will support? Who will be responsible for recruitment for each of the operating divisions? Could UKGI exist without civil servants? Could it recruit only from the private sector? If civil servants are recruited, are they on secondment or will they sign new employment terms with the agency directly? Will all the employees of every part of UKGI be subject to the proposed public sector exit payment restrictions that are in the Bill? Will guaranteed bonuses be offered to the staff, which, for the higher earners in government, is a traditional method of incentive and currently outside the public sector exit payment provisions?

On whether it strengthens governance arrangements and the commercial disciplines and will be useful going forward, what is the case for a Permanent Secretary sitting on the board? Do the Government not think it would be better for governance arrangements to separate shareholders from company directors and their duties? How will the Permanent Secretary square their role as an accounting officer and their duties to the company under company law? Who will select the board? Who will appoint the leading executives? What will the relationship to Ministers be? Will the new body provide better governance to the management of external advisers? Will there be an internal market whereby individual departments can consider which provides the best cost option, be it the new agency UKGI or external advisers? Who will set the objectives and strategy? Will it be the board or will it still be the Treasury?

In identifying that there is a role to build a unique identity and culture, will the Minister explain what this means, or flesh out what the notions of identity and culture are for such an agency? What is the target culture of a government asset manager and what is the target culture of a government corporate finance vehicle?

Finally, on improving service to customer departments, what are the current identified weaknesses that this arrangement will help to improve? What is the Government’s current plan to evaluate this? Who evaluated the current working arrangements and found the gaps? What independent body will be charged to evaluate whether it has provided a better service to customer departments?

--- Later in debate ---

[Lord Mendelsohn]

I thank the noble Lord for that unusual intervention. He is absolutely right—it is important that management is retained and incentivised, and that will happen. The bank may or may not make an appeal for anyone to come in as an investor, and as the bank goes forward it will be fairly irrelevant. There will have to be some provision as to how you will acquire the full amount and what price you pay for it. Given that it is a portfolio, it has to be established how much the Government want back from the money they have supplied, and that will be calculated. The merits of whether you have such a stake seem fairly minimal, if not irrelevant.

Apart from all that, I feel strongly, in keeping with the interventions we have had, that we should try to cherish this fantastic instrument we have created and find a way to maintain its mission. The noble Lord, Lord Teverson, has done that and has the support of a number of people who have examined his amendment in detail, and here we have a win-win. It gives greenness a degree of certainty; it does not affect the sale or the price; there is no risk that the bank will fall on the Government’s balance sheet; and the Government have complete flexibility as to what they sell, be it 51%, 76% or even 100%—they can cash in on the rest if they so choose at another time, or can do other things.

The mission is worth protecting and the organisation is worth backing. In this amendment, both have been achieved. It broadens the mission of the Green Investment Bank to areas currently excluded by state aid rules and avoids some of the problems of trying to be, in a sense, half pregnant. Therefore, rather than a recipe for conflict, controversy and confrontation, it provides clarity and greater flexibility to deliver a sale. The amendment is a perfect example of something which achieves all the objectives everyone is looking for, and we strongly support it.

[Baroness Neville-Rolfe]

I am very grateful to the noble Lord, Lord Smith, for being here this evening and, on behalf of us all, for the work he has done in getting the GIB off the ground so successfully. It has reached a break-even position from a standing start in two and a half years, which is an amazing track record, and his speech demonstrated the opportunities and the green intent of the GIB very well.

I am also delighted to welcome my noble friend Lord Barker of Battle to the debate and to our discussions. He brings such huge knowledge of environmental matters to our Benches. I was glad that he mentioned the climate change conference in Paris, because it underlines the importance of capital for green business, and I am in complete agreement with him about the potential for new areas of investment once the GIB is privatised. It was also very good to hear from my noble friend Lord Framlingham. I agree that if the GIB is not green, it is nothing. It is a brand and can blossom.

I am very grateful to the noble Lord, Lord Teverson, for his courtesy, for the discussions we have had and for the support he expressed today for GIB privatisation; and to the noble Lord, Lord Mendelsohn. With other noble Lords, they have tabled Amendment 70ZA, which would place a special share in the control of a third party—a newly established charitable company—which would have the power to block changes to the GIB’s articles of association. I fully understand and appreciate the intent behind this amendment, which is to ensure that the GIB can have a successful future in the private sector while seeking to enshrine its green purpose.

I place on record my thanks to noble Lords opposite for the very helpful discussions which they have already referenced. We are all working to the same purpose: to ensure that the GIB has a successful future. I commend the noble Lords for the way they have probed and tested the Government. I do not believe that anyone wants to remove the “Green” from the GIB. I certainly do not, nor do the noble Lords opposite and, most importantly, nor does the GIB itself. As I said in my opening remarks, the Government would not repeal this legislation unless it were necessary, but necessary it is. The challenge we face—this is where, unfortunately, the Government and noble Lords opposite are not aligned—is whether it is possible to lock down that green mission in a way that does not constitute public sector control.

I would like to propose a way forward, because I understand and share the frustrations on this issue. However, it remains the case that, if the Government exercise significant control over the corporate policy of an organisation—for example, by holding a lock over its objects—it would be deemed to be part of the public sector. It is not the form of control that is important, but the effect. Legislation, regulation, contractual agreements: all can have the same effect. The noble Lord, Lord Teverson, understands this very well and I am grateful to him for the hours he has put into trying to find a solution to this problem, although I do not entirely share his confidence that his proposals would work. We need to provide investors with certainty on the important issue of classification. In reply to my noble friend Lord Barker, we have made it clear that we intend to sell a majority stake. Decisions on the size will depend on the outcome of discussions with potential investors, some of whom might value the Government’s continued involvement. However, it is important to be clear that, under corporate law, retaining a minority stake would not afford the Government a special right to exercise control over the company.

The noble Lord, Lord O’Neill, asked about Britishness. I completely understand his concern. The GIB, which is based in Scotland, contains top-class UK experts on green and climate change issues. As my noble friend Lord Leigh of Hurley said, foreign investors could take a stake, but it is the UK’s Green Investment Bank and has invested in every region in the UK, although it has already had some overseas investors in particular projects.

As I said, I would like to propose a way forward. The amendment is well reasoned and merits close scrutiny; I commend the amount of work that has gone into developing it. I know that the noble Lord, Lord Teverson, brings experience of a similar structure through his role as a trustee of Regen SW. I invite him and his colleagues to work with the Government in testing further his proposal for a charitable company structure, and exploring with our advisers in the coming weeks whether it might be a feasible structure for the GIB. In considering this, we will have to look at whether such a structure would not only allow the GIB to be classified to the private sector, but to attract private investment and, most importantly, private investors with the capacity to fund its future business plan, which is what we all want.

As I said, we want to work with noble Lords. The fly in the ointment is that Parliament’s mandating this structure in statute might be deemed control—Parliament and the Government are equivalent in the eyes of the statisticians. Therefore, we are keen to keep talking and looking for a workable option, but I am afraid that I cannot support the noble Lords’ amendment.

On the basis of the shared purpose that has been so well articulated today, and of the commitments I have made to the House, I hope that noble Lords feel able not to press their amendment and will agree to work with the Government over the coming weeks and look at the proposal in more detail.

Enterprise Bill [HL]

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Wednesday 25th November 2015 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, I carefully considered the arguments made by noble Lords in Committee on the need for small businesses to have confidence in the commissioner and in particular for the commissioner to act independently of government. I am pleased to bring forward these amendments in response to a very constructive debate. These are to further enhance the independence from government of the commissioner and to strengthen the authority and permanence of the office. We agree that it is crucial that the commissioner should inspire confidence among all businesses and business organisations, and that he or she should work constructively with business. I hope that noble Lords will welcome the government amendments.

Amendments 2 to 7 and Amendments 75 and 76 will provide the commissioner with greater independence from government. They give the office a separate legal identity as a corporation sole and provide the commissioner with powers to appoint staff and receive public funding. The commissioner will have greater flexibility to ensure that the office can be responsive to demands but, as the office will be publicly funded, these powers will be subject to ministerial oversight. The Secretary of State can keep the commissioner’s resourcing under review and respond accordingly to make sure that the office has the resources that it needs. We wish to ensure that the commissioner’s staff have appropriate provision, and I may return to this at Third Reading.

Amendment 12 clarifies and strengthens a safeguard protecting the anonymity of small business complainants from third parties. It removes any uncertainty about whether a small supplier’s identity could be revealed by use of freedom of information requests and so avoids the potential deterrence of complaints. I hope that noble Lords will support this amendment, which strikes a balance between protecting complainants and building faith in the commissioner’s processes among both small and larger businesses.

Amendments 13 and 14 will implement recommendations of the Delegated Powers and Regulatory Reform Committee in relation to Clause 11. They will also enhance the authority and permanence of the office. We have decided not to follow the proposal that the power to abolish the commissioner should not be exercisable more than five years after the legislation comes into force. I think that noble Lords will agree that we cannot be sure that the commissioner will achieve the necessary culture change on late payment within five years, and do not want to provide for the sunsetting of the power to abolish within this time. As I have explained, the amendments are to engender greater confidence in the commissioner. I beg to move.

[Lord Mendelsohn]

My Lords, we welcome these government amendments and we on this side of the House are very grateful to the Minister for the very constructive way in which she has dealt with this issue. These are matters about which we had a great deal of concern and we are extremely grateful for the adept way in which she has dealt with the department in navigating these issues in a short space of time.

We believe that these are very important measures to ensure that independence and confidence was available for the small business commissioner and that establishing the commissioner as a corporate sole has been an extremely important way in which independence from government, as an instrument from government, has been established. We are very pleased that the Government have decided to look at giving the Small Business Commissioner the power to appoint its own staff, build its own team and adapt it for the circumstances. We think that this is a very important variable power that such a post would have. I noted that the Minister said that in relation to some of these, other matters will come forward at Third Reading. I would be grateful if she would give some indication of what they are likely to cover.

We are also very pleased that the Government have adopted the recommendation of the Delegated Powers and Regulatory Reform Committee not to allow the Secretary of State by the stroke of a pen to abolish the role of the commissioner, but now to establish it on a firmer footing. We also had great concerns about confidentiality. We were always concerned that if small businesses complained about larger businesses, there would be likely consequences and retribution or otherwise would take place. These are very important matters and the evidence that we had from the Groceries Code Adjudicator of the problems in not providing for confidentiality showed that this would limit significantly the capacity of the Small Business Commissioner. So we are extremely grateful to the Government for their view on this.

In passing, while complimenting the Government, I would suggest that the Small Business Commissioner is not too wide a job; it is not that it can succeed on one thing. It is peculiarly British that we have a view that we have to start so modestly. If the small state of Victoria can establish with a very small staff an effective operation that can deal with a multitude of things with great success, we should consider very carefully whether we can do better and greater things. This series of government amendments is very welcome, and I hope that in reviews over years to come they will consider other areas as well.

[Baroness Neville-Rolfe]

I thank the noble Lord for his comments, and particularly for the points that he made about confidentiality, which obviously is a very important issue. In relation to possible further amendments, this is to some extent contingent, but we want to make sure that there are appropriate provisions on matters such as pensions. We may have to return to this and we may not—but we will obviously write to the noble Lord and explain what we are doing.

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[Lord Mendelsohn]

My Lords, we support the thrust of the argument presented by the noble Lord, Lord Stoneham, that it is very important to put some significant measures behind the attempt to arrest late payments. We are supportive of the Small Business Commissioner trying to do something, but we are realistic that the evidence and pattern demonstrate that it will insufficient.

I will identify one particular aspect. I am grateful that the Minister wrote to me about late payment data—a matter that we discussed in Committee. Late payments are already defined in law, and that definition has been largely in force since the introduction of the Late Payment of Commercial Debts Regulations 2013, which amended the Late Payment of Commercial Debts (Interest) Act 1998. This establishes that, where a public authority purchases goods or services, statutory interest—the determination that there is a late payment—will start to run on an outstanding payment from 30 days after the supplier’s invoice is received. For other organisations and businesses where a payment period has not been agreed, statutory interest will start to run on outstanding payments from 30 days after the supplier’s invoice is received. Where a payment period is specified in the contract, statutory interest will start to run from that date. However, if the agreed payment period is more than 60 days after the events listed, the regulations state that statutory interest will begin to run from 60 days.

The important principle is that we have already established in law that, as far as we are concerned, late payment arises, at a maximum, at 60 days in relation to private sector organisations. I say that largely because we have had a variety of data problems regarding the extent of late payments. I am extremely sceptical about the data on which the department is relying—namely, the Bacs data on late payments. The reason I am sceptical is that that body makes it absolutely clear that it considers late payment to be 30 days after the agreed payment date between two parties. Even if you have a payment date of 90 days, Bacs will only consider a period of 30 days after that as being a late payment, so it purposely excludes all those other payments which are technically defined as late payments under the existing law. That is why the Bacs figures always come out as significantly lower than those of any other survey. In fact, over the last three months, the range of late payments is identified as being between £41 billion and £61 billion. Bacs identifies the sum owed to small businesses as £26 billion. I do not think that those figures are reliable. We should deal with the problem that we have defined in law—namely, that a late payment is a late payment after 60 days.

This is an important amendment as it tries to give a sense of the extent of late payments that we have to deal with and the measures that we and noble Lords throughout the House believe are required to arrest that situation. The velocity of the increase in the incidence of this problem continues to rise without any material abatement.

It may be useful to give a real-life example to illustrate whether soft or hard measures are required. In December 2013, Debenhams was roundly condemned when the chief financial officer, Simon Herrick, sent out a so-called “Santa tax” letter to suppliers just eight days before Christmas imposing a unilateral 2.5% cut on their prices. At the time, analysts saw that as a last-minute attempt to boost falling profit margins. In January 2014, the store chain issued a profit warning, following a disastrous Christmas trading period, and the CFO resigned. He had previously come under fire in October, when Debenhams’ half-year results revealed that it had spent an astonishing sum moving its headquarters to a very opulent site in Regent’s Place, Euston. Analysts and investors said that the scale of these costs had not been flagged and that the £25 million refurbishment of the Oxford Street store was completed just in time for Christmas but had caused considerable disruption to trading.

Over the intervening period there have been complaints about the continued extension of Debenhams’ payment terms. It was a real concern to read that the Federation of Small Businesses rightly criticised Debenhams after it emerged that the department store chain was asking for discounts in return for making earlier payments. In fact, Debenhams insists on a reduction of nearly 2% in suppliers’ prices in exchange for making payments 30 to 60 days earlier. That gives noble Lords some idea of the extent of its current policy on payment terms. This is the second time in three years that the retailer has unilaterally proposed changes to suppliers’ payments in the run-up to Christmas.

I was very interested to hear the noble Baroness, Lady Wheatcroft, say that PR and publicity drive culture change which changes behaviour. I do not think there has been a company more in the headlines for its poor practices on changing suppliers’ prices than Debenhams but that has not changed that company’s behaviour one bit. It has done exactly the same thing again. I am a student of some great public relations practitioners. Indeed, we have such a practitioner in this House in the person of the noble Lord, Lord Bell. He has always made the great point that good PR is always founded on substance. That has a strong part to play in the issue we are discussing. Clear adherence to regulation will determine whether or not change will happen. It will not be determined by whether or not companies can withstand a bit of poor publicity. The noble Baroness, Lady Wheatcroft, referred to the glare of warm publicity surrounding Lidl’s decision to pay its staff the living wage and said that that demonstrates that all is well. I would be interested to hear whether she knows the payment date terms that Lidl applies. They are extremely long. In fact, Lidl has been roundly criticised for them. Clearly, one bit of glaring positive publicity does not obviate or change the culture of the company.

It is important to note that the amendment contains a variety of significant powers. In fact, it is a few amendments pushed together into one, as those who attended any of the Grand Committee sessions will know. We have done this to make the point in a number of ways that we are failing to address some of the most serious principal issues, the first being that, despite there being a clear law that allows people to charge interest, they do not do it for fear of retribution. Despite having clear rules about payment terms, people still do not adhere to them because they can get away with it by unilaterally determining a payment term. Even when companies extend payment terms to, for example, 120 days, as many do, they will not be able to charge interest for fear of retribution.

We also have a huge concern about the variety of ways in which companies add terms, unilaterally change terms and create the sorts of commercial arrangements that penalise small businesses, because they can get away with it. Be it marketing charges or warehousing costs, a variety of methods are used to reduce the amount outstanding to a smaller business. All those sorts of matters act as a massive impediment to the growth and development of small businesses. Frankly, even if it is not about growth but about justice for someone trying to run a small business and having to make sure that they do not suffer the terrible consequences of trying to borrow on credit cards—as far too many do, and they suffer enormous costs for doing so—when a large supplier fails to live up to its side of the bargain and the small business has limited options with which to address it, these are the matters that we need to address. It is the sheer size of the problem that we have to address, and there are a number of ways in which this can be done.

Our amendment suggests that the Small Business Commissioner can play a useful role, although not the only role. We also support measures in their own right to try to ensure that it is the obligation of the larger company—or indeed anyone who owes money—to pay it and not to have to be chased. In our view, it is not going to be a question of whether, in dealing with 500 cases and having a very active press officer, the Small Business Commissioner will be able to make a dent in £40 billion, £50 billion or £60 billion-worth of late payments. He or she has to be able to make sure that we build a culture whereby if you are meant to pay, you pay.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord, Lord Stoneham, for his explanation, and my noble friend Lord Cope for his helpful comments. Of course, we have already discussed the commissioner’s remit and functions, and the reasoning underpinning the policy ethos and architecture in the Bill.

I can see the intention behind Amendment 11 but it is not in the spirit of these measures to fine businesses for failing to implement the commissioner’s recommendations. Rather, the Government believe it is vital that the commissioner builds a position of trust and influence with all parts of the business community. We strongly believe that powers to fine would undermine rather than enable this approach. Fines would not help solve the dispute or encourage a change in payment culture. Faced with potential fines, large companies would inevitably start to employ expensive legal teams and feel compelled to withhold information on payment practices on the basis of legal advice. All this would make it more intimidating for small suppliers to complain, especially if they want to maintain their commercial relationships. Our stakeholders, such as the Federation of Small Businesses, agree and are not calling for this approach.

The commissioner will have the discretion to report publicly on individual cases, providing the sunshine of transparency on payment issues, and to do so more often and in a more high-profile way than we have been able to do. I know from my own experience in several sectors that this will provide a strong incentive for businesses to engage constructively with the commissioner’s inquiries and seek to satisfy him or her. We have seen this approach work well in Australia and I am sure that it will work here, too.

The commissioner will make non-legally binding determinations, which may include recommendations about how the parties involved in a case could resolve the dispute or how to avoid such issues occurring in future. The commissioner will be considering whether an act or omission was fair and reasonable, in the given circumstances. To allow the commissioner to impose fines would effectively allow him or her to create rules on what is and is not good payment practice—quasi-legislating. This is not the role of the office.

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[Baroness Neville-Rolfe]

My Lords, I start by associating myself with the comments of the noble Lord, Lord Mendelsohn, about the noble Lord, Lord Stevenson. I am so glad to see him back and on the road to recovery.

This part of the Bill is about transparency and accountability, and about asking regulators to assess the impact of their work for the business impact target and to report on the effect of the Regulators’ Code and the growth duty.

I was glad that my noble friend Lord Lindsay was able to bring his great knowledge of regulation and of being a regulator to this debate. Of course, the RPC assesses the impact of EU regulation, as we discussed in Committee, but this is not taken into account in checking against the business impact target. We agree that the cost to business of EU legislation should be transparent, but the SBEE Act already achieves that. I cannot agree that those costs should now automatically be added to the target.

As a Government, we are rightly held accountable for the impact of our regulation on business. We should therefore focus the target on the measures that we are wholly in control of, not on EU regulation. That needs to be dealt with at source. As the Prime Minister’s recent letter to Donald Tusk made clear, the Government will continue to press the Commission to introduce a target to cut the total burden on business. This could include stock as well. The European Council and Parliament have already made similar calls on the Commission for burden-reduction targets, so this is under active discussion.

Amendment 18 provides for publication of guidance regarding qualifying regulatory provisions—measures which will score in the business impact target—but Section 21 of the SBEE Act already requires the Government to publish their determination of qualifying regulatory provisions and the methodology for assessing their economic impact.

The noble Lord, Lord Mendelsohn, said that Amendment 18 required a review of the stock of regulation. That is not how we read it, but I do not think that that matters for today’s purpose. The Government agree that the stock of regulation should be reviewed regularly. In the previous Parliament, Red Tape Challenge reviewed thousands of regulations, and our new programme of Cutting Red Tape reviews is continuing that work.

We will publish information regarding the operation of the target soon. I think that we have to do it by May, but I am hopeful that we will do it a long time before that. These documents will be laid before Parliament, which can debate them if it chooses to do so. The SBEE Act already requires annual publication of a list of all provisions outside the target, and the Bill will add to that a summary of other regulatory activity outside the target.

Turning to Amendment 38, I note that the duties in this part are aimed at ensuring that regulators are open and transparent about the impact that they have on the businesses that they regulate. This enables them to be properly held to account. I understand the concern about the impact of these measures on regulators’ capability and capacity. We agree that these duties should operate proportionately; we do not, of course, want to overburden regulators or, indeed, the RPC. I agree with my noble friend Lord Lindsay that the RPC’s involvement could actually help to make the job easier because of the good systems that it has developed, the way that it approaches analysis and the way that that can be spread across the public sector.

Our initial impact assessment suggests that the transparency obligations that we are introducing here will cost less than £1.5 million across all 65 regulators. That is less than 0.1% of their total budget for regulatory activity. Of course, if our implementation were to lead to disproportionate cost, we would look at the approach again. I am absolutely sure that the costs of transparency will be more than outweighed by the benefit. The discipline of assessing impact will encourage regulators to look at different options, including non-regulatory approaches and sharper targeting. They will be prompted to think harder about whether regulation is necessary.

Let me give an example. In 2013, the Environment Agency very sensibly voluntarily assessed the impact of a proposed measure on hydro power. When the agency board saw its own assessment, it concluded that the costs did not justify the benefits and withdrew the proposal, eventually bringing one forward that was much better. It was a benefit to both the businesses and the agency.

Reporting will encourage proper application of the Regulators’ Code. Section 2.2 of the code asks regulators to engage with business. Doing so could help regulators to find ways of regulating that are more effective and require less enforcement.

I understand concerns about costs; I always share them, but we are trying to keep those to a minimum and I am sure that the benefits will be considerable. I hope I have reassured the House that the transparency we seek is already provided for, and that the Government intend the duties to operate in a proportionate manner. The House has noted our plans for the business impact target and to publish more detail on that. I hope, in the circumstances, that the noble Lord will feel able to withdraw his amendment.

[Lord Mendelsohn]

I thank the Minister for that reply. We share a view that regulators can act better; and we support the establishment of these targets, as we expressed in Grand Committee. We have also said on many occasions previously that two of the major flaws in the operation of the regulators are that they have taken insufficient care to ensure that they inform those that they are regulating—or consumers or small businesses—and that they do far too little to ensure that compliance is both widespread and as easy as possible. That is certainly something that we hope that the business impact target will help to achieve; but if they saw that mission as more central, we would regard that as useful.

I am sorry that the noble Earl, Lord Lindsay, thought that we were sceptical. We were just generally making the case that you can do two things at once. I am sorry if it came over as scepticism. In general, I was rather more convinced by the contributions from the noble Earl, Lord Lindsay, and the noble Lord, Lord Curry, than I was by that of the Minister in terms of the right approach, as we look at a deregulatory push as we move on. I am grateful to them both for their contributions. The noble Lord has made a very strong effort to ensure that better regulatory activity does something to try to address the problems that we have from Europe. He has been quite effective in that role, and I wish him continued success in it.

The Minister is acutely aware of my scepticism about the calculations that you net out with at the very end of calculating the reduction in regulation. In general, it would be much more convincing and I would be much more comfortable if the overall objective was to establish, including EU regulation, a net-negative target. I appreciate that that is not present in the amendments. Overall, we should establish that there is a saving of a figure once you have netted out both. We can make a greater difference on those things that we can control. It is a source of some regret that, in the last Parliament, the RPC figures suggested that the overall regulatory burden was somewhere close to half a billion pounds more. If we establish that our target is to be significantly under, then we have a way that marries both together. In many ways, I thank the noble Earl, Lord Lindsay, for some of his observations on all the amendments.

[Baroness Neville-Rolfe]

My Lords, I thought it would just be worth adding, in relation to the last Parliament, that a large chunk of the EU costs—nearly £2 billion—related to EU regulation introduced to address systemic financial risk following the crisis. I do not think that the noble Lord disagrees with that, but it is an important background point.

[Lord Mendelsohn]

I thank the Minister for that. Indeed, it made the case for a very large part of the speech that I made earlier about the importance of regulation. I am not suggesting for one moment that there is no case for regulation: I hope that I was making quite the opposite case. I happen to think that establishing a regulation to deal with the consequences of the financial crisis is a particularly good form of regulation. Overall, however, if you can calculate the number—whatever its merits or demerits—the Government should be establishing themselves as promoting a net-negative figure rather than accepting that whatever they do in their own right is sufficient.

I thank the noble Earl, Lord Lindsay, for his support, and I tend to agree with him. An annual health check is a much better idea: we were trying to be reasonable, but that is the best idea. I also thank him for an even better idea—that, rather than the RPC, the Better Regulation Executive is a much better body to take on that role. When drafting the amendment, we were just trying to make sure that we did not add anything to the Small Business Commission in case the noble Lord, Lord Cope, got even more exercised at the breadth and range of activities that we were proposing to give it, but I think that the Better Regulation Executive is the right body. To the Minister, the noble Earl and the noble Lord, Lord Curry, I say that if we can make a modicum of progress on some of these matters—if there were some measures that would enhance our deregulatory shift—I would be very happy to support what the Government might bring forward at Third Reading. I beg leave to withdraw the amendment.

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[Baroness Neville-Rolfe]

I thank the noble Lord, Lord Young, for his constructive comments. He is right to explain that there could be difficulties and that it is important that we ensure quality as well as set quality standards. I apologise to the House that, as it were, an announcement tumbled into our Report stage today, but that is the way of the world. I emphasise that the issue of the institute and how we ensure quality is work in progress, as is the question of the levy. There will of course be further discussions on all this, and appropriate consultation processes are continuing. However, I hope that the provisions in the Bill on apprenticeships, limited though they are, will prove fruitful and helpful. I hope that the noble Lords have found my explanation helpful and, on that basis, will feel able to withdraw their amendment.

[Lord Mendelsohn]

I thank my noble friend Lord Young for his excellent contribution to this debate. He always makes extremely important points on apprenticeships. My noble friend Lady Warwick also made an important contribution on housing associations.

I congratulate the noble Baroness, Lady Sharp, on her extremely impressive summation of the core issues here. She made the point that in many ways we have apprenticeships that are a progression, and it is important to take skills all the way through. It is important to emphasise again that in relation to these measures we are looking not to deride or exclude but for a balance. We made comments earlier about programmes to move people on to apprenticeships, so we can see the value in all this. But the noble Baroness made the point that in this country, on the schemes that we currently have, we have a massive deficiency at levels 4 and 5, and that is our core problem. Now that we have the opportunity of using the public sector to be able to increase the number of apprentices, it is for exactly those reasons that the public sector should lead and demonstrate its capacity to have a disproportionately high number of higher-level apprenticeships.

I am bound to say that I heard the announcement of the establishment of an institute for apprenticeships, but I am not compelled that it has much relevance to this debate—it is more targeted towards the private sector. Who knows—given the many announcements that the current Chancellor tends to make, some officials may be working busily away on what was merely a couple of lines of notes, and perhaps in due course sufficient expertise and brilliance on the part of the officials will be brought to bear and it will become relevant. However, as it currently stands it has no relevance to where this is.

I emphasise that we think this is significant because the Bill is in front of us now. We support the move towards increasing the number of apprentices and using them as a method to deliver growth, fulfilling lives and well-being to our citizens. It is absolutely core to our being that we provide them with the necessary skills. The public sector can and should take the burden of ensuring that we have the right blend of apprenticeships, and we can do that now by amending the Bill. It is important that we take that chance. I beg leave to test the opinion of the House.

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[Lord Mendelsohn]

My Lords, I declare an interest as the joint president of a large charity that works with children with special educational needs, people with learning disabilities and a large number of vulnerable children and young people. I want to thank the noble Baroness, Lady Sharp of Guildford, for introducing this amendment, which we discussed in Grand Committee and which this side supports.

My personal experience is that we are finding it increasingly hard, especially with the funds available for the care sector, to move people with an opportunity to adopt skills into areas where they can lead more fulfilling lives. The burden on those charities is ever-increasing. If some of the apprenticeships available in the public sector could be targeted towards helping those people, it would be very helpful. The public sector is one of the few institutions that has the means, capacity and expertise to deal with this difficult, challenging role. I wanted to express our strong support for this proposal and thank the noble Baroness, Lady Sharp of Guildford, for raising it.

[Baroness Neville-Rolfe]

My Lords, as the noble Baroness, Lady Sharp, said, Amendment 58 is less specific than the amendment we debated in Committee, but its purpose is to impose targets on public sector bodies to specify a proportion of apprenticeships for young persons leaving care and young persons with learning difficulties or disabilities. Those are laudable aims, and I appreciate the way that the noble Lord, Lord Mendelsohn, shared his own charitable experience. But it is crucial that we ensure focus and simplicity for employers and do not deter them from hiring apprentices. It is a matter of principle for the Government that we should not mandate what type of person employers, whatever the sector, should be recruiting as apprentices. Apprenticeships are real jobs with training. Employers make the final decision about who they hire for any apprenticeships that they have advertised, and ring-fencing apprenticeships for particular groups would mean requiring employers to hire particular people for their vacancies.

Alongside the Department for Education, we will continue to promote opportunities for care leavers to receive extra support through traineeships and other study programmes. Among other things, we have introduced a personal adviser for every care leaver to support them until they are at least 21. In addition, full funding for apprenticeship training is available under existing frameworks for eligible 19 to 23 year-old care leavers. We are now extending this to cover the new apprenticeship standards and to care leavers up to the age of 24 from September 2016.

The Government will also publish, in spring 2016, a refreshed strategy to improve the lives and life chances of young care leavers. We anticipate that this will include the Government’s proposals to support care leavers entering the world of work in the coming years. We are committed to ensuring that apprenticeships are accessible to young people with learning difficulties or disabilities. We continue to look at how we can improve accessibility by working with key stakeholders, and have already taken steps to ensure that barriers preventing access to apprenticeships for those with learning difficulties or disabilities are removed.

To respond to the noble Lord, Lord Mendelsohn, as an incentive to employers, the Government fully fund apprenticeship training for all young people aged 16 to 18. This fully funded apprenticeship training is extended to eligible care leavers aged 19 to 23. A number of local authorities already prioritise support with apprenticeships for care leavers, which of course we encourage, and, where eligible, care leavers can also access programmes such as traineeships to get the support they need to get ready for an apprenticeship. They are flexible, so providers can adapt them to the needs of the trainee by including additional support such as mentoring.

There are examples of good practice and they have grown in recent years, to respond to wider needs. I believe that this amendment would take us down the wrong path. I hope noble Lords will understand how the Government have approached this and the things we are doing outside the framework of the Bill, and that the noble Baroness will feel able to withdraw her amendment.

Enterprise Bill [HL]

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Wednesday 4th November 2015 Grand Committee

[Baroness Neville-Rolfe]

My Lords, I thank noble Lords for this useful discussion. The noble Lord, Lord Stoneham, talked about “son of Stalin”; I think that it is more “son of Thatcher”. This is an enterprise Bill, after all, and we all seem to agree that the GIB is remarkably entrepreneurial. That is why we want to free it up. I am glad that the noble Lord, Lord Mendelsohn, is not opposed in principle to privatisation. Indeed, I agree with him about a lot of the positives that he mentioned concerning the framework in the UK, with shareholder rights and so on. I think that we have a very good base here. He brings a lot of expertise to the debate. He has rather naughtily asked a few commercial questions and I am not sure that I can answer every single one. However, we understand that this is an important issue that is of interest to a great many people, beyond the confines of this room today. There are a number of points raised to which we will give careful consideration.

I will now move on to the amendments and will answer questions as I go through. Amendments 53ZA and 53ZB would require the Government to lay a report in both Houses detailing the proposal to dispose of shares in the GIB, before the repeal of the existing legislation contained in the 2013 Act could take effect. I welcome the intention behind these amendments, which is to ensure that Parliament is kept informed of the Government’s move to introduce private capital into the GIB. That, frankly, is entirely right and fair, not least because of the level of interest. However, I would be concerned that these amendments, as drafted, might prevent the Government ensuring that the legislation is repealed at the appropriate point in a transaction process, if that were to fall at a time when the House was not sitting. As your Lordships will understand, the Government need to retain the flexibility to manage the complicated sale process.

However, it is our intention to keep Parliament fully informed. I am happy to commit today that the Government will be sure to provide Parliament with much of the kind of information suggested by noble Lords as soon as possible after any sale has taken place and at the appropriate time in the future, should the Government retain a stake that might be sold later, which obviously is an option.

Moving to the Government’s amendment, I hope that I can reassure noble Lords on a number of specific points that they have raised today. The noble Lord, Lord Teverson, asked whether it was too early for privatisation. I believe that the answer is no. We feel that moving GIB into private ownership is the natural next step for the business. The company itself, as I have already said, fully supports the move. There is strong interest in acquiring a stake in the bank from a number of larger-scale institutional investors, as could be confirmed by some comments. In his evidence to the Environmental Audit Committee last week in the other place, the CEO, Shaun Kingsbury, expressed his support for government plans to seek private ownership for the bank.

To answer the question from the noble Lord, Lord Mendelsohn, the Government will explore all options for a sale and, as I will emphasise, our decisions will reflect the outcome that we believe is in the best public interest. Obviously the proceeds will depend on how big a stake is sold and the outcome of negotiations with investors about the value of the company. We will need to be satisfied that any transaction represents value for money for the taxpayer.

Noble Lords are interested, understandably, in the transaction details, in particular whether the Government intend to retain a stake. The Government intend to sell a majority of the bank, as we have made clear, so that could involve retaining a minority stake. Our decision will depend on the outcome of the discussions that we are having and will have with potential investors. Some investors might welcome government retaining a stake, while some might want to buy 100%. To respond to the noble Lord’s point, whatever we decide to do, we will be driven by the public interest and our goal of achieving the best outcome for the Green Investment Bank itself. However, I must point out that if the Government retain a sizeable minority stake—by which I mean one that would allow them significant control over decisions made by the company—we may not achieve our objective of ensuring that it could be classified to the private sector.

[Lord Mendelsohn]

I will ask the noble Baroness a quick question. She said that this would be in the interest of the Green Investment Bank. The Green Investment Bank is a commercial institution which the Government are about to sell, so the terms of its commercial operations are very different—they are not inherently in the public interest because the public interest is defined as the mission which they gave it, and the members of the Green Investment Bank and its management have an obvious alternative economic interest. When she uses the terms “public interest” and “the Green Investment Bank’s interest” they are two entirely different things which may conflict in many ways when it comes to a transaction. Could the noble Baroness please be a bit clearer about what she means when she uses those terms?

[Baroness Neville-Rolfe]

I will come to that as I come to my final paragraph, if I may. Perhaps I could first clear up one or two points that have been raised. The first was about the advice from the ONS, which I think the noble Lord, Lord Teverson, asked for. We are satisfied that unless all the legislation is repealed, there is a real risk that the GIB could not be classified to the private sector. We have come to that view based on our understanding of the European statistics authority’s guidance, which the noble Lord has also had a look at. I was also asked whether the Government will freeze future funding.

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[Baroness Neville-Rolfe]

The noble Lord makes a good point. It is clear to the Government that we cannot retain control over the Green Investment Bank if it is to be declassified from the public sector following a sale. I do not think that really answers the question about the five objectives, which I will reflect on and come back. I think the Committee can understand the basic point that we are making and obviously, as I will come on to explain, we want the Green Investment Bank to continue to be a Green Investment Bank and to operate effectively.

Perhaps I could therefore move on to the question of the remit and reiterate the point that I made in my opening remarks. It is the Government’s policy to move the bank into private ownership and we cannot retain control over its operations. That has to be interpreted in law and is the challenge that we are working with. However, I would like to give a bit more detail on how the bank will, as we see it, retain its mission.

[Lord Mendelsohn]

Just to be absolutely clear: is the Minister saying that the principal, driving objective is to transfer the Green Investment Bank into largely private ownership? If that is so, everything else is entirely secondary. If those are the terms, that is why there will be variations as to whether the Government have a long-term commitment or wish to do any funding. Is that the principal and overriding concern, more than anything else? Because if that is the case, it means that everything else is willing to be thrown under the bus.

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[Baroness Neville-Rolfe]

I am glad we are making progress. Green investment, which I am not an expert in, as all noble Lords know, is what the Green Investment Bank does. As I see it, that is the brand of the Green Investment Bank—after all, it is called the Green Investment Bank—so the parallel with 3i is not entirely fair. Because of that, the Government fully expect that potential investors will wish to maintain the bank’s green focus and values; they will know what they are buying into.

[Lord Mendelsohn]

On that point, is an absolute assurance or guarantee required? Would the Government fetter their ability to do it, or would that lead them into the same problems during the sale process?

[Baroness Neville-Rolfe]

I think I will have to answer as I have before: we cannot prejudice the bank’s status. I think that our heart is in the right place but we are in some difficulty here. As part of any sale discussions, potential investors will be asked to confirm their commitments to these values and set out how they propose to protect them. We envisage that this would involve the new shareholders agreeing to retain the green objectives in the Green Investment Bank’s articles of association, to which the noble Lord, Lord Stoneham, referred at the beginning, and to ensure that the bank continued to invest in a way that achieved a positive impact. I hope that that helps. We also expect that new shareholders will agree to continue the GIB’s existing standards of reporting on its green investment performance, and provide independent assurance of that. I understand that these commitments are not as strong as a statutory lock, but it is simply not an option to impose more binding conditions that would require the business to act in a particular way since that would have exactly the same effect as this legislation. The GIB would very likely have to remain in the public sector, with the problems that I described before.

[Lord Mendelsohn]

I am trying to hone this down to one particular point. The Minister has said that these are expectations, not commitments that we can readily accept. An expectation is not a commitment in the first place. I am trying to work out what thresholds any potential investor has to pass in order to meet her expectations.

[Baroness Neville-Rolfe]

My Lords, I am in some difficulty because we are still designing the sale process. I know that the noble Lord has been in meetings where we have tried to explain the situation, and he has asked lots of questions. We have to try, with the House’s help, to find a way through. I have tried to explain some of our expectations and what we are trying to achieve, which I do not think is a million miles away from what others here want to achieve.

The noble Lord, Lord Teverson, rightly asked a question about the Royal Mail and whether the controls over it helped us in terms of a precedent. Actually, his comments show how valuable it is that we have introduced this amendment in Committee rather than leaving it until Report because he has asked some very good questions, and the Bill will of course go on to the other place. The simple answer on the Royal Mail is that it is regulated because it is designated as a universal service provided by Ofcom; it is not itself controlled by legislation. The same is true for other utilities, such as water companies, that choose to operate in a specific sector.

I understand that noble Lords will want to reflect on our discussion. The Government too will of course reflect on the discussions raised and on the amendments proposed. I note that noble Lords wish to debate this on the Floor of the House.

I said that I would respond on the question asked by the noble Lord, Lord Mendelsohn, about public interest in the GIB. The public interest lies in the GIB having a strong and secure future in the private sector as a green institution, and securing the best value for money for UK taxpayers.

I agree with my noble friend Lord Cope of Berkeley that it was right to raise this in Committee. In view of today’s discussion and the points made by noble Lords, I will withdraw my amendment for now and the Government will retable it on Report.

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[Lord Mendelsohn]

From this side, we thank the Minister for her approach to this. We want to be clear that we believe that it is possible to structure this so that the mission can be protected and there can still be a transfer into the private sector. If the Government come forward with such a proposal, it will have our wholehearted support.

[Baroness Neville-Rolfe]

I am grateful to noble Lords for their courtesy. It is a bit like going to the gym, this afternoon, but I am glad that we have had the discussion. Of course I will consider before Report what we can do to meet the concerns expressed. As I said, I am as keen as noble Lords to find a way forward that allows this privatisation to go ahead and does not lead us into this rather surprising cul-de-sac. We will have a think about process, given that there is agreement—not on everything but on some aspects of issues that we have discussed this afternoon.

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[Lord Mendelsohn]

I thank the noble Lord, Lord Hodgson, for that intervention. I shall make it very clear. We introduced these as probing amendments to test a variety of things. The context is that that was prior to the publication of the consultation, and the debate that we have had is very different from the one that we would have had. I and, I suspect, some others in this Room would have tickled the noble Lord, Lord Hodgson, on some of those issues in other circumstances, but these are the circumstances that we are presented with: we are focusing on the consequences of the consultation.

It will come as no surprise to anyone to hear that I was always sceptical of the legal advice—we are going back to the constants of “may” and “must”—but I also presented in meetings counsel’s views, which have turned out to be rather prescient. I would be very grateful if the noble Baroness, who will always resist publishing the advice, would at least give us a much greater recitation of what legal advice has been given and whether the Government have taken effective external advice, as well as advice on whether the consultation was consistent with the Act. Will the Minister give a timetable for the Government to come forward with a proper impact assessment of the consultation proposals, as opposed to the proposals that we all agree to? We would also be grateful if she would set out whether existing legislation will allow the Pubs Code Adjudicator to deal with the pubcos gaming the system. If this measure goes through in the form it is in now, it will mean that the pubcos can game it to their hearts’ delight.

We would also be grateful if the Minister could give us an indication as to whether the Minister in the department directly responsible for signing off this consultation gave direction to the officials to draft the consultation on the basis of the proposals not contained in the Act and whether there has effectively been a change of policy to ignore the Act and introduce a different form. This more consistently follows what was proposed previously as opposed to the Act, and we would be very grateful for some assurance that such directions were not given by the Minister responsible.

[Baroness Neville-Rolfe]

My Lords, I thank noble Lords for triggering this debate with their amendments and for taking us back—unexpectedly on my part—to pubs. I am very glad that the noble Lords, Lord Whitty, Lord Snape and Lord Berkeley, are all here to explain very clearly their concerns. I also welcome back my noble friend Lord Hodgson. I very much take the point that he made about the complications of this area and the risk of pubs closing—which I think we all want to try to avoid—and the fact that we must not get this wrong. Although the noble Lord, Lord Mendelsohn, agreed with the concerns of others on his side, he also pointed out the importance of the consumer in all this, which we must never forget.

I can understand why some noble Lords are disappointed by the Government’s decision not to implement the parallel rent assessments. I assure noble Lords that I made my previous commitments in good faith, as I am sure they know. However, noble Lords will recall that the pubs measures in the Small Business, Enterprise and Employment Act were agreed at great speed towards the end of the last Parliament, and of course since then, as has been said, the Government have changed, and we have reviewed the best way to achieve the objectives. I will come on to that in more detail later if the Committee will allow, but the key point is that the Government are trying to strike the right balance, delivering fairness for tenants and stability for the industry. I cannot accept what has been said about my right honourable friend Anna Soubry, who is a great advocate for small business and is genuinely trying to find the right answer, as I will try to explain when we go through this in more detail.

Our proposals are out for consultation at the moment, and my officials are meeting tenants’ representatives and pub companies next week to discuss this matter in great detail. There was a blank space on page 66 of the consultation document for people to add comments. I have just looked at that document and it makes it quite clear on page 12 that there has been a change on the PRA point. We are not trying to hide that there has been a change of policy here. However, I will explain the current approach later on.

I add that we are fully focused on meeting the important May 2016 deadline for implementation. There was agreement that we should get on and implement this and not leave it for years and years. Obviously, the consultation process is very conscious of that deadline. I also wish to reassure the noble Lord, Lord Whitty, that there was stakeholder engagement over the summer, which was carried out by officials. It was balanced and they listened to views from across the sector. My right honourable friend Anna Soubry visited Burton-on-Trent on Monday and met with pub companies, and she will be meeting tenants’ representatives later this month.

I will take the amendments in turn. I know that there is most concern about the third set of amendments but, for the record, I will answer the points raised on the others.

[Lord Mendelsohn]

Does the noble Baroness mean that her right honourable friend met people prior to the publication of the consultation or afterwards?

[Baroness Neville-Rolfe]

My understanding is that she met with the pubs after the consultation, as, in turn, she will be meeting the tenants once the consultation was published. I have to reject the underlying implication that somehow we are not balanced on this. Consultation is a serious matter for business. You have to put things out in draft and you have to listen to what is said, which is what we always do.

I turn now to Amendment 53ZC. I understand the concerns about potential manipulation of the ownership of tied-pub estates but I am not convinced that this amendment is the way to address the issue. It would place an additional burden on the adjudicator by requiring him or her to monitor all pub sales, to make a judgment as to whether they reveal a pattern of divestments, and to assess whether their effect is to exempt the pub companies concerned from the jurisdiction of the Pubs Code, thereby causing detriment to the tenants concerned. While one large pub company sold around 150 tied pubs earlier this year to a company that will not be covered by the code, another has recently purchased more than twice as many tied pubs that were previously outside the scope of the code. Purchases and sales of this order have been a feature of the sector for at least 15 years. However, the Secretary of State has a duty under Section 46 to review the operation of the Pubs Code every three years, and that will present an opportunity to look again at issues around sales and acquisitions.

Amendment 53ZD was debated in Committee on the 2015 Act. Parliament’s decision to define the threshold for the Pubs Code in terms of tied pubs reflected more than a decade’s worth of evidence that the problem in the pub sector related to abuses in the tied sector. We talked about this at the time. It is those abuses that the Pubs Code Adjudicator has been introduced to address, and I remain of the view that Parliament was correct to define the threshold solely in terms of tied pubs. At present, the amendment would bring within scope just one company with tied pubs—Mitchells & Butlers, which has in total around 1,800 pubs in England and Wales but fewer than 60 tied pubs. Bringing these few extra tied pubs into scope would create the anomaly of leaving a number of companies owning several hundred tied pubs outside it. Such an anomaly would have risked legal challenge—noble Lords will remember that we discussed this before—possibly imperilling all the pubs measures, which was something that we were keen to avoid.

Section 69 gives the Secretary of State the power to amend the number of tied pubs required to meet the threshold. That is the right safeguard for ensuring that the code delivers its overarching principles.

I turn now to Amendment 53ZF. I know that it is a disappointment to some noble Lords that the Government have decided not to proceed with implementing the PRA, if I may call it that. As noble Lords will recall, it was the previous Government’s intention during the passage of the Bill to introduce PRA and to streamline it with the market-only option. We have had a change of government and the incoming Government have looked again at the commitments that their predecessors made in order to get the legislation on to the statute book. We have looked at the best way of achieving the objectives of this policy. Our focus has been on providing a robust Pubs Code and adjudicator that deliver fairness for tenants and stability for the industry within the timeframe set out in the Act. It became clear, when working through the details over the summer, that the complexity of introducing PRA alongside MRO would put unnecessary burdens on the industry. Having two processes which can be triggered separately but on the same bases, which are not administratively connected and which follow different timetables and rules is not a practical or sensible proposition. We want to minimise the burdens on business. Not taking forward PRA at this time would reduce the regulatory burden of the pubs measures by £600,000 a year. These are burdens that we would have to compensate for by a reduction in another regulatory area, so it is a big figure at a time when pubs are closing.

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[Lord Mendelsohn]

I am probably unnecessarily confused here. Is the Minister saying that the burden on business was £600,000?

[Baroness Neville-Rolfe]

It is £600,000 for having the PRA in addition. I am sorry if I gave the figure incorrectly. I felt that it was helpful to share that figure of £600,000 with the Committee.

[Baroness Neville-Rolfe]

Every little helps, as they say.

[Lord Mendelsohn]

What assessment has that figure taken into account? As I read a statement from a company’s report of what it has currently spent, does it mean that that £600,000 includes the fact that it has now wasted a large amount of management time and money to that effect? Is that included or is it outside it? Has the company calculated that number?

[Baroness Neville-Rolfe]

This is a figure for the burden on business, so to that extent there is a parallel. Perhaps we can move on but there is a cost, and a complexity, in having a double system. We want to try to do this the right way. The market rent only option is the central plank of the Pubs Code. It is a fundamental change for the industry and, I believe, a powerful new tool for tenants. I do not think that there is any disagreement there.

The noble Lord, Lord Whitty, was concerned that the significant increase in price thresholds had restricted the access of tenants to the MRO trigger. We have taken the advice of stakeholders from across the industry on the definition of a significant increase in price. Our draft code reflects the advice we received: that the primary focus should be on the price of beer and that the threshold should be in the order of 5%. We are consulting on this and the percentage increases for other tied products and services. As I said, we welcome the views of stakeholders.

It is vital that we get this right for all concerned. The market rent only option will ensure that tied tenants are no worse off than free-of-tie tenants. That is the actual principle in the Act. Tied tenants will be able to request a market rent only offer when certain trigger events take place. The Government have published draft provisions that allow for the request by the tenant of an MRO in all the circumstances required by Section 43, mentioned by the noble Lord, Lord Whitty. There are four circumstances, which I will not go into again because noble Lords in this Committee are extremely familiar with this.

When we discussed these provisions before, there was a view that giving tenants access to a variety of comparators was of itself a good thing. That was what was being said in the Chamber, but the conclusion we have come to is that that is not really necessary. What really matters is that the tenants are given meaningful comparisons so that they can make the right business decision. We believe that MRO provides that. They will not be committed to accept the MRO offer but can compare it with the tied terms they are being offered. They can use the MRO offer to negotiate a better tied deal, if that is their preference, or choose to take up the MRO offer. They will not need a PRA to do either of those things. I reassure the noble Lord, Lord Whitty, that there is scope for comparison when a tenant requests an MRO, as he or she can request a tied rent assessment. That allows the comparison process to happen.

However, if experience of the Pubs Code in action produces evidence that the introduction of the PRA provisions would be a useful addition to the options available to tenants, this is something that the Government can of course reconsider. The point has been made. It is in the legislation. The power to introduce PRA remains in the Act but it is the Government’s view that we should focus first and foremost on introducing the MRO-only option and the other key provisions of the code on transparency, with the new adjudicator to enforce them.

[Baroness Neville-Rolfe]

My Lords, I am sure we will come back to this. I will take that point away and go through it again myself. There is scope for a comparison in the way that I have described, so the tied tenants should be able to look at the options easily and clearly. We are trying to bring in a system that is simple, clear and well understood. We have looked at the provisions in the Act and come forward with a consultation that we feel is fair, right, simpler, easier and better.

[Lord Mendelsohn]

My Lords, the idea that this is a good thing for small business and that a burden of £600,000 stands in its way utterly beggars belief. This provision was set up specifically in order to deal with the power and information asymmetries affecting smaller businesses with regard to larger ones. Again, it was the Minister who said on Report that,

“we have decided to reinstate PRA for existing tenants for a specific reason: because some tenants who do not wish to be free of tie would prefer the PRA, as they consider it a less confrontational way to secure a fair tied deal”.—[Official Report, 9/3/15; col. 464.]

Has any calculation been made about the cost to small businesses of not being able to have that provision, and indeed of the unfairness? Can the Minister say to me today that that cost would be significantly less than £600,000 if this was allowed to happen? I do not think she can.

[Baroness Neville-Rolfe]

My Lords, I am not sure that there has been a complete understanding of what we are proposing. They will have a free-of-tie rent and a tied rent assessment, and they consider this in the context of their own business planning, which is in their own best interests. Stakeholders and officials have sat down through the summer and done flowcharts and so on to try to work out how this will best work. Obviously I am listening to what noble Lords are saying today. We have come forward with proposals that we would like to be considered in the context of the consultation that we launched last week. Obviously, I understand—

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[Lord Mendelsohn]

My Lords, I am pretty sure this will be significantly briefer. This is largely a measure to highlight a particular issue and should certainly engender less confrontation. We are very supportive of the Government and other institutions on matters of cybercrime. This is a nudge. It is our attempt to add some measures to an important part of enterprise: sustaining effective and secure business, and the ability to secure cyberspace.

The ONS crime survey established that during the period surveyed there were 5.1 million frauds, of which 2.5 million were cybercrimes. These are crimes committed under the Computer Misuse Act. Their detection is based on footprints—that is, looking at devices affected by viruses, hacking, denial of services and virus proliferation, all those sorts of elements. Surveys, as I am sure the Government are aware, have indicated that 74% of small business and 90% of larger business have identified some form of cyber breach. In recent times there have been prominent cases where people who have been breached have suggested that they have the problem under control. We wish to raise this point because we do not believe this to be the case.

I personally participated in what I think outside America is the western hemisphere’s largest conference on cybersecurity, which took place in Tel Aviv with participation by chief information security officers— a term I had not heard of 18 months ago but these individuals are now very significant in their companies—law enforcement, intelligence services and government representatives, who were able to identify that the vast majority of offences actually are detected. It is easier to introduce a virus that is undetectable afterwards. In fact, cyber thieves produce around 250,000 novel variants of viruses every day, which is a huge amount, and I will come on to other aspects that impinge on this. We are seeing massive problems that we have to address.

It was instructive to learn during the course of the conference that the Sony cybersecurity breach that gained great prominence was identified only because they purposely left an imprint to make sure that people understood. Despite the fact that it had the participation of the most powerful cyber nation on this planet, you could not identify what the source was or its full extent. You could not even identify that it was North Korea by any form of examination of where it had been penetrated. It was only via the means of the traditional intelligence services that they were able to identify that it was North Korea. What hope, then, do businesses have in these circumstances?

Furthermore, there is a huge imbalance in the spend between larger and smaller businesses. Government figures that were published some time ago suggest that small and medium-sized businesses with 100 or more employees spend £10,000 a year on cybersecurity, but the smallest firms with fewer than 20 employees spend around £200 a year. This is highly problematic to the aim of having markets that are fully protected.

Over the past few years cybercrime has evolved, and it is now an enormous industry. The City of London Police estimate that it is a £39 billion industry, most of which is recycled into other forms of criminality. It is a hugely circular flow. Actually, it is an incredible market with suppliers, merchants and service providers. There are all sorts of things going on. It used to be said that armed robbery rates went down because if you wanted to be a criminal it was easier to sell drugs. Now, why carry a gun when you can make more with a laptop? The massive infrastructure of cybercrime is hugely problematic.

What I found most interesting at a different session of the cybersecurity conference was where it was identified that there is a massive penetration of companies’ customer details. Those details are blended and traded so that no company can ever detect that their particular security was breached. The details are sold in batches and strips. Even if your security is breached, no one actually knows the extent of the customer payment details that have been penetrated. In any blended list, you are not likely to have more than 2% of any particular company’s list in any list that is used for a cyber hack. I found this to be of extreme concern.

Mobile has been less prone to these sorts of attacks largely because Apple, Google and BlackBerry are the ones that integrate their encryption systems—this is relevant to a debate in other areas. The internet of things is now extremely vulnerable. The disaggregation of security is a huge problem and some fundamental strength is needed.

Criminals are able to recruit from security, intelligence and private sector organisations because they can pay more than the others, so I think that we have a massive issue here. As I say, the Government have not done enough. They have done quite a bit and many good initiatives are in place, but we are suggesting these amendments to try to give greater prominence to and amplify what they are doing, as well as to prod them to move in a couple of directions. I wish that we could have tabled an amendment that we were not allowed to, which would have been to try to encourage more small businesses in this country that are actually creating cybersecurity products. We wanted to table an amendment that would have mandated government departments to spend 8% of their entire IT spend on cybersecurity, because that would generate an ecosystem of cybersecurity firms. We have some good ones, although in this country really only in Cambridge, but imagine what a boost it would be to our cybersecurity capacity if we were able to do that.

Instead we believe that there is a role for government to set standards. In particular, we should promote our best: the City of London Police are outstanding. They are utterly world-leading on this and I pay a massive tribute to Adrian Leppard, who has been an outstanding commissioner. He is a world-leading and well renowned figure and the City of London Police are undoubtedly seen as one of the most significant, important and expert agencies in this. We would be very encouraged if the Government were to consider providing more prominent advice to businesses, which do not really know how to deal with this or know the right sort of things, and promoting the best in practice that we have—that of the City of London Police. I beg to move.

[Baroness Neville-Rolfe]

My Lords, this amendment is designed to protect small businesses from cyberattacks. I was really pleased to hear about the knowledge of the noble Lord, Lord Mendelsohn, on this issue. I wish I had been at the conference which he described and I agree with his objective of amplifying the issue, especially in relation to small business. I also agree with him about the role of the City of London Police.

When I worked in business, an attack on personal data held by the company was one of my top risks and concerns. Recent events demonstrate that businesses need to take action on cybersecurity and can benefit from external advice and guidance. I think it is fair to say that the Government are doing a great deal in partnership with industry on cybersecurity. We have a strong strategic programme in place, which is right. There is a five-year plan for an £860-million national cybersecurity programme to provide a range of advice and guidance to businesses of all sizes, including a specific guide, Small Businesses: What you need to know about Cyber Security. I have copies of that guide.

We have stepped up this activity recently by relaunching the “Cyber Streetwise” campaign, which offers small businesses clear and simple advice on how to protect themselves. There is information in the press and the Committee may have seen advertising at train stations or on the tube. In addition, the Government’s “Cyber Essentials” scheme shows small businesses how to protect themselves against common cyberthreats. Since October 2014 the Government have required their suppliers to hold a Cyber Essentials certificate if they are handling personal data or sensitive information. That is all increasing awareness by amplification. There are more than 1,000 Cyber Essentials certificates, which have been issued to big organisations such as Vodafone, JCB, Barclays, the Royal Mail and BAE, as well as to colleges, universities and so on. We are working to get thousands of companies and their supply chains to adopt the scheme.

Our approach is to work with a range of law enforcement and other bodies to build partnerships with businesses, representatives and trade bodies, and to use these to increase awareness. We do not believe that the suggested amendment, which I think is mainly probing, goes beyond the existing approach in ambition or effectiveness. Putting guidance into legislation could result in a tick-box approach where guidance is merely published without the associated awareness-raising, partnership-building and behaviour change that is completely essential in this area.

We want to avoid unnecessary regulation. The amendment would create uncertainty as to what businesses were legally required to do and what was best practice, possibly even giving rise to litigation. It could also reduce our flexibility in dealing with what is, frankly, a very fast-moving issue. I think we were all astonished by the Sony leak and by recent events in the UK. We are not convinced that legislating in this Bill is the right thing to do. Following the information leak at TalkTalk, though, a committee of the National Security Council is now looking at this. Cyber Ministers are looking as a group at what further changes are needed. In addition the Digital Economy Minister, Ed Vaizey, promised last week that we would meet the Information Commissioner.

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[Baroness Neville-Rolfe]

I am grateful to my noble friend, and I shall certainly make sure that people are aware of the point that he has made. There is something of a carve-out in the EU institutions. I was at OHIM in Alicante a couple of weeks ago. The cybersecurity office, in the days when it was rather less central, was put in Heraklion. However, the key thing is that member states, as well as cyber Ministers in the UK, should get together because the cybersecurity industry is no respecter of boundaries, and a lot of visits, meetings and decision-making are made outside Heraklion.

I will not delay the Committee any longer. I wanted to give a feel of the fact that things are being done. I agree with the sentiment of the amendments: we need to make sure that small businesses, as well as big businesses, which of course suffer bigger reputational damage from leaks, are doing the right thing. That is why we have a strong strategic approach, along with targeted action to help small businesses. I hope that noble Lords have found that somewhat reassuring. I am sorry that we cannot really spend any longer on this important area this evening.

[Lord Mendelsohn]

I want to make the following staccato points. First, we spend £856 million. Unfortunately, that is spent principally on national security and too little is given to the other side. It would be nice if the Government could give that more consideration. We welcome the appointment of the former British ambassador to Israel, Matthew Gould, who will have a key role in cybersecurity inside the Cabinet Office—a very useful and important position.

The noble Lord, Lord Hodgson, made a very important point. We are being targeted by criminals, not from various parts of, or cities in, this country but from every part of the world. That is very easy to do and it is a significant factor. I want to make a very simple point. The scale on which this activity can multiply is absolutely extraordinary, and it goes up by factors. We cannot afford to believe that simple awareness campaigns will work; much more effective measures are needed. There is a great deal of concern about this, and discussions have taken place between a number of countries, including our own—which was represented at the conference—on how you deal with the fact that there is an information lag and that you become the weakest part of the chain if you do not deal with it. It was entirely inappropriate for the proposal to be put forward in an amendment. Of course this is a much broader issue, but we just wanted to highlight it.

My final point is that the real problem about TalkTalk is not so much that the hacking happened. All the comments about how absurd it was that a company of that nature could run a system like that are fairly irrelevant. The extraordinary thing is that most of these serious crimes go undetected. That is the bigger problem, rather than the problem of the crimes that are detected. I beg leave to withdraw the amendment.

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[Baroness Neville-Rolfe]

I very much agree with noble Lords that it is important for consumers and businesses to have transparent information on how mobile and broadband coverage is improving. I am glad that my noble friend Lord Deben has joined the discussion. He is right: the truth is that perception in this area is lacking reality. It was a slow start, there is more to do and there are lots of individual problems with broadband, but the Government’s plans are now beginning to yield impressive dividends.

We are of course committed to ensuring that the benefits of improved broadband and mobile services are felt right across the nation. That is why we made a universal service commitment to provide minimum service levels of at least 2 megabytes per second by the end of 2015. Basic broadband is already available to virtually 100% of UK premises, and by the end of this year only about 1% of premises will receive less than 2 megabytes per second.

To deal with the remaining 1%, which in a sense is where we are, all premises will have access to at least 2 megabytes per second through the option of satellite broadband connections. They will have the capability of delivering superfast broadband for those who want it. Noble Lords may not know that the satellite scheme is currently being trialled in West Yorkshire and Suffolk, close to my noble friend’s home, and a national scheme is due to go live in December. We are very pleased with the results so far.

We remain on track to provide 90% superfast broadband coverage by early 2016, and we are aiming for 95% of UK premises—the number in the amendment —to have access to superfast speeds by December 2017.

As I think I told the noble Lord, Lord Stoneham, superfast is already available to over 83% of homes and businesses in the UK. Importantly, that is up from 45% in 2010. So that was a good effort by the coalition Government. That is the highest coverage among the top five European economies.

Recognising problems in rural and remote areas, the Government have made available up to £8 million to support pilot projects to extend superfast broadband beyond 95% of UK premises, using satellite and wireless, as I said, and will publish further lessons from those pilots later this year.

Improving mobile connectivity is also a priority. Around 94% of the UK’s land mass has coverage from at least one mobile network operator and 69% has coverage from all four. But we want to go further. To this end, a landmark agreement was reached with all four operators in December to ensure that 90% of the UK’s landmass will have voice and text coverage from each MNO by 2017. What this also means is that 97.7% of the UK will have a signal from at least one mobile operator.

These are relentless and concrete measures that the Government have taken to improve coverage. We are striving every day to make improvements so that everyone can benefit from the digital economy. I share the frustrations of everybody at the time that this has taken, but we are committed to ensuring that we have the infrastructure we need for this fourth utility.

The noble Lord proposed a requirement to report on progress being made in improving broadband and mobile coverage. This is already widely available from lots of different sources. I can make the list available to noble Lords so that they know what is being done. I am not convinced that the information gap is there; what I think is there is the need to continue getting this fourth utility fully across the UK. I hope that the noble Lord will feel able to withdraw this amendment.

[Lord Mendelsohn]

I thank the Minister for her comments. The one thing that comes across very strongly in this Committee is that in many ways one of the real crises we have in business is that far too often too much is said and marketed. It has become very apparent that trust in business is continuing to fall, and on very reasonable grounds on the part of the consumer. I have a lot of kids so I have two broadband connections into the house, neither of which provides consistency of service or provides anywhere near the advertised level of service. I would be interested to know whether at some point the Government will consider making it a condition that you can market only the minimum guaranteed and consistent service; that could be attractive rather than these pie-in-the-sky numbers. It is not acceptable to put in a fibre-optic cable to one point and then market it to a whole area with no consideration being given to whether you will put in a superfast connection.

We have to be able to say, “We do not want to be followers. We want to be leaders”. This rollout has become very difficult. I hope that the Minister takes note of the following. I know this is an area in which she has a personal and keen interest and that many members of the Government are also very interested in it. It would be a good and positive move to encourage the commercial operators in this sector to do more and to do it faster and harder. That inevitably makes sense. The Minister talks about using satellite or wireless. Given the money we have invested and the provisions we have made, we might just as well have given the cash to Google and Facebook—I declare an interest in that my wife works for Facebook—to use their drones or balloons because we probably would have been able to do the whole thing a lot faster and quicker with those mechanisms. We should not be in the position whereby the provision of this service is so slow. I am more than happy to withdraw the amendment but hope that the Minister will be consistent in her efforts to make sure these operators deliver.

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[Baroness Neville-Rolfe]

I am delighted to say that our efforts continue. We are trying to make sure that, as it were, reality goes faster. It has been a huge investment programme. I agree with a great many things that the noble Lord has said. I think there is a feeling right across the House that investment in this area is really important, which is one of the reasons I am so pleased that everybody supports the amendment we have put forward to the IDA, which obviously would allow extra spending in areas beyond things like the code that the noble Lord referred to.

[Lord Mendelsohn]

I beg leave to withdraw the amendment.

Enterprise Bill [HL]

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Wednesday 28th October 2015 Grand Committee

[Baroness Neville-Rolfe]

I am grateful to the noble Lord for his intervention and the opportunity to say that the commissioner can raise issues about his powers in the annual report, which, as I said on another occasion, will be available to Parliament, and which we have to table in Parliament unamended. He also has the power to name and shame, so he can publish the report and comment. The Australian commissioner is getting a lot of airtime, but he has found that that power has been useful in the conversations he has had in Australia on difficult cases. That will therefore help a lot and will help to change the culture, as I was saying on the Floor of the House this afternoon. There is also a review of the success of the commissioner, which I think some noble Lords questioned on Monday, two years after the coming into force of the Bill—assuming that noble Lords agree it—and then every three years. Therefore, that also gives us another opportunity.

This is a novel area, and we are moving forward in uncharted territory. We are bringing in a number of changes. I remember that when I dealt with planning in the 1980s as a civil servant, we made what seemed like quite small changes to the regime of planning, which obviously was in guidance, and that had a huge effect. My own view and hope is that these changes that we are making on transparency, payment terms—following the EU directive that I was talking about this afternoon—and of course on this vital Small Business Commissioner, will make a big change to the landscape.

[Lord Mendelsohn]

I was disappointed by some of the Minister’s comments at the very end, because arguments were set up which we clearly have not made or would make, and nothing we have said during the entire course of these proceedings would suggest that we would make such points. We think a weakness is that we have not learned the lessons—from Victoria to Queensland to New South Wales, to the Australian commissioner. Mediating one case does not establish a rule; it will not do in Victoria, Queensland—no one has ever suggested such a thing and it was wrong to suggest that we would. Similarly, the court determines costs and the Small Business Commissioner can make a particular point. The Minister presented a whole series of arguments which are wrong.

I will focus on reputation and naming and shaming. I accept that the Government think there is some huge benefit to this, saying that we can deal with naming and shaming and reputations, and that it is some kind of Aladdin’s lamp. However, frankly, people need a little more, and the noble Lord, Lord Hodgson, made exactly that point. You can string out an awful lot of the process by not being able to do it. Someone needs a lever so that they can say, “If you choose to frustrate a process and to refuse to do these things, there are other ways you can deal with this. Or, if you feel that you are being strung out, it will not work totally and wholly to your detriment”. That is quite important.

The noble Viscount, Lord Eccles, made the point that we should not make a detailed examination of particular businesses. Certainly, it would be extremely concerning if, when every business qualified, a series of checks about its health were made. However, these matters are relevant to how a conclusion is reached. There may well be restrictions when there is a payment dispute, the contract term is a problem and the larger business is willing to change it, but a broader change is required. You sometimes have to get into those issues where you are resolving a case. When a company is going to be named and shamed, its willingness to address that in the circumstances is the sort of issue that will certainly weigh on the Small Business Commissioner. If it found that there was a problem, it would reflect on whether the magic lever of naming and shaming should be applied if the company showed some sort of good faith and good will.

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[Baroness Neville-Rolfe]

I will certainly look at the point that the noble Lord makes about avoidance contracts, as it were. I was trying to explain the amendments that have been put down, partly in an exploratory way, and what effect they seem to have. Obviously, what we are doing is debating these issues and trying to find the right way forward. I am informed that a small business can raise a complaint if the larger company seeks to exclude the commissioner from answering. That is a sort of interim answer to the point that he has made about magic circle law firms seeking to get around what we see as a new conversation between big and small companies, initiated by the Small Business Commissioner so that we can improve the culture and, as he said, deal with the more egregious cases, so that that will change how people behave and we will not have large numbers of cases ending up with the Small Business Commissioner.

[Lord Mendelsohn]

The point that you can include things is the point that comes before, and the point that where you exclude it is the point where I picked up. For the purposes of brevity, I thought I would leave out the first part but I am happy for the first part to be mentioned in reverse order to where it appears, even in the Government’s own documents. Before we come to some very clever amendments that I hope the Minister will be very sympathetic to, all I am trying to say is, at least give the Small Business Commissioner some latitude. Allow it to apply its discretion and encourage people of good standing and with good experience to come forward and use that discretion to good effect, to be able to help small businesses. I beg leave to withdraw the amendment.

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[Baroness Neville-Rolfe]

I thank noble Lords for this amendment and, indeed, for the whole series of amendments on the Small Business Commissioner, which have enabled us to have a very good debate. I am glad that my noble friend Lord Deben joined the debate and note his comments on construction, which we can consider in the context of the review that we have just agreed to. However, as he says, more generally, in other sectors some companies are much better payers. What we want to do is to change the culture so that this is the norm rather than the exception, if it is the exception. I do not know the exact facts but the overall numbers are a cause of concern, as we have said on a number of occasions.

The amendment before us, which is not really concerned with construction, would require companies to report outstanding liabilities relating to overdue payment, including interest payments on the unpaid invoices. It would require any failure to disclose this information to be reported to the commissioner.

During Report of the small business Bill in the Lords, I brought forward amendments, as noble Lords may recall, to specify in the Bill how the reporting power could be used in relation to payment performance and interest owed and paid in respect of late payment. Over the summer, my officials have been working with stakeholders on the regulations. We have established a working group to draft non-statutory guidance to ensure that companies are clear on their reporting obligations, and that the information reported is robust and comparable.

From next year we will require companies to report online every six months against a comprehensive set of metrics. That includes the proportion of invoices paid beyond agreed terms and the proportion of invoices paid within 30 days, between 31 and 60 days, and beyond 60 days. That is a lot of information for the top 14,000 companies. It will not be in the annual accounts as we want the information to be provided quickly. The information will, however, be rigorously monitored and will be timely and accessible—more so than putting something into the annual accounts.

The new prompt payment reporting requirement will enable us to bring increased transparency on payment practices and performance. We can legislate by regulation for the Small Business Commissioner to monitor that information, which I think is one of the things that the noble Lord emphasised in his presentation of the amendment. The commissioner may also highlight good and poor performers as part of his or her efforts to drive a fundamental change in behaviour. This will help exert the necessary pressure—a point we keep returning to—on companies to make sure that their suppliers are paid on time and fairly compensated when that is not done.

I am confident that the measures imposed on the Small Business Commissioner will lead to significant change in the UK’s payment culture. I note that the noble Lord said he would want to return to issues to stiffen powers on Report. I would only say in conclusion that I would very much regret seeing an adversarial element developing in this proposal. We do not want more costs, more lawyers and more delay. I think that we have a shared objective of trying to make the Small Business Commissioner a success, but in the mean time I ask the noble Lord to withdraw the amendment.

[Lord Mendelsohn]

Before the Minister sits down, can I clarify that the amendment addresses none of the points that she made? It is really about identifying the liabilities you have for the interest payments where you did not make a payment. As such, that addresses the ability of large businesses to be able to say that if you do not believe that someone will chase you—a small business will chase you for a payment you are due—you can write it off as a liability very quickly on the basis that you do not believe that it will be chased. It addresses that sort of liability.

[Baroness Neville-Rolfe]

I thank the noble Lord. Indeed, you are looking at the overall millions owing rather than the individual invoices, as I understand it—therefore, the debtor’s figures.

[Lord Mendelsohn]

Yes, certainly. For late payments, fines can be attendant to it. They tend not to be incurred, largely because companies do not pursue them. This simply establishes that a company has to establish it as a long-term liability in its account that could be claimed. In pursuing the Minister’s argument about culture, it helps to establish whether the company is fulfilling all its duties, including under the Prompt Payment Code.

[Baroness Neville-Rolfe]

My Lords, there might be merit in further discussion on the finer points of this. The point I wanted to make is that it is important to also look at what we are planning in terms of payment transparency; perhaps we could discuss that outside the Room before Report.

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[Lord Hodgson of Astley Abbotts]

I cannot resist, although I know that the Committee is like a horse heading for the stable, therefore I shall be very brief indeed. On the comments made by the noble Lord, Lord Mendelsohn, on money laundering, this area has a life of its own, and the impact on smaller businesses is stupendous and without any real evidence of any efficacy whatever. This area is still growing, and the tentacles of bureaucracy are widening all the time, therefore the burden will be greater. I therefore very much support the idea that we take any steps to make sure that it is effective—not that we should not do it, but that it is effective. That is the thrust of the noble Lord’s Amendment 49B and trying to make sure that we try to prevent the further spread of this. I have today received a request about money laundering from my clearing bank. When I left university in 1964 I went to work in America. The bank has written to me saying, “We see you worked in America in the 1960s; tell us what you were paid as part of our money laundering investigation”. What that can possibly add to its knowledge of me 50 years ago I cannot possibly imagine. If you use the term “money laundering” everyone says it must be a good idea. It will require a big effort to make sure that we are effective. The question is: are we stopping people doing these terrible things, not just spraying information around and ticking boxes? Therefore, all power to the Minister.

[Baroness Neville-Rolfe]

My Lords, I share the sentiment behind Amendment 49B to ensure that regulators have regard to the needs of business when dealing with money laundering requirements. As I used to say when I was on the Back Benches, the regime was excessively burdensome and some businesses feel confused by overlapping or restrictive guidance. However, these concerns cannot be addressed by simply looking at how regulators deal with small business. There may be examples of requirements that are particularly difficult for certain entities, but it is the interactions between different types of business and with the banks that is at the heart of the problem. So small companies with innovative business models or ways of complying with requirements, to know their customers, may find it difficult to maintain business relationships with large banks which do not understand how a particular model works. The bank may simply decide not to do business, rather than expose itself to the risk that the small company is being used for money laundering.

Difficulties can be caused by the guidance that is produced by the various regulators and supervisors. That is why we are looking at the regime in the round. We are now running a Cutting Red Tape review of money laundering controls. It is important that companies that are genuinely confused about what they need to do have this confusion addressed. Our call for evidence is open until 6 November—my husband is planning to send sacks of stuff—and we are keen to speak to all NGOs, businesses and trade associations with an interest, particularly SMEs.

We want to examine more seriously the potential to improve compliance and efficiency, by identifying aspects of the good supervisory regime that appears to businesses in the regulated sector to be unclear, cumbersome, conflicting or confusing. We are already speaking to a broad range of sectors and we would be very pleased to have examples from your Lordships. The Government understand that the regime can be improved. We published the first national risk assessment for money laundering and terrorist finance risks on 15 October and one of the findings was that the supervisory regime was inconsistent. We accept that this needs to be addressed.

The evidence being gathered by the BRE will help to inform work under the Government’s action plan to reform the regime and to ensure that it is consistent; treats large and small businesses sensibly and proportionately; and follows a truly risk-based approach allowing resources to be targeted at the areas that are at greatest risk of money laundering and terrorist financing. These are also important policy objectives which must not be forgotten in today’s discussions.

I hope that gives some reassurance. I have a good deal of excellent detail on Amendment 49D in relation to investment fraud, but given the lateness of the hour, I wonder if the Committee would like me to write about that. I think it means that we do not need to amend the Bill, but a lot of good work is being done by the FCA which I would like to share with noble Lords and give more publicity to in order to get after the scammers. I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Mendelsohn]

I did not quote the noble Baroness on this one; I am saving that for later, and some significant quotes that she made on other amendments. The argument was not about what small business’s compliance is able to do in transactions with the bank. I understand the Minister’s point, but the issue is really about small businesses being able to establish that they have fulfilled their regulatory duties, which would not have that consequential action.

[Baroness Neville-Rolfe]

The review is obviously very open. I was trying to explain that if you do a review that engages only small business, you will not necessarily be able to get the same savings as you would otherwise. I have come across this for example with estate agents: if you buy a property, and are a perfectly respectable person, you have to go through all the detail that the noble Lord was describing. If you are a company director, you are constantly having to produce ID again and again. If you take the 5.4 million businesses and find a saving, that is a lot of burden reduction. Obviously, equally, if you impose new burdens, and multiply that by 5.4 million, there is a problem. That sort of technique needs to be applied, which is what the BRE is doing with this study. We will certainly make sure that the noble Lord’s point is properly considered.

Small Businesses: Late Payments

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Wednesday 28th October 2015 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, there are arrangements, particularly stemming from EU directives, about the payment of interest on late payments. The difficulty is that they are not always pushed, especially by smaller companies. We need to change the payment culture in this country, which is what the Small Business Commissioner is about and what the regulations that we will be bringing in early next year, bringing transparency to payment terms, are about as well. The small will know what the big are doing and whether they are up to scratch.

[Lord Mendelsohn (Lab)]

My Lords, the Enterprise Bill excludes the possibility of a complaint being resolved where a small business is in dispute with another small business as a result of a larger business’s unacceptable payment practices, especially where the small business caught in the middle is not protected from reprisals. Can the Minister tell us how much this exclusion reduces from the overall figure of late payments that the small business commissioner will be responsible for?

[Baroness Neville-Rolfe]

My Lords, we are trying to focus the work of the Small Business Commissioner when we set him up particularly on complaints from smaller businesses about bigger businesses. The noble Lord rightly says that there can be issues between small businesses in respect of payment. We are debating and looking at that but we plan to focus on the imbalance at the large/small end initially.

Enterprise Bill [HL]

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Monday 26th October 2015 Grand Committee

[Baroness Neville-Rolfe]

My Lords, departments could bring in outside experts to work for or with the Small Business Commissioner if they need something more specialist than civil servants can provide. Of course, there has been a lot of entry into the Civil Service from places such as business and the legal professions that perhaps gives us a bigger pool than classically we had. Indeed, the commissioner is expected to be recruited from outside the Civil Service. Obviously, the leadership of such organisations is critical—as I think we agree.

There is an important further point: staffing the commissioner’s office in this manner provides a quick and easy way to provide the commissioner with the support he or she needs. It ensures the office can be responsive and flexible to demands, for example in the event of a surge in work. It avoids the costs and administrative burdens of setting up a whole new organisation that is able to recruit and employ its own staff outside the Civil Service.

Concerns have been expressed about the number of staff that the commissioner will have. I assure noble Lords that the commissioner will have the support that he or she needs. The estimates in the impact assessment take account of complaint levels to other bodies and reflect the fact that the commissioner will signpost to other dispute resolution services. However, if experience shows that we have got this wrong then the Secretary of State can review the commissioner’s resources accordingly. I think that that is an advantage. I agree with the noble Lord, Lord Mendelsohn, that learning from experience—as other commissioners around the world have done—is very important.

It is right and proportionate that the Secretary of State should provide the commissioner’s resources. Unlike the Groceries Code Adjudicator and Pubs Code Adjudicator, the commissioner will be funded from the public purse and not from a levy on the industry it regulates, so this is different in character. It is appropriate that the Secretary of State approves the budget and staffing of the commissioner as obviously that will have a direct impact on public expenditure.

Finally, Amendment 37 requires the commissioner to lay his or her annual report in Parliament, rather than the Secretary of State doing so. That would be an unusual move and unnecessary. The Bill provides that the commissioner must publish an annual report and that the Secretary of State must lay that report before Parliament. He does not have any discretion in this and has no power to alter the report. The critical thing is that we have a Small Business Commissioner who commands authority and respect, and who acts effectively and with credibility and impartiality. As my noble friend Lord Cope said, there is also scope for a deputy commissioner. I hope that with this extra information, noble Lords will feel more confident and able to withdraw their amendments.

[Lord Mendelsohn]

I thank the Minister for that reply. She cut to the heart of the problem when she talked about our arguments on the circumstances and way in which such a post could be abolished. She said that if it was felt to be ineffective and unable to carry out its task then there would be some easy means to abolish it. The problem is that if you do not give it the means to do the job, if you restrict its ability to learn and develop, then it will not be able to do that job particularly well.

When it comes to staff, the Explanatory Notes say:

“The Secretary of State may provide staff, premises, facilities or other assistance to the Commissioner. The Commissioner will not directly employ staff or lease premises, but will be allocated appropriate staff, premises and other facilities and assistance by the Secretary of State. The staff will be civil servants”.

It is insufficient to say, as the Minister has, “We shouldn’t worry about that because of course they will not be working with the Secretary of State—they will be working independently”. By no means do I wish to cast aspersions on those individuals. However, if you want someone to do the job, it just does not work if they are given all the staff but no means of recruitment and development. It is not the largest organisation in the world: it consists of a dozen or so people; it is not huge. That is not the greatest degree of complexity. Recruiting for and scaling such an organisation is not the most difficult challenge. As for efficiency and effectiveness, what most small business people learn in running a small business is how to manage and work with their team. That is directly relevant to whether this body will be able to carry out its function. It seems somewhat ridiculous to say that it might not be able to perform its task when you give it the people who might be able to do the job but not the ability, powers, capabilities and the role actually to do it.

In that regard, I thought that the contribution from my noble friend Lord O’Neill was quite outstanding. There is a real problem in recruiting the right sort of person if you cannot see the pathway to making that sort of impact. I am encouraged that someone of the quality of the Minister has suggested that she herself might be interested in that role, although she has not confirmed that she will submit an application. That is a question that we might probe a little later. However, it is important to understand that we need people of quality and to allow those people of quality to flourish—to be in a role where they can make the best of what they have, as opposed to being within the vice of the Secretary of State. My noble friend Lord Stevenson made that point to probe the Government’s view of the Delegated Powers and Regulatory Reform Committee’s assessment. I think that it is worth reading out that assessment just so that we are absolutely clear about it. On a day when many people are talking about constitutional crises and historical precedents, I thought that the committee’s language was very relevant. It said:

“We therefore consider that it is inappropriate for the Bill to confer on the Secretary of State a Henry VIII power to abolish the Small Business Commissioner without any of the procedural restrictions (beyond the need for an affirmative resolution in each House) of the nature set out in the Public Bodies Act 2011, particularly that requiring consultation”.

That seems to suggest that this provision was written with a particular purpose in mind. I do not believe that that is the motive of those presenting it here today, but I worry because it has the feel of something that is more like that than a real way of developing something with a lasting impact for business in this country.

I am concerned that the general perception of how this provision was planned and developed underappreciated the role that the body should play. The estimate is that it will deal with 500 complaints. When a similar body was first established in the state of Victoria, it dealt with 430 complaints of a comparative nature. Victoria is the second most densely populated part of Australia; I believe it has 5.8 million people—something of that nature. Its GDP is perhaps 1/10th the size of the UK’s. It has perhaps 1/15th the number of small businesses that we do. It had 430 cases and we estimate that we will have 500. That is not a very ambitious view of the role of the Small Business Commissioner.

I say to the Minister that I hope that I am more than just charming.

[Baroness Neville-Rolfe]

I am grateful to the noble Lord for giving way. Obviously, we both enjoyed meeting the Australian Small Business Commissioner and comparing his role with the one that we have in sight. The role of that Small Business Commissioner is actually rather different from the one that ours will focus on. We have decided that he should focus particularly on late payment and the payment issues, which, as we all know, are a real problem. Many of the cases the noble Lord described involve matters such as property leases. I talked to the commissioner about what he was doing and it was a bit different from what we have in mind. We also have other provisions and ombudsmen, such as the Groceries Code Adjudicator, who deals with supermarkets, which means that the experience and the numbers are not comparable. I think that I have made it clear that we were making an assumption, I think rightly, based on experience of similar bodies in our own sphere. Obviously, one would need to keep that under review. I made it quite clear that the main thing is to have a commitment to resourcing this important commissioner. Happily, farm debt disputes are not a huge issue in this country, so we would not expect the commissioner to be hugely involved in such cases, as happens in Victoria.

[Lord Mendelsohn]

I thank the Minister for that intervention. That was about to be my next point. I have spent a large amount of time with Mark Brennan, both here and in other places. He identified the 500 tasks and challenges that he had to deal with. Of course, the origins of the Small Business Commissioner in Australia, as I outlined at Second Reading, came from very different circumstances and functions. In fact, late payment was never really part of the role. It still does not do that much. As I said at Second Reading, its performance on late payments is not one that I would wish to import. It does not deal with it effectively. In fact, one of our issues is whether or not the Small Business Commissioner can do it.

The number of complaints that the Australian Small Business Commissioner had was limited. If you divided by any means the number of complaints you had about late payments with the potential number that is meant to focus purely on late payments, you would end up in a situation where the comparable Australian figures suggest that their commissioner was trying to address 3% of the complaints and conflicts between businesses that we will if we take late payments. The assumed figure of 500 may well come from what we do currently but if you are establishing something that is meant to amplify it, what will 500 late payments do? Is one particular business responsible? If you were able to address 500 complaints, how much late payment debt would there be overall? It would not be that significant. In comparable terms, although the Australian commissioner has a different duty, 500 is still far too small.

[Baroness Neville-Rolfe]

It is important to remember the other work that is going on on late payment. We are bringing in the Small Business Commissioner. The noble Lord is right that it has not seemed to have worked in respect of late payment in Australia. That is why in parallel we are bringing in a statutory instrument, following the Bill that we passed last year, to bring in new rules on prompt payment, including some transparency provisions, which I suspect we will talk about later. These two have to come together and that is how you get the change of culture that you need.

The other point I want to make is that in my experience as a businesswoman, totemic decisions can be very important. You can end up with a lot of cases but you can find that if you make some correct judgments early on, they change the tone and the performance of the sector. None of us can know the numbers for certain but that would obviously be my hope.

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[Lord Mendelsohn]

I congratulate the noble Lord, Lord Stoneham, on his presentation of this amendment and the basket of amendments that it covers. It had strong support from the noble Lord, Lord Hodgson, and the noble Baroness, Lady Byford, and for exactly the right reasons. That is very powerful.

To try and encapsulate this, these amendments are about a couple of very obvious things. First, the brief is too selective because there are organisations outside the terms currently drawn in the Bill but for which the flow of late payments or other matters become an issue. Secondly, the issue of the public sector is an incredibly obvious one.

Two angles to this issue are hugely relevant: the issue around payments and the business environment. They are connected and relate also to the Small Business Commissioner as late payments are rarely about just the egregious actions of a particular company. As the noble Lord, Lord Cope of Berkeley, said, in many cases very difficult issues arise with cash flow. These will rarely be solved by treating this matter as just a singular dispute between two parties. You have to consider the wider impacts on the business environment and the fact that late payment can be remedied only by taking a wider view and taking into account the capacity of the Small Business Commissioner to act in relation to the business environment in general.

If there is a problem with cash flow, you can shout at the businesses for as long as you like, but it means that one and possibly both are struggling. All of a sudden, if you tilt the balance too much one way, it may lead to one of the businesses closing down. The Small Business Commissioner is meant to be an agent who can create the right solutions. The Australian model has evolved great skill in creating what is called in Australia “commercially realistic solutions” rather than just determining right and wrong. Its great attribute is its credibility and authority and the scope of who it can deal with, not just its focus. If you deal with late payments just in terms of the circumstances of the two parties, you miss the point about the ongoing cash flow. Whether it is a case of large company contracts or small company contracts, a dispute between two parties is part of the problem.

Amendments 13 and 18 address the fact that 70% of small business trade is with other small businesses. Satago is a fantastic company with terrifically rich data. However, it highlighted the fact that under the Bill it is very hard for small businesses to come forward with some of the complaints we are discussing. Our amendments would help to ensure that whether it is a case of small businesses, large businesses or the public sector, the Small Business Commissioner cannot just deal with payment problems but can also take a wider view of the business environment. As I say, this is not just about disputes between two parties but about making sure that the overarching view is the right one.

Government regulation of small businesses should focus on addressing information balance and creating fair competition. While small business legislation should protect small and medium-sized businesses, the net outcome should be an enhanced competitive and fair operating environment for all business. Government involvement in small business matters should aim at ensuring that both prospective and ongoing small businesses have sufficient knowledge to make informed business decisions. While any business has a fundamental right of control over positioning and maximising its business opportunities, this right does not extend to engaging in unfair business practices. Small business should be able to access a low-cost informal dispute resolution forum prior to any grievances proceeding to formal litigation. These things are crucially important.

The business environment covers everything from where you get credit, which terms you establish, to how the logistics support the delivery of goods. All those things are relevant to late payment. If you want to deliver with a practical solution, sometimes you can mediate between two parties. However, sometimes the Small Business Commissioner needs to draw on the experience of others. These amendments are not just about the disputes mentioned by other noble Lords and dealing directly with certain problems; they deal with payment matters in general rather than just specific payment disputes. These things are important even as regards how you design a procurement process and the flow of money that comes from it, as this can sometimes be part of the problem. We should allow the Small Business Commissioner to draw on wider experience to promote an environment where late payments are less likely to occur.

[Baroness Neville-Rolfe]

I thank the noble Lord, Lord Stoneham, for his contribution on the scope of the complaints handling and the point that he made about late payments to public authorities, which I will come to in a minute. I am also delighted that my noble friends Lord Hodgson and Lady Byford have joined us for the debates on the Bill. I know that they will bring a great deal to our discussion. Before he leaves for his constitutional engagement, I thank my noble friend Lord Cope for bringing us his long experience of the extremely difficult issue of people not paying their bills on time, which we as a Government are now seeking to address.

For completeness, perhaps I should mention Amendments 13 and 18, which I do not think anyone has focused on, which would allow the commissioner to handle a complaint made by a small business against another small business or a medium-sized business. The Bill provides that the commissioner’s complaints scheme will handle complaints by small business suppliers about payment-related issues with larger businesses—that is, a medium-sized or large business. The intention here is to help small firms where they suffer because of an imbalance in bargaining power when dealing with larger businesses. I think that that responds to one of the points made.

[Lord Mendelsohn]

I am disappointed that the noble Baroness missed the fact that during my speech I made specific reference to Amendments 13 and 18. I said that the justification for them was that 70% of all transactions for small businesses are between them, and of those, a significant number are triggered by the impact of large businesses.

[Baroness Neville-Rolfe]

I thank the noble Lord for that clarification. I was just saying that I think that that responds to the point that he was making on them, but those amendments are before us today.

I must say that there will be circumstances where an imbalance of power exists between two small firms, but we did not have the weight of evidence before us when preparing the legislation to suggest that it is necessary for the commissioner’s remit to extend to those cases. There is a lot of agreement today on a lot of aspects of our proposal, but perhaps not on that particular area: the focus that we propose on payment. We are targeting the commissioner’s services at the businesses that are most in need of support. I understand what noble Lords are trying to achieve with the amendments. We know that medium-sized businesses may struggle, but they are likely to be better equipped to able deal with their problems than their smaller counterparts.

I turn to Amendments 2 and 36.

[Lord Mendelsohn]

I thank the noble Baroness for giving way. I have just a very quick question to help us to understand how she arrived at this policy architecture. Of whichever number that she identifies as money owing to small businesses, what proportion is to large businesses and what proportion to small businesses? If she has specific numbers, that would be helpful.

[Baroness Neville-Rolfe]

I will come back on that point soon, if I can; otherwise I will write to the noble Lord with the figures, if we have them.

I turn to the public sector side of this afternoon’s debate. The proposals in Amendments 2 and 36 would widen the complaints-handing function to cover all matters relating to supply of goods and services to public authorities as well as larger businesses, and would require the annual report to summarise such complaints.

Where a small business has a payment issue with a public authority—I do not suggest that that does not happen; small businesses do have problems with public authorities—we consider that it is better addressed by existing frameworks. If I may, I shall talk the Committee through some of the existing frameworks. The first that I would mention would be the mystery shopper—slightly oddly named, I would say. It provides small businesses with an easy route to raise concerns about public sector procurement practices. It can investigate complaints about the procurement practices of the public sector and issue instructions and recommendations to remedy the situation. It publishes the outcome of its cases on its website and through its social media, naming the public authority involved.

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[Baroness Neville-Rolfe]

The mystery shopper and the arrangements I have described obviously cover local authorities as well as other public authorities, and I suspect that the amendment does the same for the same reason.

[Lord Mendelsohn]

The Minister made the point that the prime focus should be on where small businesses need to address disputes with large businesses, where there is an asymmetry of power. That is where the prime focus is, and currently the law is drafted to make that exclusively its focus. Does that mean that the Minister is not averse to an extension of the role so long as it was able to carry on with these functions, which is the prime and current focus?

[Baroness Neville-Rolfe]

My Lords, the proposal before the House is set out in the Bill. I think we have all agreed that this is quite a challenging office to set up. We want to get off on the right footing, and for today’s purposes the focus is on where this imbalance of power is.

[Lord Hodgson of Astley Abbotts]

Before the noble Lord, Lord Stoneham, finally withdraws this amendment, I hope that, if he is to persist in this at a later stage of the Bill, he will reflect on how one distinguishes payment from monitoring and contract. If you accept a payment-by-results contract, you are committed to it long before you get to the payment stage. If you change the monitoring methods in the middle of the contract, the payment flows from that because it is then paid a different way. The yardsticks, the key performance indicators, will be different. While it is very neat for the Government to say this is about payment, it washes back up the chain to what was done before. I understand what my noble friend Lord Cope and the Minister said, but these are not discrete silos. They are all interlinked.

[Lord Mendelsohn]

I have one final question. The Minister said that this of course addresses the issue about the imbalances of power. What is the size of a particular business and the circumstance of a transfer of goods which defines whether that imbalance of power exists? Is that defined by size, turnover or number of staff? What is the definition of power that allows this to take place?

[Baroness Neville-Rolfe]

My Lords, small businesses caught by this Bill are those with fewer than 50 employees —so 49 or fewer. To further refine that, we can add extra provisions by regulation, provided those are in accordance with EU law. I do not think we have tried to lay down what constitutes a big supplier but I will certainly look again and come back to the noble Lord if I have anything to add. I do not have anything further on that.

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[Lord Mendelsohn]

My Lords, I congratulate the noble Lord, Lord Hodgson, on his excellent presentation of these issues. We are very supportive, although I suspect that we would be less sympathetic to Amendment 6 on the advisory panel and it would not be something that we were wholly in favour of. This is not a formal ombudsman where there is usually an advisory panel to make sure there is some connection with it all. We also believe that the Small Business Commissioner needs a certain amount of discretion. We would not feel entirely comfortable with an advisory panel. However, the noble Lord might be infinitely more successful in persuading the Minister to adopt an advisory panel, and in those circumstances the measure would certainly help rather than hinder the potential progress of unlocking that broader role.

We strongly support the measures that the noble Lord talked about to address the questions of being very London-centric and making sure that the Small Business Commissioner understands the need to operate across the country, and also the noble Lord’s very apposite concerns about where regulation fails. Very briefly, our view is of course that the Small Business Commissioner has a role to work from the bottom up. Some of the problems we address in regulation could be dealt with quite comfortably by focusing on the role of the Small Business Commissioner.

On our Amendment 38, we are very concerned that on occasion the Small Business Commissioner would be able to inform government regulators and other public agencies of where the impact of regulation is far too onerous. In many instances, the easy option for regulators and administrators of all different types is to concentrate effort on enforcement, crackdowns and looking for disciplinary measures to deal with non-compliance. However, that is quite a lazy way to deal with the lee-ways available. Simply issuing infringement notices is not the best mechanism available to regulators to improve the business environment. Businesses want to comply with laws and regulation. Non-compliance, especially in the case of small businesses, is frequently associated with unawareness or even the very simple management challenge of having too little time and, frankly, expertise in the areas dealt with. There are only a small number of people in a small business, ranging from one to a few. It is far too much to believe that someone would be able to spend their time finding—or then understanding—all the regulatory and legislative ins and outs.

It is a responsibility of government, agencies and regulators to inform and educate small businesses about the rules and regulations that they need to comply with. Our proposed measures, together with those of the noble Lord, Lord Hodgson, sensibly address this and look for opportunities where compliance can be streamlined and business interaction reduced. The example that the noble Lord raised is one we can avoid. We need to make sure that the Small Business Commissioner plays his part in ensuring that government agencies and others can be facilitative and educative, can deal with the problems of information and are able to ensure justice, rather than just be crackdown enforcers who impose on the management of businesses the sort of difficulties which we would rather redress. Here are proposals to ensure that in circumstances where the Minister may consider it, the Small Business Commissioner might, apart from the prime and overwhelming focus, at some point on the horizon be able to exercise their immense judgment in being able to develop that sort of role. We strongly support these measures.

[Baroness Neville-Rolfe]

My Lords, as always I am grateful to my noble friend Lord Hodgson for this probing amendment, which led to a very good debate. I will try to answer the questions raised, starting with the million-dollar question of what sort of person should be commissioner. I am not writing a job description this evening but I think we will look for someone with practical experience, perhaps in law or business, and with important skills including judgment, personal authority, the ability to influence effectively and to understand the intricacies of business relations and disputes, energy, and probably the charm—going back to the opening remarks—to get things done.

I will say a few things to my noble friend on Amendment 6 and the issue of an advisory panel to assist the commissioner. I agree that the commissioner will need to understand how supply chains work in different sectors and whether or not there are particular payment issues in certain regions—I will come on to that again later. In order to carry out the role we would also expect the commissioner to have regular contact with senior figures across industrial and business sectors and elsewhere. I have heard from the Australian Small Business Commissioner how important that has been to the success of his role.

However, having said that, the Government do not consider that providing for the establishment of an advisory panel in primary legislation is necessary or advisable. We would rather permit the commissioner to determine what advice he or she may need and what that means for his or her engagement with industry and the regions. As we have said several times this afternoon, the commissioner must be, and be seen to be, independent and should be mindful of this in engaging with industry. This would inevitably bring with it considerations and criticisms regarding the balance of membership of the body.

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[Baroness Neville-Rolfe]

I thank my noble friend for that clarification. This is an eminently sensible approach: we need to make sure that the interests of regions are taken into account. Although we try not to be, some of us tend to be a bit M25-focused. I think my noble friend is saying that there is a wider wealth of opportunity on payment issues right across our great nation.

I have tried to respond to the various questions which have been raised and I hope that, in the circumstances, my noble friend and the noble Lords will feel able to withdraw their amendments.

[Lord Mendelsohn]

I have a brief question before the noble Lord, Lord Hodgson, rises. We are different from the Australian example in that we define small business and who this operates for and they do not, and in relation to complaints information, signposting and other things. There is a question about how the Australian system evolved—in Victoria it happened by accident and in all the rest by design. It allowed larger businesses that dealt with small businesses to make complaints, raise questions or seek information. Famously—and this will interest the noble Lord, Lord Hodgson—one large company used the Australian Small Business Commissioner to help renegotiate franchises to the betterment of small business. Would that be excluded with this legislative architecture?

[Baroness Neville-Rolfe]

My Lords, that would be excluded in the approach we have adopted in the Bill.

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[Baroness Neville-Rolfe]

My Lords, Amendments 8 and 9 would widen the scope of the general information and advice function to allow the commissioner to cover tax rates, allowances and thresholds of relevance to small business owners, and payday loan rates and their appropriateness. I join the tributes paid to the noble Lord, Lord Mitchell, for his contribution to the work done on payday loans. I am also glad to hear the discussions about EIS, which I agree is a good scheme. I hope it will prove useful in the long term to the noble Lord, Lord Mendelsohn.

The commissioner will be able to provide small businesses with general advice or information in connection with any issues arising from their supply relationships with larger businesses. Small businesses will have access to useful information for these relationships, whether as a supplier or customer.

I have already given some examples of the varied matters that this can cover and I will not repeat them, but the commissioner will also have an important role in signposting to relevant bodies and sources of assistance with these supply relationships; for example, regulators in particular sectors, such as utilities. I am sure noble Lords will agree that this will be a sizeable area for the commissioner to cover. The commissioner will not cover specific issues such as taxation and payday loans because this information and advice is already available and it is reasonable to assume that small businesses will know where to get access to it. The commissioner will plug information gaps where they exist or signpost small businesses to other bodies which are more likely to be able to assist them in their query, including where it relates to a dispute. Consultation feedback has indicated that there are various existing sources of relevant advice, information and support but, as has been said, small businesses are not always aware of them. We have designed the commissioner in order to address these specific issues and to become a single point of contact for small businesses when they find themselves in commercial disputes. It is important for the commissioner’s remit to be focused to achieve real impact on the ground.

I am grateful to the noble Lord, Lord Mitchell, for raising the issue of payday lenders and EIS, but I agree with my noble friend Lord Cope that we should resist this amendment because the matter could be a major distraction. Having said that, a web link to HMRC and the FCA could be considered and counting the use of that link might provide some interesting information. I am also glad that the noble Lord, Lord Mitchell, feels that we have acted decisively to reform regulation of the payday loan market. We transferred the responsibility from the OFT to the FCA. As he said, the FCA has far stronger powers to protect consumers, and its more robust regulatory system is already tackling sources of consumer detriment in this market. We also legislated to require the FCA to introduce a cap on the cost of payday loans, to protect consumers from unfair costs. This cap has been in place since 2 January 2015. The last time we debated this in this Room, that provision had not really come in. The more stringent regulatory regime is obviously having a beneficial effect in the payday market. The FCA has found that the volume of payday loans fell by 35% in the first six months of FCA regulation, before the introduction of the cost cap.

Amendment 47 provides that the Secretary of State may publish information or provide advice on the enterprise investment scheme. BIS already works to support small business, including promoting the venture capital schemes. However it would not be appropriate for BIS to provide detailed advice on the schemes. HMRC administers the venture capital schemes and provides advice to small companies, investors and advisers through a specialist unit. That service is highly regarded by the venture capital industry and it would be confusing to try to match it. However, I agree that EIS schemes are a good thing. They were expanded and developed in the last few years and higher thresholds were set for investment.

We want to try to focus the effort of the Small Business Commissioner. He will be doing an annual report and I am sure this will reflect on where queries are coming from. However, it is better to stick with the arrangements that already exist for the various tax and financial schemes we are discussing, rather than trying to bring this into the purview of the new commissioner.

[Lord Mendelsohn]

The Minister described a unit which provides advice on these schemes. Would she give some colour to that and give some idea of the scope of the advice it gives directly to small businesses? On how many occasions did it give advice during the last year?

[Baroness Neville-Rolfe]

My Lords, I would be happy to write to the noble Lord on that matter before the Bill reaches its next stage.

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[Lord Mendelsohn]

Briefly, I support this amendment, which dovetails quite nicely with an issue that we will raise later on the powers of the Small Business Commissioner. There are many difficult cases, on which many people receive letters, where the ability to use legal processes works massively to the detriment of small businesses, and it is exceptionally difficult to be able to extend those procedures. I think that the noble Lord, Lord Hodgson, made the point that it is not about getting involved in the legal case in and of itself but about using the convening power and sense of the Small Business Commissioner to help to get these processes streamlined to make sure that small businesses are not affected by that asymmetry. This is a very sensible and proportionate amendment and we support it.

[Baroness Neville-Rolfe]

I thank my noble friend Lord Hodgson for his amendment and for his examples, including the IP examples—an area that he knows is close to my heart. I like the Scylla and Charybdis parallel, which one could use more broadly in public policy. I did Latin A-level, being in an era when they did not teach women science.

Clause 3 provides for publication of general advice and information relevant to small businesses and their supply relations, and to resolving disputes. Under existing drafting, obviously this could include information about the timings of and risks of delays within legal proceedings. However, I think that the intention of my noble friend is much broader than the provision of advice and information to small business. As I see it, he intends that the commissioner should shine a light on where delays in legal processes and litigation tactics are used in a manner that is detrimental to small business as they frustrate efforts to resolve a dispute, as he said in examples that he raised.

Clause 9 requires the commissioner to publish an annual report on its activities. This must include a summary of the matters raised with the commissioner by small businesses that the commissioner considers are the most significant. It can of course include any recommendations that the commissioner may have in relation to such matters. Therefore, if issues related to delays in legal processes are brought to the commissioner’s attention and she or he considers them significant, he or she may include them in the annual report.

It is difficult to develop this further without impeding the right of business to have access to the courts. However, obviously, as the noble Lord, Lord Mendelsohn, says, the commissioner has a certain convening power. I do not think that my noble friend Lord Hodgson was trying to get him involved in individual cases, and that convening power will be able to be used to survey what is happening in these areas—as I said, to shine a light on them. I therefore agree with the spirit of the amendment, which is to shine a light on delays, on aspects of the courts system or on the exchange of legal letters that are preventing or deterring small businesses from resolving disputes. However, the Small Business Commissioner has sufficient powers in this respect and I am not persuaded that we should go any further in this area.

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[Baroness Neville-Rolfe]

Of course, I am very happy to write to my noble friend. I have to say that I was a GOV.UK sceptic to start with, which is perhaps the point that he is making. I have found that there have been transitional problems, particularly with those organisations that have been unfortunate enough to have to, as it were, migrate from their website to the new website, but actually it has a lot of strengths. I think we are talking here about a new website—the Small Business Commissioner’s website. I think it would be rather odd not to have it on GOV.UK because that is where small businesses go. Obviously, it has to be a special website and suitably promoted. However, if I have any further thoughts I will certainly write or we can talk about it because we need to get this right. It is very similar to the Consumer Rights Act, where we spent a lot of time discussing how the new rules would be described to business and passed on to consumers.

[Lord Mendelsohn]

I thank the Minister for her response and her comments after the very thoughtful intervention of my noble friend Lord Stevenson. To be clear, does her reply mean that she will reflect on that point and come back to us prior to Report?

[Baroness Neville-Rolfe]

My Lords, I will certainly reflect on it. I do not think that I made any commitment to accept an amendment. What I was doing was to agree that we could have a further think about how this was going to work. A fair point has been raised which we think is adequately dealt with but obviously I am happy to discuss that further.

[Lord Mendelsohn]

I thank the noble Baroness for that clarification. I hope that she may be slightly more enthusiastic once she has a chance to reflect on the measure. In keeping with a number of the points that we made, we are looking at areas where we wish to extend the narrow terms of how they work. Even given the context of what the noble Baroness believes should be the focus of the Small Business Commissioner, and an extended role for him in providing information or signposting, there are other things that he can do to join the dots. We are clear that those are not currently provided for within the legislation or outside it and we are very keen for the noble Baroness to consider that point. On the basis that we have at least made some positive progress on this issue compared with other measures, I beg leave to withdraw the amendment.

Steel Industry

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Tuesday 20th October 2015 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, the steel industry is of vital strategic importance to this country and the Government need to safeguard its future. The hard closure of Redcar, the announcement from Tata and the announcement from Caparo reveal how serious the problems are, with the expected loss of more than 5,000 direct jobs and many more indirect jobs. This is a crisis for the employees, families, communities, supply chain and local industries.

We are very conscious that there are issues in the market of price and overcapacity, but there have been long-term concerns about the structure of the UK steel industry. We are keen that the Government support key strategic industries in this country and make sure that highly skilled jobs are not lost. I hope that these events will trigger a reconsideration of the Government’s hostility to an industrial policy and strategy. We hope that the Government will get to grips with this crisis. It would be a tragedy for the steel industry if they did not, not only for those who have lost livelihoods but for those of us who wish to make the case for modern economic progress. What can we say about globalisation and trade to a newly redundant 50 year-old steelworker if the Government do not muster all their resources to deal with this challenge?

I have some questions for the Minister. First, when did the Government know about the problems facing Caparo and when did they first know that Tata Steel was planning to cut 1,200 jobs across the UK? What did the Government do to support these job losses and address these issues? What level of production do the Government think is the right size for the UK to ensure a strategic supply of steel in this country? What are the Government doing to ensure that this level of production is maintained? Will the Government accelerate action to support energy-intensive industries to alleviate the excess costs facing the industry? In that context, what will they do in short order to ensure that business rates reflect the current crisis in this industry?

Have the Government raised the issue of Chinese dumping during the course of President Xi’s visit? Have the Prime Minister and the Secretary of State taken all the opportunities afforded by such a large delegation to raise our concerns? Also, within the context of some of the businesses that have fallen behind, does this not offer some reason why we should have broader debtor-in-possession provisions; and why we should consider a different way in which we could muster more time and resources for restructuring? Have the Government considered using the Industrial Development Act? Given that we are potentially amending that in the Enterprise Bill, would the Government consider amending it further in order to do so? It is a measure that we would support.

Will the Government also consider using all the resources of their start-up business loans and other sorts of facilities to create special provision to support those particular areas? Finally, in the case of SSI and Redcar, there are some outstanding issues about pensions. Can we have an assurance from the Government that we will not be picking up the tab for the non-payment of pensions by the restructured industry?

[Baroness Neville-Rolfe]

My Lords, this is a worrying time for communities that rely on jobs in the steel sector. That is across all the UK, including—I should add—in Lanarkshire, Scotland. Our hearts go out to the families and businesses involved. We have obviously been in discussion with Tata on an ongoing basis. It is a major business operator in the UK. The derogations that are mentioned in the Statement about industrial emissions are extremely important to it and to its future in the different steel communities in which it operates in the UK.

In terms of strategy, not only was there a summit last Friday—which set up three working groups in absolutely key areas that I mentioned in the Statement—but Anna Soubry launched a metals strategy this week which will work with metals industries right across the board, and that will, of course, include steel.

On the subject of China, the Prime Minister is indeed talking to the Chinese on the subject of steel and the necessary restructuring. Of course, it is not only a matter for bilateral discussion, because anti-dumping is a matter for the EU: 28 countries together can do more. We have actually taken EU action thanks to the UK on rebar anti-dumping, which is an issue between the UK and China. We have a number of groups; we have local task forces now in the affected communities, and I am grateful to the noble Lord for his suggestions.

Industry: International Investment

Debate between Lord Mendelsohn and Baroness Neville-Rolfe

Tuesday 2nd June 2015 Lords Chamber

[Baroness Neville-Rolfe]

As noble Lords will have seen, the Prime Minister has already started to discuss his plans for reform and renegotiation with his EU colleagues and associated analysis. We expect to set out some further details at the European Council meeting at the end of June.

[Lord Mendelsohn (Lab)]

Does the Minister agree with me that the UK’s long-term performance under successive Governments in attracting foreign direct investment has been vital? Given that the increase in FDI in the last five years has grown faster than the UK economy and GDP per head, does she agree that this recent performance raises questions about the potential contribution of foreign direct investment to UK economic performance? Could she explain why we appear to see very little impact on productivity from rising levels of foreign direct investment and what changes are required to the inward investment strategy?

[Baroness Neville-Rolfe]

The noble Lord is right to congratulate the country on the improvements in foreign direct investment. One should pay tribute to companies such as Nissan, Tata and a whole load of smaller companies for coming to the UK, taking advantage of our flexibilities and low tax rates to do so.

The issue of productivity is a bit of a dilemma, which is why my right honourable friend the Chancellor has said that he will publish a productivity plan to make Britain work better, building on the good start made in education and skills, deregulation and so on that we discussed in the previous Parliament.