Enterprise Bill [HL]

Lord Patten Excerpts

Monday 12th October 2015 Lords Chamber

[Lord Patten (Con)]

I dislike crumby, financially repressive and socially uncaring capitalism very much indeed—by which I mean the misuse of market mechanisms to meet malign and mindless corporate ends. I much admire the market when it is free and socially responsible, when it becomes a great force for human advance and happiness. Good capitalism is very good indeed, with competitive markets and innovations piled on innovations for the common good.

Crumby capitalism is not the fault of market mechanisms but of the corporations that misuse their power to repress suppliers, work in covert monopolies and delay payments to smaller companies, sometimes bringing them to their knees. I therefore applaud the last coalition Government for making a start on some of the worst excesses of the big supermarkets and others by introducing the Groceries Code Adjudicator Act, which came into force in June 2013 and has powers to ensure that big corporates treat their suppliers lawfully and fairly. I think that the adjudicator has made a good start, but Christine Tacon has a task on her hands even to persuade suppliers to come forward for fears of reprisals by the supermarkets into which they seek to sell. There will be a long march to bring about the vital corporate cultural change which, in the end, is needed so much more than even the best of codes. I entirely applaud what the noble Lord, Lord Curry of Kirkharle, has just said about cultural changes being as important as legislative changes.

The Bill, which I strongly support even though it looks a bit like a big legal pudding made up of all sorts of ingredients hauled off the shelf, contains two themes that I judge seek to carry on the good work in the Groceries Code Adjudicator Act 2013 that I referred to: the measures to introduce a Small Business Commissioner and powers to deal with the late payment of insurance claims. In the case of the first of those two themes, the Small Business Commissioner, with a role in assisting small businesses in disputes with bigger, bad businesses, will be in a position to guide and help those who feel repressed. These practices, as the Minister pointed out in her introductory speech, currently have an annual impact on small businesses of more than £25 billion. However, the commissioner is empowered only to advise and assist, not to become some kind of tsar to go out there with powers to direct and resolve disputes, thus empowering small businesses to resolve their issues.

Promoting fair treatment for all is the theory of the Bill, as politely put, but in coarse reality that is also a matter of the big behaving better to the small. We must not expect too much too soon from this body, which has the power not to provide legal advice but just to exhort. Although exhortation and the use of the bully pulpit can be very important, the body does not have the power to arbitrate; it can only signpost the options for business conflict resolution. It will be a slow process; I come back to that groceries adjudicator, slogging on after two years of existence but still having to hold her latest big seminar for suppliers, better to understand the workings of the code, as she did most recently on 29 September—only last month. Many did not come forward for fear of those reprisals.

To make both the groceries adjudicator and the new Small Business Commissioner redundant will be a matter not of a few months or a few years but probably of decades. It will also depend on major cultural changes by malign big corporates. That is my observation based on years of big corporate experience and involvement in the financial world and as a shareholder, all three of which are declared properly in my entry in the register of interests. There are well-documented cases of corporate malfeasance back in the 1970s that took the companies involved 20 or 30 years to lay totally to rest through the introduction of vigorous codes of practice, ethics checking, internal corporate housekeeping and the vital task of never-ending staff education, for just as one lot of staff go through a period of cultural training, another lot are recruited.

Sometimes it takes big-stick legislation to deal with the handful of big corporate repeat offenders. Perhaps the best example of this, and I pay tribute to both sides of the House, is the introduction of our excellent Bribery Act 2010, which has induced enormous corporate change, albeit at the threat of the use of a big stick. I well remember the noble and learned Lord, Lord Woolf, who is not in his place today, saying during the proceedings on the Bill, I think at Second Reading, that he felt that while there was an urgent need for legislative provision, there was an urgent need for corporate cultural change as well to parallel what was being brought forward. I can only say a respectful “Hear, hear” to him.

Secondly, there are the provisions, which I also applaud, to deal with the financially repressive late payment of insurance claims. I think that these will have a much more instantaneous effect through the proposed introduction of a new Section 13A in the Insurance Act 2015 with an obligation to big business, in particular, in the insurance world to pay within a reasonable time all contracts of insurance. The insurance industry does not have to wait for the introduction of the provisions of this Bill; it should start doing it today. It has it in its power to do it today and it knows that these measures are coming. It is bad business for the industry not to start straight away.

It is wrong for some companies in the insurance industry, most of which I greatly admire, to delay payments quite deliberately as a matter of policy, massaging their figures, particularly in the run-up to interim or final results, to make the reported figures look that tiny bit better because they have paid out that tiny bit less—delays that have ruined some tiny businesses. Any such activity can hinder, or at worst torpedo, the efforts of small businesses to get back on their feet after, for example, the catastrophic floods, which the Minister referred to recently, down on the Somerset levels near where we live and have our webbed feet, and in other areas on the River Thames that were hit. However, nothing will work as well as it should do until all big corporates recognise that looking after their suppliers or those that they insure is simply good for enterprise, good for business and therefore good business.

So there are three separate hares running: the groceries adjudicator, the Small Business Commissioner and the impact of trying to persuade corporates in the insurance world to pay their claims within a reasonable time. I think that these three are interlinked. We should see how they proceed but I would certainly say to my noble friend the Minister that by 2018—three years hence—we will have a very clear view of whether they are working. We will need a review in 2018 and I look to her to perhaps give a pledge to at least look at the possibility of bringing forward a debate in that year about how these three separate themes are working and, if they are found not to be working, to bring on a latter-day equivalent of the Bribery Act to deal with the continuing problem in these three areas.