Small Business, Enterprise and Employment Bill

Debate between Lord Popat and Lord Mendelsohn

Wednesday 14th January 2015 Grand Committee

[Lord Mendelsohn]

This is a probing amendment, which seeks to ask the Government to set out more clearly how this clause will improve the current position and is intended to operate. This is indeed an amendment which covers the mystery shopper. In February 2011, the Cabinet Office supplier feedback service was extended to allow small businesses to ask about procurement processes when they were unsuccessful or felt that the procedures or systems, or how they were being treated, were unfair. This was later renamed the mystery shopper scheme, which I have enjoyed reading about.

Looking through the document headed Mystery Shopper Publication Table October to December 2014, I came across a fascinating story about the UK Shared Business Services. The description says that:

“A Mystery Shopper raised concerns about a procurement by UK Shared Business Services … for ‘the Small Business Campaign’. The supplier read in a media article that they had been unsuccessful prior to receiving any response from”,

those services. The response from the investigation by the mystery shopper service said:

“We investigated this case and UKSBS have confirmed that unfortunately information was made publically available prior to the official notification letters being sent”.

Its conclusion was that the United Kingdom’s Shared Business Services,

“are looking into their internal processes to ensure that this situation does not re occur (including ensuring training is put in place for users of the procurement process)”.

I have never seen a leak more extensively reported in a government document and I found it very amusing. However, we commend the mystery shopper, which performs an exceptionally valuable service and shows tremendous potential for development. One of the things which we commend is that it is evolving and not a static instrument. It has some direct attention and modifications come as a result of that.

I would like to probe what is in the Bill. Clause 39 provides the Minister for the Cabinet Office and the Secretary of State with a power to investigate the exercise by a contracting authority of relevant functions relating to public procurement. This essentially puts the existing mystery shopper service on a statutory footing. On the face of it, it seems strange that the clause makes provision for the Minister to carry out the investigations and does not allocate any powers to the Minister to delegate. I am sure that there are some very interesting drafting answers in the Minister’s file. How is this intended to operate? I am sure that while a number of Ministers could fit in the time to spearhead public procurement investigations, some may have less time and, possibly, not even have the skills.

The main purpose is to move an informal process and the Explanatory Notes state that the Bill,

“will make contracting authorities legally obliged to provide information on request”.

I would be grateful if the Minister could provide us with further details on this problem. I think that I have read through all the published mystery shopper documents and none has stated this to be a problem, so I wonder why it has emerged as one of the foundations in the Explanatory Notes. I would guess there have been some difficulties and I would be grateful if the Minister could tell us what they have been and whether particular departments, agencies or authorities have been at fault.

The Explanatory Notes state:

“Ministers and Government departments will continue to comply with the current Mystery Shopper scheme as a matter of interdepartmental co-operation”.

Does this mean that there will be an exclusion when they look into each other’s departments and, therefore, this will be done without the statutory obligation to provide information in a timely fashion?

As this seems to relate to matters about how the investigations are conducted, our amendment seems eminently sensible. It simply asks for more transparency around the investigation process and asks for details to be published including the focus, findings and evidence of the investigation. Naturally, an exception is made for commercially confidential information and is a means to probe the entire clause and some of the details that we think are missing about how these investigations will be carried out in an effective and timely manner.

Finally, in Amendment 35V, we consider the exercise of Ministers’ time to be so valuable and their insights to be so useful that we suggest that details of the investigation should be published including the focus, findings and evidence considered. Commercially confidential evidence is, naturally, excluded from this. I beg to move.

[Lord Popat (Con)]

I am pleased that the noble Lord, Lord Mendelsohn, welcomes the mystery shopper service. It plays a very important role, and I am glad for his support for publishing the results of investigations in the interests of transparency. I am sure that noble Lords will be reassured to know that the Crown Commercial Service already regularly publishes results of these investigations. Our published results normally cover the focus of the investigations, the findings and, critically, the action agreed by the contracting authority to rectify the issues found. We also highlight where a contracting authority has refused to accept our recommendations.

Publication of results is an important feature of the service, as it enables the Government to highlight poor practice and the advice given to rectify it, from which other authorities can learn. It also provides a way of naming and shaming public bodies which do not accept recommendations. When appropriate, it can also be used to name large suppliers who do not pay their small business subcontractors promptly in public sector supply chains. In addition, annual reports are published which highlight key themes and advice, including the results of proactive public procurement spot checks. These findings have concluded that there remain issues relating to excessive qualification requirements being demanded by authorities in assessing financial strength, poor use of pre-qualification questionnaires and poor payment practices. These publications are broadcast by Twitter and potentially reach up to 4 million people.

Publishing more information does not fit with our aim of publishing brief, user-friendly reports, appropriate to the issue being investigated. Also, very often the documents we look at, such as tender documents and pre-qualification questionnaires, are already publicly available on authorities’ websites. Increasingly, this type of information will be available through links from Contracts Finder. Additionally, a key element of mystery shopper is its agility. The team can act speedily to raise concerns and resolve issues. It would be wasteful to bog them down by obliging them to publish the evidence considered and to discuss with authorities whether certain documents or information are commercially sensitive.

The proposed amendment would restrict the Minister to publishing specific details of each case. As the clause stands, the Minister can continue to publish reports of investigations in a flexible and user-friendly way, while respecting commercial confidentiality.

The noble Lord, Lord Mendelsohn, also asked how often authorities failed to comply with a mystery shopper investigation. In the last six months alone there have been 15 instances during investigations of referrals and spot checks where we have been unable to obtain any responses or get hold of documents. These new powers would have helped us get answers in all of these cases. Co-operation between departments is no reassurance to the public. Ministers are not to be legally bound by mystery shopper powers, just like other authorities.

The point of the clause is to enable the Minister for the Cabinet Office operating through the mystery shopper service to enforce demands for information and assistance for the courts. It would not be feasible or realistic for the Minister to bring legal proceedings against another Minister or government department. I hope that I have explained to my noble friend—the noble Lord—why we feel this amendment is not feasible. I will be happy to write to him. I hope that he will withdraw the amendment if he has found my explanation reasonably acceptable.

[Lord Mendelsohn]

My Lords, I am grateful to the Minister for describing me as his friend—perhaps mistakenly. I hope that my charm offensive has at least achieved some results in this Grand Committee.

I am also grateful for his explanation and for the clarification. I wish to stress that we believe that the scheme—the initiative—is good and we are pleased to see added strength given to it. I am also very pleased to see the noble Lord, Lord Young of Graffham, nodding vociferously in the background as this is something on his radar and I am sure will continue to be a lever that he will pull and push with great force to try to ensure that it is delivering for small business.

I have one observation on the mystery shopper issue. I noted that the Crown Commercial Service always responds quickly to these measures on the outcome of a case and recommendations. I hope that that sense of speed will be carried across government to make sure of that. In light of the Minister giving more detail in writing so that our support can be further enhanced, I beg leave to withdraw the amendment.

Small Business, Enterprise and Employment Bill

Debate between Lord Popat and Lord Mendelsohn

Monday 12th January 2015 Grand Committee

[Lord Mendelsohn (Lab)]

My Lords, the purpose of Clause 15 is to set a timetable to streamline the process for companies to incorporate and register for corporation tax, VAT and PAYE online without having to provide the same information repeatedly. The aim is for this to be done “by electronic means”, as defined in Section 1168(4) of the Companies Act 2006—that is, to be able to be,

“sent … and received … by means of electronic equipment for the processing … or storage of data, and … entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means”.

Our amendment, somewhat modestly, adds a target that is desirable and deliverable. Our amendment sets the goal of ensuring that this system should be delivered to make it possible not only to enter all the data required for all the tax and registration requirements at the same time but to ensure that approval for company incorporation and tax registration is provided at the same time. We are pleased to support this clause, as it meets the objectives of reducing burdens on business and encouraging the adoption of new technology and the delivery of more public services digitally.

As an element of policy to support small businesses, the proposed measure is useful, although I doubt that it will be transformational. However, I think that the measure is to be commended because of what, in a sense, it stands for: first, that where we can make it better to establish, grow or develop small businesses, the Government should help—the Government can do more to simplify regimes, even efficient ones, and we think that this is a sensible step; secondly, that the Government must do what they can to act in a way that serves all types of businesses. As a big organisation, government struggles both to have the right horizon and to be sufficiently adaptable to meet the needs of small businesses.

This amendment puts a large stake in the ground. I am sure that the Minister could tell us how many officials in her department, prior to the introduction and design of this Bill, dealt with small businesses versus the number who dealt with, say, the automotive industry. I do not wish to diminish support for the automotive industry, but I am sure that the disparity in numbers says something about the extent to which the department is sufficiently able to appreciate the nature of the main drivers of employment and growth in the private sector economy and how to get the right feel for, and approach towards, legislation and regulation.

We share the ambition to make Britain the best place in the world to start and grow a business. When Labour left office in 2010, Britain was ranked by the World Bank as the easiest place in Europe in which to set up a business. In fact, it was ranked the fourth easiest place to do so in the entire world. I say that not to make any partisan point but to stress that we are all committed to progress on support for small businesses. So it just has to be right that, rather than inputting the same data several times to incorporate and register for taxes, a new company should be able to provide the information just once, digitally, to incorporate with Companies House and to register with Her Majesty’s Revenue & Customs for corporation tax, VAT and PAYE.

The Government’s case is that Clause 15 uses a statutory target to demonstrate, in the strongest possible terms, the commitment to improve the current system and to ensure that it is given the highest priority across government to deliver a solution as quickly as is reasonably possible. I am bound to say that, although we support and understand that, it is rather disappointing that this is not just done but needs legislative support.

I would be grateful if the Minister could reassure us by providing some details on the planned delivery of this measure. For example, given that this is a technology project and given the Government’s record on the delivery of IT projects, it would be useful to know which department will lead the project management and delivery of the work. Will there be a joint procurement and management team? What has been the engagement and market testing with the business community? What expertise is being assembled or commissioned to help with its design?

Also, does this commitment only extend to the development of tools for computer-based formats, or is it pioneering and embracing mobile and tablet devices? Could we get some idea of what we can expect from the reporting procedures between now and 2017? What progress should we expect by, say, March 2016, and what steps will businesses see between now and then? I am sure that, as with any similar project, there are already ideas of what the milestones will be. After all, how could the 2017 date itself be established without them?

While I know that the Minister’s colleague in another place was reluctant to be drawn on details, I wonder whether the few months between his comments and our deliberations have allowed more details to be forthcoming. The Minister in another place said:

“I want us to be able to deliver a complicated IT project. Government IT projects are difficult enough to deliver on time without having to hit a description written in Hansard of what we now expect to happen”.—[Official Report, Commons, Small Business, Enterprise and Employment Bill Committee, 23/10/14; col. 231.]

I need hardly remind the Minister of the useful advice of Dr Martin Read, with whom she served in the Government’s Efficiency and Reform Group. Martin Read, an outstanding IT leader and businessman, had previously looked at IT procurement and delivery in government and given some excellent advice, which I hope the Government will follow in the delivery of this project. However, to indicate that they are entering into a project without any sense of desired outcomes, costings, budgets and timings—and especially contracting and project management—would suggest that they did not really heed his advice. It is pretty hard to believe that this is a blank piece of paper and I would be grateful if the Minister would provide us with the courtesy of just some morsels of information.

Finally, in relation to the duty to report, I would be grateful if the Minister would clarify how, when, and hopefully what, it will cover. Crucially, will it cover problems in delivery and will it be possible for it to restate timetables, both positive and, potentially, negative? Interestingly, this measure does not provide enabling powers to facilitate the delivery of the targets and the Government have said that, if they identify the need for such powers, this will be dealt with through another legislative vehicle. I would be grateful if the Minister would set out the Government’s thinking on this and if he would illuminate for us where they might anticipate that such powers may or may not be needed in the future. I beg to move.

[Lord Popat (Con)]

My Lords, I thank the noble Lord, Lord Mendelsohn, for this very important amendment. I understand his desire to bring speed and avoid duplication of any kind, but I will just go through the reasoning on why this would quite often be difficult. The streamlined company registration is designed to save businesses time, money and effort when registering their details for company incorporation and tax registration. This means that businesses will not need to provide the same information on multiple occasions to incorporate a company with Companies House and to register for VAT, corporation tax and PAYE with HMRC.

Amendment 33B would require company incorporation and tax registration to be approved on the same occasion. There would be some difficulties in doing this, but I am pleased to assure the noble Lord that we would face a whole number of issues in incorporating his amendments. The amendment could be interpreted in two ways: that the incorporation and tax registration are approved at the point when the application is made or that the business would have to wait until the completion of both incorporation and tax registration to receive confirmation.

To deal with the first point, incorporation and tax registration cannot be delivered at the point that the noble Lord, Lord Mendelsohn, mentioned, when the application is made. First, there are processes that need to happen sequentially before all obligations have been met. Incorporation for a company at Companies House is the start of the process before a company can register for corporation tax, PAYE or VAT. Secondly, assurance checks need to be made to prevent fraud. HMRC and Companies House have strong existing processes to counter fraud, which will continue to apply under the new system. HMRC is currently unable to process these assurance checks in real time because they require analysis of intelligence and cross-checks with other HMRC systems. These processes are not automated. However, security aspects will be considered throughout the implementation of this project. HMRC will continue to use expert knowledge and organisational learning to fraud-proof its processes and systems through continuous improvements to system controls and checks.

To deal with the second point, although a single response could be given to customers to inform them of the completion of incorporation and tax registration, this would have to be done at the end, rather than at each stage of the process, which we think would result in a poor customer experience. We believe that keeping customers informed on the progress of their registration and supplying information as it becomes available will enable companies to begin doing business while the process is still in train—for example, by opening a bank account as soon as incorporation is complete. That will also help to generally enhance the customer experience.

The noble Lord, Lord Mendelsohn, mentioned the history of failing to deliver extensive IT programmes and asked how this will be different. The Government have made significant improvements to the way in which IT projects are managed and delivered. This project will be developed using a build, test and deploy approach, which avoids costly errors and the pursuit of inappropriate solutions. That approach is widely used and was successfully used in the development of GOV.UK and new transactional services which have delivered significant improvements for citizens and businesses. That is a major project that is currently taking place.

The other question raised by the noble Lord, Lord Mendelsohn, was what progress would be made by the time of the first report in 2016. It is premature to say exactly how much progress we will have made by the time of the first report to the House. The immediate next step is to begin detailed engagement with a wider range of businesses and stakeholders to refine the delivery options. That will include new businesses and those thinking of starting a business, as well as professional and representative bodies. As a minimum, by 2016 we expect to have developed a working prototype designed and tested with a set of core businesses with a programme of wider engagement which will give us the feedback required to develop the final product. At all times, the focus will remain on ensuring that the end solution will meet users’ needs in the most cost-effective way.

The first thing that people who want to set up their own business from home or from any commercial premises need to do is to register their company. That must be as instant as possible so that they can start trading and open a bank account. They cannot possibly at the same time register for VAT, PAYE and corporation tax. I am talking from my business experience on that—these things take time. The good news is that we are streamlining the process by including information so that future registration for VAT, PAYE and corporation tax becomes much easier. In many ways, it will be faster than it would otherwise be.

I hope that the noble Lord has found my explanation reassuring and, on that basis, I request him to withdraw his amendment.

[Lord Mendelsohn]

My Lords, I thank the Minister for his reply. It may not have appeared so, but I am somewhat excited about this measure. It is not just the notion of IT programmes which interests and excites me—they do not—but as someone who has declared an interest as an owner, investor and someone who works in small businesses, I may well get to use this system. I am enthusiastic in that regard. It is not my concern about the speed or, in a sense, the relative level of difficulties. I am more than aware of the difficulties that will be faced—especially by HMRC, with its current system. However, what is important to understand about this measure is the opportunities that it provides and the ambition that it demonstrates.