Stock Markets

Lord Stoneham of Droxford Excerpts

Thursday 17th November 2022 Lords Chamber

[Baroness Penn (Con)]

Our biggest economic challenge right now is the high levels of inflation that we are facing as a country, and the biggest driver of that inflation is heightened energy prices caused by the war in Ukraine. Yes, there are other factors at play, but I think those two things are undisputed.

[Lord Stoneham of Droxford (LD)]

The fact of the matter is that the Government have weakened the City by their policies towards the single market and Europe. I wonder what the Government are doing about the fact that people who work in the City selling financial services—I declare my interest, as a member of my family works in the City—cannot sell or are restricted in selling in Europe unless they are accompanied by somebody from the country in Europe where they are trying to sell, because of the deal we have with Europe. This is weakening the City.

[Baroness Penn (Con)]

I disagree with the noble Lord. I think that our leaving the EU presents opportunities for the City, which is exactly what the Government plan to capitalise on through the Financial Services and Markets Bill and other things that I have already mentioned. We do not just trade with Europe, and we continue to be one of the pre-eminent global financial centres in the world.

United Kingdom: Productivity

Lord Stoneham of Droxford Excerpts

Tuesday 8th September 2015 Lords Chamber

[Lord Stoneham of Droxford (LD)]

My Lords, I share with some sympathy the worries of the two previous speakers about missing a football game. However, those who think that our international competitiveness is even more critical in tonight’s cricket match might like to know that Australia is 140-5 after 30 overs.

We were promised a plan to raise productivity, but this is a presentational document published alongside the Budget. It is less a plan than a repeat of the Conservative manifesto objectives printed out in a government paper, and, sadly, I have to say, it hardly inspired my Summer Recess reading. One of my senior colleagues who had a spell in the coalition Government said that you can always judge the lack of specific quality in a government publication by the amount of blank pages in it. I gave this publication the test. It is an 82-page document, with 11 completely blank pages. Counting the 10.5 half blank pages, that is 16.5 blank pages in total, 20 % of the content. That does not set a very good example, given that it is a document supposedly about productivity. We know we have a productivity problem, but what we could have done with is a detailed analysis of what that problem is and a delivery plan to address it. Policy objectives are fine but, as the Minister said, they are worthless without a proper analysis, implementation plans and clear output objectives.

Aiming for productivity growth should be about how we get competitive advantage in international markets and safeguard it so that we can counter our poor balance of payments performance and improve real incomes domestically. Management leadership quality, investment and the skills of our labour force lie at the heart of what we must do. I agree with the Minister’s point that skills and labour quality are the key to this problem. I am concerned that the wide horizons of the paper—the fact that it is like a box of liquorice allsorts, in that you never know what is coming next—means that it fails to grapple with the specifics of what matters.

In the time available, I can deal with only three aspects. First, on broadband, there is one page on infrastructure. I accept that this is important, but I have always had doubts about the delivery of 95% superfast broadband by 2017. Frankly, I am worried that I will be part of the 5% that is left out, not least because I do not know where we are now on this issue and I am suspicious that Ministers do not know either or are hiding something. Perhaps the Minister will tell us what percentage of households now have the opportunity to have superfast broadband, given that we have only two and a bit years to get to the 95% target.

However, more important than the broadband infrastructure is this. Until superfast broadband is uniformly provided, I can read my newspapers on my tablet only in my London home. However, in Hampshire where I live, I am dependent on a huge logistical enterprise of printing plants, huge motorway-bound trucks and wholesale distribution centres, and then a man in a white van having to survive my dogs to deliver my paper because the internet bandwidth is pathetic and downloading my papers is impossible. Incidentally, in rural France this summer, where newspaper delivery can even involve planes to deliver English newspapers, I had the capacity to download even the full Sunday Times on my tablet.

What this illustrates is more important than infrastructure. Infrastructure is critical but, even more importantly, digital technology is re-engineering all the processes of manufacture, distribution, sales and income collection in every sector—public and private—and anyone who says that productivity opportunities are slowing down is talking out of their hat. They are going to speed up even more as the international economy picks up speed. This report should be addressing that question. Are we going to have competitive advantage in this digital world, or will we be left behind? It is fast-moving and, in my view, the Americans and even the Germans are way ahead in terms of this digital re-engineering. I support the northern powerhouse and living wage initiatives, but they will take time to have an impact on productivity; the threat from those more fleet of foot and a failure to take advantage of the digital opportunities are immediate challenges.

I worry that, despite the initiatives we are taking in our schools and universities to raise skill levels, we are still not doing enough in our colleges and adult education institutions to grapple with the challenge of the need for competitive advantage in skills. Budgets for adult education and colleges are being cut while we try to chase the politically attractive targets of 2 million and then 3 million apprenticeships—of uneven quality. In the previous generation, car plants were located in Great Britain because our labour force was regarded as more flexible. But Toyota still went to France because, although the labour practices there were seen as less flexible, the labour force’s mathematical skills were better—it was more IT literate and its precision was more reliable—and that made up for the inflexibility. That will be the required competitive advantage for the future. The plan needs to highlight our weaknesses and deliver a remedy.

One of the most frightening figures is that Volkswagen invests €11 billion in R&D each year—more than what the whole UK Government, universities and research councils could contemplate; in fact, approaching a third of the whole R&D budget of this country. It is adapting IT systems with its excellent engineering motor products. In the future, garages maintaining cars are going to more reliant on IT skills than mechanical skills. It shows the challenge one country on its own will have going forward.

So my final point is about Europe. One of the factors behind the United States’ productivity is the scale of its domestic market. It encourages big-scale investment as well as the development of niche businesses. One of the sadnesses of the pettiness of our renegotiation saga is that we are neglecting the bigger prize we could get if energy, negotiating skill and diplomacy could go into the opening up of the European markets. Sadly, competition does not naturally happen; it needs regulation and policing to bring it about because vested interests and established individual businesses much prefer protected markets. In a digital economy, it will be even more important to protect consumers internationally. This report needed much more than the three lines given to the opening up of services, energy utilities, financial and digital markets in the EU—in all of which we have competitive advantage to exploit. With the scale of re-engineering coming from new technology developments and the international competition and opportunities it will open up, we cannot afford to operate alone as one country in a global world.

Budget Statement

Lord Stoneham of Droxford Excerpts

Tuesday 21st July 2015 Lords Chamber

[Lord Stoneham of Droxford (LD)]

My Lords, I declare my interests as chair of Housing & Care 21.

I welcome those aspects of the Budget inherited from the coalition. I accept that we have to complete putting the public finances back in order. First, I welcome the one-year delay for achieving a surplus and the smoothing of public spending trends to reduce the immediate pain of the welfare cutbacks. Secondly, I welcome the raising of tax thresholds, although I would have liked the Government to have put more emphasis now and in the future on raising the national insurance threshold. Thirdly, I welcome the phasing out of pension tax reliefs through the higher tax bands and the efforts on reducing tax avoidance.

However, there are certain contradictions in the Government’s approach. Before the Budget, the Government’s objective seemed to be to promote growth through greater competition and less regulation. As my friend Professor Nick Bosanquet of Reform has written, the return of extensive government intervention, particularly in labour markets, is quite a shocking contradiction for a Conservative Government and is not getting the attention it deserves—although I was glad that the noble Lord, Lord Tugendhat, raised this matter in his speech.

A 34% increase in a compulsory wage level, combined with a freeze in public sector pay to 1% per annum, must lead to serious distortions in the labour market. Is this the return of a statutory pay policy by stealth? Nurses’ pay will be reduced in real terms over the next five years, while some of their patients’ pay will increase by 30% in real terms. The Treasury bemoans shortages of skilled workers but the Government’s treatment of their own skilled workers is hardly a good message to other employers, nor does it show much gratitude for the very real dedication of nurses, doctors, social workers and teachers—all of whom we should be encouraging to embrace change and efficiency improvements. This public pay policy is not sustainable if private sector earnings now start to move ahead.

Despite the Government’s plans to reduce regulation, the proposals for the living wage will involve more inspections for between 2 million and 3 million more employees and the thousands of small businesses who employ them. The return to a levy system to pay for apprentices, last tried in the 1960s, could be yet another burden on small companies. The Minister might like to explain how it is more likely to work in the less corporatist world of today than it did then. As my noble friend Lady Kramer reminded us, the Chancellor has provided for some relief for businesses in the reduction of corporation tax, but this will benefit the larger established corporations, not the start-ups—the enterprising small businesses that carry the hopes for the country’s regeneration and future prosperity.

As the noble Lord, Lord Blencathra, rightly said in his challenging speech, there is a need for employers to pay more so that wages are not being subsidised by government tax credits. However, we can only hope that the initiative eventually to redefine low pay as 60% of median earnings is not being used simply to camouflage the money being cut from benefits. The living wage puts back merely £4 billion, though not necessarily to the same people. It seems good to see the Government setting a five-year target of £9 an hour, although the minimum wage might well reach £8 an hour on current policies, and the living wage will need redefining at nearer £12 an hour once working benefits are removed and inflation is accounted for. At best, as my noble friend Lord Scriven said, it will be a premium minimum wage and not a true living wage unless it is redefined. I welcome the fact that the Low Pay Commission is being retained as an independent authority to monitor and recommend the phasing-in of the changes. I hope that the Minister can reaffirm the Government’s commitment to that independence. It is essential to retain cross-party consensus on the process and on policy implementation to avoid what could be a huge gamble which could yet unravel or lead to undue disappointment. Phasing is essential to ensure that productivity rises in those sectors vulnerable to cost increases and to ease the burden on small businesses.

Housing remains a critical component of living costs. There are important Budget changes for the private and social rented sector. I always felt that the 10-year settlement for the social housing sector of annual increases of 1% above CPI to encourage development was overgenerous and encouraged complacency. Housing associations have been protected while councils have had to undergo fundamental changes. I do not doubt that the 1% cut in rent levels each year for the next four years will be challenging, but ultimately, with some exceptions, it should be sustainable through normal efficiency savings. However, it is inevitable in the short term that there will be less development and investment in housing stock than there would otherwise have been.

My real concern is not necessarily with this policy but with the whole of the Government’s commitment to and interest in social housing. They have to realise, as did Macmillan in the 1950s, that to up the game of the construction sector we need higher growth across all building sectors, whether private sales, self-build, public sector or housing associations. Without that, we will not get off the floor of building 100,000 homes a year, let alone approach 200,000

The Government have to understand that housing associations play an important role in encouraging home ownership through shared ownership as well as in meeting the need for social rent. I say slowly again to the Government that the money projected for the right to buy would be much more productive if used to widen shared ownership, as it would get many more people on the home ownership ladder and into more new homes than the right-to-buy policy with its expensive discounts will ever do.

Budgets often look better on the day than they do subsequently. That has often been the case for this Chancellor, as he has played the role of the conjuror while retaining the traits of a gambler. He has slim margins for success in cutting the deficit if the economy does not perform as projected. He is about to assume a straitjacket on his taxes policy, as the noble Lord, Lord Desai, warned us. His mixed messages, involving more state regulation and intervention and extra burdens for small businesses, contradict what the economy needs. I fear that he has an aversion to social housing.

As my noble friend Lord Palumbo said, we all respect the Chancellor’s ambition, but history suggests that an element of caution when combined with toughness is an important ingredient of all successful Chancellors.

Queen’s Speech

Lord Stoneham of Droxford Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Stoneham of Droxford (LD)]

My Lords, I declare my interest as chair of Housing & Care 21, the housing association. I also welcome the noble Lord, Lord O’Neill, and wish him well in building on the crusading work of the noble Lord, Lord Heseltine, in reviving our northern cities. He will have our fullest support from these Benches in this endeavour. I also welcome back the noble Baroness, Lady Neville-Rolfe, and look forward to scrutinising the Government’s business and skills agenda in the coming months.

I also congratulate the noble Lord, Lord King, on his maiden speech. All the published histories of the coalition formation quote him as warning the negotiators at the time that whoever entered government would be out of power subsequently for the next generation. If he did say this, he was evidently only half-right. As for the other half, I take it that our resilience and defiance on these Benches still have five to 10 years to prove him, and the noble Lord, Lord Finkelstein, wrong.

As part of this resilience, I want to thank the nine of my colleagues who spoke in this debate and to welcome my noble friends Lady Kramer and Lord Newby to the Liberal Democrat Front Bench after their outstanding service in the coalition Government. We quietly hope that the Government will miss them and that the country will notice. While I thank my colleagues for their contributions today, I think that it is a requirement also to express thanks and appreciation for the work of Vince Cable, Danny Alexander, Jo Swinson and Ed Davey, who played a big part while they were in government in helping the economic recovery after the recession in 2010.

It has been an excellent debate with some remarkable contributions, so I will not hold the House up by repeating them, but I want to draw three fairly concise conclusions which I think the Government need to focus on. As labour markets tighten, living standards will be improved in a sustainable way only if we can improve productivity, but we must be wary of top-down initiatives to improve overall productivity. Overall productivity improvement depends on tens of thousands of small businesses taking decisions to invest more. They simply require stability, confidence, the wherewithal and the encouragement to invest.

I share the view of the noble Baroness, Lady Wheatcroft, that better management is needed. As our motor industry and our sporting teams show, better foreign managers are transforming these sectors. We need to develop more skills at home. Getting the talent out of the City to run things may help and I hope that the noble Lord, Lord O’Neill, will show the way.

Economic growth is not yet balanced enough to be sustainable and to avoid some of the pitfalls of the past. The coalition made huge steps forward in the jobs market but economic growth still remains too reliant on rising consumer expenditure financed on credit and encouraged by rising house prices. We all know where that leads. Business investment is still too low and the deficit in the current trade account matches the deficit on public expenditure as a major problem. The worry is that stronger growth and the net trade deficit may well worsen unless we make more of what we consume as a country.

During this debate I was pleased to go back 30 years and find myself agreeing with my old friend and colleague the noble Lord, Lord Horam, about making housing the number five priority for the Government and about its importance to the economy. I wish to draw attention to the importance of housing because it impinges on the performance of our economy.

Rising property prices due to shortages still encourage overinvestment in property rather than investment in business, particularly at the top end. The Government’s preoccupation with encouraging owner-occupation is simply stoking demand rather than addressing supply. I disagree with the noble Lord, Lord Skidelsky—we do need to concentrate on supply: “supply, supply, supply” should be the Government’s focus in housing. Like any other sector, it needs a plan, a partnership between all the housing sectors, private, public and voluntary.

It would be a tragedy if this Government got waylaid by a pointless political debate on the right to buy from housing association stock. I hope they have the sense to step back from this issue. I further hope that Greg Clark will recognise the need to act quickly if we are to approach a figure of 1 million new homes in this Parliament. The right to buy from housing associations will undermine efforts on the supply side. It is not the same as selling council houses. Housing associations build for sale and for shared ownership; they build affordable houses. There is a compromise if the Government will stop and think. If we cannot have a coalition deal to get rid of this ridiculous policy I hope that Greg Clark will have the good sense to find a way through.

It was noticeable in the early years of the coalition Government that the Conservatives had a blank spot on social housing. Housing associations make a huge contribution and can do more if we utilise their balance sheets better, improve their efficiency and involve them in major regeneration schemes. I urge the noble Lord, Lord O’Neill, to look carefully at the recent publication by the noble Lord, Lord Adonis, on the concept of city villages and how we can use the old council estates for regeneration by turning them into a partnership where we sell some houses, build some houses for rent and build affordable housing for people in social need. These are the measures that we need to increase housing supply. We can use that land and those estates to generate more housing.

These are the kinds of measures by which we, on these Benches, will judge the Government on their one-nation approach. As it did for Macmillan, housing played a vital role in strengthening the economy in the 1950s as well as having important social effects and benefits. It should do so again.

Small Business, Enterprise and Employment Bill

Lord Stoneham of Droxford Excerpts

Tuesday 17th March 2015 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, perhaps I may take this opportunity to thank the Minister for the way in which she has led this long and incredibly complex Bill over the past few months. She has been exemplary in offering meetings and has made sure that we have been fully briefed by officials, for which we are very grateful. Whenever debates have raised issues that she felt needed further consideration, she has written to us, thus carrying on a practice started by her predecessor; while he was pretty good at it, she has been exemplary and has won hands down in that race.

We said at the beginning of the Bill that we would like to work closely with her if we could because the Bill was in the right place in what it was trying to achieve and there were many things on which we could agree. Indeed, we felt that in some senses it could have gone further. I hope the Minister agrees that that has proved to be of considerable benefit to the process of getting the Bill to the position it is in now.

I want to make sure that recognition is duly paid to my team, my noble friends Lord Mendelsohn, Lord Mitchell, Lord Young, Lady Hayter and Lady Jones, who have all had to appear at various times during the passage of the Bill because it covered so many different aspects of the Government’s work. We also had the innovation of having a Back-Bench liaison Peer, my noble friend Lord Watson of Invergowrie. As well as taking a particular interest in the PSC register, he also worked very hard to make sure that Back-Benchers were fully involved. That helped to stimulate the debates and get us through the work. We have also benefited from a very hard-working legislative assistant, Nicola Jayawickreme, our former apprentice in our office at the end of the corridor, who has grown in stature and confidence as this legislation has progressed. So apprenticeships do work.

Having spent a lot of time in areas that perhaps we did not expect to when the Bill was first introduced, and having become expert in the intricacies of how pub companies and pub tenancies work and the implications of various activities in that area, as well as lots more, let us say “Cheers” to this Bill as we wish it on its way.

[Lord Stoneham of Droxford (LD)]

My Lords, I endorse the words of the noble Lord, Lord Stevenson, by thanking the noble Baroness, Lady Neville-Rolfe, for her unfailing courtesy and competence throughout the transaction of the Bill. I also thank the noble Lords, Lord Mendelsohn and Lord Stevenson, for their efforts to improve the Bill and to work with all of us who have been engaged on it over the past few weeks. I thank my noble friend Lady Janke, who has been assisting me on these Benches. I particularly thank all the officials who have dealt with our replies and the detail of queries that we have had on the Bill throughout the past few weeks.

[Lord Wills (Lab)]

My Lords, I briefly add my congratulations and thanks to the Minister and all her officials for their unfailing help and courtesy in the area that I was especially interested in. I set up and ran a small business throughout the 1980s and 1990s, so I had a particular interest in this Bill. There were many areas where I felt that I might have made a useful contribution. Nevertheless, it is a good Bill and I felt that I should focus my efforts on one area: the protection of whistleblowers. The Bill includes significant improvements in such protections. Again, I thank the Minister particularly for the constructive and thorough way in which she has engaged with those complex legal issues and managed to achieve significant progress.

However, there is still more that could be done. This is a rare legislative opportunity. There are still glaring gaps in protection for whistleblowers and I think the House will agree that those courageous individuals who blow the whistle on their employers, often at considerable detriment to themselves and their families, deserve all the protection that Parliament can give them. When the next scandal in protecting the public happens—as I am afraid it will, unfortunately—and when the inevitable inquiry finds out that more could have been done to encourage whistleblowing, all of us may have cause to regret that we did not do more on this occasion. However, this is a good Bill, which does a huge amount for small business. I welcome it and wish it all the best in its progress on to the statute book.

Small Business, Enterprise and Employment Bill

Lord Stoneham of Droxford Excerpts

Wednesday 11th March 2015 Lords Chamber

[Baroness King of Bow (Lab)]

My Lords, I, too, thank the Government for fiddling with Labour’s amendments so that they now feel able to embrace this area of gender equality. Anyone who has followed this debate closely cannot help but be aware that this is Labour policy, tabled by Labour Peers and others. Our amendment has been on the Marshalled List for weeks. In the debate on International Women’s Day last Thursday, I made this the main focus of my remarks, but not a single Liberal Democrat or Conservative Peer spoke in favour of it. But rejoice—a week is a long time in politics. I am absolutely thrilled that suddenly the Liberal Democrats and Conservatives are all over this like a rash, as they should be, and I have come to heap praise upon them for this most athletic U-turn.

My noble friend Lady Thornton has given the requisite thanks to organisations such as the TUC, but I, too, must come back to the role played by Grazia magazine, which has shone a light on this issue. Ordinary women up and down the country are being paid less every minute of every day in Britain in 2015. It is a scandal. I take on board what the Minister said about being able to look on the figures in a more positive light. However, the case of Shannon, 25, who is getting a £100 Liberty voucher when her male colleague is getting £2,000 in hard cash, shows that we need pay transparency. This amendment on its own will not solve the whole problem but it is a first step in the right direction. Therefore, I thank all those involved.

I hope that this will encourage Grazia to continue its campaigns. It is possible for ordinary women to change the law even though there are not enough ordinary women in Parliament. The voices of those Grazia readers who bothered to write on this subject have now been heard in Parliament. The result will give women in companies with more than 250 employees the right to pay transparency. We cannot continue to hide blatant and illegal sexism under the cloak of darkness. I very much welcome this amendment.

[Lord Stoneham of Droxford (LD)]

My Lords, I congratulate wholeheartedly the noble Baroness, Lady Thornton, on her amendment and on raising this issue. I also congratulate the Minister and the Government for agreeing to bring forward the amendments, to which I added my name and which the noble Baroness, Lady Thornton, has agreed to accept. It is a good move. My group has been committed to equal pay for a number of years. We accept that there is still a long way to go in terms of culture and practice to achieve it. This measure will publicise more widely gender pay gaps in companies and will be a step in the right direction, so I welcome it immensely. It builds on some of the Government’s other policies, in particular to improve the gender balance on boards. It also shows the benefits of cross-party agreement to achieve better legislation that is likely to be more effective and more influential in its impact in the country.

[Lord Watson of Invergowrie (Lab)]

I welcome the Government’s acceptance of the amendment in the name of my noble friend Lady Thornton and their decision to take it slightly further by changing “may” to “must”. That is an improvement and it is to be welcomed as well. I am not quite sure that I would go as far as my noble friend Lady King who was rather effusive—perhaps she was indulging in irony—in saying that the Conservatives and Liberal Democrats were now all over this like a rash. Having been involved with various aspects of this Bill through its passage, I suspect that the driving force in this is in fact the Minister herself and that some of her colleagues may not be entirely signed up to it. I suspect that the word “burdens”, which we have already heard today, will be one that will appear more than once this afternoon in terms of zero-hours contracts, fixed-term contracts, internships and so on—and yet the burdens will always be the burdens on industry and never the burdens on the individual workers who have to work those hours.

This particular amendment is about women. I hope that we can hear a bit more about the burdens that people have to suffer. Earning only 81p in the pound is a burden that no woman should have to suffer. If the amendment opens things up and exposes companies that for whatever reason are paying at different levels, that is a real step forward. I welcome the amendment—and the amendment to the amendment

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[Baroness Drake (Lab)]

My Lords, the drive behind the amendment is to encourage employers to give workers reasonable notice before work which has been offered is withdrawn and to require, where a shift is cancelled at short notice, that workers have the right to compensation.

The recession in 2008 led to lower levels of unemployment than anticipated, due in part to employers responding by using more flexible employment to manage the consequences of the downturn. Their response heralded significant changes in the UK labour market, including a sharp increase in the use of zero-hours contracts. The ONS annual business survey of employers conducted in early 2014 estimated that there were 2.7 million zero-hour contracts on employers’ books, of which 1.4 million provided work to people and 1.3 million did not. By August, those figures had risen to 1.8 million and 1.4 million respectively. Those contracts are now common among larger employers, with 50% of those with at least 250 employees using them.

Those findings are consistent with a survey conducted by the Chartered Institute of Personnel and Development. The Labour Force Survey estimated that in the last quarter of 2014, there were 697,000 people on zero-hour contracts in their main job, up from 586,000 in 2013 and 250,000 in 2012. Increased awareness following media coverage may partly explain that rise, but, as the ONS concedes, the survey may also significantly underestimate the true level because it is based on interviews with workers who often lack awareness of their type of contract. Whatever the qualifications about the data, the trend is undeniably upwards. With concentrations in sectors such as education, accommodation and food, and health and social care, women accounted for 55%, and young workers 50%, of those on those contracts.

The advantages for employers are clear: managing peaks and troughs in demand and cost-efficiencies from a supply of workers available at short notice. Zero-hours contracts may give some people choice, but others are offered them on a take-it-or-leave-it basis. The ONS Labour Force Survey confirms that zero-hours workers’ average weekly earnings were just £188, compared to £479 for permanent workers. One in three has no regular amount of income and is far more likely to want more working hours compared to other types of staff.

In 2008, 19% of zero-hours contract workers reported that they were in temporary work because they could not find a permanent job. By 2014, that figure had jumped to 41%. For those in the 25 to 29 age group, more than 58% said that that was because they could not find a permanent job—a depressing statistic.

Although there is a place for such contracts in the modern economy, their misuse causes real concern. In some sectors, they are becoming the default setting. True flexibility rests in a genuine reciprocal arrangement, but the increasing body of evidence reveals an imbalance in the employment relationship, not least when the promise of work is withdrawn at short notice, leaving the worker high and dry. The imbalance means that the employer reaps the benefit of flexibility and the risks and insecurity are transferred to the worker. Employers are required to pay zero-hour contract workers only for the time that they actually work. They are under no obligation to pay an individual who, at the behest of the employer, prepares to go to work or turns up but for whom work is not provided. The employee loses the chance to earn wages and may have paid for fruitless travel costs or childcare.

Findings from the survey revealed that 46% of zero-hour staff receive little notice or find out at the start of a shift that work has been cancelled. The CBI and the Chartered Institute of Personnel and Development recognise these problems. In its March 2014 zero hours briefing the CBI stated:

“An intervention which creates a simple formula for compensation … when a shift is cancelled at short notice … would be better targeted.”

Peter Cheese, chief executive of the Chartered Institute of Personnel and Development told the Bill Committee that people on zero-hours contacts had concerns,

“if they were called in to work at short notice and that work was then not subsequently provided. So, for example, they had to travel for half an hour … and then be told, ‘Really sorry, but the shift is not available’. We think there should be some form of compensation for that … a reflection of what we saw as good practice”.—[Official Report, Commons, Small Business, Enterprise and Employment Public Bill Committee, 14/10/14; col. 65.]

This amendment is not challenging flexibility or making the UK labour market uncompetitive; it addresses a real and deep unfairness. When an employee is offered work which they accept and then at short notice that work is not subsequently provided, they should receive compensation. Many zero-hours workers already face a pay penalty. The unpredictability of their earnings makes it difficult to access credit or secure mortgage and tenancy agreements. Constantly varying hours impacts on families, making it difficult to organise childcare and have a social life. Compensation for employees who are offered work which at short notice is not then provided is a most modest correction to the imbalance in the employment relationship, one which my noble friend Lady Hollis has confirmed that both the CBI and the Chartered Institute of Personnel and Development say they support.

An uncertain employment status can make it difficult for zero-hours contract workers to complain. If they do, they may be “zeroed out”, meaning they receive even fewer hours. This makes it even more important that regulations should require employers to pay compensation to workers whose shift is cancelled at short notice. This is not a challenge to flexibility but a call for simple fairness.

[Lord Stoneham of Droxford]

My Lords, no one wants to see exploitation of zero-hours contracts, but we need to see the wider picture. There are obviously some particular issues which need to be addressed but we need to have a wider view of the benefits of some of these practices. I obviously welcome what the Government are seeking to do on getting rid of the unwarranted exclusivity aspects of zero-hours contracts, but let us not forget that we are recovering from a recession and the most important thing in a recession is to find jobs for people. That gives them confidence and well-being. In previous recessions we found it much more difficult to get flexibility and enable jobs to be created at the pace that they have been in the last couple of years.

We may have certain concerns about the growth of zero-hours contracts, but they have certainly provided flexibility both for employers and employees in the labour market. As the labour market tightens, as we hope it will as growth picks up and productivity improves, we expect that the growth of these contracts will probably slacken because employers in a tighter labour market will have to offer permanent contracts to keep people in the jobs that they have offered them. They will obviously have to do that; that is the nature of the labour market at the moment and there has been a huge benefit to people in it remaining flexible.

We have had certain statistics about people on zero-hours contracts and we have to understand the nature of people who are doing this work. Some 17% are in full-time education, 6% are over 65; people on these contracts work more than 25 hours per week: there is no great resistance to them, in fact. We have already heard that a lot of people on these zero-hours contracts have been on them for some while. Maybe it is convenient to them as well. Some 60% have been on these contracts for more than a year, 66% do not want more hours, only 3% want additional jobs and only 10% want to change jobs to get more hours. So there are some benefits on both sides.

By all means, we should consult and review what is happening with zero-hours contracts, but wait a year or two and see whether we can maintain the growth of employment that we have had over the last couple of years and whether the economy is genuinely moving ahead before we start to interfere with these contracts in a way which could be detrimental to the growth of employment.

There are lots of other things we should be doing, such as looking at public sector contracts which are forcing some of these zero-hour practices in the public sector. I declare my interest as a director of Housing & Care 21, which is involved in the care sector, so I understand that we need to work on that area. We want also to look at the living wage but you cannot at the same time put your costs up, unless productivity is rising and we can sustain employment. There was quite an influential article in the Sunday Times a couple of weeks ago by David Smith, who said:

“People need to be safeguarded against exploitation but clamping down too hard on zero-hours contracts would risk throwing the baby out with the bathwater”.

I ask the House to be very cautious about supporting this amendment.

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[Baroness Hollis of Heigham]

My Lords, I hope that your Lordships will forgive an amendment that superficially seems nerdish, but it is an issue that will make or break many people’s lives. Please bear with me.

National insurance is a contributory system entitling you to sick and holiday pay, and, above all, the state pension. You come within it if, in any one waged job, you earn £5,700, which is about 16 hours a week’s work at minimum wage, which is the lower earnings limit—the LEL—although you do not actually pay national insurance until you earn £7,500. Over the years, all parties have rightly recognised that people in unwaged work—primarily women caring for children or elderly people—should be credited into NI and not lose their right to the state pension because they put their family first. All around the political spectrum, we have also respected the position of disabled people with difficult work prospects, who are also credited in, and those who are unemployed on JSA—assuming, of course, that they are properly searching for and training for work. They, too, get credited into national insurance.

Who, then, is left out? It is workers with part-time jobs, which includes two groups in particular. The first is middle-aged women. They have juggled a portfolio—to put it grandly—of part-time jobs, such as cleaning and shop work, with family care. It is a splintered workload, none of which separately qualifies them for national insurance. At least in the past married women could rely on the 60% dependency pension from their husbands. That disappears from 2016, so they will then not get a pension from their husband and currently they do not get one from their own waged and unwaged work. Depending on their back history, they will not get much from the state either. That is how we will reward them for doing what most of us believe is right: fitting their work around their family responsibilities. As a result, they lose years of state pension.

The second group is young people. They may be on JSA. They do everything that is required of them. They apply for countless full-time jobs and do not even get their application acknowledged. Going to Jobcentre Plus, nearly all of the jobs available are part time; many of them are also on ZHCs. It has been estimated that one-third of young people under the age of 30 are in short-hour or ZHC jobs. They do what we should be cheering them on to do. They come off JSA and cobble together a portfolio of perhaps three part-time jobs such as a sandwich job at lunchtime, security work in Boots of an afternoon and bar work in Wetherspoons of an evening. It is hard, risky, expensive and tiring work travelling to and maintaining several insecure jobs whose hours may change and clash with each other every week. They just hope that one of those jobs may lead to secure work but with the portfolio work they lose the NI rights they had when they did nothing but remain on JSA. Stay passively on JSA, come into national insurance and get your pension; come off JSA into several part-time jobs, work 30 hours a week or more but because no one single job is above the LEL lose your national insurance rights, holiday pay, sick pay and, above all, pensions. Can you imagine anything more morally perverse?

The national insurance problem is not exclusive to ZHCs; it affects perhaps up to 6 million people, largely women, with part-time jobs, but ZHCs make it far worse. On ZHCs you may work 20 hours in week one, 10 hours in week two, 20 in week three and, because that is all your employer wants, 10—back down the snake—in week four. So in weeks one and three with 20 hours a week you seek tax credits from HMRC to top up your wage. In weeks two and four on 10 hours you cannot, so instead you turn to the DWP for JSA, only you will probably not get it because you are not fully available for work and, as your 10 hours may suddenly become 20 hours, if that is what the employer requests, you are excluded from JSA. Simultaneously you are dealing with HMRC for tax credits, the DWP perhaps for JSA and the local council for fluctuating housing benefit payments and council tax support. It is a nightmare. It is a full-time job just applying for benefits.

Universal credit will help, and I support it, but it will take until 2020—another five years—before it is fully rolled out, if then. It should help that lone parent but not the older woman whose partner’s earnings float them off universal credit, nor the young man with the sandwich shop job, security job and bar work. Even for the lone parent, UC is paid monthly and in arrears, so what does she do in a low-pay job in a low-hour week? She goes for payday loans.

I could not do it. I could not cope, especially if I had children to care for, with not knowing my hours or my wages each week, or what the three bureaucracies of HMRC, the DWP and the local authorities might do about it either. Nor could I cope with not knowing when any or all of the money may come in and when it does, whether it is even correct. These are years when you may lose all entitlement to accrue a state pension. Lose seven years of NI and you lose £30 a week for the rest of your life. Have 10 years on a set of ZHC jobs and lose NI and you lose £45 a week for the rest of your life. What to do?

In a vote a few months ago, your Lordships agreed to allow two jobs below LEL to be aggregated to bring someone into NI. A number of Conservatives—although I do not think any Lib Dems—spoke in favour of it. I am not sure of that. The coalition Government, however, said no and overturned it. I then suggested that we should treat such people as self-employed. That was not accepted by the coalition Government. Could a part-time job or three be regarded as meeting JSA conditionality and, as with JSA, get you into national insurance? That was not acceptable to the coalition Government either. I tried in Committee on the Bill to reduce the LEL, bringing it down to about £3,000; I calculated that the cost would be trivial. That was not acceptable to the coalition Government either. So what then?

[Lord Stoneham of Droxford]

What was the noble Baroness doing for the 13 years of the previous Government, if she is accusing this Government of doing nothing?

[Baroness Hollis of Heigham]

That is a perfectly fair question. I point out to the noble Lord who sat opposite someone like me throughout the passage of the Welfare Reform Act from 2011 to 2012, with something like 17 Committee sittings, that I believe that the phrase “zero-hours contract” was not mentioned once—certainly not by me nor by the noble Lord, as far as I am aware. Therefore, in that context, the issue did not arise.

I tried to reduce the LEL but I could not. This time I suggest we again lower the LEL—the cash threshold at which you come into NI—to the cash value of JSA, which is £72.40 a week or near enough £3,750 a year. On JSA, at £72.40, you are currently credited into NI. With this amendment if you are earning £72.40 per week in any one job, 11 to 12 hours per week at minimum wage, you also get your NI stamp. It is simple and fair. If it is good enough for JSA, it should be good enough for part-time work. Get JSA and get your pension, work hard in three 12-hour jobs, each below the LEL, and do not. What sort of message is that?

The question is do we want social security to support a flexible labour market, to abate some of its risks, to ensure for workers some of its rewards such as the state pension or do we simply not care what happens to them down the line? If so, what are we saying to people about wanting to come off benefits and go into work? Why, under the system we now have, would they want to? It is not rational to do so. Too many people have more to lose than to gain and this amendment would help overcome that moral dilemma. I beg to move.

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[Baroness Hollis of Heigham]

My Lords, I thank my noble friend Lady Drake for her superb contribution. She put it wonderfully well.

Although the noble Lord, Lord Stoneham, intervened, I thought that he might make a fuller contribution. His basic charge was that we did not do anything about this. We did. I do not normally go around shouting about this, but we persuaded James Purnell that grandparents who were caring for children and carers of older people should come into the national insurance system and be credited at 20 hours a week. Previously, carers of older people came into the system only if they worked for 35 hours a week—effectively full time—for one person only. I persuaded the then Secretary of State that a carer doing more than 20 hours a week should get, not carer’s allowance, but national insurance credit. I also persuaded him that grandparents caring for their grandchildren and thus freeing their daughter to work should benefit from what was then HRP. This was effectively transferred from the daughter, who, since in work, would be in the national insurance system in her own right. I thank James Purnell, the last Secretary of State with whom I worked on this, who agreed both those changes.

[Lord Stoneham of Droxford]

I am grateful to the noble Baroness for giving way. Now that she mentions them, I accept that there are things that her Government did. Will she also accept that there is quite a lot that this Government have been doing to look at what is quite a complex problem?

[Baroness Hollis of Heigham]

I do not accept that at all. We shall come back to that point when we talk about the forum. Apart from the wider issue of universal credit, the Government have not done anything to help these groups in the last four and a half years—I can think of not one thing. If the noble Lord, Lord Stoneham, can think of something, then we shall see whether we agree on the evidence. Not only did we persuade James Purnell, who responded generously and positively, but also, as my noble friend rightly said, women had the safety net of a 60% dependency pension. The noble Lord’s party, through his right honourable friend, Steve Webb, has got rid of that 60% dependency pension for married women from 2016 so that a group of women who would have had some pension in retirement have now lost it. I should not be too keen on boasting about that if I were the noble Lord, Lord Stoneham.

At that time we were also told that the number of people with multiple jobs was only 20,000—mostly women, so they did not count. Now we have 50,000 and apparently they still do not count. The noble Lord, Lord Stoneham, said earlier today that zero-hours contracts were a response to the recession. The increase in jobs has come largely since 2010 and has only been apparent for most of us since about 2012. We went through very many mostly happy hours in which this was never discussed when we were considering the Welfare Reform Bill.

[Lord Stoneham of Droxford]

The zero-contracts did not come about—

[Lord Popat (Con)]

Order please. We are on Report. I am afraid that intervention is limited.

Small Business, Enterprise and Employment Bill

Lord Stoneham of Droxford Excerpts

Tuesday 3rd March 2015 Lords Chamber

[Lord Stoneham of Droxford (LD)]

My Lords, I support the thinking of both the previous speakers because there is a problem with late payment. I know that the noble Lord, Lord Mitchell, has a lot of business experience of this, particularly working with small businesses—and the noble Baroness, Lady Harding, also has a lot of experience in the business world. The argument here is really that the Bill is a move forward. It is trying to open up the issue of what terms companies are offering and attempting to make sure that they are properly reported.

However, the Labour amendment is unduly prescriptive and there will be a lot of unintended consequences if companies are forced down from their current credit terms of 60 or 90 days to 30 days. There would be the bureaucracy of quarterly payments and quarterly reporting and the information that would have to be provided on what is in those quarterly reports. We have to be clear that this is a very prescriptive amendment, which to be properly considered would need a great deal of consultation with business, particularly small businesses, on its consequences—because they could be quite dramatic.

I suspect that first there would be a big jump in the number of invoices being queried; that would be bound to happen. This would inevitably damage the legislation’s attempt to make companies more accountable and for the first time properly report publicly what they are doing—instead of having the information just drift out as a result of complaints from suppliers. People will be able to see what companies are doing, and the companies can be held accountable. It seems that that is the first stage. If there are consequences we want to look at, it would be better to deal with them gradually, so that we get genuine improvement on payment terms, rather than setting up a very bureaucratic and prescriptive solution that could damage a lot of companies and even deter business.

Small Business, Enterprise and Employment Bill

Lord Stoneham of Droxford Excerpts

Wednesday 28th January 2015 Grand Committee

[Lord Stoneham of Droxford (LD)]

My Lords, I worked for most of my life in a sector where we were often referred to as being in the last-chance saloon—the newspaper industry. It is perhaps a more appropriate analogy to make to the pub sector and its owners. Many attempts have been made to grapple with this issue. My noble friend mentioned four Select Committees. There have been unintended consequences in profusion as we have tried to deal with the issues over the past 10 or so years. We have to get it right this time and anticipate, where we can, any actions that could try to get round the intentions set by Parliament.

We are talking about small businesses. At its heart, what we are trying to achieve is to be in favour of free and fair competition. This means that ties must not create unfair pressures on individual publicans or give too much power to large companies. That is what this is about. When Parliament started to look at the whole beer industry over the last 20 or 30 years, it never anticipated the existence of pubcos. We can concentrate on them, but pubcos are already property companies that have overleveraged themselves—as, indeed, have many regional newspaper owners, as I know from experience. They are finding it difficult to survive and to invest. I will come on to that in a moment, because it is at the root of a lot of problems.

With their amendment, the Commons agreed to enshrine in law the principle that the tied licensee should not be worse off than a free-of-tie licensee. That is what the Commons laid down. I accept the concerns mentioned by the noble Lord, Lord Whitty, that we do not want to go down a route where this is watered down and put into a consultation period of 12 months, and then find, as we emerge from the long grass, that it has been watered down even further. That is my concern. There are a number of weeks still to look at this. As we move to Report our task is not to water down what the Commons decided but to improve the workings of the code and the Commons’ intentions, to enable our pubs to be more sustainable, able to be improved and invested in, and to protect community institutions run by enterprising and hard-working publicans.

Over the last few weeks I have been pleased to visit a number of pubs owned by Punch and Enterprise. One visit was at the instigation of the management of Punch. I have to say that no lunches were involved, but they knew the way to my heart: they arranged for me to see the pub that is the principal pub of Portsmouth football supporters. I also visited some tenants on their own as part of my due diligence looking at aspects of the Bill.

I will deal with a number of particulars that are being raised in the amendments. First, let us look at the threshold. There is a change from the threshold being “all pubs” to 500 tied pubs. As the noble Lord, Lord Whitty, indicated, the concern there is that it creates a distinction that might encourage companies to move tied pubs out of their remit so that they can get below the 500 limit. The original definition was, I think, based on the size of the company and the power that they are likely to have in the marketplace. There was also a concern to protect the smaller, family-owned brewery companies and their tied pubs. We are concerned about this change because we fear that it will provide an incentive for companies to reduce their number of tied pubs.

We also recognise that, in the leasehold model, there is a lot of movement between tied and non-tied pubs, where exploitation of market power can emerge. That is why it was thought important, in the original Commons clause, to link the two, so that the 500 threshold was across the board and not just related to the tie. The other aspect—there is a division here that the Minister should confirm—is that we are assuming that the 500 limit will be confirmed and can be changed, if necessary by affirmative action, if the response is that it is used to contrive ways round the threshold. However, the actual figure will not be enshrined in the primary legislation. I would like confirmation on that.

There are further issues on definition. The proposal is fundamentally to protect tied pubs but once the market rent option is exercised the tenant effectively will not be able to access the protection offered by this pubco. Someone said earlier that the rights of tenants will be preserved, but if they move from a company that is covered by the 500 threshold to one where it is not, they will lose some of their rights. We need to ask the Minister what her current thinking is in ensuring that some ongoing protection continues if a tenant moves to the market rent option.

We are concerned about the removal of the sale and the administration trigger points, as these are precisely the avenues that anybody trying to get round the legislation will go down. I also understand the concerns, particularly with the complication on the administration side—we all know it is a complex process—but speed is of the essence. We need to look at what protection is available to the tenant in sale and administration. If a company decides to sell and move a tied pub into another company that is below the threshold they will lose the market rent option right. Tenants will lose a right by that move. Is there some mechanism that can continue that protection after the sale for those tenants in that situation?

Similarly, on administration, I understand the complications. I have worked in that area at times in my career when companies—not my companies—have been in administration. I know that speed is of the essence and the complication of the MRO is an issue. Again, if somebody is a tenant in a company that goes into administration and moves into a company that no longer has the protection of the threshold, will they lose their rights? I think they will at the moment, but if we are to change the triggers we must look at that when we consider the reformed clause.

Another area in which concerns have been raised is the parallel rents assessments. When a tenant has the opportunity to go down the market rent option, the whole point of the parallel rent assessment is that it improves the information for the tenant in terms of helping him to make a decision as to his direction. Doing away with that for existing tenants needs to be looked at.

I turn to the amendment tabled by the noble Lord, Lord Borwick. I understand that there are two stages. There is a 21-day period when someone is trying to get agreement on the market rent option. If he goes down that route he has 90 days for it to be set and organised. But if we turn the 21 days into 90 days there will be a six-month period of uncertainty, which clearly is not acceptable. In the initial negotiating period both parties might agree that they are making progress and are moving towards an agreement but they cannot meet the 21 days, so they could mutually agree to extend the period. That would be quite normal in a legal process in business. That is another area that should be looked at.

Something I noticed when I visited those pubco pubs was that some publicans had investment or were about to have investment. They are the tenants who are most likely to be pleased and probably in line with this, but not altogether. We need some protection for investment in the sector. As we go down the route of the market rent option it will have to reflect the investment that has been made in the pub.

I assume also that if the pub has had an investment, some agreement will have to be made on exactly how that would be funded. The tenant might well want less of an increase in rent and more on the wet rent because that is a marginal cost, as opposed to a fixed cost. These are quite complex issues but there is nothing stopping protection where the market rent option is a possibility; if there has been investment, it would normally be reflected in the market rent that is set.

With those comments, while I did not speak in our initial debate, I say that I am concerned. I had access to the order of the amendments only at about 12 o’clock today, so trying to prepare how the hell one was meant to reply to this debate was difficult when one did not know what the order was. A lot is required in working out what the final Clause 42 should have in it. I shall listen carefully to what the Minister says but, as I imagine we have four weeks or so before we come back to this on Report, we will have to have a consultation on the detail so that we get this right.

[Lord Mendelsohn (Lab)]

My Lords, I want to clarify one thing in response to the comments of the noble Lord, Lord Hodgson, about my dear and noble friend Lord Stevenson of Balmacara, who is not in his place. He does in fact drink at the Crown; the alternative option is the Red Lion. They both happen to be privately owned, so we will leave that one there.

I am grateful to my noble friend Lord Whitty for helping us to focus on the context of this debate. There is little doubt that a small business Bill is the perfect location for these provisions. During the discussions we have had on supporting small business, all sides of the Committee have raised issues to ensure that small businesses are given the support to allow them to operate efficiently and to have the right level of protections and opportunities for commercial activity, employment, growth and development. In the area that we are addressing today, we are looking at issues of asymmetric information, imbalances of bargaining power, behaviour and commercial restrictions—all issues that we have discussed in different ways on parts of the Bill.

We believe that the Bill should be a key part of the UK’s growth requirements, to be achieved by allowing commerce and markets to flourish and addressing impediments to functioning and competitive markets. This is why we are keen to support it. Commercial change, innovation, transformation and adaptability are crucial for the UK. With all the good that there is within the UK pub sector—although there has also been some bad, which many colleagues spoke to so eloquently at Second Reading—it is a market that should see itself as being enabled by the proposed legislation and the measures that we are debating today. We certainly see the market rent only option in this context. It is a firm pro-business and pro-market principle that we are pleased to see in the Bill.

Labour has long argued for a market rent only option as the only way of guaranteeing the principle that tied tenants are no worse off than their free-of-tie counterparts. We have brought the issue to a vote in the Commons four times. Under the original Bill, licensees would merely have had the right to ask their pub company to show them how much their rent would be under a free-of-tie scheme. This was problematic, as all the information would be held by the pubcos; all the calculations would be crunched by their accountants and all the final estimates made by them. Even if they then revealed that the landlord would be better off free of tie, they would have had no legal right to demand this option.

The Government’s own response to a consultation on a statutory code, printed in June, concluded that,

“a mandatory free-of-tie option … is popular with many tenant groups and might arguably offer the simplest way of ensuring a tied tenant is no worse off than a free-of-tie tenant”.

However, for reasons known only to them, it took a new clause and a massive Back-Bench rebellion for the Government to come to what in our view was the right conclusion. Now that they are there, we are very pleased that they are working hard on how we can make this work. The proposed new clause puts the right principles back into the Bill. It delivers a mandatory free-of-tie option that allows publicans to buy their beer on the open market. The Business, Innovation and Skills Select Committee concluded that this was the only way to ensure that landlords would be no worse off than if they were free of tie, as it would force pubcos to offer tied tenants the best deals.

We are in a somewhat complex position. We have had amendments tabled very late and I saw the impact assessment only on my way into the Committee today. It is not simple and straightforward, and the lack of time to adequately identify where we are on all these matters has generated a great deal of examination and commentary. Some aspects were expected, but there is a great deal of concern about the approach in detail. I look forward to listening to the comments and explanations that the Minister is going to give. I expect she will have quite a bit to do today. We should make it clear that although we are supportive of the Government’s approach—

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[Baroness Neville-Rolfe]

My Lords, that is the proposal set out in the Government’s amendments.

[Lord Stoneham of Droxford]

Will the Minister confirm whether she is looking at any protection for people who, when a company is sold or goes into administration, move from a company that is covered by the threshold to one that is not?

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[Lord Hodgson of Astley Abbotts]

The noble Lord, Lord Whitty, and I have taken common cause on various things but he will not be surprised to know that I cannot take common cause with him on this tonight. A managed pub, as I explained at some length in my opening remarks, has an employee. It is a totally different relationship. To say that pubcos could switch their estate from being tied to being managed would mean changing the whole basis of the employment. The fact is that they are employees with salaries and bonuses and fringe benefits. It is not possible to undertake the sort of gaming that the noble Lord is describing—in terms of switching from managed to tied—which is why managed pubs can safely be left out. The question of what the tie means is something which we have been discussing tonight, but managed pubs form no part of this because they have employees with all the applicable rights and responsibilities.

[Lord Stoneham of Droxford]

My Lords, the noble Lord, Lord Hodgson, indicates why this needs more discussion. He is right on managed pubs—I absolutely agree—but leased pubs do switch between leased and tied. That is why I was raising my point. The Bill looks very much at the tied part of the sector, but there is movement here which needs to be looked at. To say that any change in the number—once we have decided what that number is—should require further primary legislation and be subject to affirmative resolution is wrong because, as we have seen over the last couple of decades in this sector, people adjust to new legislation and they also sometimes try to avoid its objectives. The Minister, with suitable consultation through the affirmative procedure, needs to be able to make changes as necessary. The number could well be up or down, but it needs to be made appropriately. The prime issue is leased and tied pubs, not managed ones.

Small Business, Enterprise and Employment Bill

Lord Stoneham of Droxford Excerpts

Monday 26th January 2015 Grand Committee

Finally, I also support the amendment that would establish a whistleblowing ombudsman, and I look forward to hearing the Government’s response to this innovative proposal. I wholly support the creation of an ombudsman, as there appears to be a gap in accountability between a whistleblower raising a concern and the response they then get from the regulator or the employer to the public interest issue. PIDA focuses only on the victimisation of the whistleblower. That is vital, but it does not deal with how the concern is then addressed. A body such as an ombudsman would complement the Government’s measures to produce regular information from regulators on whistleblowing by holding those bodies to account. With those remarks, I support all the amendments in this group.

[Lord Stoneham of Droxford (LD)]

My Lords, I apologise for being a little late for the beginning of the remarks of the noble Lord, Lord Wills, but I will say a few words in this debate. Generally on this side we are supportive of moves that provide extra protection for whistleblowers. Clearly, people who feel that they have to whistleblow must be protected and must have the remedy for being protected. Listening to the debate, I think that the idea of having some form of national code that would supersede the many codes that have grown up is on the face of it a good thing. I will say only that speed is always of the essence in these cases. If they are allowed to drag on, they become very bureaucratic —the individuals are put to huge inconvenience and stress while their grievances are dealt with. My only concern about setting up another regulator or ombudsman is about whether that would just create a bureaucracy that would add to the burden on those who try to deal with these issues, and would slow up the process in which grievances can in general be dealt with quickly. Obviously I will be very interested to hear what the Government have to say in response. We are broadly sympathetic to this tightening up of legislation in this area and the encouragement it should give to genuine whistleblowers.

[Lord Young of Norwood Green (Lab)]

My Lords, we support these amendments. I will preface my remarks by reminding us that in many circumstances this is a matter of life and death. Often the whistleblower finds that his or her life is turned upside down for a considerable period of time and they are put under enormous stress. The lives of the general public can also be affected, as we know from some of the first cases, for example that of the paediatric unit in Bristol. We know that when large organisations get it wrong, they put people and the public at risk, sometimes in extreme circumstances. It is right to remind ourselves of that, and of how much courage it takes for an individual in a large organisation to bring themselves to the point when they feel they have to whistleblow. They might have gone through the procedure of trying to alert their first line manager or even somebody further up the management chain, and still have failed to get any recognition that there was a real problem to be addressed.

We therefore think that the amendments proposed by my noble friend Lord Wills are reasonable; they are justifiable in trying to sort out whether a worker is in fact a whistleblower and is ensured protection. That is extremely important. The amendment enables workers who have been wrongly identified as having made a protected disclosure to be protected under PIDA. Trying to ensure that gagging clauses are finally rooted out is surely another important amendment, and I look forward to hearing the Minister’s response to it. The National Audit Office concluded that many individuals believed that they were gagged regardless of whether or not this was actually the case. Anything that makes that situation clearer and provides adequate protection surely is worth while.

I do not think I need to take much time over the question of whether or not we should include student medical professionals. It seems necessary and I hope that the Government will be sympathetic to it.

Amendment 65 deals with blacklisting. Although we believe that there should be a further inquiry into the general nature of blacklisting, my noble friend Lord Wills has suggested a very reasonable approach to what happens to an individual who, having already lost their job through no fault of their own, finds themselves in a situation where they are unable to gain any further employment, which is surely appalling.

Amendment 63 seeks to ensure that there is not a get-out clause where an employer can suggest that instead of something being a disclosure of information where there is a protected circumstance, that can be got round by considering that it in fact was an allegation, which does not give the employee protection.

I do not need to go into an awful lot more detail because my noble friend Lord Wills and the noble Lord, Lord Low, gave a very detailed analysis. But I will deal with the point about the whistleblowing ombudsman, if only to respond to the noble Lord, Lord Low. One can always make the point about another layer of bureaucracy but when somebody finds themselves in the position of being a whistleblower, we would like to think that these situations are dealt with speedily and promptly but all the evidence tells us that unfortunately these cases go on, in many cases for years, and surely at the end of the day what the individual wants is justice. Having somebody who is genuinely independent as the last port of call is a worthwhile suggestion.

For those reasons, we support these amendments and I look forward to hearing the Minister’s response.

--- Later in debate ---

[Lord Young of Norwood Green]

My Lords, I shall speak to all the amendments in this group. It is as well to remind ourselves what an employee has to go through even to get to an employment tribunal.

The Enterprise and Regulatory Reform Act created a number of hurdles that people have to pass. First, they must go to early conciliation at ACAS. If that breaks down, they are issued with a certificate to say that conciliation has been unsuccessful and they must go into the employment tribunal system. An entry fee has to be paid to the employment tribunal service. If they want to take it to a full hearing, there is an additional fee. We do not believe that it is just or fair for a pregnant woman who has been discriminated against at work, for example, to have to pay £1,250 to enter the employment tribunal system.

After going through an incredibly stressful time, including an often expensive employment tribunal, someone might be given a compensatory award that says that they have been wronged at work. The employer must remedy that problem but might decide not to pay. There are a number of hurdles that someone has to get past to be paid, which is why we must try to find a way of remedying the problem, particularly in cases where an employment tribunal sitting in front of a judge has declared that the employee deserves to be compensated and the wrong must be righted.

Amendment 68ZH says:

“Any payments made under this section by the employer must be paid to the employee to the extent that the relevant sum has been fully paid before any sums are payable under the penalty notice”.

Ironically, fines might well be paid to the Government as a result of an employer failing to comply but the compensatory reward could remain outstanding. The Exchequer might benefit but the individual has been denied justice in that the compensatory award has been ignored by the employer. That is why we are recommending that in these circumstances that sum should be dealt with first. Again, I look forward to hearing the Minister’s response to this.

Then there is the question of naming and shaming. We already have a number of circumstances in other legislation where employers are named and shamed. With regard to the national minimum wage, the circumstances in which employers are actually prosecuted or even named and shamed are very few and far between. That is why we believe that this clause ought to include,

“a provision for the publication of the name and other particulars of an employer who does not pay the relevant sum as per the conditions of the notice”.

I beg to move and look forward to hearing the Minister’s response.

[Lord Stoneham of Droxford]

My Lords, I support the principle of these amendments. I look forward to hearing the Minister’s detailed response. It is right that the Government have introduced a number of reforms on employment tribunals, but in doing so they have introduced fees. I understand that the Government are in the process of starting an inquiry into the impact of those fees. We know that the number of people going to employment tribunals has fallen dramatically, so we need to know the reasons for that.

The principle of fees seems to be right in terms of deterring people from making frivolous claims, but we need to ensure that the integrity of the employment tribunal service is open to people with genuine claims, even if they have low means. Therefore, if we are tightening up on the fees, we should be looking closely at the payment of compensation so that the individuals who are awarded compensation get the money as quickly as possible, and preferably ahead of the fines that subsequently could be due on the employer for not having paid that money earlier.

--- Later in debate ---

[Lord Stoneham of Droxford]

I thought that the Government were doing much more than the noble Lord, Lord Young, indicated to enforce the minimum wage. That has been led by the Secretary of State and the naming and shaming is an important element of it—there has been considerable publicity. The Minister should perhaps spell out a little exactly what the Government have been doing in this area and the Opposition should not take all the credit. They deserve the credit for introducing this measure, but the Government are committed to seeing it enforced, and seeing that people are paid appropriately.

Finally, it should be said that this is a Bill for small businesses and, as we saw in the previous discussion, there is a danger as to affordability when it comes to the paying of fines, particularly by small employers. Those should be appropriate, so I will be interested to hear what the Minister will say about enforcement. I hope she will confirm the Government’s commitment to making sure that the minimum wage is firmly enforced.

[Lord Watson of Invergowrie (Lab)]

My Lords, I was certainly in accord with the noble Lord, Lord Stoneham, on his last remarks, but I find it rather strange that he should pray in aid of his argument that any fines should be affordable by the small businesses concerned. Small businesses have no need to incur any penalties whatever; all they have to do is abide by the law and they will not be forced to pay a penny more than they are legally obliged to do. There is no merit to that argument. If you do not want the fine, pay the national minimum wage.

While I suspect that the Government will resist the move from £20,000 to £50,000, my point in respect of the amendment has two prongs to it. One is that I want to know why there should be an upper limit at all at £20,000. Why is there a need for an upper limit? In earlier parts of this clause, it says that the total amounts should be in respect of the amount owed to the individual. But if there is an upper limit of £20,000—and goodness knows what kind of employer would incur a debt of failure to pay the national minimum wage in excess of £20,000—why should we use that as a cap? What is the logic, first, for having a cap at all and, secondly, for that to be the figure? If £20,000 is not to be a sufficient disincentive, £50,000 might just about do the job, and for that reason this amendment ought to be accepted by the Government.

--- Later in debate ---

[Lord Young of Norwood Green]

My Lords, I shall speak to a number of the amendments in this group as well as say a few words by way of a general introduction. The rise in the use of zero-hours contracts is a trend that should concern Members across the Committee. While a small number of people find this type of contract suitable, too many people from across the UK are at the mercy of unscrupulous employers who are exploiting this type of employment. The increasing reliance on this form of employment does nothing to promote the jobs that the country needs. For many employees, zero-hours contracts present huge drawbacks in comparison to permanent regular work. There is no guaranteed level of regular earnings to provide any certainty over meeting bills or planning for the future. By our very nature, we human beings need stability and certainty in our lives; these types of contracts do not offer that. The need to respond to calls to attend work, frequently at short notice, disrupts life outside of work and places a particular strain on families and on arranging care for dependants. One of the most concerning aspects about the explosion of such contracts is that women are likely to be disproportionately affected by them.

Zero-hours contracts by share of the workforce are most common in: the arts, entertainment, and recreation services—2.5% of the workforce; in accommodation and food services—2.2% of the workforce; and in healthcare services—1.2% of the workforce. Not surprisingly, they are most common among people in caring and leisure occupations, where it is 1.7%, and among the less skilled—1.4%. These industries have high percentages of female employees.

We welcome Clause 148, which introduces an exclusivity ban in zero-hours contracts. This is a welcome step forward from a Government who had to be dragged kicking and screaming on this issue, but they have fallen far short in bringing forward measures which tackle the exploitative use of such contracts. This does nothing to change the practices of companies that base their entire workforce management strategy on them. Our Amendment 68ZU would reinforce the powers of the Secretary of State. Amendment 68ZW, perhaps in time-honoured fashion, would delete “may” and insert “must”—I cannot think where I have encountered that before—while Amendment 68ZAB would extend the powers of employment tribunals.

This is a huge problem area, and we need to remind ourselves that workers in these circumstances find themselves in situations where they do not attract sick pay, holiday pay or national insurance contributions. While we would not deny that there are some circumstances where zero-hours contracts might be relevant and applicable, the numbers that we are currently encountering place a huge burden on the workforce. This disproportionately affects them in terms of the employment rights and benefits that the vast majority of the workforce would expect to be theirs as of right. In those circumstances, I beg to move.

[Lord Stoneham of Droxford]

This amendment is all very well but I am not quite sure where it is leading us. It is not very specific. The Government have included clauses to stop people being excluded from doing other work while on a zero-hours contract, which seems to go to the heart of one of the principal problems. Here we are talking in general terms about an obligation on an employer to offer a fixed-hours contract to a worker who has worked regular hours for a continuous period. I am not sure where that is leading to. It is very general, apart from saying, “What we really want is to get rid of all zero-hours contracts and put everyone on a permanent contract on a 40-hour week or 35 hours a week, or whatever it is”. That is not actually what zero- hours contracts are being used for.

I accept that there is some bad practice, which we want to see eliminated. Where there is discrimination or unfair practices, we should work at that. The principal source of exploitation is where people are excluded from doing other work by these contracts. Some of these contracts have worthwhile benefits, as we have seen during the recession. One thing that the recession has done is to enable people to share work around when it is limited. I suspect that as the work comes back, as it is clearly doing as we move out of recession, some of these problems will begin to fade in their severity.

[Lord Young of Norwood Green]

I want to make it clear that this is an attempt not to rule out zero-hours contracts but to introduce some reasonable ground rules. I shall give the Committee some statistics that it might find interesting. The Chartered Institute of Personnel and Development research last November noted that 83% of staff on zero-hours contracts had been engaged for longer than six months, and 65% had been engaged for two years or more. We have a situation in which 65% of staff on zero-hours contracts have been on them for two years or more; that is not a short-term need. If someone has been employed for that length of time, does the noble Lord really not think that they should be entitled to basic rights such as holidays, sick pay and pension contributions?

We are not embarked on a Don Quixote-like mission, tilting at windmills and hoping to abolish all zero-hours contracts, but we are on a mission to ensure that there is some fairness and reasonable ground rules. We are suggesting that if someone has been employed on a zero-hours contract for a reasonable period of time, it indicates that there is a permanent need for this type of employment. In such a case, they ought to have the employee rights that workers on full-time contracts would enjoy.

[Lord Stoneham of Droxford]

I thank the noble Lord for his speech and his intervention. I accept that there are issues here which we need to deal with but we are putting very general terms in here. One thing we do not want to do is to lose some of the flexibility which people have benefited from over the last couple of years, when work has been in short supply. One major problem is in the local authority area, where people are doing social care work. The Government should obviously look at and deal with this area, because they have the means to do so through their contracts, but I am not sure whether these general terms that are being looked for will actually do the job.

Small Business, Enterprise and Employment Bill

Lord Stoneham of Droxford Excerpts

Wednesday 7th January 2015 Grand Committee

[Lord Flight]

My Lords, Amendment 5, and its sister Amendment 25, have been tabled on the back of some excellent research undertaken by Grant Thornton in its impact assessment of the Bill. The research focuses on the fact that some small and medium-sized businesses qualify as SMEs for the purposes of the Government’s definition of those qualifying for R&D tax credits, but for the purposes of this Bill they are treated as large companies. The amounts and definitions here are interesting in that the R&D tax credit definition of a small company is one with a turnover of up to €100 million, assets of up to €26 million and with up to 500 employees. I draw the Committee’s attention to the fact that I believe that there is a printing error in the amendments and a pound sign was inserted instead of a euro sign. For the purposes of the Bill, the definition of SMEs is enterprises with a turnover of less than £25.9 million, assets of less than £12.9 million and a maximum of 250 employees.

The number of businesses to which this point relates is 2,851, according to Grant Thornton, with a combined turnover of £151 billion, an average turnover of £53 million and some 30,000 employees. The key point about businesses in this sector, which I will define as small SMBs, is that they have played the biggest and most disproportionate role in contributing to economic growth in this country. They have outperformed small companies and large businesses on employment growth, profitability growth, R&D and capital investment. This group is arguably more important than the very small SMEs that the Bill addresses.

The challenge that we face here comes under two different categories. First, as the Bill stands, small and medium-sized businesses will not benefit from the new provisions for providing access to finance and credit information, although they need this just as much as very small companies. Secondly, they will face increased regulatory requirements and costs arising from the requirement to publish reports on payment practices and the rather more demanding and expensive requirements in relation to the public register of significant ownership in businesses.

When the Bill was drafted, I am sure that the Government cannot have meant it to have the unintended consequence of being positively damaging to the most important entrepreneurial sector in this country. I am equally sure that the noble Baroness, Lady Neville-Rolfe, who I believe when she was a senior executive at Tesco railed against the ever-increasing amount of regulation imposed on business, will not want to see yet more regulation being imposed on small and medium-sized businesses.

In essence, Amendments 5 and 25 insert the R&D tax relief definition of an SME. To press home the point, under R&D tax relief it is inappropriate for small and medium-sized businesses to report on payment practices. Late payment for them is as much an issue as it is for small businesses. Indeed, medium-sized business find that it takes on average 48 days to be paid, against the average across the G8 of 42 days and only 32 days in Germany. In addition, such reporting on payments would be a costly and tedious regulatory requirement on what are still small companies. Amendment 5 deliberately sets a threshold of 499 employees and a turnover of £100 million, in line with the R&D tax credit, and Amendment 25 similarly defines a limit for the purposes of benefiting from credit information and credit facilities.

I put in a plea for the Government to consider these points. The Bill has a lot of virtue; it is there to try and help small businesses. Its definition of small businesses is, unwisely, too small for the purposes of what really matters. Small SMBs are not just equally important but potentially more important than small SMEs to the fortunes of our economy.

[Lord Stoneham of Droxford (LD)]

My Lords, I wish briefly to comment on the amendments, particularly following the comments of my noble friend Lord Cotter, who spoke on this issue of late payments.

Obviously, late payments are invidious. They affect small businesses severely, particularly in terms of cash flow. However, in looking at these amendments, there is a balance that we have to get right. There is a danger, certainly in some of the amendments, that we will overregulate. I refer particularly to Amendment 6, which has a requirement for quarterly reports and indicates that all payments to suppliers made more than 30 days after the date indicated have to be listed in some way, unless a formal query has been made on the invoice. The danger is that if one overregulates, all that will happen is that businesses will be inundated with formal queries as a way of avoiding the reporting.

Also important—if one is going to require all this information to be collated—is the reality that in many sectors balancing the payment of bills, whether we like it or not, sometimes protects the cash flow of certain companies that otherwise could be in difficulty. If this information is made more public in detail, there could be consequences for the management of the credit of those companies. So there are problems of overregulation that could be bureaucratic and inflexible, and could damage the businesses that we are trying to help.

[Lord Cope of Berkeley (Con)]

My Lords, I recognise that late payment has been one of the most stubborn problems affecting small businesses over many decades. It is quite a few decades since I was Small Firms Minister in Margaret Thatcher’s Government, but the problem goes back a long time before that. I congratulate the Government on having found a new method of trying to deal with it, which has been incorporated in these clauses. In principle, that is much to be admired and supported.

I am much in favour of Amendment 5, tabled by my noble friend Lord Flight. Like him, I was much impressed by the Grant Thornton list of companies, which gives very important support to something that we all know—that small and medium-sized firms such as those in this list vary hugely. When you compare the turnover, the balance sheet and the number of employees of the different companies, the huge variety is astonishing. Like my noble friend, I cannot believe that the Government really want to impose this new element of bureaucracy on these companies, some of which have very small numbers of employees. One of them had two employees, and many of them—littered about—have fewer than 10, although they often have very large turnovers and large amounts on their balance sheets. We can imagine what sort of companies they are without following them up. Therefore, I support Amendment 5.