Baroness Neville-Rolfe
Main Page: Baroness Neville-Rolfe (Conservative - Life peer)Enterprise Bill [HL]
Baroness Neville-Rolfe Excerpts
Lord Cope of Berkeley (Con)
My Lords, I, too, feel that it is right for the Small Business Commissioner to have this focus on late payment from large companies, as I have said before in debates on this Bill. As many of us know from experience, this is a problem that has been with us for many years—in fact, for many decades—and all sorts of attempts have been made from time to time to improve the situation, some of which have had some effect. This is a further attempt, because the problem is still with us. If you broaden the initial remit of the commissioner too far—and I am not talking about the eventual remit, although maybe it will be larger in due course, which I would welcome—you will just give an impossible job to whoever gets the appointment. It will be a difficult job in any case, but it would become an impossible job.
Under the terms of Amendment 16, the commissioner would be required to establish a complete framework and fair operating environment for all businesses over a whole string of different methods and aspects. That is an enormous job to place on this new commissioner and the staff. Let them concentrate on one of the most stubborn problems we have had over many years. If they succeed in that, then we can begin to see the remit widen and used in a much bigger spread, which I think we would all like to see, in due course.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport (Baroness Neville-Rolfe) (Con)
My Lords, first, I welcome the noble Baroness, Lady Burt of Solihull, to the Front Bench and commend her for her brevity and clarity. I hope the House will not mind if I take a little time to highlight some of the issues arising in this important group of amendments. I shall begin, as one must, by reiterating the importance of tackling late payment and our commitment to doing so. The measures in this Bill establish a Small Business Commissioner, delivering on and developing our manifesto commitment.
I, too, pay tribute to my noble friend Lord Wolfson for his good payment practice at Next. We should try to encourage good practice as it helps with the cultural change we are seeking. Our aim is to build on the measures taken during the previous Parliament to drive down late payment. Some of these measures are still in the pipeline, notably the new requirement on the UK’s largest companies to publish performance data on payment which will bring the sunshine of transparency to the problem.
I am extremely grateful to noble Lords for their diligent scrutiny of the Small Business Commissioner measures in Committee. After careful consideration of the arguments, we have put forward concessionary amendments, as noble Lords opposite were kind enough to acknowledge. I hope they will bear them in mind in considering what to do today.
We all know how vital the UK’s small businesses are to our economic growth. This is something we must all reflect on as we approach Small Business Saturday. In Anna Soubry, we have a Small Business Minister who champions the cause. I am a former chairman of a Scottish SME, Dobbies, and as well as understanding the practices of much bigger companies I really believe in the need for reform. On late payment, with a good strong Small Business Commissioner becoming a vital part of the support system and with the support of this House and the other place, we can make things happen. Our assault on late payment must continue.
We are committed to making Britain the very best place to start and grow a business. The Government will play their part in assisting business where it needs it most by cutting red tape and opening up markets at home and abroad to new and innovative businesses. I should say briefly that today the Chancellor confirmed that we will extend small business rates relief for another year, and 600,000 businesses will benefit. We are funding new or extended enterprise zones, including, I was delighted to see, in Carlisle, Dorset and Ipswich. We will be providing £24 million for local growth hubs to continue to join up business support on the ground in each LEP area.
The Small Business Commissioner will build the confidence and capabilities of small businesses to assert themselves in contractual disputes with larger firms and to avoid them in the first place. He or she will work to encourage a culture change in how businesses deal with each other to promote a fair operating environment. The commissioner will handle complaints by small business suppliers about payment-related issues with larger businesses. He or she will also act as a hub of user-friendly information. He or she will provide general advice and information to assist small businesses with their supply relationships, which will be sensibly integrated with other sources of business advice. My officials will involve small business users in the design phase to ensure that the commissioner’s services are easy to use and navigate.
We arrived at this policy architecture following careful consideration of the issues and the evidence, including responses to our summer consultation and further evidence including data on late payment. Our aim has been to put forward a targeted and effective response to the most pertinent issues facing small business and to focus the commissioner on late payment so that rapid progress is made. That is the point that my noble friend Lady Wheatcroft made so well.
“StatusA1 The Commissioner is a corporation sole.”
Baroness Neville-Rolfe
My Lords, I carefully considered the arguments made by noble Lords in Committee on the need for small businesses to have confidence in the commissioner and in particular for the commissioner to act independently of government. I am pleased to bring forward these amendments in response to a very constructive debate. These are to further enhance the independence from government of the commissioner and to strengthen the authority and permanence of the office. We agree that it is crucial that the commissioner should inspire confidence among all businesses and business organisations, and that he or she should work constructively with business. I hope that noble Lords will welcome the government amendments.
Amendments 2 to 7 and Amendments 75 and 76 will provide the commissioner with greater independence from government. They give the office a separate legal identity as a corporation sole and provide the commissioner with powers to appoint staff and receive public funding. The commissioner will have greater flexibility to ensure that the office can be responsive to demands but, as the office will be publicly funded, these powers will be subject to ministerial oversight. The Secretary of State can keep the commissioner’s resourcing under review and respond accordingly to make sure that the office has the resources that it needs. We wish to ensure that the commissioner’s staff have appropriate provision, and I may return to this at Third Reading.
Amendment 12 clarifies and strengthens a safeguard protecting the anonymity of small business complainants from third parties. It removes any uncertainty about whether a small supplier’s identity could be revealed by use of freedom of information requests and so avoids the potential deterrence of complaints. I hope that noble Lords will support this amendment, which strikes a balance between protecting complainants and building faith in the commissioner’s processes among both small and larger businesses.
Amendments 13 and 14 will implement recommendations of the Delegated Powers and Regulatory Reform Committee in relation to Clause 11. They will also enhance the authority and permanence of the office. We have decided not to follow the proposal that the power to abolish the commissioner should not be exercisable more than five years after the legislation comes into force. I think that noble Lords will agree that we cannot be sure that the commissioner will achieve the necessary culture change on late payment within five years, and do not want to provide for the sunsetting of the power to abolish within this time. As I have explained, the amendments are to engender greater confidence in the commissioner. I beg to move.
Lord Mendelsohn
My Lords, we welcome these government amendments and we on this side of the House are very grateful to the Minister for the very constructive way in which she has dealt with this issue. These are matters about which we had a great deal of concern and we are extremely grateful for the adept way in which she has dealt with the department in navigating these issues in a short space of time.
We believe that these are very important measures to ensure that independence and confidence was available for the small business commissioner and that establishing the commissioner as a corporate sole has been an extremely important way in which independence from government, as an instrument from government, has been established. We are very pleased that the Government have decided to look at giving the Small Business Commissioner the power to appoint its own staff, build its own team and adapt it for the circumstances. We think that this is a very important variable power that such a post would have. I noted that the Minister said that in relation to some of these, other matters will come forward at Third Reading. I would be grateful if she would give some indication of what they are likely to cover.
We are also very pleased that the Government have adopted the recommendation of the Delegated Powers and Regulatory Reform Committee not to allow the Secretary of State by the stroke of a pen to abolish the role of the commissioner, but now to establish it on a firmer footing. We also had great concerns about confidentiality. We were always concerned that if small businesses complained about larger businesses, there would be likely consequences and retribution or otherwise would take place. These are very important matters and the evidence that we had from the Groceries Code Adjudicator of the problems in not providing for confidentiality showed that this would limit significantly the capacity of the Small Business Commissioner. So we are extremely grateful to the Government for their view on this.
In passing, while complimenting the Government, I would suggest that the Small Business Commissioner is not too wide a job; it is not that it can succeed on one thing. It is peculiarly British that we have a view that we have to start so modestly. If the small state of Victoria can establish with a very small staff an effective operation that can deal with a multitude of things with great success, we should consider very carefully whether we can do better and greater things. This series of government amendments is very welcome, and I hope that in reviews over years to come they will consider other areas as well.
Baroness Neville-Rolfe
I thank the noble Lord for his comments, and particularly for the points that he made about confidentiality, which obviously is a very important issue. In relation to possible further amendments, this is to some extent contingent, but we want to make sure that there are appropriate provisions on matters such as pensions. We may have to return to this and we may not—but we will obviously write to the noble Lord and explain what we are doing.
“Commissioner and Deputy Commissioners not civil servantsService as the Commissioner or a Deputy Commissioner is not service in the civil service of the state.”
Lord Mendelsohn
My Lords, we support the thrust of the argument presented by the noble Lord, Lord Stoneham, that it is very important to put some significant measures behind the attempt to arrest late payments. We are supportive of the Small Business Commissioner trying to do something, but we are realistic that the evidence and pattern demonstrate that it will insufficient.
I will identify one particular aspect. I am grateful that the Minister wrote to me about late payment data—a matter that we discussed in Committee. Late payments are already defined in law, and that definition has been largely in force since the introduction of the Late Payment of Commercial Debts Regulations 2013, which amended the Late Payment of Commercial Debts (Interest) Act 1998. This establishes that, where a public authority purchases goods or services, statutory interest—the determination that there is a late payment—will start to run on an outstanding payment from 30 days after the supplier’s invoice is received. For other organisations and businesses where a payment period has not been agreed, statutory interest will start to run on outstanding payments from 30 days after the supplier’s invoice is received. Where a payment period is specified in the contract, statutory interest will start to run from that date. However, if the agreed payment period is more than 60 days after the events listed, the regulations state that statutory interest will begin to run from 60 days.
The important principle is that we have already established in law that, as far as we are concerned, late payment arises, at a maximum, at 60 days in relation to private sector organisations. I say that largely because we have had a variety of data problems regarding the extent of late payments. I am extremely sceptical about the data on which the department is relying—namely, the Bacs data on late payments. The reason I am sceptical is that that body makes it absolutely clear that it considers late payment to be 30 days after the agreed payment date between two parties. Even if you have a payment date of 90 days, Bacs will only consider a period of 30 days after that as being a late payment, so it purposely excludes all those other payments which are technically defined as late payments under the existing law. That is why the Bacs figures always come out as significantly lower than those of any other survey. In fact, over the last three months, the range of late payments is identified as being between £41 billion and £61 billion. Bacs identifies the sum owed to small businesses as £26 billion. I do not think that those figures are reliable. We should deal with the problem that we have defined in law—namely, that a late payment is a late payment after 60 days.
This is an important amendment as it tries to give a sense of the extent of late payments that we have to deal with and the measures that we and noble Lords throughout the House believe are required to arrest that situation. The velocity of the increase in the incidence of this problem continues to rise without any material abatement.
It may be useful to give a real-life example to illustrate whether soft or hard measures are required. In December 2013, Debenhams was roundly condemned when the chief financial officer, Simon Herrick, sent out a so-called “Santa tax” letter to suppliers just eight days before Christmas imposing a unilateral 2.5% cut on their prices. At the time, analysts saw that as a last-minute attempt to boost falling profit margins. In January 2014, the store chain issued a profit warning, following a disastrous Christmas trading period, and the CFO resigned. He had previously come under fire in October, when Debenhams’ half-year results revealed that it had spent an astonishing sum moving its headquarters to a very opulent site in Regent’s Place, Euston. Analysts and investors said that the scale of these costs had not been flagged and that the £25 million refurbishment of the Oxford Street store was completed just in time for Christmas but had caused considerable disruption to trading.
Over the intervening period there have been complaints about the continued extension of Debenhams’ payment terms. It was a real concern to read that the Federation of Small Businesses rightly criticised Debenhams after it emerged that the department store chain was asking for discounts in return for making earlier payments. In fact, Debenhams insists on a reduction of nearly 2% in suppliers’ prices in exchange for making payments 30 to 60 days earlier. That gives noble Lords some idea of the extent of its current policy on payment terms. This is the second time in three years that the retailer has unilaterally proposed changes to suppliers’ payments in the run-up to Christmas.
I was very interested to hear the noble Baroness, Lady Wheatcroft, say that PR and publicity drive culture change which changes behaviour. I do not think there has been a company more in the headlines for its poor practices on changing suppliers’ prices than Debenhams but that has not changed that company’s behaviour one bit. It has done exactly the same thing again. I am a student of some great public relations practitioners. Indeed, we have such a practitioner in this House in the person of the noble Lord, Lord Bell. He has always made the great point that good PR is always founded on substance. That has a strong part to play in the issue we are discussing. Clear adherence to regulation will determine whether or not change will happen. It will not be determined by whether or not companies can withstand a bit of poor publicity. The noble Baroness, Lady Wheatcroft, referred to the glare of warm publicity surrounding Lidl’s decision to pay its staff the living wage and said that that demonstrates that all is well. I would be interested to hear whether she knows the payment date terms that Lidl applies. They are extremely long. In fact, Lidl has been roundly criticised for them. Clearly, one bit of glaring positive publicity does not obviate or change the culture of the company.
It is important to note that the amendment contains a variety of significant powers. In fact, it is a few amendments pushed together into one, as those who attended any of the Grand Committee sessions will know. We have done this to make the point in a number of ways that we are failing to address some of the most serious principal issues, the first being that, despite there being a clear law that allows people to charge interest, they do not do it for fear of retribution. Despite having clear rules about payment terms, people still do not adhere to them because they can get away with it by unilaterally determining a payment term. Even when companies extend payment terms to, for example, 120 days, as many do, they will not be able to charge interest for fear of retribution.
We also have a huge concern about the variety of ways in which companies add terms, unilaterally change terms and create the sorts of commercial arrangements that penalise small businesses, because they can get away with it. Be it marketing charges or warehousing costs, a variety of methods are used to reduce the amount outstanding to a smaller business. All those sorts of matters act as a massive impediment to the growth and development of small businesses. Frankly, even if it is not about growth but about justice for someone trying to run a small business and having to make sure that they do not suffer the terrible consequences of trying to borrow on credit cards—as far too many do, and they suffer enormous costs for doing so—when a large supplier fails to live up to its side of the bargain and the small business has limited options with which to address it, these are the matters that we need to address. It is the sheer size of the problem that we have to address, and there are a number of ways in which this can be done.
Our amendment suggests that the Small Business Commissioner can play a useful role, although not the only role. We also support measures in their own right to try to ensure that it is the obligation of the larger company—or indeed anyone who owes money—to pay it and not to have to be chased. In our view, it is not going to be a question of whether, in dealing with 500 cases and having a very active press officer, the Small Business Commissioner will be able to make a dent in £40 billion, £50 billion or £60 billion-worth of late payments. He or she has to be able to make sure that we build a culture whereby if you are meant to pay, you pay.
Baroness Neville-Rolfe
My Lords, I thank the noble Lord, Lord Stoneham, for his explanation, and my noble friend Lord Cope for his helpful comments. Of course, we have already discussed the commissioner’s remit and functions, and the reasoning underpinning the policy ethos and architecture in the Bill.
I can see the intention behind Amendment 11 but it is not in the spirit of these measures to fine businesses for failing to implement the commissioner’s recommendations. Rather, the Government believe it is vital that the commissioner builds a position of trust and influence with all parts of the business community. We strongly believe that powers to fine would undermine rather than enable this approach. Fines would not help solve the dispute or encourage a change in payment culture. Faced with potential fines, large companies would inevitably start to employ expensive legal teams and feel compelled to withhold information on payment practices on the basis of legal advice. All this would make it more intimidating for small suppliers to complain, especially if they want to maintain their commercial relationships. Our stakeholders, such as the Federation of Small Businesses, agree and are not calling for this approach.
The commissioner will have the discretion to report publicly on individual cases, providing the sunshine of transparency on payment issues, and to do so more often and in a more high-profile way than we have been able to do. I know from my own experience in several sectors that this will provide a strong incentive for businesses to engage constructively with the commissioner’s inquiries and seek to satisfy him or her. We have seen this approach work well in Australia and I am sure that it will work here, too.
The commissioner will make non-legally binding determinations, which may include recommendations about how the parties involved in a case could resolve the dispute or how to avoid such issues occurring in future. The commissioner will be considering whether an act or omission was fair and reasonable, in the given circumstances. To allow the commissioner to impose fines would effectively allow him or her to create rules on what is and is not good payment practice—quasi-legislating. This is not the role of the office.
“(5) Before making regulations under this section, the Secretary of State must consult—
(a) the Small Business Commissioner (unless that office is vacant),(b) such other persons as appear to the Secretary of State to be persons affected by the regulations, and(c) such other persons as the Secretary of State considers appropriate. (6) If, as a result of consultation under subsection (5), the Secretary of State considers it appropriate to change the whole or part of the proposed regulations, the Secretary of State must carry out such further consultation with respect to the changes as seems appropriate.”
“Regulations under section 11: procedure
(1) In this section “regulations” means regulations under section 11.
(2) If after consultation under section 11, the Secretary of State considers it appropriate to proceed with the making of regulations, the Secretary of State may lay before Parliament—
(a) draft regulations, and(b) an explanatory document.(3) The explanatory document must—
(a) explain why the Secretary of State considers that one of the conditions in section 11(1) is met, and(b) contain a summary of representations received in the consultation.(4) The Secretary of State may not act under subsection (2) before the end of the period of 12 weeks beginning with the day on which the consultation began under section 11(5).
(5) Subject to subsections (6) to (13), if after the expiry of the 40-day period the draft regulations laid under subsection (2) are approved by a resolution of each House of Parliament, the Secretary of State may make regulations in the terms of the draft regulations.
(6) The procedure in subsections (7) to (10) applies to the draft regulations instead of the procedure in subsection (5) if—The Secretary of State must have regard to—
(a) either House of Parliament so resolves within the 30-day period, or(b) a committee of either House charged with reporting on the draft regulations so recommends within the 30-day period and the House to which the recommendation is made does not by resolution reject the recommendation within that period.(a) any representations,(b) any resolution of either House of Parliament, and(c) any recommendations of a committee of either House of Parliament charged with reporting on the draft regulations,made during the 60-day period with regard to the draft regulations.(8) If after the expiry of the 60-day period the draft regulations are approved by a resolution of each House of Parliament, the Secretary of State may make regulations in the terms of the draft regulations. If after the expiry of the 60-day period the Secretary of State wishes to proceed with the draft regulations but with material changes, the Secretary of State may lay before Parliament—
(a) revised draft regulations, and(b) a statement giving a summary of the changes proposed.(10) If the revised draft regulations are approved by a resolution of each House of Parliament, the Secretary of State may make regulations in the terms of the revised draft regulations.
(11) For the purposes of this section regulations are made in the terms of draft regulations or revised draft regulations if they contain no material changes to their provisions.
(12) In this section, references to the “30-day”, “40-day” and “60-day” periods in relation to any draft regulations are to the periods of 30, 40 and 60 days beginning with the day on which the draft regulations were laid before Parliament.
(13) For the purposes of subsection (12) no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than four days.
(14) Regulations are to be made by statutory instrument.”
Lord Curry of Kirkharle (CB)
My Lords, I remind the House once again that I chair the Better Regulation Executive and clearly have an interest in this subject. I compliment the noble Lord, Lord Mendelsohn, on his eloquent speech, because we—the BRE—absolutely agree with the tenor of what he said. I shall comment on Amendment 17.
At the beginning of the coalition Parliament, when the BRE embarked on the one-in, one-out process, as your Lordships will be aware, we reported every six months on our progress. Initially, we did not include the impact of EU regulation in that six-monthly reporting process. It was precisely because we became very concerned that we were potentially misleading the business community by not highlighting the impact that EU regulation was having on it that we then, part-way through that process, declared through the RPC’s reporting mechanisms the cost as we understood it of EU regulation and its impact on the business community. Yes, the cost of EU regulation in the previous Parliament largely equated to the savings that we achieved through our domestic one-in, two-out process, but the reason for our declaring that through the RPC is precisely why the noble Lord raised the subject this evening: because we did not want to mislead the business community.
Our policy has been to work in Brussels to try to encourage the same transparency and to apply the same principles there of setting a regulatory budget. We encourage the Commission, the Parliament and the Council to adopt the same policies as we have adopted here, and to work with other member states, seeking their support through agreement to sign up to these principles. We have made significant progress there, although it has to be said that we have not quite achieved that budgetary process yet. But in our view, that is where we should now target our resources to address the cost of EU regulation.
Baroness Neville-Rolfe
My Lords, I start by associating myself with the comments of the noble Lord, Lord Mendelsohn, about the noble Lord, Lord Stevenson. I am so glad to see him back and on the road to recovery.
This part of the Bill is about transparency and accountability, and about asking regulators to assess the impact of their work for the business impact target and to report on the effect of the Regulators’ Code and the growth duty.
I was glad that my noble friend Lord Lindsay was able to bring his great knowledge of regulation and of being a regulator to this debate. Of course, the RPC assesses the impact of EU regulation, as we discussed in Committee, but this is not taken into account in checking against the business impact target. We agree that the cost to business of EU legislation should be transparent, but the SBEE Act already achieves that. I cannot agree that those costs should now automatically be added to the target.
As a Government, we are rightly held accountable for the impact of our regulation on business. We should therefore focus the target on the measures that we are wholly in control of, not on EU regulation. That needs to be dealt with at source. As the Prime Minister’s recent letter to Donald Tusk made clear, the Government will continue to press the Commission to introduce a target to cut the total burden on business. This could include stock as well. The European Council and Parliament have already made similar calls on the Commission for burden-reduction targets, so this is under active discussion.
Amendment 18 provides for publication of guidance regarding qualifying regulatory provisions—measures which will score in the business impact target—but Section 21 of the SBEE Act already requires the Government to publish their determination of qualifying regulatory provisions and the methodology for assessing their economic impact.
The noble Lord, Lord Mendelsohn, said that Amendment 18 required a review of the stock of regulation. That is not how we read it, but I do not think that that matters for today’s purpose. The Government agree that the stock of regulation should be reviewed regularly. In the previous Parliament, Red Tape Challenge reviewed thousands of regulations, and our new programme of Cutting Red Tape reviews is continuing that work.
We will publish information regarding the operation of the target soon. I think that we have to do it by May, but I am hopeful that we will do it a long time before that. These documents will be laid before Parliament, which can debate them if it chooses to do so. The SBEE Act already requires annual publication of a list of all provisions outside the target, and the Bill will add to that a summary of other regulatory activity outside the target.
Turning to Amendment 38, I note that the duties in this part are aimed at ensuring that regulators are open and transparent about the impact that they have on the businesses that they regulate. This enables them to be properly held to account. I understand the concern about the impact of these measures on regulators’ capability and capacity. We agree that these duties should operate proportionately; we do not, of course, want to overburden regulators or, indeed, the RPC. I agree with my noble friend Lord Lindsay that the RPC’s involvement could actually help to make the job easier because of the good systems that it has developed, the way that it approaches analysis and the way that that can be spread across the public sector.
Our initial impact assessment suggests that the transparency obligations that we are introducing here will cost less than £1.5 million across all 65 regulators. That is less than 0.1% of their total budget for regulatory activity. Of course, if our implementation were to lead to disproportionate cost, we would look at the approach again. I am absolutely sure that the costs of transparency will be more than outweighed by the benefit. The discipline of assessing impact will encourage regulators to look at different options, including non-regulatory approaches and sharper targeting. They will be prompted to think harder about whether regulation is necessary.
Let me give an example. In 2013, the Environment Agency very sensibly voluntarily assessed the impact of a proposed measure on hydro power. When the agency board saw its own assessment, it concluded that the costs did not justify the benefits and withdrew the proposal, eventually bringing one forward that was much better. It was a benefit to both the businesses and the agency.
Reporting will encourage proper application of the Regulators’ Code. Section 2.2 of the code asks regulators to engage with business. Doing so could help regulators to find ways of regulating that are more effective and require less enforcement.
I understand concerns about costs; I always share them, but we are trying to keep those to a minimum and I am sure that the benefits will be considerable. I hope I have reassured the House that the transparency we seek is already provided for, and that the Government intend the duties to operate in a proportionate manner. The House has noted our plans for the business impact target and to publish more detail on that. I hope, in the circumstances, that the noble Lord will feel able to withdraw his amendment.
Lord Mendelsohn
I thank the Minister for that reply. We share a view that regulators can act better; and we support the establishment of these targets, as we expressed in Grand Committee. We have also said on many occasions previously that two of the major flaws in the operation of the regulators are that they have taken insufficient care to ensure that they inform those that they are regulating—or consumers or small businesses—and that they do far too little to ensure that compliance is both widespread and as easy as possible. That is certainly something that we hope that the business impact target will help to achieve; but if they saw that mission as more central, we would regard that as useful.
I am sorry that the noble Earl, Lord Lindsay, thought that we were sceptical. We were just generally making the case that you can do two things at once. I am sorry if it came over as scepticism. In general, I was rather more convinced by the contributions from the noble Earl, Lord Lindsay, and the noble Lord, Lord Curry, than I was by that of the Minister in terms of the right approach, as we look at a deregulatory push as we move on. I am grateful to them both for their contributions. The noble Lord has made a very strong effort to ensure that better regulatory activity does something to try to address the problems that we have from Europe. He has been quite effective in that role, and I wish him continued success in it.
The Minister is acutely aware of my scepticism about the calculations that you net out with at the very end of calculating the reduction in regulation. In general, it would be much more convincing and I would be much more comfortable if the overall objective was to establish, including EU regulation, a net-negative target. I appreciate that that is not present in the amendments. Overall, we should establish that there is a saving of a figure once you have netted out both. We can make a greater difference on those things that we can control. It is a source of some regret that, in the last Parliament, the RPC figures suggested that the overall regulatory burden was somewhere close to half a billion pounds more. If we establish that our target is to be significantly under, then we have a way that marries both together. In many ways, I thank the noble Earl, Lord Lindsay, for some of his observations on all the amendments.
Baroness Neville-Rolfe
My Lords, I thought it would just be worth adding, in relation to the last Parliament, that a large chunk of the EU costs—nearly £2 billion—related to EU regulation introduced to address systemic financial risk following the crisis. I do not think that the noble Lord disagrees with that, but it is an important background point.
Lord Mendelsohn
I thank the Minister for that. Indeed, it made the case for a very large part of the speech that I made earlier about the importance of regulation. I am not suggesting for one moment that there is no case for regulation: I hope that I was making quite the opposite case. I happen to think that establishing a regulation to deal with the consequences of the financial crisis is a particularly good form of regulation. Overall, however, if you can calculate the number—whatever its merits or demerits—the Government should be establishing themselves as promoting a net-negative figure rather than accepting that whatever they do in their own right is sufficient.
I thank the noble Earl, Lord Lindsay, for his support, and I tend to agree with him. An annual health check is a much better idea: we were trying to be reasonable, but that is the best idea. I also thank him for an even better idea—that, rather than the RPC, the Better Regulation Executive is a much better body to take on that role. When drafting the amendment, we were just trying to make sure that we did not add anything to the Small Business Commission in case the noble Lord, Lord Cope, got even more exercised at the breadth and range of activities that we were proposing to give it, but I think that the Better Regulation Executive is the right body. To the Minister, the noble Earl and the noble Lord, Lord Curry, I say that if we can make a modicum of progress on some of these matters—if there were some measures that would enhance our deregulatory shift—I would be very happy to support what the Government might bring forward at Third Reading. I beg leave to withdraw the amendment.
Baroness Neville-Rolfe
My Lords, during Second Reading, noble Lords expressed concern at the Government’s intention to include the Equality and Human Rights Commission in the business impact target. They felt that it would put at risk EHRC’s international accreditation as an “A” status national human rights institution. In Committee, there was further debate regarding the EHRC’s international accreditation and the effect of its activities on business. Since then, I have had a very constructive meeting with the noble Baroness, Lady O’Neill, chair of the EHRC, and her officials. That meeting showed that the Government’s and EHRC’s objectives were closely aligned. The EHRC indicated a very welcome desire to assess, and be transparent about, the impact that changes to its regulatory activities had on business, and to have those assessments validated by the independent Regulatory Policy Committee.
The Government have no desire for the EHRC’s inclusion in the business impact target to pose a risk, whether real or perceived, to its “A” status as a national human rights institution. The business impact target does not fetter the independence of the EHRC, or indeed any regulator, to make its own decisions in relation to the changes it introduces, but the Government have listened to the EHRC’s concerns and recognise the value attached to its international standing.
The amendments to Clause 13 and Schedule 2 amend the reporting requirements of the target for all regulators that are in scope. They will require regulators to publish required documents relating to the regulatory activities that they have undertaken in an annual reporting period, rather than providing them to the Secretary of State. Cutting this direct reporting link to the Government will both mitigate any risk to the EHRC’s “A” status and offer some comfort to other regulators that their independence is not at risk either. Vitally, it will deliver the Government’s objectives of transparency around regulatory impacts to business.
In addition, Amendment 37 removes the EHRC in particular from the duty to provide a Minister with certain information relating to the effect of the regulators’ code on the performance of its functions. We accepted, as a result of our discussions with the EHRC, that there may also be a risk here to its international standing and this amendment will mitigate that risk. I beg to move.
Baroness Hayter of Kentish Town (Lab)
I thank the Minister for introducing these amendments so clearly and for the discussions she had. As she made clear, the key issue is obviously the protection of the EHRC and excluding it from the requirement to report on the impact of the Regulators’ Code. As she said, we debated this at Third Reading of the small business Bill when she accepted its special case. I just ask the Minister to confirm that these proposals meet the aspirations that she set out at that point to eliminate all risk of the EHRC losing its “A” status.
We know that the EHRC has welcomed the amendments tabled today. It considers that they will deliver the Government’s intention of improving transparency while safeguarding its ability to carry out its statutory functions free from government control or direction. Also, the EHRC welcomes the Minister’s assurance that the commission will not be subject to the growth duty.
On Amendment 37, the commission seeks assurances that the new business engagement requirements will be proportionate, allowing for the existing engagement mechanisms such as its routine contact with business organisations and its two-yearly stakeholder survey to be used to fulfil these requirements wherever possible. Subject to those reassurances, which I anticipate that the Minister will be able to give, from our side we are happy to support these amendments.
Baroness Neville-Rolfe
My Lords, I am grateful to the noble Baroness for her comments. All risk in relation to the proposals in this Bill has obviously been dealt with; the accreditation or reaccreditation is a wider matter. We sought to take on board the will of the House and talked to the EHRC. We dealt with the provision we were worried about at Second Reading and tabled the first amendment, which, as I said, applies more broadly. As a result of the discussions, we also tabled Amendment 37 because we identified with the EHRC a further possible risk. Certainly, we plan to manage the arrangement in a proportionate fashion.
My understanding is that the EHRC has signalled that it is content, but if the noble Baroness has reason to think that that is not the case I am obviously very happy to try and sort things out with the noble Baroness, Lady O’Neill, again. My impression is that it is very pleased with the changes that we have made and the process that we have gone through.
Lord Curry of Kirkharle
My Lords, I am moving a small, technical amendment to correct a drafting error in the Small Business, Enterprise and Employment Act 2015. This came to light as departments included the statutory review clause for legislation being introduced in this Session.
An important and often overlooked part of the better regulation agenda is reviewing legislation that impacts on business on a regular basis to see if it is working, is cost effective and continues to be needed. That is a really important principle. The Small Business, Enterprise and Employment Act strengthened the previous system of reviews through a statutory duty requiring Ministers to include a provision in secondary legislation to review the legislation. Where this is not considered appropriate, Ministers need to publish a statement. Once the legislation is in force, the Minister must carry out a review of the legislation within five years. These reviews are published as a report. They look at the legislation to see if it has worked, continues to be needed and is cost effective. Recommendations will be made around keeping the legislation as it is, repealing it or amending it to make it more cost effective and less burdensome to business.
This duty applies both to domestic and EU-derived legislation. For EU-derived legislation there is a requirement to look at how other EU member states implemented the directive to ensure that how it is implemented in the UK does not put British business at a competitive disadvantage. As part of that exercise, it is clearly sensible for the comparative process to embrace other member states which are most relevant from a UK perspective, bearing in mind the nature of the activity subject to regulation. For example, in many cases there may be more to be learnt from member states that have a broadly similar institutional and regulatory structure to us in the UK, or where the scale of activity is comparable to that found here.
My amendment helps achieve that outcome by correcting a drafting error. The Act introduces a “the” in front of “other member states” in Section 30, where it says,
“have regard to how the obligation is implemented in the other Member States”.
This unfortunately implies that in their reviews, departments must look at all the other EU member states. Clearly, that would be very burdensome and was never the intention. I therefore propose to remove “the” and add “so far as is reasonable” to the requirement to ensure that departments are able to carry out their reviews in a proportionate way and are not open to judicial challenge. I thank noble Lords, hope the amendment will be supported and beg to move.
Baroness Neville-Rolfe
My Lords, I am glad to be able to take this opportunity to thank the noble Lord, Lord Curry, for his great work on deregulation. “Intelligent regulation” was the phrase used by the noble Lord, Lord Mendelsohn, and that applies here. I also associate myself with earlier comments that he made about the Better Regulation Executive, which is the dynamite behind the Red Tape Challenge.
I thank the noble Lord for proposing this amendment. It is supported by the Government. The principle that new regulation should be kept under regular review is widely supported, but I accept the noble Lord’s argument that it is important that these reviews are carried out in a proportionate manner. In the case of EU measures, that must mean focusing the comparison on those other member states most relevant from our perspective.
Baroness Neville-Rolfe
My Lords, Clause 17 sets out the framework for a new and improved Primary Authority to enable more businesses to participate. The scheme is already very popular, with more than 8,000 Primary Authority partnerships in operation. The changes that we are making to the Primary Authority scheme in this Bill will make it easier for more small businesses to access consistent, tailored and assured advice that they can rely on, giving businesses greater confidence to invest and grow. The government amendments, suggested by parliamentary counsel, are minor and technical, and correct minor drafting discrepancies, meaning that the drafting is consistent throughout the new clause. Making these changes will ensure that the legislation is clearer and easier to understand for users of the Primary Authority scheme, with whom we have been discussing the Bill. The underlying policy and effect of the clause is unchanged. I beg to move.
Baroness Warwick of Undercliffe (Lab)
My Lords, I take the opportunity of this amendment to say that I was most grateful to the Minister for her reassurance in Grand Committee about the measures that the Government will bring forward to allow housing associations to become private sector bodies again following the statement by the ONS. It is hoped that those measures will take housing associations out of the scope of this duty. Will the Minister say how she plans to take account of the Government’s commitment when preparing the consultation on those bodies that will fall within the scope of that duty, and will she clarify when the consultation will take place?
Baroness Neville-Rolfe
My Lords, I am grateful not only to the noble Lord, Lord Mendelsohn, but to the noble Baroness, Lady Sharp, and the noble Lord, Lord Young, for their comments and to the noble Baroness, Lady Warwick, for taking us back to Committee and the issue about housing associations. I am rather hoping that somebody from the Box will be able to let me answer her question about timing before we finish, but if not, I will write to her separately.
This group of amendments would require the public sector target to apply to high-quality and high-level apprenticeships and would differentiate between new and existing apprenticeships. I have spoken previously during the passage of the Bill about how the Government are committed to ensuring that all apprenticeships are of a high quality, and that is central to our reforms. So there is common ground here.
Having said that, we had a very good discussion in Committee, but, rather like Amendment 52, which the noble Lord, Lord Stoneham, sensibly did not move because of today’s events in the spending review, discussion on quality has, I think, been overtaken to some extent by today’s announcement in the other place by the Chancellor that the Government intend to establish the institute for apprenticeships. That will be central to the discussion of this area, and I hope that this independent new quality body will be welcomed once people understand in detail what is proposed.
It is against that background that I will try to respond to the debate this evening. First, in response to the noble Lord, Lord Mendelsohn, we are committed to an apprenticeship programme that is for all ages and all sectors. All apprenticeships should be quality apprenticeships. As the noble Baroness, Lady Sharp, made clear, all apprenticeships, whether they are level 2 or level 3, offer benefits and obviously should be of appropriate quality. We believe that they are an important step into the labour market and provide very valuable jobs in the economy. For example, recent research shows that adult apprenticeships at level 2 deliver £26 of economic benefit for each £1 of government investment. We must not lose that.
Employers are developing new standards to meet the skills of their sectors. The trailblazer quality statement sets out a range of measures to improve quality, including a minimum duration of one year, and must involve substantial on-the-job and off-the-job training. Training providers are also registered to ensure that they can provide good-quality services, and we are creating more degree apprenticeships.
The current employer-led apprenticeship trailblazer programme has rightly put employers in the driving seat, determining what constitutes quality. However, to deliver a genuinely world-class apprenticeship programme, it is widely agreed that we need a long-term arrangement that will support employers to uphold the high quality of apprenticeship standards and—I think this is an important point—to be able to respond to the changing needs of business, technology and society. We are therefore establishing a new employer-led institute for apprenticeships, as I have just explained. That will set the standards and ensure quality, and we anticipate that it will be active from 2017 onwards.
I would like to respond to the point that the noble Lord, Lord Mendelsohn, made about bureaucracy; as he knows, that is something against which I am as keen a campaigner as he is. That is something that we need to have regard to in this process. However, the good news is that the body will be independent. It will put employers at the heart of ensuring a sustainable governance arrangement to uphold high-quality apprenticeships and respond to the changing needs of business. We intend to introduce legislation to deliver the institute for apprenticeships, and further details will be made available in due course.
I turn to the amendment from the noble Lord, Lord Young. We do not think it necessary for the public sector target to differentiate between new and existing employees. The public sector duty and the apprentices levy will encourage the public sector to identify talent from diverse backgrounds across their organisations. It will help many people, new starts and existing staff, to learn new skills and achieve their potential. Apprenticeships are of course not just for young people entering the world of work. To my mind, there is value to both employer and apprentice when anyone takes up an apprenticeship as they change roles, get promoted or start a new, demanding role within their organisation.
The noble Lord, Lord Mendelsohn, asked about the impact on local authority schemes, which are a good entry route. Our approach to the apprenticeship programme will be not to undermine local authority-supported schemes that help to create entry routes into apprenticeships. Indeed, we believe that such schemes—for example, traineeships and the Prince’s Trust—are also important. With regard to the end-point assessment in local authorities, we do not currently plan this but we welcome input on the role of the new institute from all stakeholders, and I will pick up the noble Lord’s point about bureaucracy.
The noble Baroness, Lady Warwick, asked about the timing of the housing association consultation. We plan to bring forward the consultation by the end of the year.
Finally, in response to the noble Lord, Lord Young, I think that I have already explained and engaged on the question of whether apprenticeships should be new jobs. I think we agree that apprenticeships are paid jobs for people of all ages and are dependent on employers offering opportunities. They offer a substantial way of building a workforce with the skills that people need to succeed, and offer substantial training to ensure that apprentices gain significant new skills. I am conscious that the noble Lord is a great expert on apprenticeships and I look forward to his input.
Lord Young of Norwood Green
Frankly, given the large number of what are described as adult apprenticeships, I think that we should distinguish, but I can see that I have not won that particular argument.
I could not help reflecting on the point that the Minister made about the institute and apprenticeship standards. It will guarantee the quality of standard but not the quality of delivery, and that is the challenge—that is where things can sometimes go badly wrong. I am not opposed to the new institute. I merely say to the Minister that if the Government are going to increase the numbers and the volume that they are talking about and they are successful in doing so, the challenge will still be to ensure that every single employer is delivering a quality apprenticeship.
We know we have had experience in the past where that has not been the case. The Government have changed the definition of what constitutes an apprenticeship, the timescales have been altered and so on, but that does not mean that there is no element of risk there. I say that in a constructive way. The Government need to think through very carefully how they are going to ensure that the quality of the training provider and of employer delivery will match what they believe defines a quality apprenticeship. If they do not, they will not attract into apprenticeships the kind of people that we need to attract. We need engineers and people working in construction, and we need more young women going into those areas. To do that, you need to create an environment where people feel that they are entering a quality area of employment.
Baroness Neville-Rolfe
I thank the noble Lord, Lord Young, for his constructive comments. He is right to explain that there could be difficulties and that it is important that we ensure quality as well as set quality standards. I apologise to the House that, as it were, an announcement tumbled into our Report stage today, but that is the way of the world. I emphasise that the issue of the institute and how we ensure quality is work in progress, as is the question of the levy. There will of course be further discussions on all this, and appropriate consultation processes are continuing. However, I hope that the provisions in the Bill on apprenticeships, limited though they are, will prove fruitful and helpful. I hope that the noble Lords have found my explanation helpful and, on that basis, will feel able to withdraw their amendment.
Lord Mendelsohn
I thank my noble friend Lord Young for his excellent contribution to this debate. He always makes extremely important points on apprenticeships. My noble friend Lady Warwick also made an important contribution on housing associations.
I congratulate the noble Baroness, Lady Sharp, on her extremely impressive summation of the core issues here. She made the point that in many ways we have apprenticeships that are a progression, and it is important to take skills all the way through. It is important to emphasise again that in relation to these measures we are looking not to deride or exclude but for a balance. We made comments earlier about programmes to move people on to apprenticeships, so we can see the value in all this. But the noble Baroness made the point that in this country, on the schemes that we currently have, we have a massive deficiency at levels 4 and 5, and that is our core problem. Now that we have the opportunity of using the public sector to be able to increase the number of apprentices, it is for exactly those reasons that the public sector should lead and demonstrate its capacity to have a disproportionately high number of higher-level apprenticeships.
I am bound to say that I heard the announcement of the establishment of an institute for apprenticeships, but I am not compelled that it has much relevance to this debate—it is more targeted towards the private sector. Who knows—given the many announcements that the current Chancellor tends to make, some officials may be working busily away on what was merely a couple of lines of notes, and perhaps in due course sufficient expertise and brilliance on the part of the officials will be brought to bear and it will become relevant. However, as it currently stands it has no relevance to where this is.
I emphasise that we think this is significant because the Bill is in front of us now. We support the move towards increasing the number of apprentices and using them as a method to deliver growth, fulfilling lives and well-being to our citizens. It is absolutely core to our being that we provide them with the necessary skills. The public sector can and should take the burden of ensuring that we have the right blend of apprenticeships, and we can do that now by amending the Bill. It is important that we take that chance. I beg leave to test the opinion of the House.
Lord Harris of Haringey (Lab)
My Lords, I, too, rise briefly to speak to Amendment 60. I appreciate that there has been very substantial progress on this. It does highlight, though, the automatic tendency of government, when something needs to be enforced, to say, “Why don’t we ask trading standards to do it?”, without any thought about who in practice is going to be able to do so. I declare my interest, in being chair of National Trading Standards, although this is about local trading standards. Local authority trading standards departments have on average already faced reductions of 40% to 50%, and they may well be—we all wait to see what the implications of today’s figures are in practice—facing substantially more. They already have had a very large number of duties placed on them, couched in similar terms to this, and the Government keep adding to the total.
Perhaps when she responds to this group of amendments and explains the solution that has been found in terms of this particular additional requirement, the Minister might tell us what arrangements the Government are going to put in place for all the other duties that are placed on trading standards departments to make sure that they can be effectively delivered. Indeed, perhaps in passing, she might want to tell us the precise number of duties and pieces of legislation that trading standards departments are expected to enforce.
Baroness Neville-Rolfe
My Lords, I thank the noble Baroness, Lady Sharp, for her support for the Government’s new procurement rules under which, on big projects—a £10 million project lasting for more than 12 months—an apprenticeship commitment is now required in the contract.
Amendment 57 seeks to allow for the employment of apprentices by subcontractors of a public body to be included in targets set for the public body, and for a public body to be able to set apprenticeship targets for its subcontractors, as defined in Amendment 59.
Amendment 60 removes the enforcement duty on local weights and measures authorities for protecting the term “apprenticeship” from misuse. In order to meet the 3 million starts commitment, I agree that the public sector needs to do its fair share by employing more apprentices. As I said before, my own Bill team is leading by example, with an excellent apprenticeship, and I take the point made earlier by the noble Lord, Lord Mendelsohn, about levels.
It is important that the public sector seizes the real value and benefits that apprentices of all levels can bring to their organisations. This modern approach will allow it to develop internal talent, answer ongoing business needs and develop existing staff. However, I fear that Amendment 57 could put this ambition at risk. It would enable public sector bodies that are captured by the duty to meet their targets via persons who supply goods and services to them.
I reassure noble Lords that the Government recognise that certain public procurement contracts can be a key means of upskilling workforces, but we do not believe that this is the right way to do it. Although the policy is currently mandatory only for central government, its agencies and non-departmental public bodies, all other contracting authorities are strongly encouraged to adopt the new approach. Many public bodies and local government already build skills considerations into their procurement on a voluntary basis. A decision was therefore taken not to introduce this in the wider public sector initially but, in the first instance, to take a voluntary and collaborative approach, learning from the sort of good practice that we discussed in Committee —we talked about Crossrail, and of course other big infrastructure projects are on their way.
Officials in the Department for Business, Innovation and Skills and the Crown Commercial Service will work together with officials in the Department for Communities and Local Government, the Local Government Association and local authorities to identify existing best practice and experience and bring forward further proposals for wider action in local government in 2016.
I now turn to Amendment 60. I am very grateful to the noble Lord, Lord Mendelsohn, for returning, after a bit of a bump, to happy collaboration on this Bill. I would also like to thank the noble Lord, Lord Harris of Haringey, for what he said. I go back with trading standards; as an official, I was responsible for the Food Safety Act, where we also managed to find some money for trading standards. I thank the noble Lord for the great work that he has done and that is done by trading standards right across the country. As he says, they are multitaskers with a vengeance and cover an enormous area. I understand the noble Lord’s point and, as I am sure he knows, government officials have been reviewing the burdens on trading standards. In due course, we will return to that subject.
In the mean time, I reassure the House, as has been said, that we intend to appoint and fund a lead local authority to carry out the enforcement of the measure on behalf of the Department for Business, Innovation and Skills. That has been discussed with the Trading Standards Institute, which agrees that this is the most sensible approach. We already know that this model works successfully for some functions, such as the illegal moneylending team which is based in Birmingham City Council.
I hope that the noble Lords feel that we have made progress in these areas, have found my explanation reassuring and, on this basis, will feel able to withdraw their amendments.
Baroness Sharp of Guildford
I thank the Minister for her reply. I rather expected it, but had hoped that perhaps in discussing the issue further with the DCLG and the Local Government Association they might have discussed this all-embracing amendment.
I did not see, if I may say so, my amendment as necessarily meaning that a public body could transfer some of its target to its subcontractors, which was a point the Minister made. In the amendment I moved in Committee, one of the points I made was that the target could be transferred. However, I do not see this amendment as providing for a transfer of targets. I see it very much as an additional target that could be set using the power of public procurement for some of these smaller contracts, which the public bodies concerned might find quite useful.
I recognise that there is a push on the part of the Government to get all public bodies to take on apprentices, and this is one that we very much welcome. As I said, the idea was really to do nothing but provide an extra nudge. I am sorry that the Government are rejecting this idea of the extra nudge. With that, I beg leave to withdraw the amendment.
Lord Mendelsohn
My Lords, I declare an interest as the joint president of a large charity that works with children with special educational needs, people with learning disabilities and a large number of vulnerable children and young people. I want to thank the noble Baroness, Lady Sharp of Guildford, for introducing this amendment, which we discussed in Grand Committee and which this side supports.
My personal experience is that we are finding it increasingly hard, especially with the funds available for the care sector, to move people with an opportunity to adopt skills into areas where they can lead more fulfilling lives. The burden on those charities is ever-increasing. If some of the apprenticeships available in the public sector could be targeted towards helping those people, it would be very helpful. The public sector is one of the few institutions that has the means, capacity and expertise to deal with this difficult, challenging role. I wanted to express our strong support for this proposal and thank the noble Baroness, Lady Sharp of Guildford, for raising it.
Baroness Neville-Rolfe
My Lords, as the noble Baroness, Lady Sharp, said, Amendment 58 is less specific than the amendment we debated in Committee, but its purpose is to impose targets on public sector bodies to specify a proportion of apprenticeships for young persons leaving care and young persons with learning difficulties or disabilities. Those are laudable aims, and I appreciate the way that the noble Lord, Lord Mendelsohn, shared his own charitable experience. But it is crucial that we ensure focus and simplicity for employers and do not deter them from hiring apprentices. It is a matter of principle for the Government that we should not mandate what type of person employers, whatever the sector, should be recruiting as apprentices. Apprenticeships are real jobs with training. Employers make the final decision about who they hire for any apprenticeships that they have advertised, and ring-fencing apprenticeships for particular groups would mean requiring employers to hire particular people for their vacancies.
Alongside the Department for Education, we will continue to promote opportunities for care leavers to receive extra support through traineeships and other study programmes. Among other things, we have introduced a personal adviser for every care leaver to support them until they are at least 21. In addition, full funding for apprenticeship training is available under existing frameworks for eligible 19 to 23 year-old care leavers. We are now extending this to cover the new apprenticeship standards and to care leavers up to the age of 24 from September 2016.
The Government will also publish, in spring 2016, a refreshed strategy to improve the lives and life chances of young care leavers. We anticipate that this will include the Government’s proposals to support care leavers entering the world of work in the coming years. We are committed to ensuring that apprenticeships are accessible to young people with learning difficulties or disabilities. We continue to look at how we can improve accessibility by working with key stakeholders, and have already taken steps to ensure that barriers preventing access to apprenticeships for those with learning difficulties or disabilities are removed.
To respond to the noble Lord, Lord Mendelsohn, as an incentive to employers, the Government fully fund apprenticeship training for all young people aged 16 to 18. This fully funded apprenticeship training is extended to eligible care leavers aged 19 to 23. A number of local authorities already prioritise support with apprenticeships for care leavers, which of course we encourage, and, where eligible, care leavers can also access programmes such as traineeships to get the support they need to get ready for an apprenticeship. They are flexible, so providers can adapt them to the needs of the trainee by including additional support such as mentoring.
There are examples of good practice and they have grown in recent years, to respond to wider needs. I believe that this amendment would take us down the wrong path. I hope noble Lords will understand how the Government have approached this and the things we are doing outside the framework of the Bill, and that the noble Baroness will feel able to withdraw her amendment.
Baroness Sharp of Guildford
I am grateful to the Minister for her reply. It is rather as I had expected. I acknowledge the amount of work that the Government are doing outside the Bill by promoting apprenticeships, particularly for these vulnerable young people. I hope they will continue to press public authorities to take their share of helping to train young people and give them opportunities. With that, I beg leave to withdraw the amendment.
Baroness Hayter of Kentish Town
My Lords, like the noble Baroness, Lady Noakes, we cannot support Amendment 61 as it would enable an insurer to rely on the fact that it is had received legal advice to bolster the reasonableness of its position where a consumer had sued for an unfairly refused or delayed claim. However, it would not have to disclose the contents of the advice to the court, as the noble Baroness said. We consider that this would be an unbalanced tussle between the insurer and the insured.
Surely, if insurers refuse to make the content of their legal advice public, they must set out their other grounds for any delay without relying on their legal opinion. That should be sufficient for courts to assess, objectively, whether the grounds for delay were reasonable in the circumstances. It would be slightly absurd to allow an insurer simply to say that it had received legal advice saying that its grounds for dispute were reasonable, without requiring it to disclose the substance of that advice. Indeed, it would put insurers with deep pockets to obtain expensive legal advice in an unfairly strong position compared with the policyholder.
The House will be aware that the Law Commission takes a similar line to ours on whether an insurer’s defence to a late payment being that it had “reasonable grounds” for disputing the original insurance claim could be bolstered by the assertion that a lawyer told it that it had such grounds. In the Law Commission’s view, whether the insurer had reasonable grounds is an objective question based on the grounds themselves, not on a lawyer’s letter. Indeed, the mere fact that it had received legal advice would have no evidential value. Surely, an insurer should not need to rely on its legal advice to prove the reasonableness of its position. Furthermore, it seems only fair for any such legal advice to become disclosable where a party wants to rely on the fact that it has received it to bolster the reasonableness of its position.
On Amendment 62, as has already been made clear, the Law Commission has written extensively on limitation periods. I have to confess that two colleagues present tonight have read all that in more depth than I have. During the insurance law project, the Law Commission considered recommending a special limitation rule in respect of late payment of insurance claims when it accepted that insurers with many claims would need certainty about when they could close their books on a claim. At that point, the commission decided that that was not the right way forward and that it was more consistent to recommend the application of general limitation laws. It said at the time that special limitation periods in particular circumstances add unnecessary complexity which can lead to further confusion and can disadvantage claimants.
Despite this, the commission, perhaps along with the noble Baroness, Lady Noakes, has some sympathy—the emphasis being on “some”—with Amendment 62, which sets out a measured change to the limitation period to give insurers more certainty about when they might close their books, knowing that their liability had been fully satisfied in relation to a particular claim. Although this could have the effect of shortening the limitation period for policyholders, possibly to their disadvantage, the commission also acknowledges that it is not an unreasonably short period and might even give insurers an incentive to make payments more quickly to start the one-year period rolling and we hopefully close that file.
We hear those arguments but remain to be convinced that this amendment is necessary, as we have seen no evidence of likely detriment, only assertion of it. We were particularly concerned that the Law Commission concluded that Amendment 62 would not “materially undermine” policyholder rights. That sounds a bit like some undermining of policyholder rights. Therefore, we look to the Minister to provide assurances on this point, should the Government be minded to consider this amendment further.
I am aware from what the noble Lord, Lord Flight, said that the insurers very much support this measure. Well, they would, wouldn’t they? I have not heard the same from policyholders. We agree that there is some sense attached to Amendment 62—although not to Amendment 61—although I think a little more evidence still needs to be produced before the Government take that fully on board.
Baroness Neville-Rolfe
My Lords, I am grateful to my noble friend Lord Flight for his comments and for the work done by the absent noble Earl, Lord Kinnoull. I am very grateful to my noble friend Lady Noakes for injecting realism into our discussion this evening. I agree that Clauses 20 and 21 are very important and overdue, and should improve London’s reputation, as the noble Lord, Lord Lea of Crondall, said.
The Government and the Law Commissions that first developed the clauses have been keen to find a solution which would satisfy all stakeholders, allowing the London market to support the provisions. I am grateful to the market for its continued efforts. The latest amendments proposed by industry stakeholders relate to the complex legal areas of limitation periods and legal privilege.
I will deal first with Amendment 61, but I should say at this point that the Government have more sympathy for Amendment 62, which I will come to. The starting position in both areas is that the default rules should apply unless there is a very strong justification for making special exceptions for particular circumstances.
Amendment 61 seeks to answer some insurers’ concerns that they will be forced to disclose legal advice they received in relation to the underlying insurance claim if they seek to show they had reasonable grounds for disputing that claim. Whether an insurer has reasonable grounds to dispute an insurance claim is an objective question, based on the substance of the grounds themselves rather than whether the insurer has received legal advice in relation to them. The insurer can establish these grounds without waiving privilege by setting out the grounds for dispute in its pleadings or by relying on the content of its correspondence with the policyholder.
Legal privilege is an important protection for parties, particularly during ongoing litigation. But the existing rules concerning waiver of legal privilege already balance the competing interests in the question of when legal advice should become disclosable. This amendment threatens to put policyholders at a disadvantage, which is not justified by a corresponding need on the part of insurers.
We have read the further legal opinion, which my noble friend Lord Flight kindly sent to me today. However, legal privilege is a complex topic which has been developed over the years by the courts and should not be changed in a specific context without very good reason. While I note all the work that has been done, the Government, like my noble friend Lady Noakes and the noble Baroness, Lady Hayter, are not convinced that such good reasons exist here. I therefore ask my noble friend to withdraw Amendment 61.
The Government have “some sympathy”, to pick up the wording quoted by the noble Baroness, Lady Hayter, with Amendment 62, which relates to limitation. Some insurers have argued that the vast number of claims they deal with on a daily basis means that they need to know when they have satisfied all their liabilities in respect of a certain claim. I agree that it does not seem unreasonable to expect a policyholder to bring a late payment claim within a year of being paid the substantive insurance claim or the final payment under it.
It appears that Amendment 62 would increase certainty for insurers without materially prejudicing policyholders. It might even have the effect of encouraging insurers to make that final payment, to commence the one-year period for any subsequent late payment claim and bring the matter to a close. If that were the case, it would, of course, be a benefit to policyholders.
To that end, I believe that the amendment at least deserves further consideration. I agree that the policy intention behind it might represent an improvement to the late payment clause, which could be in the interests of both policyholder and insurer. In the light of this debate, I would like to explore the details of this possibility further and to discuss it with all interested parties. In the circumstances, I hope my noble friend will not move Amendment 62.
Lord Flight
My Lords, I thank the Minister for her professional and courteous reply. I am grateful that the Government are willing to further consider the issues raised in Amendment 62. With regard to Amendment 61, I say simply that I hope the relevant individuals will read the Edelman opinion. The bottom line is that if Clause 20 goes through as it is, it opens the door to vexatious litigation. But I thank the Government for their response and beg leave to withdraw the amendment.
Baroness Neville-Rolfe
I thank the noble Earl, Lord Lytton, for his amendment, and, in particular, for his words and the work that he has done in this very complex area. Having said that, some very critical comments have been made this evening which seem unfair. I will, therefore, take time to go objectively through the amendments and respond where I am able to do so.
The experience of the noble Lord, Lord Mendelsohn, underlined to me the urgent need for reform. That is why we brought forward provisions in the Bill, the consultation and the modernisation and improvement plan for the agency. I will look into the point that the noble Lord made, on which I am not briefed, about the fact that the backlog seems to be increasing and cases are not being dealt with—but I am not able to answer that this evening.
Amendment 64 would allow the Valuation Office Agency to share HMRC information with ratepayers. Members of my team greatly appreciated the meeting noble Lords held with them to discuss these issues. A subsequent meeting has now been held with ratings agents and further meetings with businesses will follow. I understand that our proposals to address the high volume of ineffective appeals and delays under the current system have been recognised as worthwhile, not least in speeding up any refunds. We will continue to work with businesses to ensure that the new system is practical, workable and beneficial.
As the noble Lord, Lord Stoneham, said, we have been running a parallel consultation on implementation, in which we set out a clear and structured three-stage process. The consultation is still open and I am sure that the bodies mentioned this evening will respond. The reforms promote full and early engagement between parties. Factual information will be established during check stage, with arguments and evidence exchanged at the beginning of the second challenge stage—far earlier than happens at present. This significantly brings forward the point at which the Valuation Office Agency is able to provide information to address the ratepayer’s case.
Business rates are a unique tax which require the collection and holding of commercially sensitive information. This can include details of market deals such as rent-free periods or the treatment of fit-out costs—information that the landlords and tenants in question may well not wish to make available to their competitors. I note the concern about the Valuation Office Agency but we should abstract from that to some extent because it has a duty to protect information and the interests of the ratepayers must be taken into account. That is a fundamental principle of data protection and to override it and allow routine sharing of confidential information would undermine the basis of trust on which the system depends.
Amendment 66 allows the Secretary of State to regulate the operation of several aspects of the appeals system. I share many of noble Lords’ aims: to support small business, of course; to see high performance standards in the appeals system, which is obviously not fit for purpose at present; and to ensure that decisions are made quickly. I have some good news today for small businesses in that the spending review extended the doubling of small business rate relief for a further year. Given the discussions, particularly in Committee, noble Lords will also be pleased to hear that the Valuation Office Agency will now prioritise small businesses within the appeals system. Of course, the majority of rates are paid by larger businesses and they bring the most appeals, but I think we all agree that the small business interest is extremely important.
Performance is more appropriately addressed by a service-level agreement than in the Bill, and that is what we proposed in the consultation. The requirement for parties at every stage to provide specified information in a structured way will ensure that the Valuation Tribunal for England is able to deal with cases in a quicker and more efficient way. However, it would not be appropriate for Parliament to prescribe the operation of an independent judicial body, which is what would happen with the amendment.
The Government agree that ratepayers should be able to move on to appeal stage if no decision is forthcoming at challenge stage. The proposal for trigger points in the consultation paper will provide that right. The 18-month figure in the consultation paper is obviously longer than the six-month figure proposed by noble Lords. However, we have made a commitment to reduce that figure as the system develops and beds in.
Amendment 67 would remove the power to introduce the payment of fees at appeal stage. This is a fundamental part of our reforms, because it will increase the incentives for early and full engagement in the first two phases. It will promote quicker decisions and reduce costs for businesses, as well as helping to reduce the large number of speculative appeals, which I do not think anyone has mentioned but which clog up the system for everyone else. We need to get away from that.
In the three-stage process, there are no charges at check or challenge stage, where it is our expectation that the majority of cases will be resolved. We are also proposing that appeal fees will be refunded where appeals are successful. Discussions on these important matters will continue as part of the consultation process. The consultation closes on 4 January, and we will consult further next year on the draft regulations.
The Government are not, as the noble Lord, Lord Stoneham, implies, clamping down on taxpayer information. These measures introduce earlier information exchange and will help the ratepayer. The new system enables businesses to make the judgment on the basis of information provided at stage 2, before launching an appeal, which is stage 3. So the Bill addresses the information deficit, which I think is of mutual concern.
Finally, Amendment 65 changes Clause 22 to protect taxpayers’ information. Identifiable taxpayer information which is held by the Valuation Office Agency is exempt from FOI requests, but that exemption does not extend to information shared with local government under Clause 22. Therefore, as the clause stands, identifiable taxpayer information could become exposed to disclosure under FOI. The amendment will exempt from FOI anything shared under the clause which would identify the ratepayer; it will not exempt any other information from FOI and will merely ensure that taxpayer confidentiality is maintained. I reassure the noble Lord, Lord Mendelsohn, that the amendment, far from restricting the flow of information, is key to enabling the safe transmission by giving the agency the confidence and security to share data without risk under FOI.
It has been a long debate and it is late. I commend Amendment 65 to the House and ask the noble Earl to withdraw his amendment.
The Earl of Lytton
I thank very much those noble Lords who have supported this amendment, and the Minister for her thoughtful comments. I particularly took to the comments of the noble Lord, Lord Stoneham, which were elegant, to the point and delivered much more effectively than I could ever have done.
I make one point on the point raised by the noble Lord, Lord Mendelsohn, on the check, challenge and appeal process, which relies entirely on resources being available at the check stage. I, too, had heard the point about resources being withdrawn from appeal handling until, I think, the 2017 revaluation is out of the way. So there is an ongoing structural problem. On that point, the Minister did not answer the question that I put about at what level disclosure would take place. If, under the check, challenge and appeal process, the disclosure does not appear at the check stage, we are precisely back where we are at the moment.
There are two other things. With regard to what the Minister said about HMRC information being disclosed, the label “HMRC information” in this context is by proxy only because this is information that has always been dealt with as a Valuation Office Agency matter under the relevant legislation. It is about the valuation officer role rather than the person concerned with general taxation, the district valuer. There is a very important difference—which was pointed out in the Holgate opinion, which I have circulated—between the two. There is a morphing into HMRC information under that label which should not be used. It is mislabelling where that information comes from, the purposes for which it is compiled and the route by which it comes.
My final point is on confidentiality. Why would a lessor or business want to keep its rental information confidential? Given what is known and the leakage through the system, that would be a tough call in this country. We are not dealing with the sort of closed shop that applies in many other jurisdictions. However, I can think of some very good reasons why a confidentiality clause might be included, for instance, where a letting is procured ostensibly at a headline rent but is actually underpinned by a three-year rent-free period in a five-year review cycle. Of course, someone would not want that to be bandied about. If the Valuation Office Agency could be counted on to sift that out, so that there was absolutely no question of the integrity of the body in analysing that and it was a true reflection of what that rent was in real terms, as opposed to just the headline rent, I do not think we would have any problem. However, it cannot be. I know that from direct experience.
It is unfortunate that this very important point of principle occurs so late when there are not so many people in the House let alone in the Chamber. It would clearly be wrong even to consider pressing this amendment in the circumstances. Had it been in any other circumstances, I would have been sorely tempted to test the opinion of the House, but now is not the time or the circumstances to do that. It is with great reluctance that I withdraw this amendment because from having spoken with the clerks I am not at all clear that it will be possible to bring it back at a later stage. If it is not possible, we will have to rely on the good offices of the other place in order to raise this and, I hope, do it.
I will end on one thing. We stand in all this in terms of what we are doing to foster business in the construct of an Enterprise Bill, and we should never forget that mission. As the noble Lords, Lord Mendelsohn and Lord Stoneham, said, this runs entirely in the wrong direction. It is the wrong question and you get the wrong answer. It is a false premise. It is a reductio ad absurdum in terms of where we are. That has to be addressed. It is clear that this is an area of tax that is long overdue for fundamental, thoroughgoing reform. It is a failing of many Administrations over many years that it has not been dealt with. Businesses are the worse for it. With that, I beg leave to withdraw the amendment.
“63C Freedom of information
(1) Revenue and customs information relating to a person which has been disclosed under section 63A or 63B is exempt information by virtue of section 44(1)(a) of the Freedom of Information Act 2000 (prohibition on disclosure) if its further disclosure—
(a) would specify the identity of the person to whom the information relates, or(b) would enable the identity of such a person to be deduced.(2) In this section “revenue and customs information relating to a person” has the same meaning as in section 19(2) of the Commissioners for Revenue and Customs Act 2005.”