Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Tuesday 17th March 2015 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, the amendments in this group make a number of consequential and technical changes to the Bill. I turn first to Amendments 4, 6, 12 and 13. In Committee, the Government moved a number of technical amendments about the penalties in the Bill. The majority of those related to the penalties in Parts 7 and 8. At the time, it was unclear whether changes to the fines available to magistrates in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 would be implemented during this Parliament. This was because the regulations needed to accompany commencement were yet to be debated in both Houses of Parliament and a number of the amendments were designed to ensure that the penalties worked in either event. As noble Lords may be aware, Section 85 of LASPO came into force on 12 March. As a result, there is no longer an upper limit on fines in the magistrates’ courts. My amendments therefore remove the changes we made in relation to these fines, as they are no longer necessary.

I now turn to Amendments 14 to 16. Noble Lords will be aware that the Deregulation Bill has recently been read in this House for a third time, and yesterday this House considered and agreed amendments made to it in the other place. These technical amendments are therefore required so that the Schedule 9 amendments are based on the text of the Insolvency Act after amendment by the Deregulation Bill.

Finally, I turn to Amendments 7 to 9. Our penalty measure in Clause 150 provides for full and prompt payment of employment tribunal awards. This will reassure claimants that, should they be successful at a tribunal, they will receive the money that they are owed. Clause 150(5) already amends the Employment Tribunals Act 1996 to provide that the affirmative procedure applies to regulations made under the new provisions. However, it does not also remove them from the category of instruments that are subject to negative procedure. Amendments 7 to 9 correct this.

I hope noble Lords will welcome these various amendments and give them the House’s support.

[Lord Stevenson of Balmacara (Lab)]

My Lords, it says in the Companion very clearly that Third Readings are mainly used for tidying up complicated parts of Bills that perhaps have eluded the draftsman or indeed are subject to a change in other places. The descriptions as made by the Minister clearly fulfil all aspects of that and we have no wish to enter into them.

I must say that I was slightly confused by the insertion and then removal and then the reinsertion but in a different way of the Legal Aid, Sentencing and Punishment of Offenders Act provision. However, the Minister has explained the reason for that in a private meeting and we are very happy with the provisions now.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Wednesday 11th March 2015 Lords Chamber

[Lord Stevenson of Balmacara]

I am sorry to interrupt. I just want the Minister to clarify something. She said that our support for her amendment was at a late stage. I point out that that is not the case. We saw the amendment at noon one day and I signed up to it as soon as it appeared. It was certainly not at a late stage. We are very supportive of what she is doing. Our problem is that she is not doing it in nearly enough other cases. Her case that more evidence is required really does not stack up.

[Baroness Neville-Rolfe]

I am sorry if I caused confusion. What I was saying is that this is a relatively late stage in this Bill and that what we have done is taken steps to bring forward some of the actions that follow from the Francis review. Noble Lords opposite have been extremely helpful about supporting that and supporting it instantly. I am very glad to have been able to end that confusion.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Monday 9th March 2015 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I simply want to add a little to the comments of my noble friend Lord Watson. In his typically modest way, he did not take enough credit for himself for raising some of the issues. I think he touched on them at the end of his remarks, but without his probing in Committee we perhaps would not have got as far as we have. With the additional help of the DPRRC’s recommendations, which were very firm in a number of areas relating in particular to the change to the affirmative procedure but also to matters related to foreign limited partnerships and directors’ responsibilities, we have now got to a much better place. We are very grateful to the Minister for listening so well and for bringing forward these amendments.

[Baroness Neville-Rolfe]

I thank noble Lords. I am especially grateful to the noble Lord, Lord Watson, for his support today and for the work that he put into what has become the government amendments. If I may, I will write to him on the public interest test.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Tuesday 3rd March 2015 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, Amendment 5 is in my name and that of my noble friend Lord Mendelsohn. I declare an interest in that my wife is a practising solicitor who deals with construction contracts. When we raised this issue in Committee I made the following points. Recent research shows that about £3 billion is outstanding within the construction industry, and only in that industry, by way of cash retentions; that the practice unfairly enhances the working capital of the party deducting them; and that most of those who retained moneys openly accepted that they added cash retentions to their working capital or actually reinvested them. The effect is that bodies that are commissioning work are also in effect borrowing from the small firms that are carrying out the work. This is counterproductive to good economic activity at a time when such firms are also having major problems in accessing finance.

The key issue is that cash retentions are being deducted from payments already earned. However, there is no statutory protection for the retained moneys that will ensure that they will in fact be available for release if, in the event, there are no uncompleted remedial works that need to be done. There is a good case for any retention funds to be kept separate from working capital, perhaps within an escrow account—as is now used for government contracts—or a separate trust account.

When the Minister responded to the debate, as well as outlining the new but still rather patchy approach to payments being adopted by the Government, she agreed that there were a number of issues of concern with the payment culture in the construction industry. But she said that the current statutory framework governing contractual terms on payment—which was introduced in 2011—with a prohibition on “pay-when-paid” clauses and a right to adjudication, would be sufficient to see out this unfortunate practice. She added that since 2014, the Government have been working with the industry to implement a payment charter that contains 11 commitments, including one specifically aimed at removing the need for retentions, with the intention of moving by 2025 to a position where retentions are no longer necessary.

The noble Baroness pointed out that the powers being taken in the Bill would be sufficient to gather the information needed for a review of current policy, and I take that point. But she was a little unconvincing about why it will take 10 years to gather the information about this issue, even if there were a need to go wider than just the construction industry. If this amendment is accepted, it would have far-reaching benefits for small businesses throughout the construction industry. They would not have to wait another 10 years before this practice is outlawed—but even if they did have to wait that long there is surely a case, which I have outlined above, for action now to require the use of escrow accounts for this type of payment. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord for this amendment and for providing the opportunity for us to look again at the important matter of retention payments. Following Committee we have been busy. We have consulted with stakeholders on payment terms, and it is clear that the practice of retentions is an issue, as we suspected, largely confined to the construction sector. As with other payment issues in construction, issues with retentions go to the heart of the industry’s business models. These models are driven by a broad and diverse range of customers—and, of course, there is an extensive reliance on subcontracting. The work is project based and frequently short term, with no ongoing relationships. Typically, low levels of capitalisation mean that the industry is heavily reliant on cash flow.

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[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord, Lord Stevenson, for his comments on Amendment 20, which would restrict the regulators to which the provisions on small business appeals champions can apply. It was also good to hear from my noble friends Lord Deben and Lord Lindsay.

Clause 18 already provides that the list of regulators to be covered by the appeals champions should be set out in regulations. A consultation on the list of regulators closed in January. We intend to publish a summary of the consultation and our response before Parliament rises, based on careful consideration. The Government’s response will then become the basis of the regulations which will bring regulators into scope. These regulations will be subject to affirmative resolution, so Parliament will have the opportunity to consider which regulators should be on the list. On other occasions, the noble Lord, Lord Stevenson, has called for just that affirmative resolution. Although the consultation has closed, we shall take into account representations that noble Lords have made during discussions on the Bill. I am coming on to reassure about the EHRC, but I encourage any noble Lord who has particular concerns about anything else to let me know: we will give them a fair hearing.

Listing inclusions and exemptions would make the Bill cumbersome and unwieldy. Pre-empting our case-by-case consideration through a blanket exemption is not the right way ahead. The amendment first seeks to exclude the EHRC. Noble Lords have linked this to the protection of the EHRC’s A status as a national human rights organisation. The Government share the determination to protect the commission’s status and we understand that, as a regulator, the EHRC is different and needs to maintain its independence from government.

The Government’s position is that the EHRC will not be in the scope of the champions policy. It was not included in our consultation on the list of regulators to be brought into scope. No specific regulatory functions of any other particular named body are listed for inclusion or exclusion in the Bill and it is not necessary to do so in relation to the regulatory functions of the EHRC. Doing so would set a precedent that might lead to overly complex legislation. We have never proposed to include the EHRC, and today I can make a commitment not to do so. The Government will not include the EHRC in the small business champions policy. I hope that noble Lords will accept that full, unequivocal and repeated assurance. In Committee, the noble Baroness, Lady Thornton, was kind enough to accept my assurance on this point, and the majority of noble Lords accepted similar assurances in respect of the growth duty during the passage of the Deregulation Bill. I hope that the House will be willing to do the same today.

The second part of the amendment proposes to exclude any regulator belonging to a list of departments. The proposal would exclude more than half of the regulators we propose to include. Many of them have considerable contact with small businesses. There is broad support for small business appeals champions to make sure that businesses have effective routes to regulators. The amendment would deny that assurance to care homes, which need to challenge rulings by the Care Quality Commission or businesses challenging inspections by the Health and Safety Executive. I do not understand why we should emasculate a policy that has such widespread backing.

The noble Lord, Lord Stevenson, asked whether the Government had decided to exclude a health regulator from the appeals champion policy. We have made no decisions yet, and we shall do so on a case-by-case basis. As I have said, if any noble Lord or regulator is in this situation, they should make representations to us. We intend to make a decision on the list and publish our response before the end of the Parliament.

This is not the growth duty. This is simply a policy that aims to improve public administration and provide an assurance that regulators have the procedures and processes in place to support business appropriately. We all agree that small businesses need a better deal, and we should be aiming to apply this policy to regulators where possible rather than looking at potentially wide exemptions. I hope that, in the circumstances, the noble Lord will feel reassured and that he will agree to withdraw the amendment.

[Lord Stevenson of Balmacara]

I thank all those who have contributed to the debate. Perhaps I may make one or two points about it. I would say to the noble Earl, Lord Lindsay, who obviously has great knowledge of and experience in this area, that I can understand why he might think so. However, I draw his attention to the fact that the intention in the second part of the amendment is to select a group of regulators equivalent or similar to the EHRC in the sense that they are required to be taken out of a broader approach. It does not attack all the regulators in a department. If he misunderstood that, I apologise, but it is clear that what we are trying to do here is to say that because we were not involved in drawing up the list of regulators, we are not absolutely clear which are in and which are not. In that sense, it is imperfect and we would have to be quite inventive, if the amendment were to be accepted, to come to the right conclusion. I accept that it is not as well done as it could have been. However, it has provoked a good debate and that is the point. Indeed, the noble Baroness has already accepted that there may be one or two regulators that might well be included in the list of the growth duty within the Deregulation Bill. That might not be appropriate for small businesses—and vice versa. We are in a situation where we are not sure how the lists will bottom out. It is that unease which I was trying to attack, and in that sense I hope that the noble Earl is reassured on the point.

It is worth reflecting on the fact that, to do what is required in the Bill, as I understand it, appointments would need to be made to various regulators at board level. That would have an impact on how these bodies operate. I do not think it is an entirely free-riding champion helping to resolve appeals. These are people who, by their constitutional and statutory position, will have to have an involvement in the day-to-day work of these regulators. By accepting this, we are accepting by implication that there will be a change—perhaps a beneficial one—to the way that some regulators will operate in the future; they will not do so as they were originally set up. Again, that is what I am trying to reflect in this debate.

However, I accept that, as presently drafted, the amendment would not achieve the ambitions we had for it and there may be better ways to approach this. It may be that the rather convoluted process whereby I think the noble Baroness was inviting individual Members of your Lordships’ House to write in with special and favourite regulators to be excluded will mean that we arrive at a resolution in an appropriate way. I am sure that this will come out all right in the wash, but at the moment it seems rather a complicated way of doing it.

I will say again that it will not be possible for either House of this Parliament to pick and mix within the secondary legislation. Either it must be accepted as it stands or we can vote against the whole of the SI. It is not fair to say that we will have a choice at the time when these regulations are going through. The choice will have to be made outside Parliament and before the Government, whichever Government they are, put forward the secondary legislation. We have to be realistic about the fact that there will not be the same level of scrutiny.

I broadly take the points which have been made. It will be interesting to see how they go through. We made it clear in Committee that we are not against the idea of there being appeals business champions, as it were. I think we agreed that we would call them “small business champions” in relation to regulation. It is a good idea but I am not quite sure whether it will work in practice; only time will tell.

Finally, on the EHRC, I am grateful to the noble Lord, Lord Deben, for his consistent support for this issue. If it is so clear in the minds of Ministers that the EHRC is not, will not and never can be part of the processes involved in this Bill or in the Deregulation Bill, why on earth can they not just accept that it would be sensible to table an amendment at Third Reading stating that the EHRC is not involved? That would peradventure put beyond doubt the question of whether the EHRC is ever around. There may be evil forces at work and there may not. We do not think there are, and we are not looking at it with suspicion. However, enough damage has already been done to the EHRC, for heaven’s sake, and what is left of it needs to be protected. It would be a positive and rather a noble thing for the Government to accept at this stage that it would be right to have that line in an amendment, just because the EHRC is so special, as the noble Lord said, and to be super-careful because of the particular nature of the commission. That is for the Minister to reflect on and perhaps to come back at Third Reading.

[Baroness Neville-Rolfe]

I very much take the point that the noble Lord has made. I am happy to consider whether we could put the EHRC into the Bill, but whether I can do that, I am not sure. Giving the commission that clarity seems to be widely supported around the House.

[Lord Stevenson of Balmacara]

That is a very generous offer and I think it would solve an awful lot of problems. Indeed, we have been discussing it week after week for the past two or three months. I would be very pleased if she can do this, but I repeat that I am happy to withdraw the amendment at this stage.

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[Baroness Neville-Rolfe]

My Lords, government Amendments 21, 22 and 23 respond directly to our Committee debates regarding the small business appeals champion and the business impact target. Regarding the champion, the noble Lord, Lord Mendelsohn, made a number of helpful observations about how it might work in practice. He was keen to ensure that any guidance issued to the champions should be laid before both Houses as well as published. I made it clear in Committee that this was already our intention and I am pleased to confirm it with Amendments 21 and 22.

I turn now to the business impact target. I thank the noble Lord, Lord Stevenson, for his comments in Committee regarding the scope of the target. In particular, he raised concerns around the clarity of the coverage regarding voluntary and community bodies. I have reflected on this issue and I agree that there is more that we can do in the Bill to clarify it. I have therefore tabled Amendment 23, which is a relatively straightforward provision to simplify Clause 27(5). It will remove the current membership threshold of at least 21 individuals for unincorporated bodies that do not distribute any surplus to their members. As I am sure many noble Lords will be aware from their own work in the voluntary sector, such bodies can be adversely affected by redundant, ineffective or excessively burdensome regulation, just as much as businesses can. Therefore, including them within the scope of the business impact target makes a lot of sense. It will not harm the voluntary sector, but will help to ensure that any burdens from new regulations are minimised and that there is transparent reporting of impacts.

This Government have already made a number of changes that have made it easier to set up and run charities and social enterprises. Those include providing greater legal clarity on volunteer liability and supporting proposals to make criminal record checks simpler and less onerous. The amendment will mean that such bodies are not excluded from the definition of “small” and “micro” businesses in Clauses 33 and 34, meaning that they can benefit from any regulatory exemptions made by reference to that definition. I hope noble Lords will welcome the amendments, and I beg to move.

[Lord Stevenson of Balmacara]

This must be the shortest amendment ever considered in my time in the House. I look to the clerks for further guidance on these matters. The Minister suggested that we might welcome the amendments; we do welcome them.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Wednesday 21st January 2015 Grand Committee

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

I thank the noble Lord for helping us to probe the effectiveness of Clause 114, which of course was put forward as part of the Red Tape Challenge. Like him, I am sorry that the noble Lord, Lord Mendelsohn, is not here today. I thank the noble Lord, Lord Stevenson, for his kind words about BIS and the Insolvency Service, which of course has been intimately involved in preparing for the Bill and associated legislation.

Because of our concern to help small business, insolvency has recently been subject to the Red Tape Challenge, and suggestions made from across all parts of the industry have been incorporated into this Bill. Alongside measures being taken forward elsewhere, these clauses on insolvency will lead to improvements in the efficiency of our processes. The efficiencies will provide a total of over £30 million a year more for creditors, many of whom of course are small businesses—which underlines the purpose of the Bill.

Administration is the primary corporate rescue procedure in the UK. It is well respected internationally for its speed and the size of its returns to creditors, which many compare favourably with similar procedures in other countries such as Chapter 11 in the USA, which was mentioned at Second Reading. We are working with the industry to take forward the voluntary reforms set out by the Graham review, while taking a new power—this is important—in case the voluntary reforms do not bring the desired confidence.

Amendment 61ZA would delay the introduction of this clause and would force government to review the impact of abolishing the administration duration time limit. Administration is a dynamic procedure, and we want administrators to take swift action to restructure and rescue businesses where at all possible. For this reason, there are time limits; I think there is agreement that there should be.

Currently, administration lasts for 12 months with the option to extend it by six months. With the consent of creditors, we are seeking to extend this to 12 months. We do not consider that an administration should last indefinitely and do not intend to review the time period further. To allow companies to remain in administration for longer than necessary would add unnecessary expense to the procedure and, in some cases, might even give the insolvent business an unfair advantage over competitors.

I take the point the noble Lord, Lord Stevenson, made, that where an administrator commences a wrongful or fraudulent trading action he fears that the claim could take more than a year or two to complete. However, I do not think that that time limit will necessarily reduce the effectiveness of the right proposed under Clause 114.

During debate in the other place, concern was raised as to whether this clause will be used, bearing in mind that it may take longer to conclude such a claim. However, Clause 124 will enable creditors of the company to consent to an extension of the administration by an additional year, and the court has power to grant extensions beyond that.

Clause 114 was suggested by insolvency practitioners as part of the Red Tape Challenge. Our earlier consultation suggested that delaying its introduction pending a review, or completely removing the time limit on administration, would not be well supported by many stakeholders, particularly creditor groups. For this reason I hope that the noble Lord will be reassured and will withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the noble Baroness for that reply. I should have said at the outset that I was grateful to her and to her colleagues for organising a couple of meetings on this issue, which a number of noble Lords present attended and which were very helpful in providing us with background to this section of the Bill.

In her response the Minister alluded to the question which has been long debated but is still unresolved, of whether Britain should have a Chapter 11-style approach to trying to maintain companies that get themselves into difficulties. I have amendments later on in the Marshalled List, where we will come back to the more substantive issues here, so I will not deal with that in any detail now. However, it is worth saying that while the detail of Chapter 11 is not appropriate for translation across to the British system—or at least not at present—the one important thing that comes through in that is a very strong sense that existing companies should be retained and encouraged to try to trade themselves through the difficulties that they may be experiencing at the time. It is in that sense, and that sense only, that the questions posed in my original statement still hang in the air.

There is an awkwardness here. A one-year administration when many processes need to go beyond two years, a need to apply to courts or to other authorities to get an extension of the administration period, perhaps to two years, and the knowledge that most administrations actually complete within two years all suggest that there is a bit of a case here which would provide the struggling company, which will eventually be successful but is currently going through difficulty, an easier route through. I do not put it any stronger than that. That was behind the letter but the Government have set their mind against it. We will probably have to come back to this at some future date but at this stage I withdraw the amendment.

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[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord and my noble friend for these amendments. I hope that I have understood their thinking correctly.

I will start by talking about Clause 118, which Amendment 61ZB seeks to amend. The clause removes the need for trustees to seek sanction before exercising certain statutory powers. That is a cost-saving measure, which arises, as I have already said, from the Red Tape Challenge; it receives considerable support externally and helps to achieve efficiency, as my noble friend Lord Flight explained.

The requirement for sanction was originally designed to protect creditors from an unregulated insolvency profession, preventing officeholders from taking steps that could have a negative impact on the bankruptcy estate such as continuing to trade a bankrupt’s business, which you have to look back in time to imagine. Now, of course, we have a much more highly regulated insolvency practitioner profession. Failure to act in the interests of creditors is a regulatory matter, and it would be for the trustee’s regulatory body to take appropriate disciplinary action.

The amendment would make an exception for cases where there is a creditors’ committee and the trustee wished to appoint the bankrupt to assist in dealing with certain tasks. This sometimes happens where the bankrupt is involved in a particularly unusual trade or there is some urgency to the matter and the trustee cannot find someone to perform vital tasks.

Let us take the case of a bankrupt and a remote farm—which is close to my own personal experience many years ago—perhaps in winter when weather conditions are challenging. That may mean a quick decision is required to instruct the bankrupt to continue to feed the animals or to engage a vet to look after sick animals, and so on. The requirement for sanction where there is a creditors’ committee would add unnecessary delay and cost.

A further reason for resisting the amendment is consistency. If accepted, trustees would be able to exercise all other powers without permission except this one, and then only where there is a creditors’ committee. That might add unnecessary complexity to the insolvency framework.

Amendment 61ADG would have the effect of removing a part of Schedule 10, which updates the section of the Insolvency Act 1986 which itself dealt with the process of interim receivership. Noble Lords will be aware that an interim receiver is appointed to protect assets where a bankruptcy petition has been presented and there is a real risk that assets could be lost before the petition is heard.

While the official receiver is acting as interim receiver, he or she is protected from liability where they dispose of an asset which subsequently turns out not to be part of the person’s estate, provided that when they did it they had good reason to believe that it was. Schedule 10 makes amendments to extend that protection to insolvency practitioners when they are appointed to that role. Amendment 61ADG would act to remove the protection for insolvency practitioners while leaving it in place for official receivers. I suspect that that was not the intention of the amendment.

Amendment 61WA would introduce a requirement into the Insolvency Act for the official receiver to notify creditors how they may go about removing and replacing them as trustee. I am grateful for the noble Lord’s probing amendment to government Amendment 61W, which my noble friend Lord Popat will introduce later on in this debate. However, I will just say that it is intended that these matters will be dealt with by guidance to official receivers, and I do not agree that we should introduce new regulation when we are trying to cut red tape. I hope that that explanation is helpful, and that on that basis the noble Lord will withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her comments. In answer to her direct question of whether she interpreted our comments correctly, as far as I am concerned she did. I will leave the noble Lord, Lord Flight, to respond, but my impression is that she also got to the heart of his comments.

I am still concerned about two things, although I will read what the noble Baroness said in Hansard and reflect upon it. As the noble Lord, Lord Flight, said, we have a brilliant IP insolvency system, which comes high in the rankings. However, that is because it spends a lot of time and effort bringing creditors into play. Whenever we see this dilution coming through in the Government’s Bill here, I worry about that. I understand the cost argument. It must be right that cost is taken out of this where it can be, but the creditors are important, particularly in relation to small businesses, which are after all the subject of the Bill. Creditors can often be critical friends as well as antagonists in these matters, so simply to disengage them from an area is not right. I think that we share the common view that, where possible, we should be careful about doing anything that diminishes the role that creditors or creditors’ committees may play. However, I take the point that there are costs that need to be balanced up.

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[Lord Stevenson of Balmacara]

I thank all noble Lords who have spoken on this group. I think that together we have arrived at a conspectus view, which has persuaded the Minister that a little more thinking on this would be welcome. I am grateful to her for that.

I do not think that we are in any sense trying to be negative about what is being proposed. This is the future—we understand that. I just think that we are not quite there yet and that the sentiment from all sides is that we perhaps need to encourage people to do things in a more innovative way but not lose some of the values in the original proposals. If we can get somewhere along that line, I would be very grateful. I am also grateful to her for her comments about broadband. We are on the same side here and we want this to happen. She made the point herself: if she has to leave her wonderful kitchen in her rural farmhouse to find an internet café in order to participate in the wider world, something is not quite right yet in the Government’s plans.

[Baroness Neville-Rolfe]

I would like to inform noble Lords that I have broadband. I do not have mobile, which is actually a joy.

[Lord Stevenson of Balmacara]

Now we know that to be successful in the world of business is to be selective in the use of your technologies. That is a lesson for us all. In the mean time, I would like to withdraw the amendment.

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[Baroness Neville-Rolfe]

My Lords, I start by paying tribute to the noble Lord, Lord Stevenson, for building up StepChange. I can only express my regret at the news that he will be stepping down. He leaves a great legacy there and I know that he will be much missed. I pay tribute also to the other DRO facilitators, including Citizens Advice.

Turning to the wider subject, last Friday the Government introduced legislation to increase DRO eligibility. This included raising the debt and asset limits to make DROs more accessible for the most vulnerable debtor: those with low levels of debt and limited resources, and for whom bankruptcy is too expensive. The noble Lord, Lord Stevenson, mentioned high bankruptcy application costs. He may already be aware that we will be introducing in 2016 a new debtor petition application process, which will allow a person to pay the application costs by instalments. As part of the announcement last week, the Government committed to fully reviewing DROs again two years after the changes come into effect on 1 October this year. We, of course, consulted on these changes, including on the fee paid to the facilitators of DROs. The majority of respondents, including CAB, which is the largest facilitator, stated that they did not want to increase the fee, being mindful of the need to keep this important service affordable.

The noble Lord, Lord Stevenson, has agreed today that increasing the fee is not the solution. As he pointed out, the Insolvency Service receives £80 for its element of the DRO application process. Unfortunately, as I have explained to him outside the Committee, Treasury rules preclude the Insolvency Service from setting its fee at less than this figure, which represents full cost recovery. It is important that the Insolvency Service works hard to keep its costs as low as possible. The DRO unit has recently undertaken a lean review and is focused on continually improving its service. This service includes verifying DRO applications, providing an advice service to the facilitators and considering creditor objections to the granting of DROs. The Insolvency Service has also committed to an upgrade of the IT system providing the electronic DRO solution, which may help. The upgrade will improve response times and make the system more user-friendly, potentially saving time and resources for DRO facilitators. I must thank facilitators such as StepChange for providing a lot of input into those improvements.

This Government do not feel that there is a need for an additional review. However, we will continue to look at ways to improve the administrative processes, which will be of benefit to the facilitators and affect the underlying costings. I note what the noble Lord, Lord Stevenson, said about good practice in Scotland. More broadly, before I finish, the Government are very keen to ensure that anyone facing debt worries seeks independent, reputable and free debt advice at an early stage. We have put the funding of free debt advice on a sustainable footing through the Money Advice Service. The Government have also commissioned an independent review of the Money Advice Service to make an assessment of the need for debt advice and education. The review, and the Government’s response, will be published shortly. We have had a good debate on this important subject, albeit again a bilateral one. I hope that on this basis, the noble Lord will feel able to withdraw his amendment.

[Lord Stevenson of Balmacara]

My Lords, I thank the Minister for her kind words about me and my contribution to StepChange. I am sorry to leave it—it is a terrific organisation—but I am sure it will be in good hands after I have gone.

We are edging towards the point where this issue needs more exploration and discussion. As I have said, we are willing to participate, as I am sure many others will be. It costs us £250 per applicant to do something that we want to keep in play and we only get £10 back. That is too big a gap and we need to address that issue. There are other money sources around but it is a hard time out there for charities and it is not easy to see how this can be done on a sustainable basis.

I am glad the points have been raised. I stand ready to discuss these matters, should that be required, and in the interim I am happy to withdraw the amendment.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Monday 12th January 2015 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Bill creates a duty on the relevant Minister of the Crown to appoint a person for each non-economic regulator. As the person is variously described it is a bit confusing, both in the Bill and in the notes, as to exactly what they will be called. It might be worth having a further discussion about this at some point, but for the purposes of this amendment my eye was drawn to the phrase in the notes “Small Business Appeals Champion”.

An additional point to make here is that it is quite refreshing to read of a Government who are prepared to go hammer and tongs into adding new regulations to an area. I am not one who is necessarily against regulation in principle, as good regulation drives a lot of good things, but this has quite a set of layers of regulation in it. Given that we are also considering the Deregulation Bill, and indeed have been faced with a number of attempts to try to reduce regulation, we ought to be quite clear what we are doing here. Although I make a trivial point about the name, it is also important.

The aim is to ensure that there are clear and effective procedures and processes in place, so that businesses—again, it seems to be defined as “businesses”—can challenge regulatory decisions, should they feel that they have been treated unfairly. I put on record that we support this approach. We are aware of the previous history of this: in the publication Small Business, Great Ambition it was said that businesses were not always confident that there was a clear pathway to challenge decisions by a regulator. It is good that the Government have recognised this and want to come forward with proposals. It is also interesting that, in the evidence for that, it is clear that two issues are in play here. Businesses did not know how to challenge decisions—I imagine that is more at the smaller end of the market—but they also found that it was either too expensive or too time-consuming, or both, which again rings true to anybody with experience in this area.

In the consultation issued by the Government prior to the preparation of the Bill, Small Business Appeals Champion and Non-Economic Regulators—it perhaps gave away its content in its title—the Government explained that,

“given the range of different statutory arrangements … the Government will need to give individual consideration to the application of the policy to each regulator before the policy is implemented”.

That is a large amount of work given the number of regulators that have been revealed as a result of our work on the Deregulation Bill, for which a parallel but different set of regulations is of course being imposed. Can the Minister update us on how they are doing on this? It will be quite an extensive trawl through a number of regulators that were set up over the years. It is important that we have some sense of how we are getting on and whether any lessons can be learnt from that experience.

Cutting to the chase, a small business appeals champion—or whatever name we agree on—will be appointed to every non-economic regulator. These will be quite important people, particularly for small businesses, because they will be concerned about, and seek redress, when regulators introduce new regulations that might be against the best interests of their businesses. I worry that the Bill is not very sharp about the regulatory powers and responsibilities. Will they be sufficient? Will they be adequate to achieve what they set out to do? Will it be more than just a talking shop?

Individual appointments to the regulator will be by a Minister of the Crown. The Bill states that they will either be statutory office-holders within the regulator or be appointed by the Minister of the Crown in respect of the regulator’s functions—presumably as additional personnel. I am concerned about this. The power of a small business appeals champion will lie in their ability to challenge the regulatory functions that they are appointed to review. Perhaps the Minister will explain this when she responds, but it does not seem to me that a person who is already employed by the regulator is in a very strong position to criticise the regulator’s activities. Could she talk us through this? Are they not meant to be independent? It would be very unusual to have someone in a position of reviewing or providing reports to external bodies about a particular body if they are employed by that body. It might be better if they are board members and maybe they should be appointed in a particular capacity to each board, but the range envisaged in the Bill seems to be too large for this to be appropriate.

To take further examples, what happens if a reviewer has to comment to the Minister on the way that the regulatory duties are discharged by his or her boss? Is there not a problem there? The employee will have a duty of care that might be breached if they are expected to make recommendations in public that will end up being considered in Parliament. Noble Lords begin to see where I am going. This is almost like a whistleblower. Parliament has considered this topic and will return to it later in this Bill, but real concerns have been expressed about how we treat whistleblowers. Their effectiveness is entirely related to whether they can make their comments without being subsequently sorted out by the powers that be in their organisation.

Similar points came up on whether an employee in a regulator would have sufficient knowledge and expertise to do the job envisaged by the Bill. It seems to me that someone who reviews the work of a regulator would need to be at the board level. Although there will be no doubt excellent people further down the chain, I doubt whether they would have the experience or expertise, or be senior enough, to take a view.

There is also an intention in the clause that one reviewer would be appointed to each national, non-economic regulator in some cases but to groups of regulators in others. For instance, some regulators, groups of industries or groups of functions will work in roughly the same area; the suggestion is that one regulator could cover them all. Is there a list of the regulators that would likely be grouped together? If there is not, could we get that in play? That is quite important. For instance, we could consider one regulator for energy, but we could also think that there would need to be different expertise relating to gas or to water, as opposed to some of the other utilities. There is also the asymmetry of expertise and experience that I have already mentioned. For instance, if a reviewer was employed by one regulator but was expected to review and critique a cognate regulator—or even a very different one—one would worry about whether they had the expertise, or whether they would be able to criticise a sister organisation operating in the same field.

I am afraid that I have asked a lot of questions. I should have made clear that this is merely a probing amendment. We support the general approach, but we would be grateful to have a bit more detail so that the Committee could better appraise whether this is a good move. I beg to move.

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

My Lords, I thank the noble Lord for his amendment relating to the appointment of small business champions—my snappier, if less accurate, title for them. I agree that sometimes we need to regulate, especially, as in this case, to make regulation better.

The Government have brought forward these clauses because we want to ensure that regulators’ appeals and complaints processes are accessible and fair, and work for business. We want to make sure that, if a business wants to challenge a poor regulatory decision, there is a clear and easy-to-understand process to make a complaint or appeal to that regulator. I agree with many of the noble Lord’s comments.

How are we progressing with identifying regulation? The consultation closed last Friday. It is on the government website. We will make final regulations with our proposals for listing regulators once the Bill is approved. Our proposed list was set out in the consultation. What regulators will be grouped together? We have not decided on that, but we will certainly look at it once the list of regulators is finalised in the light of the comment that the noble Lord made.

Turning to the amendment before us, the Government intend that the small business appeals champion policy should apply to a diverse range of national regulators, with equally diverse circumstances. For example, there are large regulators, some with statutory governance arrangements, complex stakeholder groups and thousands of staff, such as the Health and Safety Executive, the Care Quality Commission and the Environment Agency. However, there are also tiny regulators with few staff, where there is no board and the legal responsibility for regulating lies with the Secretary of State, such as the Employment Agency Standards Inspectorate, the Animals in Science Regulation Unit or the Senior Traffic Commissioner. There is something in between as well, such as the Office for Nuclear Regulation or the Charity Commission. We have designed this policy so that it has the flexibility to work across this varied array. A key part of that flexibility is around appointments.

I agree with the noble Lord that in some cases it may not be appropriate to appoint a board member as a champion. For instance, if the board is involved in the appeals process, it would create a conflict of interest. However, in other cases, it could be a positive advantage to appoint a board member as the champion. A non-executive director might be uniquely well placed to combine an understanding of the needs of regulated businesses and an intimate knowledge of the way the regulator works. There is not an unlimited supply of people of talent and objectivity who are prepared to take on public roles of this kind and familiarity can be a distinct advantage, especially in very technical areas.

The Government do not agree that the appointment should be limited to exclude regulators’ board members. We have deliberately placed responsibility for appointing champions with the relevant Minister, supported by his or her departmental officials, and not with the regulator, to ensure that someone of appropriate independence and stature is chosen. We should trust Ministers to be responsible for ensuring that an appropriate appointment is made, and not constrain them as the amendment proposes. In carrying out the recruitment process, the Minister and the Government will, of course, ensure adherence to any relevant guidelines such as the Code of Practice for Ministerial Appointments to Public Bodies. I hope that the noble Lord will be reassured by what I have said and agree to withdraw his amendment.

[Lord Stevenson of Balmacara]

My Lords, I thank the Minister for her very clear exposition. I agree that we should focus on small business champions—I will try to do that, although it gets a bit complicated later on. Who is involved and what sort of bodies are likely to be grouped together are obviously a work in progress and I hope to get information on that as we go forward as it shapes the way in which we respond to this issue. We may wish to return to that at a later stage.

I understand the point the Minister makes about the need to have expertise and a sufficient number of high-calibre people doing this important work. It will help small businesses and, as I said, we support it. However, I think that the conflict-of-interest point has resonance. Her examples do not necessarily reassure me that, simply because the appointment comes from outside and is made by somebody who is not themselves the regulator, that will provide the degree of independence, authority, expertise and single-mindedness of purpose that will be required if this is to be effective. However, for the purposes of this debate in Committee, I beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord for tabling this probing amendment. To answer his question I will explain the purpose of the clause. The Government have significantly improved the regulatory environment for business, as I have already explained. There has also been some encouraging progress at an EU level. This December’s EU Competitiveness Council conclusions on better regulation were extremely positive, calling for the first time for EU burden reduction targets. Therefore, the issue now goes wider than the UK. Building on those achievements, the Government are legislating to lay the framework for transparent regulatory reporting.

On Amendment 33P, I acknowledge that the framing of the business impact target sets a wide scope for future Administrations to determine for themselves what will count for the purposes of the target; that is, what is a “qualifying regulatory provision”. We consider it prudent to allow sufficient flexibility for future Administrations to determine the precise scope of the target, depending on their priorities and circumstances. We believe that this approach should attract support on all sides, not least at this stage of the Parliament.

Potentially a wide range of regulations could be in scope, meaning that some adjustment may be necessary to avoid perverse outcomes or other adverse impacts. For example, it may not be sensible to include certain measures—such as those related to national security or civil emergencies—within the target, because they could not be anticipated at the start of, say, the five-year parliamentary term. In addition, a future Government may wish to exclude measures that have negligible impacts on business, such as simple consolidations of existing regulations. Including all such measures in the target could be disproportionate and would represent a poor use of taxpayers’ resources without delivering obvious benefits to business.

The fundamental point is that the choices that a future Administration make regarding the scope of a business impact target will be transparent and will be for the Government of the day to defend. It is not appropriate for this Government or for Parliament unduly to restrict that choice. I hope that that is not byzantine but sensible and that on reflection noble Lords will feel that it is a reasonable rationale.

My noble friend raised the important issue of methodology and I agree with him that you can have as many methods as you have economics professors. However, it is an important principle that we need transparency around methodology and, of course, methodology is an important component of the good work that a body such as the RPC does. It is entirely appropriate that the Government of the day are able to look at the methodology options in a transparent way, to make appropriate decisions and to put them before Parliament. I hope that the noble Lord will be willing to withdraw his amendment.

[Lord Stevenson of Balmacara]

My Lords, I prefaced what I said by saying that it was a very low-minded question. I hoped that I would get an answer to my concern, which was that I did not understand why we had to regulate in the Bill for stuff that I thought was taken as read more generally. Perhaps that was too detailed or too low a question to be answered on the Floor of the House. Perhaps the Minister might write to me about it. I do not think that it is a major issue.

The major issue is the one raised by the noble Viscount, Lord Eccles, which is increasing my sense of concern—“panic” might be too strong a word—arising from some of the ways in which Clause 21, in particular, is described. It is not just the slightly odd use of the word “things”. This is a complicated set of calculations with a new quango being set up to look at it, with all the other things that go with that. I think that we will come back to it, as I have an amendment later that deals with the way in which this might be amended. At this stage, I will certainly withdraw the amendment, although I think that we will need to come back to some of the points raised.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord, Lord Stevenson, for his questions and for allowing us to debate these important provisions. I will start by answering the question about coverage and refer him to Clause 27(2)(b), where he will see that businesses activities are defined as including activities,

“by a voluntary or community body”.

The definition is broad and includes the voluntary sector. I can understand why that is.

[Lord Stevenson of Balmacara]

That is, of course, true and I have read that. Clause 27(2) specifies that, but Clause 27(3) says that they do not count as business activities if they are controlled by a public body, or are,

“acting on behalf of a public authority in carrying out the activities”.

We are back on a rather circuitous argument.

[Baroness Neville-Rolfe]

The noble Lord has anticipated me. Voluntary shops presumably would be covered, but I will come on to talk about why there is a carve-out for public services, which is a slightly different point; I think that it is in the noble Lord’s last amendment.

Perhaps I should also, before I answer on individual amendments, talk a little about the verification body. It could of course be the RPC, which already exists, but the Bill allows flexibility for the Government of the day to decide on the precise body that they want, the people who are on that committee and the mechanics of how they are remunerated. At the moment, they get paid a daily rate, which seems fine to me. The Secretary of State will be under a duty to appoint a person, people or a body to perform the verification function. The body or persons must, in the view of the Secretary of State, be independent of UK Ministers and have expertise in economic and cost-benefit appraisal and the impact of regulation on business—including, significantly and importantly, smaller businesses. They will obviously also be subject to the usual public appointments rules.

Returning to the amendments, I think that there is a strong consensus on the importance of minimising regulatory burdens on voluntary and community bodies. Those bodies range from Cancer Research UK at the upper end to local community football clubs or parent-teacher associations. They are affected by many of the regulatory burdens affecting businesses, including reporting requirements. That is why the economic impact of regulations affecting the activity of those bodies is explicitly included in the scope of our target and it is why they are included in other regulatory reform proposals in the Bill. Moreover, as noble Lords will be aware, the Government have made a number of changes that have made it easier to set up and run charities and social enterprises. For example, we have provided greater legal clarity about volunteer liability and supported proposals to make criminal record checks simpler and less onerous.

However, the Government are not convinced of the need for the two amendments tabled today. The vast majority of voluntary and community bodies are small and will therefore already be covered by the existing reporting requirement set out in Clause 23(4). As well as being fewer in number, larger charities can call on greater resources and are able to mitigate the impact of regulatory burdens more easily than smaller charities. The amendment would therefore have the unintended consequence of weakening the focus of the reporting requirement on mitigating disproportionate burdens and undermine its intended impact. It also means that the benefits of the amendment in extending the reporting requirement to community and voluntary bodies in general would be limited.

Amendments 33U and 33N relate to the expertise of the independent verification body. I understand that there is a desire to deliver a clear specification of expertise—that is, regarding small business, community and voluntary bodies, as well as businesses in general. However, the Government’s view is that the clause already provides sufficiently for that outcome. Clause 25(6) requires that the independent verification body must have expertise in assessing the likely impact of regulation on business activities, including activities carried on by smaller-scale businesses or voluntary or community bodies. The Government consider it most important that the verification body has substantive expertise in assessing the economic impact of regulation on voluntary and community bodies, not just on commercial business. That is reflected in the membership of the existing Regulatory Policy Committee. However, securing that outcome does not require a change to the Bill.

Finally, I turn to Amendment 33X and the question asked by the noble Lord, Lord Stevenson, about the carve-out for public sector bodies. The Government’s primary focus in the Bill is reducing regulatory burdens on business and the third sector. Subsection (3) therefore excludes from the definition of qualifying activities those carried out by public sector bodies or that are related specifically to the delivering of a public service. Public sector regulatory burdens are of course important, but they are clearly beyond the scope of a business impact target. Including them within the target system would lose the clarity of focus on business—small business in particular—so essential to the growth agenda.

This carve-out also avoids unintentionally capturing regulations concerning requirements of public sector delivery—for example, schools, prisons and NHS services. We feel that it would be perverse to capture within the target the impacts associated with regulations relating purely to the provision of public services in that way. Doing so would lead to significant changes in reported impacts arising purely from changes in public sector delivery arrangements. For example, where service delivery was transferred from the public to the private sector, or the other way round, the effect would be an increase/decrease in the reported burden on business.

I hope that that explains the rationale for the provisions and why it is important that they are retained. I hope that the noble Lord will have found that reassuring and will be willing to withdraw the amendment.

[Lord Stevenson of Balmacara]

Not quite. I do not think that it is reassuring. I am getting more and more like the noble Viscount, Lord Eccles, as we go through the day. Is the Minister really saying that every PTA in the country will have to be in scope to this quango? I may be thought bonkers, but this is getting beyond a joke. We are talking about a Government so dedicated to deregulation that they will require my Little Missenden parish council school to get together in a way to ensure that it has proper regulatory functions in place and understands the process of regulatory procedures to the point at which it can appeal and go to see a small business champion, who will, of course, be far too busy dealing with big business problems. I understand, I think, that the regulatory structures need to be reformed a little, but one only has to read pages 26 and 27 to become completely hysterical about what we are saying. We have talked about things already, but the wording here does not strike one as being a wonderfully clear and concise expression of the new regulatory burden.

[Baroness Neville-Rolfe]

We are building on existing good practice, which I have explained. If small bodies such as the ones that the noble Lord described are affected by a new regulation, it seems right that the impact should be considered in the assessment by the independent body—the sort of compliance assessments that we rely on to look at the impact of regulation. It could, of course, be de minimis. That would be perfectly possible in the circumstances described by the noble Lord, but to exclude them does not seem to be right. This is in relation to the impact target; we are particularly focused on that at the moment.

[Lord Stevenson of Balmacara]

I appreciate what the Minister is saying, but I do not see a de minimis provision here. Perhaps the noble Baroness can take that away to look at. It is similar to what the noble Viscount, Lord Eccles, was saying. It looks like a many-headed Hydra and I do not think that that is what was meant. I think that it is meant to be a much simpler cut-through to try to find a balance between ensuring that those who are adversely affected by regulatory practice have a mechanism recognising that they are so affected and having a way of resolving it without suddenly putting the aegis of the country on a war-time footing alert that they are going to be attacked by the bureaucrats who will be coming to get them. I extend to make my point.

[Baroness Neville-Rolfe]

My Lords, given the concern that has been raised and given that, as the noble Lord, Lord Stevenson, says, our intentions are certainly to cut red tape rather than the reverse, I shall be happy to discuss this before Report if that would be helpful.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Wednesday 7th January 2015 Grand Committee

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord for setting out his thinking on these amendments. I shall comment in turn on the two amendments, taking Amendment 31 first.

The powers in Clause 11 are deliberately drawn as widely as possible to enable UK Export Finance to provide wide-ranging and flexible support, and to respond quickly and imaginatively to changes in market conditions. Our intention is for UK Export Finance to have the widest possible ability to support UK-based firms in their involvement with exporting, whether these firms are existing exporters, those in exporting supply chains or aspiring exporters.

The current requirement for a connection between the department’s support and an actual or contemplated export has made it difficult for the department to respond to the needs of exporters in certain cases, especially in relation to support for the general business of an exporter or a supply chain company. We share the aim that has been expressed today of maximising government support for exports and of maximising the awareness of that support among UK businesses. However, by delaying commencement, this amendment could serve to delay the introduction of new facilities for UK businesses to seek new opportunities and win export contracts that would help us increase UK trade, the aim set out in the Britain Open for Business update announced by the Prime Minister last year.

In view of the points that were made earlier by the noble Lord, Lord Mitchell, I should say that when it comes to promoting British exports, this Government have done an enormous amount. I pay tribute to my noble friend Lord Popat, who is playing an important part in the passage of this Bill. It was on his recommendation that your Lordships’ House established a Select Committee under the chairmanship of my noble friend Lord Cope, who spoke earlier, examining the ways that the Government could support and encourage SMEs to export. That was a very valuable initiative, which reported in March 2013. The Government accepted all 23 of its recommendations, including measures on credit risks for SME exporters and better publicity for services provided by the Government.

We are absolutely committed to increasing British exports to rebalance our economy. As recently as the Autumn Statement, the Chancellor outlined a £45 million package to increase exports, including £20 million for first-time investors. That is in addition to work to increase UKTI’s presence in emerging markets and our work since 2010 to put a much greater emphasis on trade and economic growth in our diplomatic relations. The additional funding that this Government have provided for UKTI has allowed it to double the number of businesses helped since 2010, and we are on track to support more than 50,000 businesses this year. I echo the points made by my noble friend Lord Leigh of Hurley about the export effort for SMEs that he observed on his trip to China with the Prime Minister. Less glamorously, I saw the results for myself on a week’s visit to China in September. I was impressed both by the programme and performance of UKTI and by the scale of business involvement. Again, it was a mixture of SMEs, larger businesses and legal experts.

UK Export Finance is referred to several times in these amendments. In 2011, the Government reintroduced, after 20 years, UK Export Finance support for goods usually sold on shorter terms of credit—mainly those supplied by smaller companies. So far in this financial year, around 120 companies have benefited from direct UK Export Finance support, and almost 80% of them are smaller firms. Companies in the supply chains of exporters benefit indirectly from UK Export Finance support. We want them to benefit directly, hence the provisions in the Bill. UKEF is keenly aware of the need to improve awareness of it among smaller exporters. Last year, the British Exporters Association scored the product range of UK Export Finance at nine out of 10, while the Global Trade Review voted UK Export Finance the world’s best export credit agency. So we are making progress. Awareness of UKTI has also increased significantly over four years, from an average of 51% in 2010 to 65% now.

The noble Lord spoke at greater length to Amendment 32, touching on a very important area. It is of course government policy, informed by an extensive public consultation conducted in 2009-10, that UK Export Finance will comply with international agreements which apply to export credit agencies. UK Export Finance complies with the OECD common approaches, which set out how export credit agencies should undertake due diligence on the environmental and human rights impacts of projects falling within their scope. The OECD common approaches make reference to the UN guiding principles. In undertaking environmental and human rights due diligence in line with the common approaches, it is the practice of UK Export Finance to apply the 2012 performance standards of the International Finance Corporation. These are recognised as comprehensive standards. UK Export Finance is taking an active and leading role in further OECD consideration of human rights issues, which will inform possible changes to the OECD common approaches, should they be agreed.

I pause to comment on the example of fossil fuels given by the noble Lord, Lord Stevenson. UK Export Finance has not supported any transactions in violation of the coalition agreement’s pledge to support green technologies rather than invest in dirty fossil fuel energy production. The Secretary of State made it clear in a Written Ministerial Statement in July that “dirty fossil fuel” should be taken as referring to projects that produce pollution in excess of international environmental standards. The practice of UK Export Finance is not to support such projects.

As I have already said, UK Export Finance complies with the OECD common approaches and has a dedicated environment advisory team that reviews the environmental, social and human rights issues of projects covered by the common approaches prior to the department agreeing to provide support. I hope that gives some comfort. Against this background, the Government consider it neither necessary nor appropriate to impose a statutory duty on the Secretary of State to have regard to only one set of principles—which are, in any case, already taken into account through UKEF’s adherence to the common approaches.

On the second part of the amendment, the common approaches set out how export credit agencies such as UK Export Finance must take account of environmental, social and human rights issues. In line with this, UKEF requires that projects with significant ethical risks are subject to a full impact assessment and that international standards regarding environmental, social and human rights issues are complied with before it provides export credit finance support. UKEF will also monitor these issues throughout the life of projects where relevant, sometimes over periods as long as 10 years.

I was glad to hear the noble Lord, Lord Stevenson, make reference to various changes and improvements made in recent years, including the Bribery Act. That has been pivotal in clamping down on corruption. UK Export Finance also conducts due diligence on the contracts it supports to ensure that they are not tainted by corruption and that the risks associated with dealing with the parties are acceptable. This includes but is not limited to warranties from exporters and checks against prohibition lists maintained by multilateral development organisations such as the World Bank.

The Secretary of State also benefits from the advice of the independent Export Guarantees Advisory Council, whose remit is to advise on UKEF’s application of its ethical policies. The annual report of the chair of the Export Guarantees Advisory Council is published alongside UKEF’s own annual report, which lists the transactions supported by UKEF each year.

I hope that noble Lords are reassured that UKEF takes appropriate consideration of ethical issues in its decision-making and therefore will agree that it is not necessary to place a new statutory requirement upon the Secretary of State. On that basis, I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her very expansive response. I appreciate the effort that went into it. I know it is not her direct area of responsibility and I am sure that she received assistance from others. They put together a good response and I appreciated listening to it. I was also remiss in not paying tribute to the work of the noble Lord, Lord Popat, which has been referred to in the Committee before and is worthy of further comment. His is a terrific initiative and is doing well. The noble Lord, Lord Livingston, and his predecessor have also done a terrific job, which we support. The export champions, many of whom sit in this House, do a great job right across the world.

We are all on the same side here. Obviously, we recognise that we need more exports. We cannot become the nation that we want to be or enjoy the economic success that we all think we should have if we do not radically increase the amount and volume of our exports. We can take that as common ground. But—there is always a “but”—while I agree that we need to maximise support for exports and we accept that there is a long way to go, it does not have to be a zero-sum game. It is possible—many countries do this—to have regard to the terrible impacts of extractive industries, the difficulty of ensuring responsible trading and the respect for human rights in all aspects of activity, and not to be guided always by, in some senses, the lure of more arms sales. Of course, we have special regimes for them, but it is still very difficult to get a proper sense of what is happening there because they tend so much to dominate the work of both UKTI and UKEF.

Issues were brought up by my brief example, and there are many others. I accept the fact that since 2012, although that is not a long time ago, UKEF has not been involved in supporting the export of dirty fossil fuels—although I note that the quotation we were both referring to states that the situation is that it has not publicly financed new coal-fired plant overseas,

“except in rare circumstances in which the poorest countries have no feasible alternative”.

That seems to me to be a large door through which many rather undesirable practices may have taken place, but I have no evidence of that. However, it makes the point again that it may be that how we are interpreting things is good at the moment, but without statutory underpinning, how can we give sufficient support to people in order to ensure that good practice continues in the long run?

The proposals set out in Amendment 32 are not onerous. The Minister said that she felt that the amendment simply sets out what is common practice now in relation to promoting UK government adherence to the UN guiding principles. That is fine, so why not let us have that in legislation and all agree on it? Further, preparing a report for both Houses of Parliament might well be a way of bringing up some of the issues that do bear on this debate: for example, what exactly is the interaction between the moral and ethical standards we are looking at on the one side and the success or otherwise of exporting around the world?

However, I hear what has been said and I know that this is a complex and difficult area. The work that is going on in government is in some sense at the right level and indeed is of a standard that the rest of the world could easily emulate. However, we must not lose sight of this because it is important and it will have long-term consequences, both good and bad, if we do not get it right. With that, I beg leave to withdraw the amendment.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Monday 15th December 2014 Lords Chamber

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

My Lords, further to our Second Reading debate on 2 December, I now beg to move the commitment Motion for the Small Business, Enterprise and Employment Bill. This has been agreed through the usual channels. The Motion sets out that the Bill will be taken in Grand Committee. Furthermore, given that Clause 42 was added to the Bill only at Commons Report stage by way of a government defeat, the Order of Consideration Motion sets out that Part 4 on pubs will be taken after Part 11 on employment.

As I set out at Second Reading, the Government have accepted the principle that there should be a market rent-only option for tied pub tenants. However, the clause will require some amendments to ensure that it works correctly, is consistent and mitigates some potential unintended consequences. A later consideration in Committee will allow everyone more time to consider these important points. I welcome the commitment from the noble Lord, Lord Stevenson, at Second Reading to work with the Government to ensure that the clause works effectively. I look forward to support for the commitment Motion.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for repeating the assurance she made at Second Reading that the Government accept the principle of the introduction of a market rent-only option for tenanted pubs. We understand the reasons for wishing to reorder consideration of the Bill and I confirm that we are very happy to work with the Government to ensure that this option is made workable.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Monday 8th December 2014 Lords Chamber

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

My Lords, these three amendments are minor and technical amendments to tidy up the Bill. Amendment 1 simply serves to update a cross-reference in Clause 21 to make sure that the Bill’s requirements relating to how refunds are paid apply also where the consumer rejects only some of the goods.

Amendment 2 adds Clause 38—other pre-contract information included in the contract—to the list of provisions in Clause 48(1) from which the trader cannot “contract out”. It corrects an omission and aligns the clause with Clause 31(1) for goods.

Amendment 4 simply retains some provisions originally considered to be obsolete. The provisions concerned insert provisions into the Criminal Justice and Police Act 2001 which we now consider need to be retained. I beg to move.

[Lord Stevenson of Balmacara (Lab)]

My Lords, at this stage of a Bill, I always feel that the subject matter should be aspirational, involving the high reaches of policy-making and big speeches. It is always a slight disappointment when we deal simply with technical matters. However, I congratulate the Minister on raising the issue. I am glad that she has done so and even gladder that she was able to battle through the noise made by those leaving the Chamber in such numbers as she was speaking. I am sure she will be delighted to hear that we fully support these amendments.

However, we were expecting to see in today’s Marshalled List amendments concerning issues that had been raised by Ofcom. We had understood that such amendments would be tabled, given the meetings arranged by another government Minister, which were attended by many Members of this House, on the subject of provider-led switching and whether or not the Government might support measures to reduce anti-competitive behaviour in relation to the internet. However, those amendments are not in the Marshalled List. Will the noble Baroness comment on that situation?

[Baroness Neville-Rolfe]

My Lords, I understand that my honourable friend Mr Ed Vaizey is dealing with this issue. I think we have the powers that we need, and we discussed this on a previous occasion. As I say, my right honourable friend is dealing with the issue. We are not in a position to add a provision to the Bill but I assure the noble Lord that the issue is being progressed very keenly.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Wednesday 26th November 2014 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, Amendment 49, which we support, would amend Section 3 of the Communications Act 2003, requiring Ofcom to promote competition and consumers’ interests by introducing a gaining provider led—or GPL—switching regime to the communications market.

It is obviously clear from what we have already heard and what we heard in Grand Committee that simple switching processes are vital to the health and future of all markets. While banking and energy customers are able to switch by contacting their new provider of choice, in mobile, pay TV and broadband customers have to contact their original provider before switching. The current losing provider led process is complicated and slow, works against consumers and distorts fair and open competition.

What is this mystery all about? As outlined by previous speakers, we have a situation where the Minister assured noble Lords, when she responded to this debate in Committee, that the Government have considerable sympathy for GPL switching in the UK. She said:

“In the Connectivity, Content and Consumers paper published last year, we emphasised that we want that across the board”.—[Official Report, 5/11/14; col. GC 692.]

That seems to be a supportive statement. Given that GPL switching already operates for fixed-line voice and broadband services delivered over the BT Openreach network, it is incomprehensible that it does not yet operate for mobile services or for pay TV. In Grand Committee, the Minister said that Ofcom had the power to mandate GPL switching for all communications services. However, as we have just heard, that does not seem to be Ofcom’s view. Indeed, so much does it disagree with what the Minister has said, it had to write to correct her after the debate in Grand Committee. It is worth quoting:

“We have said consistently that legislative reform to support GPL switching would enable us to address switching issues more quickly and directly, and make it easier for consumers to take advantage of the competitive UK communications market. Therefore we were pleased both with the government’s full support for Gaining Provider Led switching”—

in the July 2013 paper—

“and with the subsequent amendment tabled by Lord Clement-Jones … which would give effect to this aspiration by giving Ofcom a clear duty to mandate GPL switching”.

It is clear that Ofcom not only feels it does not have the power, but would welcome the certainty provided by legislation in the Bill. I suspect that that has more to do with the fact that this is a very litigious market within which a number of providers will probably seek judicial review on other issues if there is any doubt at all over whether the powers exist. It seems not so much a Christmas present but a necessary condition for the improvement of our markets that we should go ahead with this. I do not understand why the Government are reluctant to do so. I hope that they will be able to clear this up by supporting the amendment.

[Baroness Neville-Rolfe]

My Lords, as someone who has switched provider recently, I have seen at first hand how important it is to make the switching process easier for consumers. I empathise with people who are troubled by this, but I believe that we are close to solving the issue. Obviously the consumer is at the heart of our efforts and I am as keen as other noble Lords to make progress. I hope that I have some good news.

I am aware that Ed Richards has written to support the principle behind the amendment and I have also heard what he said to the parliamentary committee. As a result of that correspondence, we have had subsequent discussions with Ofcom. It has confirmed that it already has sufficient powers to deal with mobile services, on the same basis as it already deals with fixed line and broadband, which I will mention. We will want to see the conclusions of Ofcom’s current call for inputs before deciding what legislation is required for pay TV and bundles, but pay TV is not the issue that we are debating.

While I understand the concerns behind my noble friend’s amendment, I believe that it is not necessary, given Ofcom’s existing functions under the Communications Act 2003. Ofcom announced in December that RPL switching would be mandated for all providers delivering broadband and fixed telephony over the existing copper network. Work has started and full implementation of it will be completed by June 2015. Because many consumers now subscribe to telephony as part of a bundle of services, it does not make sense to focus on telephony alone. In July, Ofcom published a call for inputs to understand better the processes used to switch providers of bundled voice, broadband and pay TV. It will also hold discussions with the industry and consumer organisations, and, to respond to my noble friend Lord Stoneham’s question about the timetable, it will publish a document setting out the results in the first half of 2015. Ofcom will consult further and as appropriate on mobile and bundled services with a view to mandating RPL switching.

I share my noble friend’s concerns about RPL switching, but a short-term partial solution is not the answer. I can assure him that we are fully engaged on this matter with Ofcom and we will continue to be so. Given that progress, and everything that Ofcom is achieving with its existing powers and the ongoing work to move towards a system of RPL switching across the board, I ask my noble friend to withdraw his amendment.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Wednesday 19th November 2014 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

The amendment stands in my name and that of my noble friend Lady Hayter of Kentish Town. I declare my interest as retiring chair of the charity StepChange. Your Lordships’ House will be well aware of the considerable influence that it has had in curbing the explosion of high-cost credit that has so disadvantaged consumers in recent years. However, there is more to do.

The purpose of the amendment is to level the playing field on logbook loans by requiring the lender to obtain a court order before repossessing goods being repossessed by this archaic system, which uses legislation first introduced in 1878. A logbook loan is a bill of sale securing a loan on an asset, often a vehicle, and it gets its name from the fact that the lender retains the vehicle’s logbook or vehicle registration certificate, the V54, until the loan and any outstanding interest are repaid. Logbook loans are another form of very high-interest credit, and share with payday loans the use of unfair terms and conditions. They tend to be used by people who have bad credit ratings but need cash quickly. If you check them out on the internet you will find that an application for a logbook loan can be completed in as little as 15 minutes.

Recent research shows that logbook loans secured by a bill of sale are generally for amounts ranging from £500 to £2,000; the average is about £1,000. They are typically repaid over a six to 18-month period. The APR varies, but tends to range between 200% and 500%. These are not cheap loans.

It is the use of a bill of sale that causes the most difficulty. The legislation governing such loans, which dates from Victorian times, means that, uniquely in the high cost credit market, the lender can repossess the debtor’s asset—the vehicle—without a court order. We need to change this, to level the playing field. Bills of sale are already illegal in Scotland. Should we not take a leaf out of its book?

The history of this is interesting. After reviewing the position in December 2009, the previous Government proposed to ban the use of bills of sale for consumer lending, but, after the election, the coalition Government decided not to go ahead but to rely on a voluntary code of practice. Recent research by Citizens Advice shows that there is likely to be a 60% increase in bills for sale registered from 2011 to 2014. We believe that it is now time to stamp out this arcane practice. The Victorians had much to commend them but this legislation is not their finest monument.

When we raised this issue in Committee, the Government response was twofold. First, the Minister confirmed that the Law Commission has agreed to a request from Treasury Ministers to look at how best to reform bills of sale. This is indeed somewhat ironic, given that we had a debate only yesterday on Schedule 20 to the Deregulation Bill, when the Government were rather limply trying to defend their decision not to ask the Law Commission to review acres of what they call “legislation no longer of practical use”. However, this process will take time and unless the noble Baroness has some more information to share with us, it seems highly likely that this issue will not get into the next Law Commission Bill, which is unfortunately not due until 2016. The Government also pointed out that the FCA is in charge of this sector of consumer credit and mentioned that it had defined logbook loans as “higher risk activities”. That is certainly not wrong but when, oh when, will they get around to doing something about it?

As we found with payday lenders, it does no harm to give the regulator a bit of a push when you think that it may not get to the right place quickly enough. Consumer detriment is happening now and it ought to be stopped, so our amendment follows the approach that the House took to capping payday lending, as a sort of regulatory push. As well as welcoming the promised robust action by the FCA, we think it is appropriate to hasten it on its way. If loan book lenders have to use the courts to repossess goods, it will level the playing field with the other consumer credit operators and make it more likely that many will exit the market. That would be “job done”. I do not believe that the actions being proposed by the Government are sufficient to outlaw this scourge in good enough time. Our amendment will strengthen protections for consumers using logbook loans. I beg to move.

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

My Lords, before turning to Amendment 1 in detail, I would like to take a step back and set out why the Government do not believe that this Bill should be the vehicle for addressing issues in consumer credit and financial services more generally.

First, as noble Lords will be aware, the Government have introduced a major package of reforms to strengthen regulation of financial services markets. In the Financial Services Act 2012, we replaced the flawed system of financial regulation that we had inherited. We created the Prudential Regulation Authority to take the lead in ensuring that our banks and our insurers are safely and soundly run. We also set up the Financial Conduct Authority—FCA—as a consumer protection and market conduct regulator.

To ensure that the FCA has a clear and comprehensive remit covering all consumer financial services matters, we transferred the responsibility for regulating consumer credit from the OFT to the FCA. This means that the FCA’s statutory objectives, such as consumer protection, apply to the regulation of consumer credit. It also means that the FCA’s comprehensive and flexible rule-making powers can be used to help protect consumers from bad practices in the consumer credit market for the first time. For example, the payday lending rules introduced by the FCA have meant that the volume of payday loans has shrunk by 35% since the FCA took over regulatory responsibility in April 2014, demonstrating the strength of the regulatory regime. The Government therefore consider that the Consumer Rights Bill is not the place for making amendments to the law on consumer credit.

I turn to the detail of the amendment. Across government, we share concern about the risk to consumers from logbook loans, which were well described by the noble Lord, Lord Stevenson. The Government believe that people should be able to borrow and should have the tools to make an informed decision about which credit products are right for them but that consumers should be confident that they will be treated fairly when things go wrong. As I have said, responsibility for consumer credit regulation, which includes logbook lenders and the associated arrangements, transferred from the Office of Fair Trading to the Financial Conduct Authority on 1 April. Consumers are far better protected under the stronger, well resourced FCA regime.

Like payday loans, the FCA defines logbook loans as “higher risk activities”, as has been said, so lenders face closer supervision. Logbook lenders are subject to a range of binding FCA rules, including requirements to provide precontractual explanation to borrowers of their rights before any agreement is signed. The Government have ensured that the FCA has a wide enforcement toolkit to take action where its rules are breached. There is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, I echo the words of those noble Lords who have said that this has been a very good debate: it has indeed been good and it is right that it should have been, because it raised difficult issues with which the Government have been grappling. The predominant weight of the arguments that we have heard today—because they were not universally on one side—was for change, so I hope that that will weigh heavily with the Government when they come to consider what they are going to do.

I had a full speech here, full of witty aphorisms and wonderful evidence, but you always find that in debates of this nature, somebody stands up and says, “Do you know, just about everything that could be said about this thing has been said, but not by everybody,” and then they repeat them. I am not going to do that. The issue on which I want to reflect is what on earth the Government are going to do with this. When you have had your case as put in Grand Committee completely destroyed by the forensic words of the noble Lord, Lord Moynihan; when you have had your best arguments bashed to boundary by the noble Baroness, Lady Heyhoe Flint; when you have reduced the noble Lord, Lord Clement-Jones—and it is an astonishing thing—to speak for less than three minutes in a debate; when your former Secretary of State is lining up to give you good advice about how you should deal with this, then you are in a spot of trouble.

You know you are in trouble when you have to rely on people on the other side who are basically scaremongering. I respect the noble Lords who have spoken in support of the Government on this matter, but I think they went way over the top, while we on this side were utter models of restraint. We insisted on only two things: that the equity that should exist for anybody who wishes to buy tickets is not abolishing, changing or adjusting any market; I thought that the noble Lord, Lord Grade, made that point very well, and it was previously made by the noble Lord, Lord Holmes, who picked up the point made by the noble Baroness, Lady Heyhoe Flint. Instead, it is about making those markets that exist work fairly, removing the fraud where it is possible, and making sure that people can see and get access to the events they want. When you have consumers, event organisers, participants and the police—for goodness’ sake—on your side, what on earth are you doing, and who are you listening to when you stand against them?

[Baroness Neville-Rolfe]

My Lords, many of us love British sport and our creative industries. This love unites most of us in the House and certainly those in the Chamber today. As the noble Lord, Lord Stevenson, said, it has been a very good debate. We have had a star cast, including ladies of sport—the noble Baronesses, Lady Grey-Thompson and Lady Heyhoe Flint—and the noble Lord, Lord Holmes, so we have had real experts.

Noble Lords will know that I take a great deal of personal interest in this issue. In fact, I should almost declare an interest as a mother of three cricketers. I have met the England and Wales Cricket Board, the organisers of Wimbledon and the Rugby Football Union. I have also met Which? and I am aware of the interest of UK Music, which I meet on other things. I have actively engaged with Mike Weatherley MP and his All-Party Parliamentary Group on Ticket Abuse. I have been working with these bodies to try to get to the core of this issue: what we can best do to help and protect the fans? It is the fans who really matter in this equation.

I congratulate the noble Lords, Lord Moynihan and Lord Clement-Jones, and the noble Baroness, Lady Heyhoe Flint, on their extensive work on this issue and the expertise they always bring to our debates. Most fans buy tickets direct from the venue or the organiser, often well in advance of the event. To pick up a point made by the noble Baroness, Lady Heyhoe Flint, debenture holders and sponsors often get ticket allocations well in advance, which is why there are sometimes tickets on sale well ahead of events. A lot can change between a ticket being bought and the event itself—people fall ill or make other plans—and these fans then resell their tickets to other fans. This is the market we are discussing today, for which there has been great support. I agree with the All-Party Parliamentary Group on Ticket Abuse when it says that,

“the existence of a secondary market is justified by the need of consumers to pass on tickets bought for events that they can no longer use”.

Let me be clear: we believe fans should be protected in this market.

If the House will bear with me, I will respond to the debate and will then set out some new plans to take things forward. The noble Lord, Lord Moynihan, talked about fraud. Fraud is a criminal offence under the Fraud Act 2006. It covers activity by all sellers, including consumers and traders. Many of the actions referred to are fraud: selling tickets you do not have and have not purchased is fraud; traders impersonating consumers to sell tickets are committing criminal offences; and, arguably, selling tickets knowingly in contradiction of their terms and conditions without informing the consumer of this may be fraud.

Repeating in the Bill that fraud is a crime would not make it any more illegal. What matters to fans, and many of your Lordships, is enforcement of the law that we have. There is fraud in the ticket market: we do not dispute the numbers quoted from the National Fraud Authority on this. In the specific case of ticket fraud, it reports £1.5 billion of losses. That is not a number to be ignored and we are not going to ignore it. As my noble friend Lord Grade said, there is a serious problem.

The Government have a huge focus on cutting economic crime, and we have created a powerful Economic Crime Command within the National Crime Agency to drive this forward. We have also strengthened the reporting and intelligence arrangements for fraud. ActionFraud is now the single national reporting centre for fraud and financially motivated cybercrime. Since 1 April this year, responsibility for ActionFraud rests with the City of London Police, bringing it closer to the National Fraud Intelligence Bureau. This allows links to be made between disparate crimes that would otherwise not be connected and it has led to a significant increase in the reporting of fraud. The Government are also investing £860 million through the National Cyber Security Programme, which includes work on online fraud.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, the Bill brings in clear quality rights for consumers of digital content for the first time. In this digital age, many of us are consumers of digital content on our smartphones, our smart televisions, our computers and, I was hearing this morning, on wearables. The sector is crucial and growing for the UK economy. The Business Population Survey estimated that there were more than 300,000 digital content firms in 2013—e-book publishers, games, software and website developers—with an annual turnover of just over £200 billion. It is vital that we have the right sort of regulation for that important, very innovative sector. That is why we have consulted widely on our approach to digital content.

The digital content chapter provides that when digital content is faulty, the consumer is entitled to a repair or replacement of the digital content. If that cannot be done within a reasonable time, or without significant inconvenience to the consumer, the consumer is entitled to a price reduction, which may mean some money back or, in some cases, 100%. I set out the general picture because we are about to discuss a number of amendments in this area.

This approach takes account of the way that industry works. As my noble friend Lord Clement-Jones, who I am delighted to see here at this debate, said in Grand Committee,

“in practical terms the software industry will always find a workaround or fix to a problem”.—Official Report, 20/10/14; col. GC 211.]

I have been using that quote elsewhere. In other words, when digital content is faulty, the problem is usually remedied quickly through an update.

The proposed amendment would apply to intangible digital content the same rights as apply to goods. So when intangible digital content is faulty, the consumer would also be entitled to a short-term right to reject, a limit to a single repair or replacement, and a final right to reject. Applying the full suite of goods remedies to digital content where it does not form part of goods, as it does in a washing machine, for example, would result in provisions that were not fit for the digital world.

We want provisions that encourage an increase in uptake and allow industry to innovate and flourish. This amendment would be a retrograde step, to the detriment of consumers. As the noble Lord, Lord Knight, who has already been quoted as a real digital expert, reflected in Committee, we must remember that many digital content producers are micro-businesses and start-ups, and we need to maintain an environment in which they can flourish and provide innovative products—while, of course, not letting them off the hook for substandard offerings.

The noble Lord, Lord Stevenson, made a number of good points, but I feel, as does my noble friend Lord Clement-Jones, that the proposals in his amendment could have unforeseen effects. A short-term right to reject intangible digital content and strict limits on the numbers of repairs and replacements would not be practical in the complex world we live in. In the digital environment, a fault in one copy of digital content may be replicated in all copies, or the fault may not be a result of an action by the trader at all. That is why a repair is a more equitable solution in the first instance than a full refund.

There are also issues around the practicality of “returning” intangible digital content. I think the noble Lord, Lord Stevenson, is suggesting that there should be an obligation on the consumer to delete digital content and on the trader to provide a refund. I do not believe it would be equitable or necessary to impose such a burden on consumers, who may not be technically savvy enough to achieve this—or not without assistance from the content supplier. Of course, many forms of digital content are quickly used, so the consumer may already have taken advantage of the digital content as much as they intended—for example, having viewed the film or read some of the e-book—before they reject it. There is a high risk that a short-term right to reject would therefore push manufacturers towards more restrictive data management techniques that would not be in the best interests of the consumer. Or it could cause the industry to be more conservative in its product offerings, reducing our competitiveness. Innovation would be chilled.

Looking to the future, it is also worth considering the moves in Europe towards a digital single market, and remembering that digital content is commonly sold across borders. The short-term right to reject is a domestic law; there is no short-term right to reject in the consumer sales directive from which many of the goods remedies derive. If we went ahead with a short-term right to reject intangible digital content, we could be out of step with Europe, creating problems for our manufacturers who want to sell across borders.

I believe that, although there are attractions in providing a short-term right to reject for digital content where it does not form part of goods, this would tip the balance of the Bill too far the wrong way. Indeed, it would be to the detriment of consumers, who would suffer from, at the very least, restricted product offerings and higher prices. I therefore ask the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her full reply. I would like to come back on one or two of the points that she mentioned. I also thank the noble Lord, Lord Clement-Jones, for coming at me with rather less venom than he threatened me with outside the Chamber beforehand, when he implied that I would be mad even to stand up and make my speech. The bark was rather worse than the bite on this occasion, particularly as I have now discovered that, even though he had the correct item in his hand, he misquoted my noble friend Lady King. My noble friend is incredibly adept on the iPad, and was able to summon up the full quote, and of course it was about a different issue. I shall have words with my noble friend Lord Knight later: he gets quoted too often on these issues and, as I have discovered, he is not always sound on some of the points that we want to put through.

Ticket Touting

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Wednesday 5th November 2014 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, I should be careful about moving on to the turf of the criminal justice services. What I will say is that this was a narrow question about ticket touting, which is regulated under the Criminal Justice and Public Order Act, which was specifically set up to help with the terrible problems in football. I think that everyone feels that it has had some success. Clearly, our discussions have been wider, covering what we are doing for the consumers on the general question of ticket touting and how we can make sure that this is a good market, where people can buy tickets and be sure that they are not getting defrauded, while also ensuring that the consumer gets a good deal and can attend sport, the theatre and pop concerts. That is what we all want.

[Lord Stevenson of Balmacara (Lab)]

My Lords, Operation Podium argues, and the Government need to accept, that ticket fraud is usually,

“committed by organised criminal networks … creating legitimate-looking websites, taking payment for event tickets and then failing to supply them.”

That is the fact, but what is perhaps not realised as often is that many people who suffer from that ticket fraud then discover they are also subject to a scam which means that their credit card details are used again and again, so they are doubly hit. What sort of balance does the Minister find in that?

[Baroness Neville-Rolfe]

The noble Lord is right to express concerns but I think the House needs to understand that we have brought in new regulations as recently as June, and we have been working with the online marketplaces so that consumers are protected. The four main resale sites now go way beyond what they used to do. They are refunding or replacing unusable tickets and working with the RFU and all the other sporting bodies to make sure that things are okay. I saw the RFU yesterday and was very impressed by the action it is taking for the 2015 Rugby World Cup in using anti-forgery designs and a ballot system. We have to make progress in the real world, where consumers want to get tickets and attend games and concerts.

Copyright and Rights in Performances (Certain Permitted Uses of Orphan Works) Regulations 2014

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Thursday 23rd October 2014 Grand Committee

[Baroness Neville-Rolfe]

My Lords, I thank noble Lords for their valuable contributions and comments. We always have lively debates on these intellectual property issues, partly because of the balance that one has to try to strike on the whole series of measures we have taken.

The noble Lord, Lord Howarth, welcomed the EU directive, as did I, and I in turn welcome the work he has done with the British Library. He is of course the noble Lord, Lord Howarth of Newport, which is where the Intellectual Property Office is located, so he is a friend for that reason as well. It was also good to hear of the interests of my noble friend Lord Bridgeman, who introduced a family perspective into this debate to complement and assist the perspective of national collections such as the British Library.

The noble Lord, Lord Howarth, argued that the scheme did not meet the needs of museums and that the balance was wrong. Clearly, I respect his view, but I disagree. We must protect copyright owners as well as the cultural sector, which was a point made by the noble and learned Lord, Lord Scott.

The noble Lord, Lord Howarth, also felt that the UK scheme was bureaucratic and expensive. As he said, I care a lot about regulation and bureaucracy and will be keeping a beady eye on this. As we have heard, there are views on both sides. As my noble friend Lady Buscombe said, we are slightly between a rock and a hard place. We have to find a balance and move forward on these important intellectual property issues. There were many years of debate when little was done, and it is good that we have moved forward in recent times. We now have a policy on orphan works coming into effect.

We are mindful of the need to make the scheme affordable to cultural institutions. We have developed the orphan works licensing scheme, including the approach to pricing, in consultation with museums, libraries and archives. However, the needs of potential users of orphan works need to be balanced with the rights of copyright holders.

The noble Lord, Lord Howarth, also argued that the diligent search requirements were onerous. I will come on to talk about those in a little more detail in view of the other points that were raised, but I say at this point that it is a fundamental principle of diligent search that it needs to be a diligent search for all relevant rights holders of any given work. That is only fair. Of course, many libraries, museums and archives are already doing this. The difference will be that when those searches do not result in rights holders being found, the search will not have been wasted.

Of course, the EU directive covered only the heritage and cultural orphan works, not commercial works. The UK scheme also covers a broader field than the original EU directive. Despite our efforts to make the directive wider during its negotiations, it does not allow us to regulate commercial use. That also partly answers the question of the noble Lord, Lord Stevenson, about why we had to have two statutory instruments, one under Section 2(2) and the other under domestic legislation, but we are of course debating them together.

The noble Lord, Lord Howarth, asked about licence fees. He said that if you multiply a minimal fee by millions of works, you get large sums.

[Lord Stevenson of Balmacara]

To go back to diligent search, if I am picking this up correctly from what the noble Baroness has said, the irony will be that the position in the order reflecting the incorporation of the EU measure has got specified minimum requirements for a diligent search, but there are no such requirements in respect of the commercial work. That is, I think, the cause of the unease that we all feel. Does she not recognise that unless a similar or even greater level of scrutiny is required, the danger will always be in the minds of the rights holders that they are not being dealt with fairly in the domestic issues?

[Baroness Neville-Rolfe]

I thank the noble Lord for his intervention. I think in fact that is not right. There will be rules for diligent search and indeed we have published guidelines on diligent search, which I am very happy to make available to the Committee. For exactly this reason, we are very aware of the interplay between the two schemes and that is something that we have been concentrating on during the extensive period of implementation and thinking about exactly how to implement this.

I would say that licence fees are not a tax. They are the price owed to the copyright holder. It is fair to pay for this, given that copyright is, in a sense, a property right, as has been said.

Consumer Rights Bill

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Monday 20th October 2014 Grand Committee

[Baroness Neville-Rolfe]

The department always keeps the operation of new regulations under review, and I can certainly follow up with the precise detail on this provision, if that is helpful.

The noble Lord, Lord Knight, also asked whether the consumer could require a trader to delete any data that they may have collected. In a sense, the answer is similar: it would be a significant departure from the current regime, which traders are familiar with, and of course data protection rules need to be complied with at all times.

The noble Lord, Lord Stevenson, I think asserted that consumers have the right to a refund only if the trader did not have the right to supply it. However, as I have just said under my second general point, the consumer can get 100% of their money back under Clause 44(2) if a repair or replacement cannot be made within a reasonable time or without significant inconvenience.

In conclusion, I have heard the argument in favour of giving intangible digital content the same rights as goods, including applying the short-term right to reject. I realise that there are strong views on both sides of this debate and a keenness to get this area right. We are already improving the situation for digital content by providing new rights when consumers buy digital content. There may be some attractions to the idea of providing exactly the same rights for digital content as goods, but the issues are not clear cut and a balance has to be struck with the impact on industry. To exactly align the rights for digital content and goods could have severe consequences—to the detriment of industry, which would have to bear the costs, and consequently, I fear, to consumers, who might suffer from reduced product offerings, reduced innovation and, ultimately, higher prices. I therefore ask the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her response, although I am very disappointed in it. I also thank my noble friend Lord Knight for his contributions. It is obviously going to be a lively afternoon if this is the rate at which he intends to intervene. I encourage him to do so, a bit like “Angry Birds”—or is that the wrong analogy? Just while I have him in my sights, his support for me was, I think, generous but perhaps a little lukewarm on the central point, which we might have a talk about afterwards. However, I also felt two things about what he was saying—which I think is relevant to the debate; I am not trying to pick on him. I agree that very often the download level, at which you are paying a matter of pence for things, can look very trivial, and that perhaps makes the effort of trying to remove the charge uncertain; but there are people in this world who look after the pence and hope that the pounds will look after themselves. For all people we have to be sure that there is not a massive rip-off taking place on a big scale. Prices are important, but they are not the only determinant.

Secondly, the failure to find a way in which one can return intangible downloads is also a way of cluttering up one’s computer. I think that I would be quite pleased if I got rid of some of the stuff that I have wittingly or unwittingly received in my computer which is slowing it down. These are points that we perhaps might come back to.

My main argument is that there is a lack of consistency in approach here. It is therefore not really about the detail, it is about the principles of this. In light of the fact that the consumer can experience some types of digital content in both tangible and intangible form, it seems unarguably the case that we need to have a single remedy and a single process under which that is operating. I think that we are building in problems for ourselves as a society if we do not get this right at this stage, and I fear that the Government are getting it wrong.

There is also a danger that the market will become skewed if one regime is seen to be effective and efficient for tangible goods but there is another for intangible goods. The better consumer protection for tangible goods and materials will be of benefit, and higher prices may even be applied to that area. Again, that would distort the market, which I thought was what we were trying to avoid. The cost elements of the two platforms are an issue to which we would have to return.

The Minister said she was worried about consumers’ willingness to try new and innovative products, but we are not hearing—as we have in previous debates in this Committee—that it is an important tenet of consumers’ interest in new products and innovative solutions that they have security in their rights. If they do not have easy, effective and properly organised rights as regards intangible goods, they will be less likely to take innovative material. That would be bad for innovation and our economy.

The Minister said that what we were asking for was a step too far but, as we heard from my noble friend Lord Knight, there is a huge asymmetry in the relationship between the traders now operating on the internet and consumers. He gave an example about the benefits that come back to producers in the form of personal data and the unwillingness of the Government to take that on board as a serious issue. If a consumer takes a free download in return for providing personal data but has no redress in terms of what the data are used for if he chooses to reject the material he has downloaded, there is a new asymmetry that we need to think carefully about.

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[Baroness Neville-Rolfe]

My Lords, I enjoyed the graphic picture described by the noble Lord, Lord Stevenson, of how things have changed and the smaller scale of everything as a result of the digital world. Despite his comments on the previous amendment, I think that we share a common goal: to legislate for the consumer of digital content in a 21st-century way.

One of the main aims of the Bill is to provide clarity on what rights consumers have when goods, digital content or services are substandard. I am sure that we are all agreed that one of the things that a consumer needs to know is to whom they should go when things go wrong. Intermediary businesses also need to be clear on when the rights do and do not apply to them, particularly when they are developing new and innovative business models. The digital content quality rights are contractual rights consumers have when they pay a trader to supply digital content to them under contract.

The noble Lord, Lord Stevenson, asked whether freemium products were covered by the clause for those who are not as digitally aware as some among the younger generation. A good example would be “Smurfs”, which is a free game but users can buy additional content within the game such as a house for Smurfers. The basic model is free but consumers then pay, sometimes at premium rates—hence the term freemium—for enhancements and additional features. Where a consumer pays for digital content and the trader provides it under a contract, the quality rights apply. This means that the initial free product will not attract the quality rights. However, the later paid-for features will, indeed, attract the quality rights. This includes being fit for the purpose for which they were bought—that is, to use in connection with the free product. Those of us who have studied the proceedings in another place will know that “Candy Crush” occupied a great deal of time among Members, to their great delight.

The noble Lord also asked what happens when the two matters come together and whether the quality rights that apply to the paid later additions then change the status of the free product. I will come back to him on that point.

The digital content chapter covers a consumer contract with the trader who supplies the digital content and not the intermediary who introduces the consumer to the trader, as they are not supplying that digital content. The intermediary will be covered only if they also supply digital content as part of their business. For example, if a consumer buys a computer game from an online trader such as Green Man Gaming, Green Man Gaming is the trader, in the same way as if they buy a board game from WH Smith, WH Smith is the trader.

If the consumer uses a search engine to find a trader from whom they can buy the game, the contract is not between the search engine and the consumer. The same is clearly true in the physical world. If the consumer uses Yellow Pages to find a shop, Yellow Pages is not the trader.

What consumers need to know is who the trader is. This information needs to be clear and transparent. I know that this is not always the case in the digital world. However, the consumer contract regulations, to which we referred in our discussions last week, came into force in June, particularly in respect of distance sales. They require that the identity of the trader and their contact details are provided to the consumer before the contract is made. This applies to digital content as well as to goods and services. Therefore, the proposed amendment is not necessary because this is how our reforms work. The rights apply against the trader the consumer has paid for the supply of digital content and not against the intermediary. The name and contact details of the trader have to be provided to the consumer under those regulations. I therefore ask the noble Lord to withdraw the amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her response. I take it from that that there is now agreement and clarity about the role of the intermediary, which I fully accept. I am glad to have on the record that the trader is the person with whom the consumer is contracting to provide a particular good or service delivered digitally and that the role of the intermediary is not involved unless they are also supplying either directly or indirectly material which could be called digital and it would be a paid-for service. I am also grateful for the confirmation that the consumer contract regulations will apply to that.

What I am not quite so happy about is the point raised by my noble friend Lord Knight about free downloads and what constitutes a free download—that is, not for monetary consideration—in the digital world. I wonder if the Minister would take that point away. It obviously comes up in relation to the freemium type of arrangement, but there are wider considerations here. I do not understand why the Government are taking a rather pure view of the fact that the trigger point appears to be the transfer of cash for a product that is already embedded into something that has been downloaded. The vanilla version—if I can use that term—of the game is clearly being used and operated in a traded way even though money is not being exchanged. There must be a reasonable expectation on both sides that a later development in that process would be for money to be exchanged so that the game could be enjoyed at a higher level. If the rights to it kick in only at the point at which consideration passes, then we are not covering the point at which the free version somehow interferes with and reduces the enjoyment of the player. It is perhaps too complicated to deal with here, but I would be grateful if we could exchange letters on this point. With that, I beg leave to withdraw the amendment.

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[Lord Stevenson of Balmacara]

My Lords, I am grateful to my noble friend Lord Sugar for putting down this amendment and my noble friend Lord Haskel for adding his name to it and standing in and presenting it for my noble friend Lord Sugar who is unavoidably detained today. As has been said, this is an alternative approach to things which is, perhaps, more reflective of a more dynamic and engaged relationship between consumer and trader in which you have to trust the trader to develop the tools you use and you go forward. It certainly beats the old advice—which I am sure my noble friend Lady King has already tried—that when in trouble switch it off, hope for the best and it will magically work itself out. It is an attractive idea that somebody up there is thinking about how it works and how best to improve it. With the dangers that my noble friend has mentioned, we need to hear from the Minister about how this has been received.

[Baroness Neville-Rolfe]

My Lords, I am also grateful to the noble Lord, Lord Haskel, for his amendment and for standing in for the noble Lord, Lord Sugar. I look forward to his appearance on the Lord Sugar show.

I recognise that some types of digital content, such as software and games, do, in the words of the noble Lord, Lord Haskel, evolve over time. That is precisely why we introduced Clause 40, allowing updates that were in the terms of the contract. So let me reassure noble Lords that there is nothing in the Bill that prevents digital content traders from providing updates or upgrades, under the terms of their contract, to improve the functionality of the digital content. We have heard several times from the noble Lord, Lord Knight, about the iterative nature of some digital content and I am grateful for his digitally aware intervention.

Clause 40 ensures that, as long as modifications are allowed under the terms of the contract, there is nothing to prevent the trader from updating or upgrading digital content as long as it remains of satisfactory quality, fit for any particular purpose and as described. Such contract terms would be assessable for fairness under Part 2, “Unfair Terms”. The “as described” aspect does not fix the digital content to a static description. The digital content has to match the description but this does not mean it has to be exactly the same as the original description. It simply means that if the digital content is described as containing a certain feature then it should have that feature. However, as long as it has the described features, any additional features would not prevent it from matching, rather as a blouse may match a jacket, although the jacket may have more colours.

To a large degree, the description is in the gift of the trader, as long as it includes the main characteristics of the digital content, its functionality and interoperability. I have heard the industry’s concerns that it needs to be able to provide updates that are made for the consumer’s benefit. Perhaps a feature is taking up too much processing power and slowing everything else down, or perhaps a feature has become vulnerable to a security threat and needs to be removed while it is fixed, to protect the consumer from the threat. Of course it is important that industry is able to act in these cases but I am not convinced by arguments that Clause 40 will prevent it from doing so or slow it down in cases of urgent updates.

Let us assume that a trader has needed to remove a feature of some digital content, either intending to improve functionality or protect from a security threat. What would the trader do next? They would have two options. They could repair the feature to make it work more efficiently or improve security, and then reinstate it. Or they could take a decision that it was a minor feature that not enough consumers used, so they would not reinstate it. If, in that scenario, the removal of the feature meant that the digital content no longer matched the description, as required by Clause 40, the first remedy available to the consumer would be the repair or replacement of the digital content.

In the first option I have just outlined, that is normal industry practice already and is appropriate. A consumer has bought some digital content expecting it to contain the features or perform the functions it was described as doing. If the digital content no longer does that they will be justifiably unhappy and will expect the problem to be fixed. In the second option, where the trader is not repairing or replacing the feature, the consumer would be entitled to some money back. Let us remember that the amount due is unlikely to be the full price paid. It would be an appropriate amount and we would expect this to take into account the use the consumer had already had of the digital content and the continued functionality of the rest of the digital content. So the amount might be small.

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[Baroness Neville-Rolfe]

I agree—I take the rebuke. Obviously, perfect spelling is very important to the future of civilisation.

As I was saying, the digital content might have introduced a code that has damaged all the digital content on the consumer’s device, including the underlying operating system—for example, as can happen on one’s iPad. In this case, the compensation could be considerably more.

We have already debated the issues surrounding business liabilities under this clause and we have talked a little about the consumer angle. I have listened very carefully to both of the perspectives discussed in relation to this clause and I will read Hansard. I am keen to ensure that we have the balance right here. I think that we have. For that reason, I hope that your Lordships will agree that this clause should stand part of the Bill.

[Lord Stevenson of Balmacara]

My Lords, I thank the Minister for her comments. By her use of examples she has explained some of the difficulties. She put herself into exactly the position I was trying to bring her to, which is that I do not really understand how this works yet. I now understand the mechanism and that it will apply to free delivery, and anticipating her line of argument, presumably where free apps turn into freemium apps there will be an assessment of both the free part and the premium part because there will be two different elements in the calculation that go towards it. I can see that the issue is about the damage caused rather than the original pricing because there was no price on the free element. However, I still do not quite understand who is doing that. Is this now a matter for the courts or will some new form of arbitration system be set up for problems around free downloads? I am not looking for a response at this point, but perhaps the Minister could write to me.

[Baroness Neville-Rolfe]

Perhaps I may clarify that obviously it is ultimately for the courts since we are talking about provision for damages and so on. I shall set that out clearly in writing.

[Lord Stevenson of Balmacara]

I am now slightly more confused because the text of the Bill states that the consumer has a right and can exercise that right against a trader. Is that going to be in the courts in all circumstances? If we are talking about some of the apps referred to earlier by my noble friend Lord Knight, we are considering trivial things which may create a lot of confusion. I cannot believe that the courts will wish to engage themselves with “Angry Birds” and “Candy Crush” users who are annoyed about an issue.

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[Baroness Neville-Rolfe]

Perhaps I have confused the noble Lord by saying that ultimately this is a matter for the courts. However, he will be pleased to know that we are planning to issue guidance in this area which will be subject to the usual consultation. The minor points being articulated by the noble Lord will be the subject of guidance and therefore, it is hoped, will not reach the courts too often.

[Lord Stevenson of Balmacara]

“A hae ma doots” about that—but perhaps I should not use that term in Hansard. I have some doubts about where this is going, so again perhaps I may request a letter that sketches this out in more detail; I am sure that we will reach an accommodation. In the mean time, I am happy not to press my opposition to the clause.

Tata Steel

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Thursday 16th October 2014 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for repeating the Statement made in the other place. I am sure that everyone in the country will appreciate the uncertainty and anxiety that yesterday’s announcement by Tata Steel will have caused for thousands of steel-workers, their families, affected communities and firms in the metals supply chain. I hope that the Minister will join me in expressing that to those people.

As the noble Baroness said, steel is a vital foundation for much of the UK’s manufacturing supply chains. The UK is a leading global player in sectors such as aerospace, automotives, construction and energy infrastructure, and the production of steel here in the UK underpins much of that competitiveness. However, we now know that Britain’s largest steel manufacturer is preparing to sell half of its capacity. What contingencies will the Government put in place to maintain and enhance the skills and capability of that industry to ensure that they are not lost to the UK?

Secondly, what commitments have the Government obtained from the potential new owner regarding the maintenance of existing sites and industrial capability, the safeguarding of jobs and additional investment? How binding are these commitments likely to be, or are we in danger of repeating the mistakes we encountered during the Cadbury takeover? Is the Minister concerned that we have learned that the unions have not been involved in any consultation or communication with the potential new owners?

Thirdly, this matter affects England and Scotland. What discussions have the Government had with their counterparts in Scotland to ensure a co-ordinated and united response for the good of the steel industry across the United Kingdom?

Finally, do the Government have a plan for what happens if negotiations for the sale break down? It is clear that Tata wishes to divest itself of its Long Products division, so what active role are the Government taking about maintaining that capacity in the United Kingdom? Should an effective industrial strategy not consider and mitigate these risks?

[Baroness Neville-Rolfe]

My Lords, we share the concern about the uncertainty for the communities, as I made clear in the Statement. Fortunately, we have done a great deal of work on skills, including providing a stronger steel industry, which makes the prospects of a good outcome much more likely. I understand that the unions were warned about the announcement, but clearly there were constraints relating to inside information. I emphasise that no closures have been announced; this is the beginning of a possible sale. I reassure the noble Lord that we are actively engaging in discussions with both the Tata Group, the existing owner of the asset, and the Klesch Group, with which we will discuss its intentions. The Scottish angle will be attended to and is very much in our minds.

Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Tuesday 29th July 2014 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, I accept that the guidance notes are important and I will take the point away, if my noble friend is kind enough to give me the detail. I also say to the noble Baroness, Lady Morris, that I will keep an eye on the cloud aspect, which she rightly raised. I feel that it is important to include the cloud, because it is part of modern life, but clearly we need to look at how it is going.

My noble friend Lord Grade of Yarmouth felt that changes would harm rights holders. I would say that the exception legitimises what millions of people already do, something that the market has accepted for many years. This is aimed at consumers who have paid for content and support the creative industries by paying for music, films and books.

Many points have been made. I will study Hansard carefully and come back if there are points that I have not addressed in my summing up. As I said in my opening speech, this is a delicate balancing act. The Government believe that the copyright system has not kept pace with the digital revolution. As a result, a great many intuitively acceptable activities are illegal or uncertain. These changes relating to private copying, parody and use of quotations form part of a package that should make copyright works more valuable to all, give users clarity about their rights and build respect for copyright in the process. They will contribute to a more modern statute book that meets the challenges of an increasingly digital and changing world.

[Lord Stevenson of Balmacara]

My Lords, I thank all those who participated in this debate. It was wide-ranging and many noble Lords made helpful and informative speeches, even matching those points picked out by the noble Baroness when she referred to the noble Lord, Lord Clement-Jones. The point of having the debate was made in the range and diversity of the issues raised all round the House. I am glad that a number of noble Lords were able to pick up on the concerns which I raised in my speech.

I would make one point to the Minister. I regret that I did not welcome her to her first substantive position on the Front Bench in this Chamber, although she has appeared in the Moses Room. She is turning out to be a formidable performer and we are all impressed by her ability to grasp such a complex issue in such a short time. However, she was quite wrong to say that these two statutory instruments were unbundled simply to provide us with the opportunity for a further and more substantial debate. They were unbundled because they had a car crash on the way to being approved. As a result, they had to be brought back in a different Session, separated from the other statutory instruments. I do not think that the noble Baroness should gloss too much over that.

Would we have got to the same place we are in today had we proceeded down my recommended route of going primary in these matters? Probably, but I suspect that we would still face, as many noble Lords have said, the prospect of these rather imperfect instruments being brought into law. However, as the noble and learned Lord, Lord Scott, said, the advantage would have been that we would have had some sensible, mature discussion—in the right order and at the beginning of the process, not the end—about what was going on, what the purposes were of these exceptions and whether they fitted some overall narrative, as my friend the noble Lord, Lord Grade, said in his prescient point. It would also have presented the opportunity, as my noble friend Lady Morris said, of trying to raise the whole level of the debate in the country about this really important issue. If we cannot get people on board in terms of what IP is and what it can do for them, we have lost the battle.

In putting down this amendment to regret, my challenge was to raise the question of why the Government had gone for a secondary legislation route rather than a primary route and how it had come to be so badly handled, as we heard from the evidence of those who were consulted about this issue. Why did the Government not raise the questions asked during the debate about changes in the licensing regime, which have now caught up with—and in some cases overtaken—this set of SIs? Why was no real consideration given to the Copyright Hub, which is going great guns in solving a lot of problems in the copyright area; and why and how is this at variance with what we think will be the way that some developments take place with our EU colleagues?

I do not think that I have had satisfactory answers to those questions. I have had the detail, but not the overarching view. Perhaps in a subsequent letter that is yet to come, some of these points might be picked up. In particular, I hope that the letters that come will recognise that the point made by the noble and learned Lord, Lord Scott, about contract override has not been resolved; that the question of whether the regulations —in particular, with respect to remuneration—are intra vires lies open to judgment; and that the question of whether the Government should legislate in an area where they are not yet fully certain still raises questions of propriety. I felt that my noble friend Lady Morris was right in her jibe that the way that the Government argued the case on intra vires was really a question of looking for appropriate fig leaves for their position. They may be right, but it is unfortunate that it has been left for the courts to decide.

The feeling in the industry is that the battle over these regulations is over and that those affected have been consulted to death but not listened to and, as a result, are simply exhausted. That, more than anything, suggests that the Government have got this completely wrong from beginning to end—although, in fact, I do not think that we have heard the last of these proposals.

Having listened to the debate and having been buoyed by the support of those around the Chamber who picked up on the points I made, I still think that we should accept the inevitability that the regulations will come into law, and therefore, with the leave of the House, I beg leave to withdraw my amendment to the Motion.

Copyright and Rights in Performances (Extended Collective Licensing) Regulations 2014

Debate between Baroness Neville-Rolfe and Lord Stevenson of Balmacara

Monday 21st July 2014 Grand Committee

[Lord Stevenson of Balmacara]

I am grateful to the Minister for rehearsing that point, but I really still do not quite get it. She said that it was possible that different collecting societies would have different thresholds at which informed consent would be deemed to have been properly researched and implemented. Can she be quite clear that we are not talking about a minority of members of a collecting society being able to impose some sort of structure on other right holders at—let us take an arbitrary point—50%?

[Baroness Neville-Rolfe]

I think that this issue merits further discussion, which might need to be the subject of the new art of letter writing.

If I may, I would like to come back to the point made by the noble Lord, Lord Howarth—that libraries do not need regular checks on digitisation projects. All ECLs, including those for digitisation, must be balanced with safeguards for non-members. It is this which has led us to the view that we need regular reviews. Libraries and archives are very important to us, as are digitisation projects, but, as I said earlier, this does not seem likely to be the main focus of use of the provision in the early stages.