Small Business, Enterprise and Employment Bill

Bill Esterson Excerpts

Wednesday 19th November 2014 Commons Chamber

[Sheila Gilmore]

I agree with my hon. Friend.

The hon. Member for Burnley (Gordon Birtwistle) seems to believe that the last Government did nothing on this issue. I do not agree, but even if that were true, it would not be a reason for not dealing with the issue now. On that basis, we would never do anything different or new because a previous Government had not done so. That would be a very strange way of doing politics.

[Bill Esterson (Sefton Central) (Lab)]

My hon. Friend is quite right. This has become a huge problem in the past four and a half years, so much so that people in this country are, on average, £1,600 a year worse off since 2010. That is a direct result of the failures of the Government who are now in power. That is the reality for people up and down the country.

[Sheila Gilmore]

I thank my hon. Friend for his pertinent intervention.

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[Sheila Gilmore]

My hon. Friend echoes the point that I was seeking to make. If there were equality of arms and people were negotiating on an equal basis, that would be different from a situation of “take it or leave it, and be grateful for what you’re getting. Arrange your life around all the constraints.”

In many ways, the Opposition’s amendments are modest. They are not asking for huge changes, but they go beyond the miserly reforms to zero-hours contracts that the Government are offering. I think the Government want to get brownie points by saying that they are now dealing with the problem of zero-hours contracts—the Prime Minister mentioned them today—but the Bill’s provisions simply do not go far enough. I urge the Minister, even at this late stage, to consider supporting the Opposition’s amendments and strengthening the Bill’s provisions so that the Government can say that they are making a proper effort to deal with the problem.

[Bill Esterson]

In evidence to the Committee, Sarah Veale from the TUC said that there is a significant difference between what she called the higher end of the employment market, which is often where trade unions are organised and staff are well paid, and other areas. She stated:

“Our worry is with the unscrupulous employers who use these contracts deliberately as a means of cutting wages and having people available, the flexibility being to their advantage and not so much to the advantage of the worker”.

When talking about provisions in the Bill she said:

“A lot of work will need to be done with the regulations for this to ensure that there are no easy avoidance tactics used by unscrupulous employers.”

That is what the TUC said about what the Bill sets out to do, where the gaps are, and how much more work is needed to make it effective for staff who otherwise would be exploited.

Yesterday we talked about the impact that uncertainty has on people—whether tenants in pubs or small business owners and managers more generally—and on their communities and staff. Today we are considering people in employment, and my hon. Friend’s amendments set out how important it is to look after people who otherwise face uncertainty and difficulty as a result of low pay and everything that follows from it.

[Andy McDonald]

Does my hon. Friend agree that the impact of people being subjected to zero-hours contracts inhibits their ability to economically engage? It is bad for our communities and economy if people do not have that regularity of income and cannot plan for their future and families.

[Bill Esterson]

That is exactly my point, and I will be developing it during my speech. The lack of certainty leads to difficulties for a large number of people in our society. Whether caused by zero-hours contracts, part-time employment, general low pay, undercutting, a lack of payment or the minimum wage, bogus self-employment or, indeed, a combination of those factors, it all leads to a situation where the reality of the economic recovery is no recovery at all. I mentioned earlier that on average people are £1,600 a year worse off, and although apparently we have an economic recovery, that is not what is happening for the majority of people and their families in everyday life.

My hon. Friend the Member for Edinburgh East (Sheila Gilmore) mentioned the care sector, which is important in the context of the amendments. Before she died earlier this year, my mum was looked after by some wonderful women. Two of them came at weekends to look after her, and they visited four times a day. They told me that their working weekend was, on average, 25 hours long, yet they were paid for only 10 hours. Far from getting the minimum wage, they were being paid less than half that for their work, because they did not get money for their travel time and were paid only for the 15-minute slot when they were with the vulnerable elderly or disabled person they were caring for. In addition, a draconian system was about to be introduced in which they had to phone on arrival and when they left, to ensure that their employer knew they had carried out the visit. Whose phone they were supposed to use was a matter of conjecture, and whether they were supposed to ask the householder or vulnerable person, or use their own mobile—presumably at their own cost—was not made clear. The reality was a low-paid existence for people doing one of the most important jobs that anybody can do, which is look after the most vulnerable people in our society.

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[Tom Blenkinsop]

Proposed new section 6A(c) in amendment 8 states

“changes in provisions relating to the national minimum wage improving other measures of pay in the labour market.”

That obviously means that Labour wants better collective bargaining in workplaces. The best way of ensuring any minimum standard is to have collective bargaining on site as that would reduce the costs of enforcing the national minimum wage at a later stage. Does my hon. Friend agree that one good measure for the care sector and other small SMEs is more collective bargaining in the workplace?

[Bill Esterson]

That is absolutely right, and as evidence from the TUC that I mentioned earlier made clear, where we have organised workplaces, we have a better system of pay, conditions and support, and as a result better services in sectors such as the care sector.

[Tom Blenkinsop]

Does my hon. Friend agree that the best way to have collective bargaining on site is to pay subscriptions to a trade union? Traditionally, of course, that has been done through check-off. Does he agree that the Government’s current position on check-off, as an employer of their own employees in the civil service, is a demonstration of their lack of commitment on this issue?

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[Bill Esterson]

My hon. Friend raises an incredibly important point and is absolutely right to raise it in the context of this debate. It is extremely relevant to the points I have been raising, as I am sure you will agree, Mr Speaker.

[Graham Jones]

My hon. Friend referred to the Government policy of name and shame, which I understand has been announced four times. Only 25 firms have been named, despite evidence that as many as 300,000 people in the UK earn less than the national minimum wage.

[Bill Esterson]

My hon. Friend must have been reading my speech, because I was about to make exactly that point. He has made it for me. The reality of the naming and shaming policy is that it has not worked: it has not delivered an improvement in the enforcement of the national minimum wage. If 300,000 people are being paid less than the national minimum wage, Government Members should be ashamed of that.

[Mr Donohoe]

Even if they were paid the minimum wage, working for three hours a week does not, in any shape or form, allow them to live, does it?

[Bill Esterson]

We should undoubtedly do everything we can to encourage employers to pay a much higher rate. The real level of the national minimum wage has fallen year on year. I agree that we should push employers to pay the living wage, too.

[Mr Donohoe]

I am talking not so much about the living wage or the minimum wage as the number of hours people work a week. People cannot pay their keep if they are not working a particular number of hours a week. Regardless of what they are being paid an hour, they need the hours. The introduction of zero-hours contracts has surely been the biggest mistake.

[Bill Esterson]

My hon. Friend rightly brings me back to zero-hours contracts and the problems and difficulties they create for people. Working a very low number of hours causes enormous hardship and difficulties: the difficulty of working an uncertain number of hours that can go up or down; the difficulty of claiming benefits to cover some of the gaps when going on and off benefits; and the difficulty in trying to navigate a system deliberately put in place by the Government to restrict what people, who are in work mostly, are paid in social security. I am glad he has made that point.

The use of agency workers, typically from eastern Europe, by companies in this country to undercut local staff is wholly unfair on the migrant workers who work for very low rates of pay and wholly unfair on local staff who are pushed out of the picture by being undercut. That is disastrous both for them and for the workers who are brought in. The knock-on effect is very damaging to the local economy too, because often any money earned, even in such low amounts, is sent back home and not spent locally and circulated around the local economy. The agencies have to be stopped. I am glad that it is Labour policy to take action to reduce the abuse perpetrated by such agencies. My hon. Friend the Member for Edinburgh South (Ian Murray) made the point very well: good businesses want to pay decent wages, but they are undercut in so many ways that they find it difficult to do so when unscrupulous employers exploit the system. Agencies’ use of overseas staff on low rates of pay is just one of the ways in which that happens.

The Bill introduces a penalty for employers who do not pay the national minimum wage. The problem is that there will be no improvement in enforcement. I mentioned the cuts in the number of staff at Her Majesty’s Revenue and Customs.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

indicated dissent.

[Bill Esterson]

The Minister shakes her head. Is she telling me that I am wrong when I say that the people who used to work in this sector for HMRC in my borough and have told me they have lost their jobs and that they are not telling me the truth?

[Jo Swinson]

I am not telling him that his constituents are not being truthful in relation to their circumstances, but I am saying that the Government have invested more money in the enforcement of the national minimum wage. HMRC has employed more compliance officers in this area of work. I am sure that on behalf of his constituents he would wish to take up his concerns with the Treasury, but national minimum wage enforcement work has received additional investment from the Government.

[Bill Esterson]

I am glad the Minister has made that point. The reality is that those who used to work for HMRC would be very puzzled to hear it. Many staff working at HMRC, whose numbers have fallen in the past four-and-a-half years, would be puzzled by it, too.

The lack of improvement in enforcement is a worry, which is why our proposal to give the responsibility and power to local councils is so important. We propose the real deterrent of a £50,000 fine—the Government have not come forward with anything on that scale—and the aspiration of £8 an hour for the national minimum wage. That would move things forward significantly, while at the same time encourage the payment of a living wage.

All these low pay issues—the people who have to put up with low hours on zero-hours contracts, as my hon. Friend the Member for Central Ayrshire (Mr Donohoe) pointed out; the part-time nature of many of the jobs created in recent years, which the Government are so keen to trumpet; the way in which the minimum wage is undercut; the lack of a living wage; and the fact that people are £1,600 a year worse off—show why it is so important for proper action to be taken. The national average for the number of people in work on low pay is one in five. In my constituency, two in five are paid less than a living wage. For my constituents, the issue of low pay is absolutely crucial. They are crying out for an improvement in the way the economy is balanced, so that far more people benefit from economic recovery and we see a reversal in the year-on-year fall in living standards they have suffered under this Government.

There are very high numbers of people on low pay, which—the point was made in an earlier exchange—has led to low tax receipts. That explains why the apparent improvement in the number of those in employment has not been linked to a reduction in the deficit. The deficit is now going up again, despite the draconian cuts in public spending.

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[Bill Esterson]

The economic indicators tell the story. Whatever the Government are doing and whatever is happening in the economy, for the majority of people it is not working, but it is certainly hurting. That is the reality for many of my constituents: two in five earn less than the living wage. They are hurting and finding it difficult to make ends meet—to pay their mortgages, their rent, their food bills—and many people in work are going to food banks because they cannot survive otherwise.

I was talking to a nurse the other week on the picket line outside Ashworth hospital. He felt he had no alternative, because of the dire situation he was in, but to strike for four hours over the 1% pay rise he had been denied by the Government. One per cent.—how mean can you get? When it gets to the end of the month, he has to choose between putting fuel in his car to get to work and buying food. That is how precarious an existence he and many in the country are living because of low pay.

As others have mentioned, more and more people are entering self-employment, and their position is incredibly insecure. As anyone who, like me, has run their own small business will know, there are times when money is not coming in and there is no guarantee of a wage. It is a difficult situation and one facing a growing number of people. For some, it is a choice, but many more are forced into self-employment for a variety of reasons, and it is a very insecure way of life.

With all these different forms of low pay, I am afraid that the prospects for prosperity or a recovery in living standards will not be good for many people unless we significantly change how our economy operates and the way we deal with issues such as low pay. For that reason, interventions of the kind proposed by my hon. Friends on the Front Bench are important; they give support and encouragement by ensuring that the rules are enforced, that people are paid according to the law and that action is taken to improve pay.

Amendments 8 to 10 are designed to help raise the pay of the lowest paid in the country and those most affected by our low pay economy and to boost the economy in parts of the country, such as my constituency, where there is a big problem. They are designed to protect workers, enforce the law and support businesses that are being undercut and trying to do their bit. The point my hon. Friend the Member for Edinburgh South made about his own experience in business was a great example of what a good employer should be doing—making absolutely sure they pay their staff decently. My granddad used to run a corner shop, and he said, “If you can’t afford to pay people a decent salary, you should not employ anyone.” If that was good enough for him back in the 1940s and ’50s, it should be good enough for us now. That is how good employers operate. Sadly, however, there are unscrupulous people around who will seek to take advantage where they can, so we need to take action to help the lowest-paid in our society. I hope the House will support amendments 8 to 10.

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[Jo Swinson]

The evidence submitted in the reports is pretty comprehensive, so I think it does meet the requirements set out, particularly when combined with the assessment of the latest hourly earnings and the impact of the minimum wage and what it does to living standards and hourly earning. I think that the existing reporting requirements are adequate and that the amendment would bring about a duplication. I welcome the interest in the issue, however, and I welcome the fact that as well as those formal reporting requirements, we have had various debates—sometimes in Westminster Hall, sometimes here in the Chamber—on these issues. Furthermore, these topics are returned to frequently at BIS oral questions, and I expect that to happen tomorrow. It is right that we have these opportunities to discuss these issues because they are important.

Let me deal with some of the specifics that came up in the debate about enforcement of the national minimum wage. In particular, we heard the charge that the number of investigations had gone down and that this was some sign of failure, but I believe the picture is more nuanced than that. Since the national minimum wage was introduced and HMRC has been the enforcement body, that body has continually assessed how it undertakes enforcement activity and how it can be improved. It is true that the number of individual investigations has gone down, but that has been coupled with a much more efficient undertaking of investigations. In particular, HMRC often now has larger and more complex investigations as part of the risk assessment work being undertaken. Sometimes those cases take longer to complete, so there will be fewer overall cases. The number of people covered by each case, however, has been increasing.

In addition, when someone makes a complaint to HMRC about the national minimum wage, rather than just going in to investigate the particular worker, Joe Bloggs, and their circumstances, HMRC has the power to widen the investigation—not only to ensure that the anonymity of the complainant is preserved, but to recognise that if there are anomalies in one particular worker’s payment, it might well be the case for other workers within the organisation. It has the power to expand the investigation more widely. Although that has reduced the number of cases that have been completed, the number of workers helped and the amount of arrears recovered has increased, so that is a good thing.

The number of workers helped, for example, has risen between 2009-10 and 2013-14 by more than 17%. The average number of workers per case has nearly tripled, and the average amount of arrears per case has increased by 260%. I think that is a good news story on enforcement, particularly concerning the resources available for enforcement, about which the hon. Member for Sefton Central (Bill Esterson) was concerned. Some 144 officers have been involved in HMRC. As a result of the additional resource dedicated by BIS—the budget has increased by £1 million to £9.2 million—a further 26 individuals have just been hired. A team of 170 is now working to ensure that there is compliance with the enforcement of the national minimum wage. It is clear from the figures that that significant increase in resources has already been delivering, and it will continue to deliver.

[Bill Esterson]

I am pleased that the Minister has given us those figures, but if so many people are involved, why have so few employers been named and shamed under the Government’s policy? The numbers do not seem to stack up.

[Jo Swinson]

So far 30 employers have been named and shamed, and, as I said in Committee, there will be a further tranche of naming and shaming shortly.

The previous system was much more permissive in terms of the number of cases in which naming could operate. Until the new rules were introduced, only one employer had been named over a period of many years. We introduced those rules on 1 October 2013, but they did not operate retrospectively, and hence applied only to investigations that began on or after that date. The previous criteria apply to the many current investigations that began before 1 October 2013, and in those cases employers are much less likely to be named. Many other investigations began on or after 1 October 2013 and are still ongoing, so the final stage of the issuing of a notice of underpayment and the consequent ability to name and shame has not been reached.

As I think has been recognised, the numbers are already increasing, but given that this is a new scheme, it is inevitable that they will start small and become larger as cases work their way through the system.

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[Bill Esterson]

I do not remember whether the Minister gave these figures in Committee, but she said a few moments ago that 30 companies had been named and shamed. Does she accept that up to 300,000 staff are affected, and if she does, can she tell us how many of them are employed by those 30 companies?

[Jo Swinson]

I think that the hon. Gentleman is comparing apples with oranges. According to the most recent estimate, the number of employees who are paid less than the national minimum wage is lower than 300,000—about 236,000, I believe. I stress that that is an estimate. Obviously we do not have data on every single person in the country; such estimates are based on surveys. The figure of 30 companies is not an annual figure; those are cases that have been completed since the new rules came into force.

I can assure the hon. Gentleman that the vast majority of cases in which the national minimum wage law has been found to have been breached are being named and shamed once the notices of underpayment have been issued. Obviously there is still a job to be done: people must be informed about how they can ensure that their rights are being properly enforced. Let me say yet again that if people fear that they are not being paid the national minimum wage when they should be, they should ring the pay and work rights helpline, which is a free service and totally confidential. The number is 0800 917 2368, and I shall continue to take every opportunity to publicise it, because it is important for people to know that they can receive advice on a confidential basis and then make a complaint if they decide to do so.

Local authorities have been mentioned. I think it right that HMRC works in partnership with authorities—with some success—to ensure that enforcement happens, but I also think it right for there to be a national enforcement body. The issue of social care has been raised, along with the issue of travel time, which is well documented. Travel time, other than the times involved in travel to and from work at the beginning and end of the day, needs to be included in the national minimum wage. We are well aware of that, and HMRC is enforcing it.

We know that there are issues in the care sector. That is why targeted enforcement was carried out, and why my colleagues at the Department of Health have been working closely with local authorities to produce guidance to ensure that they contract providers who can provide quality care, along with fair terms and conditions for their work force. Authorities should not be pricing contracts at a level that prevents their basic national minimum wage obligations from being met.

Amendments 9 and 10 concern zero-hours contracts. We have already discussed the question of whether or not they are sometimes a good thing. It was the former Member of Parliament for Sedgefield, Tony Blair, who said, on 3 October 1995,

“There will be an end to zero-hours contracts.”

However, the Labour Government did not deliver that, perhaps because there are people for whom such arrangements work well, as we heard from the TUC during the evidence session in Committee.

While there are undoubtedly problems with zero-hours contracts, and I do not wish to dismiss them, I think it important to introduce some perspective to the debate. Last year the Chartered Institute of Personnel and Development conducted a survey to establish what was happening on the ground, and produced a report. It found that zero-hours contract workers were just as satisfied with their jobs as the average United Kingdom employee, that they were happier with their work-life balance, and that they were less likely to feel that they were being treated unfairly by their organisations.

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[Matthew Hancock]

No. As the hon. Gentleman knows, no amendments were moved yesterday on family brewers. We will reflect on the vote on the larger pubcos and the mandatory free-of-tie option as the Bill continues its passage in the other place.

[Bill Esterson]

The Minister says he is going to reflect on the vote, with the will of the House being the market rent only option. I know he has spent his time apologising to the Prime Minister for losing that vote, but perhaps I may press him on the point. This will be taken to the House of Lords. Is he going to try to overturn the will of the elected House or not?

[Matthew Hancock]

As I have said, the House has made its position clear and we will reflect on that vote ahead of consideration in the other place. That is a very clear exposition of the position.

On the question of how we can ensure that Britain can compete in the future, that we can support businesses and the jobs and prosperity that they bring, that this country is the best place in the world in which to start and grow a business, and that we make things as easy as possible for all those who have the spark of an idea and want to turn it into commercial reality, I say that there have been few Governments in history that have done more for small businesses than this one. For the first time in modern history, we are on track to reduce the burden of domestic regulation—something that was never achieved by the Labour party. With these measures in the Bill adding to a multitude of others that have already been taken, we are doing all we can to support the British people and to ensure that we have a long-term economic plan that can secure for you, Madam Deputy Speaker, and for families across the country, the prosperity that we all want to see.

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[Bill Esterson]

Will my hon. Friend give way?

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before the hon. Member for Chesterfield (Toby Perkins) considers giving way, I must point out to him that this is an extremely short debate, that he has had plenty of time to speak over the past two days, that many Members in the Chamber have not spoken on the Bill at all in those two days, and that he has spoken for longer than the Minister. However, I leave it up to the hon. Gentleman; he has the floor.

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[Bill Esterson]

The Bill has the words “Small Business” firmly in the title, but the measures it introduces also cover employment. We did not discuss what the hon. Member for Huntingdon (Mr Djanogly) talked about at all, but a strong theme running through much of what we did talk about was the insecurity that is endemic in our society today, whether for small businesses or in employment. The question that I do not think has been answered in Committee, on Report and on Third Reading is whether the measures in the Bill will address that insecurity.

We had some very good debates on pub companies, and an amendment that will help family brewers was made in Committee. That will go a long way towards helping that sector. Then we had yesterday’s fantastic decision by the House to support the market rent only option, which Members across the House and many outside have long campaigned for. I know that Elaine Lynch of the Weld Blundell in Lydiate will be one of many publicans in my constituency who will welcome that decision.

Another issue we debated long and hard, including on Report, was late payment. As my hon. Friend the Member for Coventry South (Mr Cunningham) said, we will have to wait and see whether the Bill makes a difference in practice. One in five business failures are the result of late payment. Some £39.4 billion in late payments, or £38,000 on average, is overdue to small businesses. The Government have missed an opportunity by not supporting our amendment on an automatic 8% charge on late payments. As the Forum of Private Business has stated, that would have made a significant difference and gone a long way towards reducing the time and cost that small firms spend chasing late payments, allowing them to concentrate on growing their business and creating jobs.

I think that opportunities have been missed with regard to employment, zero-hours contracts, the exploitation of workers and abuse of the national minimum wage. The Government have promised to do things without actually putting measures in the Bill. We will have to wait and see whether they make a difference or not. In my constituency, 40% of workers are paid less than the living wage. Across the country that is a huge problem for many people and their families, whether as the result of the growth in part-time work, zero-hours contracts or bogus forms of self-employment. The reality is that the change in the nature of employment and the growth in low pay are fundamental reasons why the deficit has gone up, despite the Government’s claim that they would get it down, because tax receipts are not being collected. That is the reality of what life is like—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I asked the hon. Gentleman to be brief. I trust that he will listen to the Chair.

[Bill Esterson]

Thank you, Madam Deputy Speaker. I made that point because the Bill was an opportunity to tackle some of the problems at the heart of our economy, to build an economy that works for small businesses and for ordinary people, and I do not think that the Government have come anywhere near that. That is why we need a Labour Government to support small business and people on low pay. This Bill is a missed opportunity. I hope that the Government can deliver on some of the things they said in Committee and on Report, but we will have to wait and see.