Enterprise Bill [ Lords ] (Second sitting)

Bill Esterson Excerpts

Tuesday 9th February 2016 Public Bill Committees

[Bill Esterson (Sefton Central) (Lab)]

I beg to move amendment 38, in clause 1, page 1, line 11, at end insert—

‘(c) to consider complaints from small businesses relating to their access to finance, and, where the Commissioner considers it appropriate, to make recommendations to the Secretary of State about measures that should be taken to improve small businesses’ access to finance.’

This amendment would extend the remit of the Commissioner to receive complaints about the access of small businesses to finance, and would enable the Commissioner to make recommendations to the Secretary of State about measures to improve small businesses’ access to finance.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 39, in clause 1, page 1, line 11, at end insert—

‘(2A) The complaints at subsection 2(b) include complaints from

(a) small businesses relating to cash retentions and

(b) construction firms regarding cash retention by companies.’

This amendment would make it clear that the Small Business Commissioner’s remit included complaints from small businesses about cash retentions and from construction firms about cash retention by other companies.

New clause 12—Payment practices: protection of retention monies in the construction industry—

‘(1) Any clause in a construction contract or related contract enabling a party to withhold retention monies shall be of no effect unless, upon their withholding, the monies are deposited forthwith in a retention deposit scheme authorised by the Secretary of State.

(2) Where a clause is rendered ineffective under this section any retention monies already withheld and not placed in a retention deposit scheme must be refunded in full to the party providing them.

(3) For the purpose of section (1) the Secretary of State shall make regulations to govern arrangements for establishing and operating retention deposit schemes.

(4) Arrangements under section (3) must be arrangements under which a body or person (“the scheme administrator”) undertakes to establish and maintain a retention deposit scheme (“the scheme”).

(5) The regulations made under section (3) must include requirements relating to—

(a) the selection and appointment of the scheme administrator;

(b) the funding and management of the scheme; and

(c) the release of retention monies from the scheme.

(6) Where the Secretary of State is satisfied that a proposed scheme complies with the regulations made under section (3) he may give authority for the proposed scheme to operate as a retention deposit scheme.

(7) The Secretary of State may delegate his power under subsection (6) to the Scottish Government, Welsh Government and Northern Ireland Executive.

(8) The monies held in the scheme must solely be retention monies and any interest accruing on the monies.

(9) In this section—

“construction contract” has the same meaning as in the Housing Grants, Construction and Regeneration Act 1996.

“retention monies” refers to monies which are withheld from monies which would otherwise be due under a construction contract, the effect of which is to provide the paying party with security for the current and future performance by the party carrying out construction operations of any or all of the latter’s obligations under the contract.’

This new Clause would require retention monies provided for within construction industry contracts to be placed in an approved retention deposit scheme.

New clause 16—Information on the Enterprise Investment Scheme and Seed Enterprise Investment Scheme—

‘The Secretary of State must publish information and guidance, for investors, about the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme.’

This new Clause would place a requirement on the Secretary of State to publish information and guidance on the availability of Enterprise Investment Scheme and the Seed Enterprise Investment Scheme, which provide tax relief for investors in early stage small businesses.

[Bill Esterson]

Welcome to our deliberations, Ms Buck. It is a pleasure to serve under your chairmanship.

This group of amendments and new clauses covers access to finance, cash retention, the enterprise investment scheme and seed enterprise investment scheme, and how they relate to the small business commissioner. When we talk about the small business commissioner’s remit being extended to cover complaints about access to finance, it is not so much about dealing with specific complaints about specific funding applications, but about having someone who will listen to small businesses’ concerns about access to finance, who can signpost them to help them navigate the system—one of the roles that the Government do envisage for the commissioner—who can take complaints about flaws in access to finance and who can advocate at a high level for small and medium-sized enterprises, something which the US Small Business Administration does extremely well.

In the 2014 Department for Business, Innovation and Skills small business survey, 39% of SMEs said that they had difficulty in getting the money they wanted when applying for finance. For microbusinesses, that figure rose to 42%. It was 32% for small businesses and 25% for medium businesses. Some 48% of SMEs had difficulty accessing finance through bank loans. For Government grants, it was 53%. It seems odd that the small business commissioner’s remit would be so narrow as to overlook such a basic issue faced by so many SMEs. Most small businesses who talk to me say that late payment is the No. 1 issue, but that is closely followed by a lack of access to finance, as borne out by the Federation of Small Businesses, which is why this is such a potentially important area of interest for somebody called a small business commissioner.

If the commissioner is to offer a signposting service, although that is not what is needed on late payments, it would certainly suit the question of access to finance, particularly when it comes to the opportunities of peer-to-peer lending and Government contracts, because SMEs cannot navigate the system and do not know what is available to them. As the Chair of the Business, Innovation and Skills Committee told us on Second Reading last week:

“The problem of access to finance remains a pertinent issue for firms, which is why the Select Committee has launched an inquiry into it. If the Bill’s purpose is to make the UK the best place in Europe to grow a business, why does it not tackle access to finance? If the Government are serious about ensuring growth, why does the Bill not put in place measures to facilitate an expansion of scale-ups to power employment and economic growth?”—[Official Report, 2 February 2016; Vol. 605, cc. 837-838.]

Lord Mitchell, using his vast experience in business, spoke on the matter during deliberations in the Lords and discussed the problems in various Government schemes, saying that there had been good growth in non-Government schemes, but not so much in Government initiatives. He said that the market for alternative finance had grown, but

“largely as a result of the paralysis of the high street banks”—[Official Report, House of Lords, 3 March 2015; Vol. 760, cc. 129-130.]

Challenger banks have made good progress—Metro Bank and Aldermore, and Santander, if it can be regarded as a challenger bank, are changing the landscape. Peer-to-peer lending has taken off and is providing an interesting opportunity for many small firms. The changes are welcome and most hon. Members would accept that the traditional high street banks have not done the job of providing good sources of finance, to smaller businesses in particular, over many years. Having alternative sources of finance stepping in is welcome.

We need to know what is happening, and this is where the opportunity for the small business commissioner comes in. We need to know whether what is happening or what is changing is adequate.

Lord Mitchell gave the example of a start-up company from Merseyside, similar to the one I quoted earlier. A start-up company director found access to government funding so incomprehensible she gave up searching—a young entrepreneur with a tech start-up in the north-west, a prime example of the sort of start-up the Government have said repeatedly that they want to help to get off the ground. When she ran her postcode on the Government site she was presented with several hundred schemes for Wales and Scotland. When she entered her details for updates on suitable funding schemes she could bid for, she received a call from a company that wanted several hundred pounds upfront, not to help her put together bids, but to navigate the Government website on her company’s behalf, and email her with a list of schemes she could bid for. Many companies exist to charge start-ups for understanding the Government funding scheme for them. While this is clearly an example of entrepreneurialism on one level, I suggest it says more about the difficulties in navigating the Government’s funding processes.

A small business commissioner would be in a very strong position to represent the interests of small businesses, especially start-ups, when it comes to championing their interests on access to finance, whether from Government or elsewhere. Traditional lending is not doing the job that it needs to do. Alternative finance is a major opportunity and the small business commissioner should be a part of that.

Research undertaken by Everline and the Centre for Economics and Business Research towards the end of last year found that although small businesses have big growth plans for 2015, they are unable to carry them out due to a lack of finance and talent with the right skills. In the current market, most SMEs will only approach larger banks when seeking finance, even though the process can be time consuming and the rejection rate is about 50%. Those small businesses have the potential to drive growth and employment in the UK but are hampered by not only a lack of finance but a lack of confidence in trying to access the working capital they need—more than half think that traditional lenders are not interested in lending to them, and they may well be right, given the feedback that I have received.

Although a large number of alternative finance providers are willing to lend, and might also have more suitable product solutions, small business owners often are not even aware of their existence. As a result, small businesses need support to increase their knowledge of other finance options and prevent banks from always being the default choice. That should ultimately improve the supply of cash flow to viable small businesses who need additional working capital to aid growth, fill a cash gap or take advantage of a market opportunity.

How can we improve access to finance for small businesses? There is clearly a significant demand for easier access to finance for small businesses. To date, the market has been dominated by banks, whose products are often not adequately tailored to the specific requirements of small businesses. Particularly problematic are short-term cash flow needs, which demand a level of control and flexibility around speed of access and repayment timeframes that simply is not available from traditional lenders.

The small business commissioner could provide two things, if we are considering the scope of the office, both of which sit logically with the signposting and advocating approach that the Government want the office to take. They both also offer a shift from a person who reacts to complaints to one who actively supports SMEs and helps them to grow. The first thing it could provide is an accessible signposting service that offers clear advice to SMEs about the finance options available to them and helps them to capitalise on alternative funding, similar to that offered by the Small Business Administration in the United States. The other provision is also similar to what is offered by the US system. It would give the interests of small businesses on the issue of access to finance a real voice before Government. So much of the problem is not about whether the money is there or not, but about making sure that the Government do the right thing in making SME funding available. The Public Accounts Committee report in 2013 made many of the same points: SMEs do not know what is available to them, or their appeal rights, and the Government are not doing enough to link them to finance options.

Let me move on to cash retentions. Cash retentions in the construction industry are a particular problem of late payment covered by this group of amendments. They have been particularly problematic over many years, particularly for smaller firms in the supply chain. For example, a firm in my constituency, Jenkins, showed me the shelf full of files of cash retentions from contracts it has been involved in—some of them reaching back two or three years or more, some five, six or even 10 years.

[Lucy Frazer (South East Cambridgeshire) (Con)]

I am looking at the amendments—does the hon. Gentleman think that they are really necessary? Clause 1(2)(b) refers to “payment matters”, and clause 4(4) defines “payment matter” as relating to a request for payment, which generally relates to a question of supply. Is it not possible to say that cash retentions, which are in effect a request for payment, are included in the Bill? Would that definition not give some flexibility to the small business commissioner to focus on what really matters to him, whether that is late payments per se or some aspect of late payment?

[Bill Esterson]

That is an interesting point. I am sure that the Minister will have some theories in response to that intervention. This was debated at length in the Lords, and the Minister there accepted that cash retentions are an important, separate set of issues. I am sure the Minister will talk in detail about why the Government have agreed to set up a review of the issue and make proposals. These are very much probing amendments to consider this particularly acute issue of late payment within the construction sector. That is why we have tabled the amendments and why the Lords spent so long on this issue and a similar amendment.

Cash retentions in the construction industry are withheld as a form of security to encourage firms to return to remedy defects. In practice, the prime motivation for the withholding can be to improve the working capital of the withholding party. In our deliberations this morning, we talked about some of the problems of late payment being used as a form of working capital, or to support treasury in the public sector; a similar point applies in the construction sector. Cash retentions are ultimately funded by small and medium-sized enterprises in construction supply chains. Each year, small businesses lose millions of pounds of retention moneys because of upstream insolvencies or because they give up chasing the release of the moneys. New clause 12 is designed to ring-fence retention moneys by placing a statutory obligation on organisations withholding retentions to deposit moneys in a retention deposit scheme. It should be noted that retention moneys legally belong to the party from whom they have been withheld. They are required to be released to that party—half on handover of the work and the other half normally 12 months later. In practice, the period is considerably longer. I mentioned Jenkins, a firm in my constituency where that has often been the case, but where it is common for it to take three or four more years.

Subsection (1) of new clause 12 states that unless the party withholding retention moneys deposits them immediately in a deposit retention scheme, any contractual clause enabling such withholding has no legal effect. Any moneys previously deducted must be returned in full. Construction firms already have a statutory right under part 2 of the Housing Grants, Construction and Regeneration Act 1996 to suspend their work for non-payment. The retention deposit scheme could be modelled on the tenancy deposit schemes introduced by regulations issued under the Housing Act 2004, as amended by the Localism Act 2011. Currently, three tenancy deposit schemes are Government-approved. Landlords of shorthold tenancies must place tenants’ deposits in one of these schemes. Tenants’ deposits are provided as security for the performance of the tenants’ existing and future obligations; retention moneys serve the same purpose.

One of the schemes is run by a not-for-profit enterprise. The Dispute Service Limited, not surprisingly, operates a scheme called the Tenancy Deposit Scheme. The scheme held—at least when my notes were written—more than a million deposits. It is funded by the interest earned on the deposits and any excess profit is channelled into a charitable foundation to be used to raise standards in the letting sector of the property industry. I am informed that the CEO of the scheme has already expressed his interest in expanding the scheme for the purpose of depositing retention moneys. Therefore much of the new clause reflects the requirements of the Housing Act 2004 in so far as they relate to tenancy deposit schemes.

--- Later in debate ---

[Anna Soubry]

Some might say I was being slightly patronised there, Ms Buck, but I am sure that that was not the hon. Gentleman’s intention. There will be a review, which will report in March, from which a series of recommendations will go out for public consultation. I am very keen that we reform the retention system in the construction industry. If anyone wants me to repeat that, I will say it yet again, because I have said it not only in this Committee, but in the Westminster Hall debate last month: it needs reforming and we need to get on with it. I could make the point that some people were in government for 13 years and did not deal with the problem, but that would be churlish of me and I would not do such a thing. Nevertheless, the point I am making is that there is an adjudication system to help those companies that suffer.

I have also conceded that I am told on very good authority that, for reasons that we know and understand, the existing system is not working as we would like it to. In any event, I think it is out of date and unfair and it needs sorting out. I would be delighted to be the Minister who sorts it out once and for all, so that we have a modern, fair system that protects those who need to take care of all the snags and things that come to light after a build has been completed and, at the same time, ensures that the money is there so that they can make good any defects. There is a way to sort it out. It might not be what is proposed in the amendment—there might be a better way to do it—but those are exactly the things that the review will explore.

Amendment 38 specifically says that the new small business commissioner would consider complaints relating to access to finance, not complaints about whether or not small businesses have knowledge about the various schemes. One of my predecessor’s achievements was bring together as many of the Government’s schemes as possible through one portal: the British Business Bank. If someone wants access to finance, they can go to their bank or to their accountant and ask for advice, or they can seek the advice of the Federation of Small Businesses. Equally, they can google it, and one of the results will be the British Business Bank, which gives all the details of all the various schemes, not only those operated by the Government—start-up loans being an extremely good example—but also advice on peer-to-peer lending, the angel schemes, crowdfunding and so on. We are beginning to see a real change in the amount of information available, especially from that one-stop-shop, the British Business Bank, so that small businesses know where to go if they are looking for finance.

The amendment, though, is about small businesses’ complaints about their access to finance. With respect, the Financial Ombudsman Service already deals specifically with such complaints. Were we to extend the role of the small business commissioner, all we would be doing is duplicating an existing system that everyone seems to accept is working well. As I said earlier, we learned from the consultation that the one thing no one wants is the duplication of services.

The Financial Ombudsman Service is working well, and it has respect. Small businesses can go there to make their complaints; Members may well have referred their constituents. We already have exactly the device required. I argue strongly that expanding the remit of the small business commissioner would not be appropriate when it comes to finance, because we already have a very good system. Small businesses are within the remit of the Financial Ombudsman Service if they have a turnover of less than €2 million and fewer than 10 employees. So it is there for the microbusinesses.

The Financial Conduct Authority is currently consulting on whether even more small businesses should be given access to the FOS. The FOS analyses the complaints it receives from microbusinesses and reports on them every year. It also publishes occasional stand-alone reports, such as, in August 2015, “Micro-enterprises and financial services—a review of complaints”, which had the express purpose of highlighting areas of good practice and promoting change where it is needed. Access to finance for businesses is also regularly considered by Select Committees.

With respect, I really believe that the amendment would represent an unnecessary extension of the remit of the small business commissioner. Again, we must make it very clear that the primary function of the small business commissioner is to address the big problem that all small businesses complain about, which is late payment. That is where I want his or her focus and resources to be.

I turn to other matters. I think I have dealt with cash retentions in the construction industry, but I want to deal with the other amendment, which deals with the enterprise investment scheme and the seed enterprise investment scheme. Details are already published, with guidance and information, on gov.uk. We in BIS support and complement this work with promotional activity. Again, with respect, I really do not think the amendment is necessary, because what it wants to achieve is already being done.

I think that is it, unless there is anything else I need to add. I ask for the amendment on cash retentions to be withdrawn because I honestly think we are going to make huge progress very quickly and we are all on the same page. I respectfully suggest that the other amendment is just not needed: we do not need to extend the remit of the small business commissioner in this way, because others are doing the job very well for small businesses.

[Bill Esterson]

Let us deal with access to finance and the EIS and seed schemes. The Minister needs to read the whole of amendment 38 to consider where it is going. If the word “complaints” were replaced by the word “representations”, it might be easier to follow. The point is for the commissioner to make recommendations to Government about improving access to finance; that is the intention behind the amendment, as I thought I had explained. That is also in the explanatory statement that came with the amendment, but I will not pursue the point by pushing it to a vote.

When the Minister says that late payment is the priority, I understand that. Clearly, one has to start somewhere and that is what the Government want to do. However, as I said in my opening remarks, the second issue—it is a very big second issue—is access to finance. It is really important that we get to grips with that as well. Please understand the importance of the amendment and what it is driving at.

The Minister commented on the schemes and their advertisement on the gov.uk website. I understand that. The point I made earlier was that not enough businesses are finding them. That is why if the small business commissioner has a signposting role, he or she should use it as much as possible. Perhaps the Minister will take that away and consider it.

[Anna Soubry]

We want the small business commissioner to have his or her own website, and I want there to be portals—the hon. Gentleman understands these things—so somebody can click on something that says “access” and go through to the various information. That is terribly common on so many websites, so I want there to be that sort of access. The hon. Gentleman makes a very good point, and we agree that one-stop shops are the way to get information about a lot of this work out there.

[Bill Esterson]

That is a fair point. I will come back to some of the challenges and our concerns about the portals. Many small businesses do not use the web, so encouraging greater digital use is one of the many challenges for the Government.

There is great concern about retentions. The amendment has cross-party support, and hon. Members who spoke made their points extremely well. Often, between 2.5% and 5% of moneys are retained under the cash retention system, so it is massively difficult for small businesses to be as effective as possible. The hon. Member for Kilmarnock and Loudoun made a point about businesses not taking part in apprenticeships and not investing in the future as a result of the scale of retention.

[Hannah Bardell]

Does the hon. Gentleman agree that it is important that the review and these proposals are added to the Bill before Report?

[Bill Esterson]

It is incredibly important that that happens as quickly as possible, but SNP Members are in the same position as us: we are ultimately dependent on the Government for this to work, so we have to take the Minister’s bona fides. She is now on the record as saying that she will take action. I made the point that the recommendation was first made 52 years ago and it has been made on numerous occasions since. The problem is that businesses do not understand why we are waiting and why the Government and Parliament are taking so long to act. It is probably not until we come to this place that we start to understand why.

The Minister said it is too soon. A similar point was made in the Lords, and Labour peers accepted similar comments from Baroness Neville-Rolfe. We will wait and see for now, but if the review is finalised in March, the Bill’s Report stage may happen at about the same time.

I leave this thought with the Minister: if there is the opportunity, will she consider tabling amendments to take that into account? Let us challenge her Department and officials to table such amendments on Report to satisfy Members on both sides of the House. With that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn,

Clause 1 ordered to stand part of the Bill.

Schedule 1 agreed to.

Clause 2

Small businesses in relation to which the Commissioner has functions

Question proposed, That the clause stand part of the Bill.

[Bill Esterson]

The clause deals with the definition of small businesses. I do not intend to detain the Committee for long on this subject, but it is important to consider what it says. There have been wide-ranging debates in the Lords and here about what the small business commissioner ought and ought not to do. The clause, which defines the small business commissioner and who they will serve, is an opportunity to reflect on the importance of exactly that remit.

Although debate on the Bill has covered a variety of issues, I believe that on both sides it has had at its heart the recognition of the value of small businesses to the UK economy. Members across the House have had an opportunity to offer valuable support to the companies and entrepreneurs that fall within the definition laid out in the clause. The debate is an opportunity to speak about the importance of small businesses, but the Bill carries an opportunity to boost the prospects of companies all over the UK.

What are we talking about when we lay down these technical definitions of a small business? There are now thought to be 5.2 million small businesses in the UK. They employ 48% of the UK’s workforce and, on the back of sheer hard work, account for 33% of private sector turnover. The definitions laid out in the clause single out incredibly hard-working people. My wife still runs a small business and is a constant reminder to me of how much effort and how many sleepless nights it takes to start, grow, run and maintain a business—all those things and more. The Bill is for those who deserve our support on late payment, which is one of the most vexing issues facing small businesses today and one that we simply have not done enough to resolve. It is also one of the issues that my wife lobbies me on almost daily.

The Bill presents us with an opportunity radically to change the outlook for some of the most important contributors to our economy. It offers the small businesses in the definition some level of support or guidance on late payments, but it could serve the business owners or the budding entrepreneurs also captured in the definition who have brilliant ideas but do not have the knowledge base needed to grow. It could serve the businesses that are struggling with not only late payments but investment challenges, ongoing legal disputes, access to finance, lack of mentoring and difficulties with public sector and private sector clients.

The clause captures a body of people whose challenges go far beyond late payment and who need far more than supportive words and signposting to systems that, as time has shown us, simply have not tackled the problem. All the challenges they face are tackled by specialists in big companies, but the definition in the clause demarcates a group who largely are so busy keeping the wheels of local economies turning that they do not have time to be legal or financial experts. The Bill is an opportunity for us to provide them with real support.

Beyond the technical definitions laid out in the clause are the owners of 5.2 million small UK businesses. If they are not watching this debate, they will still feel over the coming months and years the outcome of whether we focus on limited support for the specific challenge they face or whether we take this chance to offer meaningful answers to some of the key issues that stifle their growth and prosperity—and by extension, the growth and prosperity of the local economies in which they operate.

We would like the small business commissioner’s remit to go much further than the one in the Bill. Even if we just focus on late payments, it does not take a great deal of prodding of the definitions to see how limited the scope of support is. One fifth of UK small businesses—more than 1 million firms—have experienced or come close to insolvency as a result of a total estimated by BACS to be £26.8 billion in outstanding late payments. Sage estimates a significantly higher figure—I cannot remember it.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It was £55 billion.

[Bill Esterson]

I thank my hon. Friend. The Government’s proposed small business commissioner is likely, according to the Government’s own predictions, to help just 500 small businesses a year. The commissioner will serve as a signposting service to mediation services that already exist and have failed to deal with the crippling problem of late payment in the past. In fact, it was the Minister’s colleague, the hon. Member for Huntingdon (Mr Djanogly), who said on Second Reading:

“On capacity, the new £1.1 million SBC website should handle 390,000 disputes from 70,000 businesses, yet the SBC will deal with only 500 complaints a year. That gives rise to the question of what will happen with the rest of the disputes and what the real impact of the proposal will be. Could the site cope with the workload of significant numbers qualifying for assistance? That remains unclear.”—[Official Report, 2 February 2016; Vol. 605, c. 828.]

That is just the website, which the Minister mentioned. The small business commissioner will employ only a handful of staff, and there is nothing in the Bill to say that they will be legal, financial or even business experts.

We have to be honest when we look at the definitions laid out in the clause. The aspiration to support small business is lofty and laudable, but it prompts a question: without the legal clout of the Australian small business commissioner or the wide-ranging agreement with the US Small Business Administration, and without anything like the budget or staff numbers of either of them, how many such companies is the legislation actually likely to help?

[Anna Soubry]

I will keep this as short as I can, because I do not think that there will be a vote on the clause.

I agree with a large part of what the hon. Gentleman says. The clause defines small businesses that may access the commissioner’s functions as those with a headcount of fewer than 50 people. Financial thresholds may also be applied under secondary legislation—for example, if it transpires that there are businesses with relatively few employees, but high financial worth. They might be excluded from the commissioner’s scope, because our emphasis is small business.

I think Lord Mendelsohn talked about the “asymmetry of power”; the measure is about small businesses, especially very small businesses—the actual definition for small business is 250 employees, but we are taking that down to 50 and fewer, because those businesses simply do not have the sort of power that other, bigger businesses have. We want to redress that and to change the balance.

Perhaps the small business commissioner will not at the moment deliver as we all want them to deliver, but it is a terrifically good beginning to have someone in situ specifically looking after the needs of small businesses, concentrating on the primary role—I will be boring by repeating this—of tackling the problem of late payment, because that is the big issue that troubles the majority of small businesses. The commissioner will be their champion.

I hope to be—I like to think I am—the champion of small businesses, and that is why I was appointed. I do not know whether there has been a small business Minister before and, although I do other things as well—I seem to do everything—the emphasis is on small business. I actually sit in Cabinet because the Prime Minister wanted a Minister with responsibility for small businesses at the Cabinet table—unfortunately, he could not find one, so he got me. No! To be serious, that is why the role was created.

I am so proud that we will have the small business commissioner as the small business champion, especially for late payment. I do not think that there will be any dispute about the clause.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

General advice and information

[Bill Esterson]

I beg to move amendment 40, in clause 3, page 3, line 10, at end insert—

“(d) tax rates, allowances and thresholds of relevance to small business owners.”

This amendment would extend the general information and advice that may be published by the Commissioner to include tax rates, allowances and thresholds of relevance to small businesses.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 41, in clause 3, page 3, line 10, at end insert—

“(e) guidance on payday loan rates and their appropriateness.”

This amendment would extend the general information and advice that may be published by the Commissioner to include information about payday loans.

Amendment 43, in clause 3, page 3, line 29, at end insert—

“(5B) The Commissioner must publish, or give to small businesses, general advice or information about the relationship between the Small Business Commissioner’s complaints scheme and any other legal remedy available to a complainant.”

This amendment would require the Small Business Commissioner to give general advice or information to small businesses about the relationship between the Small Business Commissioner complaints scheme and any other legal remedies available.

Amendment 44, in clause 3, page 3, line 43, at end insert—

“(9A) Where a recommendation is made under subsection (8), the Commissioner may take the relevant action in response to the recommendations where she sees fit.”

This amendment would give the Small Business Commissioner the power to act directly on recommendations he has made.

New clause 14—Guidance for local authorities—

“The Commissioner must prepare and publish guidance to local authorities outlining—

(a) the functions and services she may offer to small businesses, and

(b) related to the complaints process.”

This new clause would require the Small Business Commissioner to provide information about her functions and services to local authorities.

[Bill Esterson]

The group of amendments and new clause 14 look at tax rates, payday loans, the small business commissioner’s complaints scheme and other remedies, at ensuring that the commissioner has power to act on his or her recommendations, and at providing information to local authorities.

We want the small business commissioner to have not only a broader remit as the office develops, but greater powers to investigate, to mediate and to advocate for small businesses on regulation and legislation. If the Government want the commissioner to be a signposting service, we at least need the remit for it to be broader. The start would be to equip the commissioner with the tools to advise and signpost on the main issues that matter to small businesses—we talked about access to finance in our debate on the last group of amendments—so that the commissioner can in turn equip entrepreneurs with the knowledge necessary to access the support available to them. The amendments deal with some of those issues.

--- Later in debate ---

[Anna Soubry]

Hear, hear!

[Bill Esterson]

I thought the Minister might say that. However, we have included it precisely because it does not seem to happen every time. After the introduction of the Groceries Code Adjudicator, both the GCA herself and commentators found that the take-up of her services by suppliers was hampered by the fact that not enough people knew about her and the services she provides. It is a simple issue of communication, or good marketing, but it takes more people than the postholder himself or herself to ensure that an awareness that they exist and an understanding of what they do reaches more than 5 million small businesses.

On a whole host of issues that we will come to later in another new clause, it seems that the Government are going to great lengths not to learn important lessons from the introduction of the Groceries Code Adjudicator. This is a simple one: make sure people know that the office exists and use the local authorities as an ideal vehicle for raising that awareness. Raising awareness is not done straight from the small business commissioner and it is not currently done from the Groceries Code Adjudicator to the many people they are trying to help. That would not be possible, given that, under the small business commissioner, we are talking about reaching more than 5 million companies. By equipping local authorities with the understanding of the post, they need to triage small local businesses into signposting the small business commissioner where appropriate, and in that way we can make light work of spreading the news. The website on its own will not do it. Local authorities will also no doubt appreciate that, not least because it will plug the gap left by so many of the Government’s cuts to councils and to national schemes designed to give advice to small businesses.

[Anna Soubry]

In resisting the amendments I will put the following arguments. The commissioner will give small businesses general advice and information that would be helpful for their dealings with larger businesses. I have given one such example as portals through websites. Many of us as Members of this place have our own websites, so we are more than familiar with how best to talk to constituents and provide them with information. We know that there are ways to do it that never existed before, but that will be for the commissioner to decide. I respectfully suggest that we do not need to write all this stuff down in legislation. We can allow him or her to use the abilities that they will undoubtedly have to ensure they provide the services and the general advice and information that they believe will best suit small businesses.

The commissioner will also direct to relevant bodies and sources of assistance, as I described. Our consultation showed that there is widespread support for that function, and that small businesses—I think the hon. Gentleman will agree—do not always know about the services available to them. The commissioner will address those information gaps. For example, I have no doubt that some small businesses will contact the small business commissioner with a complaint about a utility company. The small business commissioner will ensure that their complaints go to the right place, such as Ofgem or Ofcom. We all know small businesses that have huge problems accessing superfast broadband or have difficulties with their landline, BT and so on. The commissioner can give them direct access at the click of a mouse or a button to Ofcom. I have already talked about the financial services ombudsman, which is another way of helping small businesses to resolve problems and disputes.

The commissioner will not cover specific issues such as taxation, because such information and advice is already available. Nobody wants duplication. I am confident that good advice is available, so why would we double it up and confuse people further? The commissioner’s information will be sensibly integrated with other sources of business advice—as I said, access to finance is a very good example. The commissioner will decide what advice and information will assist small businesses. It can already include his or her own schemes and remedies.

I agree that awareness of the commissioner is crucial. However, he or she will be best placed to decide how to promote their services. I will absolutely trust whoever is appointed, because part of the skill set I expect them to have is the knowledge of how to get out there and ensure that everybody knows about them.

I recognise that the payday loans market has caused serious problems for consumers, but, with respect, I do not think it should be in the Bill because we took the action that was needed to address it in the previous Parliament. The Financial Conduct Authority’s more stringent regulatory regime is already having an effect on the payday loan market. It found that the volume of payday loans fell by 35% in the first six months of regulation, even before a cost cap was introduced last year.

The commissioner’s power to make recommendations about the information that the Secretary of State gives simply allows for different ways of providing information. The commissioner already has the power to publish and provide information.

New clause 14 is a good example of bad legislation. We do not need legislation to tell people to talk to one another. While the hon. Gentleman was talking about it, I wrote down off the top of my head what local authorities can and should do—many are already doing these things—to support small businesses. They should ensure that they have good, sensible business rates; create the right environment; free businesses from unnecessary regulation and undue checks; support high streets with imaginative parking by, for example, providing access for wheelchairs and buggies; ensure their local plans, core strategies and planning matters are small business-friendly; and support the high streets and all of the wonderful small businesses that we have in our constituencies. Finally—as I said, this is just off the top of my head—they should ask whether planning applications include access to superfast broadband. Good digital technology must be at the heart of their planning decisions and everything they do as local authorities.

I respectfully suggest that that sort of legislation is not needed. Local authorities, with few exceptions, know how best to work with small businesses, but it is not their job to give them advice. It is their job to create the right environment in which they can thrive and grow. That is why I urge everybody to reject the amendments.

[Bill Esterson]

The Minister talked about constituents contacting us via our websites. I have constituents who contact me via my website, too. I have an electorate of something like 68,000. [Interruption.] That is quite a small electorate, but not all 68,000 contact me via my website.

[Anna Soubry]

I am sorry; I did not say that they contact me via my website, but I understand how websites work and how they can disseminate information and enable people to access the information they need by way of portals. Obviously, an MP’s website does not have many portals, but we are all familiar with how websites operate in a modern world so that people can get the information that they need. That is all I am saying.

[Bill Esterson]

We can also measure how many people are looking at a website. I do not have the technical know-how to do that, but some do. I know that 68,000 people do not visit my website or anything similar to that, and 250,000—the borough’s voting population—do not visit Sefton Council’s website, either. I do not think that websites are therefore anywhere near the answer to providing access to the small business commissioner.

The Minister talked about new clause 14, which is not about getting local authorities to work on how they access business, much as I want them to do all the things that she talked about. I do not disagree with that, but that is not what the new clause is about. It is actually about ensuring that local authorities know that the small business commissioner exists and what he or she does so that they can work together to improve life for small businesses. It is a shame that she did not grasp that.

On tax, in my experience most small businesses want to pay tax; they just want to ensure that they pay the right tax. Whether that is true of some rather larger businesses, we can all speculate from time to time. To pay the right tax, however, businesses sometimes do not find that the advice from HMRC is what they need. In the Lords, we heard an example of a business attending a seminar organised by HMRC so that it could get its tax right and when, having followed HMRC’s advice, it approached HMRC to say what it thought it should be doing, HMRC disagreed and said:

“We are not bound by our own advice”.—[Official Report, House of Lords, 26 October 2015; Vol. 765, c. GC137.]

That was something of a shock to the company, which had invested all that time and effort in dealing with its tax affairs in an attempt to pay the right level of tax. That is why it is important that the small business commissioner is involved in helping businesses to understand tax rates and to pay the right tax so that they are not dependent on HMRC, which does not always act as we might reasonably expect. As that was a probing amendment, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Bill Esterson]

I beg to move amendment 42, in clause 3, page 3, line 29, at end insert—

“(5A) The Commissioner may assist small businesses by taking an active and direct role in resolving, mediating or facilitating the resolution of disputes.”

This amendment would give the Small Business Commissioner the power to take an active role in resolving, mediating or facilitating the resolution of disputes.

We are talking about the important topic of mediation and facilitating the resolution of dispute, which is sometimes known as alternative dispute resolution. The amendment looks to learn from what goes on in Australia and would provide the commissioner with the opportunity to insist on mediation as a better way of solving disputes between two business parties than going to court, for example.

In the foreword to the July 2015 BIS publication “A Small Business Commissioner”, the Minister said:

“In Australia, the Victorian Small Business Commissioner is having a real impact on the ground.”

She told us earlier about her meeting with him. One reason why that commissioner is having an impact on the ground is that he has so many more powers than is proposed in the Bill. One such power involves being able to insist on mediation and to ensure that unfair payment practices are dealt with on a case-by-case basis. That is not what is being proposed here. If the Minister really wants the United Kingdom’s small business commissioner to match the performance we see in Australia, she must give them the same tools and powers to do the job.

The staff of the New South Wales small business commissioner are formally trained in mediation. In Australia, attendance at mediation may be legally required by a court, and the small business commissioner may insist on mediation after the initial consideration of the complaint. Any decisions or agreements reached during mediation are signed by both parties and are returned to the small business commissioner, who can hold them to account if they do not keep their side of the agreement. Mandatory mediation is vital as far as the Australian model is concerned. The office of the Australian small business commissioner says:

“Mediation is so successful that most of all matters referred to us for mediation are resolved prior to having a court decide the matter… The mediation process is essential in minimising the costs of business and commercial disputes.”

Compulsory attendance at mediation in the Australian model is enshrined in the legislation that set up the New South Wales small business commissioner. Section 17 of the Small Business Commissioner Act 2013 states:

“If an application is made to the Commissioner for assistance in resolving a complaint or other dispute involving a small business and the Commissioner decides to deal with the complaint or dispute, the matter to which the complaint relates or the dispute may not be the subject of any proceedings before any court unless and until the Commissioner has certified in writing that alternative dispute resolution services provided by the Commissioner under this Act have failed to resolve the matter or dispute.”

There are various other requirements in other sections of the Australian legislation. At a national level, the Australian small business commissioner has similar powers. The Australian Government are undertaking to absorb the role into the proposed small business and family enterprise ombudsman, but the legislation is clear about mediation.

The value of mandatory mediation is not only in enabling the small business commissioner to see a complaint through to resolution but in ensuring that both parties follow a process that minimises cost and the risk of the complaint ending up in court. The balance of power must not be so weighted against the small business supplier that it is put off pursuing a complaint for the lack of cheap, accessible dispute resolution, something which we discussed earlier. This is about fairness, ensuring a level playing field, reducing costs, and producing commercially realistic solutions to disputes, including those involving late payment. I look forward to hearing the Minister’s response.

[Hannah Bardell]

Following on from the hon. Gentleman’s comments, we also welcome, as we did on Second Reading, the creation of a small business commissioner, but as we said then and as we believe now, it is important that the commissioner has real power and teeth to arbitrate and to take on issues when they are brought to them, rather than just to give advice. The Federation of Small Businesses has said that it is important that the commissioner is endowed with real powers to assist small business. It is important for the integrity of the office of the commissioner that it is regarded by small businesses as a route by which they can achieve a meaningful outcome. The current suggestion of a commissioner making recommendations or highlighting particular cases is simply not enough if they are to gain a reputation as a small business champion. All too often, such bodies do not have the power to bring companies into line. If we want a fair system across the board, further powers, such as those in the amendment, are important.

--- Later in debate ---

[Anna Soubry]

We can talk about powers, which will come up later in the Bill, but we are talking about remit. It is not the remit, in my view, of small business commissioners to offer services that are already available. They can point people in the right direction, but Members must be under no illusion about what the commissioner’s role will be. If someone comes to the small business commissioner with a case that is within scope and says, “Will you mediate?” the commissioner will say, “No, I’m not going to mediate. You go off to mediation, but if you’ve got a complaint about bad practice relating to late payment, come back to me. I’ll deal with it.”

The services are there. Let us concentrate on what the commissioner’s role is. The role is to tackle late payment and to change the culture, so that we do not have so many small businesses that are not paid in time or have unfair conditions put on them in terms of when they are paid. That is why I urge hon. Members not to support the amendment. It is not the direction of travel. Mediation services are already out there, and it is the job of the commissioner to direct people to existing services.

[Bill Esterson]

Well, we will find out in time whether that works. The reason for quoting the Australian example is that both parties have to accept that mediation will have consequences. I think I am right in saying—the Minister will correct me if I am wrong—that if a party refuses to engage in mediation, there may be penalties if matters end up in court. That is an interesting approach.

[Anna Soubry]

If someone has a legal dispute and therefore issues proceedings, they will be pointed—there is no debate about it—to mediation. If they are a belligerent party and refuse to use mediation, when they come to court and lose, they will take the heavy toll of costs accordingly. At the moment, all the courts point people in the direction of mediation, and it is a very belligerent party that does not go down the mediation route. In fact, it may be almost impossible in the English system for a case to get into a county court or the High Court unless it has gone through mediation or some judge has determined that the case needs to go before it because mediation is not the correct route. In other words, we have a good system that is working.

[Bill Esterson]

That is interesting, but we come back to the huge problem of late payment that we are still grappling with after all these attempts. The Minister mentioned the number of pieces of legislation that have attempted to help with that.

The Minister has mentioned a number of times, including on this matter, her concern about not duplicating. If we have things that are not working, we need to consider new approaches; that is at the heart of the creation of the small business commissioner. However, it is about making the commissioner as effective as possible. That is why we have looked at mediation in the way we have. The amendment does not make the power compulsory, but it gives the commissioner the opportunity to be one of the services available.

While I do not dispute what Members on both sides of the Committee have said—that plenty of mediation services are available—if the system was working well, businesses would be finding those mediation services and using them. Something is not quite right, because it sounds like that is not happening. The constituents who have come to me have certainly not been taking advantage of such services; they have been suffering in silence when it comes to challenging those who owe them money.

I agree with the Minister; we need to change the culture. I have no doubt about that, but the question is how best to do it. This probing amendment was about doing just that. We absolutely need to raise awareness of the services that exist. If that is not sufficient in time, I hope that she and the Secretary of State—she may by then be the Secretary of State—will decide to give the small business commissioner those additional powers. Perhaps then we will have made further progress in helping to achieve the outcomes we want in reducing the level of late payments. As she quite rightly says, ideally we want it to stop being the problem that it is now. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 ordered to stand part of the Bill.

Clause 4

The SBC complaints scheme

[Bill Esterson]

I beg to move amendment 47, in clause 4, page 4, line 25, at end insert?

“or is made by a small business (“the complainant”) which has an agreement to supply, or has supplied or may supply, goods or services to another small or medium sized business (“the respondent”), which has the same meaning given by section 7(1) in the Small Business, Enterprise and Employment Act 2015.”

This amendment would extend the Small Business Commissioner’s remit to complaints made by an SME against another, to which it is providing goods or services.

One day, someone else will be moving an amendment, but not today. Amendment 47 is about the remit of the commissioner and the ability to consider complaints made by one small business against another, which can be due to supply chain issues. Behind a problem in payment from one small business to another, there often lies a chain in which larger businesses and, indeed, the public sector are the real problem. A small business cannot pay another small business if it is owed money itself. That was addressed in detail in the Lords. In Grand Committee in the Lords, we found out that 70% of small businesses trade with other small businesses.

The amendment is an attempt to unpick some issues and challenges that enable the commissioner to be as effective as possible. It would protect small and medium-sized businesses and enhance competition, creating a fairer environment for all businesses. Government involvement in small business matters should aim to ensure that prospective and ongoing small businesses have sufficient knowledge to make informed business decisions. Although any business has a fundamental right of control over positioning and maximising its business opportunities, that right does not extend to engaging in unfair business practices. This is not just about situations where small businesses cannot pay; it is also about situations where they choose not to.

I could not understand from the explanatory notes why the Government have not included complaints made by small businesses in the remit of the small business commissioner. The amendment would set that straight.

[Alan Brown]

I echo what has been said. The amendment seems to be a logical extension. Earlier we supported the extension to public bodies, which I thought would strengthen the Bill, and I think this amendment would too. Fellow SMEs should be protected as well. There should not be a loophole. We do not want to get to a stage where there is an argument about what constitutes an SME. All businesses should be treated equally, and this simple amendment would allow that opportunity.

[Anna Soubry]

This is why we have done it in this way. As we see from the clause, the commissioner will handle complaints by small business suppliers about payment-related issues with larger businesses—that is, any medium-sized or large business. The intention of all this legislation is to help small firms where they suffer from the imbalance in bargaining power. I have referred to the words of the noble Lord Mendelsohn about asymmetry. We know that smaller firms, by virtue of their smallness—especially microbusinesses—are at a disadvantage, especially against medium and larger companies. We believe that that is where the real problem is, and that is what we particularly want the small business commissioner to address.

That is not to say that if a small business is in dispute with another small business, it will not have access to all the sorts of dispute mechanism that we have heard about, but we do not believe that is where the real problem is, or the real imbalance of power. That is why we have specified businesses of fewer than 50 employees. They are disadvantaged by their size against medium and larger companies. We know that such businesses often feel unable to challenge contract terms proposed by larger businesses, as I think we have all agreed and mentioned, because it could breach or damage existing or potential commercial relationships with those companies.

Smaller businesses may not have the time, money or expertise to take a legal challenge, which is another consideration. However, as we know, sometimes it is because they are simply frightened that if they take any form of legal action—even something like mediation—it will completely thwart the future commercial relationship between them. They are in a much weaker position by virtue of their size, so that is where we are putting all the emphasis. Their big problem is medium and larger businesses. That is why I resist the amendment.

[Bill Esterson]

The Minister rightly makes the point about the imbalance in bargaining power, but I repeat that 70% of trade is with other small businesses and that when a larger firm is behind the problem due to delays elsewhere in the supply chain, there does not seem to be a mechanism for addressing that. Perhaps she can take that away, if she is resisting our attempts to include small businesses: how can we deal with problems in the supply chain that come ultimately from a large or medium-sized business? With those comments, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[The Chair]

To move amendment 48, I call, with remorseless inevitability, Bill Esterson.

[Bill Esterson]

I beg to move amendment 48, in clause 4, page 4, line 26, after “(4))” insert

“or relates to allegations of unfair treatment or unfair contracts”.

This amendment would empower the Small Business Commissioner to investigate allegations of unfair treatment or unfair contracts.

[The Chair]

With this it will be convenient to discuss the following: amendment 54, in clause 5, page 6, line 10, at end insert—

‘(12) On application by the Commissioner a court may declare an unfair contract term void.”

This amendment would empower the courts on application from the Small Business Commissioner to declare void a contract term that is unfair.

Amendment 57, in clause 8, page 8, line 32, at end insert—

‘(3) The Commissioner must ensure that all information provided by complainants, litigants and other parties against respondents is handled with confidentiality.

(4) The Commissioner must not release the information outlined in subsection (3) without the consent of the complainant, litigant or relevant party.”

This amendment would provide protections for those either providing information to the Small Business Commissioner or from complainants or litigants with large businesses.

New clause 7—Companies: Payment terms with suppliers—

‘(1) On the advice of the Commissioner, the Secretary of State may make regulations—

(a) imposing a limit on the number of days after receipt of a supplier’s invoice a company can seek to challenge that invoice,

(b) prohibiting the practice of a company seeking to change the payment terms of a supplier company unilaterally, and

(c) prohibiting a company from requiring a supplier company to make a payment in order to join that company’s list of suppliers.

(2) The regulations may make provision for a prescribed breach by a prescribed description of person of a requirement or prohibition imposed by the regulations to be an offence punishable on summary conviction—

(a) in England and Wales by a fine, and

(b) in Scotland or Northern Ireland, by a fine not exceeding level 5 on the standard scale.

(3) The regulations may specify the size of company and supplier company to which they will apply.

(4) Before making regulations under this section the Secretary of State must consult such persons as the Secretary of State considers appropriate.

(5) Regulations under this section are subject to affirmative resolution procedure.

(6) For the purposes of this section—

“company” has the meaning given by section 1(1) of the Companies Act 2006,

“prescribed” means prescribed by the regulations.”

This new Clause would empower the Secretary of State to make regulations: (a) to impose a limit on the number of days after the receipt of a supplier’s invoice a company may challenge that invoice; (b) to prohibit a company changing the payment terms to a supplier company unilaterally; and (c) to prohibit a company from requiring a supplier company to make a payment in order to join that company’s list of suppliers.

[Bill Esterson]

We move to the topic of unfair treatment or unfair contracts and how they are or might be dealt with by the small business commissioner, starting with amendments 48 and 54. The issue is similar to some of the problems faced by consumers that were dealt with in the Consumer Rights Bill—is it an Act now?

[Anna Soubry]

I don’t know.

[Bill Esterson]

I look for inspiration, and I am sure that we will get it. [Interruption.]

[Anna Soubry]

Yes, says the Whip. Whips are always right.

[Bill Esterson]

Thank you. Whips always know.

I think that there was an agreement in Committee on that Bill, which is now an Act, that microbusinesses have a lot in common with consumers, and that there is merit in considering them in the same way when they are purchasing goods and services, and certainly those that are not their core business. Examples include a hairdresser, who would buy shampoo or scissors as part of the business, whereas an individual would perhaps buy such things from Boots. When the hairdresser was buying coffee or a kettle for staff, however, it would perhaps be reasonable for them to be treated as a consumer. One-off business-to-business purchases made by a small business, such as somebody who is self-employed, should attract the same protection as would be afforded to consumers.

--- Later in debate ---

[Anna Soubry]

I shall now deal with new clause 7, which is really not necessary given the package of legislative and non-legislative measures we have taken to tackle late payment. I shall give some examples.

We plan to make regulations this year to require large companies to report six-monthly on payment practices and policies. That information will be available for public scrutiny. We have strengthened the prompt payment code to enforce a maximum 60-day payment term for all signatories from this year. Public sector buyers are required to have 30-day payment terms in contracts and throughout their supply chains, as we discussed this morning. We have to sharpen that up—we have to be better—but it is there. From 2017, public sector buyers must also publish annually their liability to debt interest payments. Central Government will publish quarterly on liability to debt interest from April 2016, and we will monitor the effectiveness of the measures.

There has been a little jollity—if one can be jolly about the mystery shopper service—but, in all seriousness, I have been absolutely convinced by that service because I have seen the evidence of the work it does. I might not be happy with the name, but it does investigate poor payment performance by public sector bodies and in their supply chains, and it is having an effect and making a difference.

Stakeholders—that dreadful word, but they are important people who have an interest—tell us that they want more public exposure of the payment practices of larger companies, and I agree with them. Bans on certain practices would be easy to sidestep and substitute with others. However, as we all know, publicity—casting a spotlight—is one of the best disinfectants against bad practice. That is the way forward. Were we to go down the sort of legislative route suggested by the new clause, it would become all too easy to sidestep and get around, so we would not make the advances that we need to make. For those reasons, I urge the hon. Gentleman to withdraw the clause or, if he pushes it to a vote, I urge the Committee not to support it.

[Bill Esterson]

I am still intrigued about the mystery shopper—at some point we may find out.

[Anna Soubry]

It is going to be a running joke.

[Bill Esterson]

The Minister is making a joke of it. I am intrigued to discover what it is finding and what is happening with its findings. I hope that we might hear that at some point. We do not need to hear today, but I would be very interested. I do agree that mystery shoppers can be very important in improving the quality of service and operation in a number of organisations.

I accept the Minister’s assurances on new clause 7, but, again, when the commissioner has been up and running for a while, it might be good for them to look at some of the payment-terms issues in the new clause and how well things such as the prompt payment code are bedding in—that is, is it as effective as we want it to be? That might be something useful that the commissioner could do in future to make a real difference.

Before the Division, the Minister talked about whether the commissioner should take unfair contract terms to court. She said that a quasi-judicial role would be inappropriate. Take the example of somebody in an imbalanced business relationship being offered a three-month payment term on an invoice, knowing full well that it is unfair and completely wrong, but, given their dependence on that contract and business relationship, feeling they have no choice but to go ahead with it. At a later date—this is what the amendment is getting at—there might be an opportunity for them to get some kind of redress. That would be the sort of issue in which the commissioner might intervene. The amendment suggests the commissioner might recommend to the court that the term was inappropriate, rather than take a quasi-judicial role. Nevertheless, I take the Minister’s points and, as the amendments were intended to be probing, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[Hon. Members]

Hooray!

[Bill Esterson]

Thank you very much, Ms Buck. I have never been more popular—often this popular, but never more.

I beg to move amendment 46, in clause 4, page 4, line 27, at end insert—

‘(3A) A relevant complaint may be made anonymously.”

This amendment would enable the Commissioner to act on anonymous complaints from small businesses against a larger business.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 49, in clause 4, page 4, line 27, at end insert—

‘(3A) A “relevant complaint” at subsection (3) may be made anonymously by a small business (“the complainant”) which has an agreement to supply, or has supplied or may supply, goods or services to a larger business”.

This amendment would allow the Small Business Commissioner to be able to act on anonymous complaints.

Amendment 51, in clause 5, page 5, line 37, at end insert—

‘(4A) In enquiring into, considering and determining a complaint, the Commissioner must take all reasonable steps not to identify the complainant, unless the complainant consents.’

This amendment would provide anonymity to complainants who raise a complaint with the Commissioner.

[Bill Esterson]

The amendments deal with anonymity and confidentiality. I do not intend to spend too long on them, but this is an important subject area, because it is one of the places where we can learn lessons from the Groceries Code Adjudicator. One concern raised by the adjudicator was that many of the supermarket suppliers that wanted to make complaints were nervous of doing so for fear of loss of business. That explains why the investigation into Tesco that recently concluded was not the direct result of complaints being investigated; it was prompted only when the adjudicator herself decided to intervene because of suppliers’ fear of the consequences of complaining and being publicly identified. She has encountered that theme on far too many occasions over the past two years. Indeed, there are some unfortunate examples of that confidentiality not being maintained for a number of reasons when suppliers have approached the adjudicator that has no doubt created a concern among businesses, which have therefore chosen not to approach her.

--- Later in debate ---

[Anna Soubry]

I do not disagree at all. That is why a flexible approach rather than an overly prescribed legislative approach is what I seek, and I am told that our model reflects the small business commissioner model in Australia. If as the hon. Lady describes the small business commissioner receives a flood of anonymous complaints and—even better—some have substance to them, it is difficult to believe that the commissioner would not grab that and take it forward. However, this is about accepting and understanding the difficulty of anonymity for the person against whom the charge or complaint is made, because they cannot take part in the investigation without some more detail to answer the charge. The small business commissioner must act and be seen to act in a way that is fair to both parties.

That is why the Bill does not prohibit anonymous complaints from being made. In legislation we are making the dangers of anonymity clear and ensuring that it is fair, but not for small businesses alone. We might be biased in favour of small businesses, but when looking at complaints the commissioner must be absolutely fair to both parties.

[Bill Esterson]

I think the point was well made by my hon. Friend the Member for Wakefield and by the Minister that if a pattern of anonymous complaints emerges, that is absolutely something the commissioner may act on. Having carefully reread amendments 46 and 49, I accept that they might potentially be read in that way—that was the intention—but I am satisfied by what the Minister says and having it on the record is extremely helpful. Amendment 51 deals with confidentiality and I agree that in an individual case it might be difficult for the commissioner to act if complainants did not give information to the commissioner. Granted they might want to give it confidentially, but those are two separate matters and I am satisfied by what the Minister said. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 ordered to stand part of the Bill.

Clause 5

Enquiry into, consideration and determination of complaints

[Bill Esterson]

I beg to move amendment 50, in clause 5, page 5, line 35, at end insert—

‘(3A) Where the respondent fails to provide information voluntarily the Commissioner may investigate the failure and can enforce compliance with information requests on contract terms.’

This amendment would allow the Small Business Commissioner to investigate and require compliance with information requests on contract terms.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 52, in clause 5, page 5, line 37, at end insert—

‘(4A) In support of the consideration and determination of a complaint made under the Small Business Commissioner complaints scheme, the following bodies may be required to provide information or answer questions during the course of the Commissioner’s investigations—

(a) Government departments,

(b) local authorities,

(c) public sector bodies, and

(d) companies.’

This amendment would require Government, local authorities and public sector bodies and companies to provide information or to answer questions when a complaint is made.

Amendment 53, in clause 5, page 5, line 44, at end insert—

‘(6A) A recommendation made under subsection (6) may be that the complainant and respondent enter mediation to resolve their dispute.

(6B) Where a party declines mediation the relevant party shall provide an outline to the Commissioner on costs relating to litigation.’

This amendment would allow the Small Business Commissioner to recommend that the parties attend mediation and to make a commentary on costs in litigation where a party declines mediation.

--- Later in debate ---

[Bill Esterson]

All three amendments are drawn from what happens in Australia. The Australian small business commissioner is a great success and we have discussed that in some detail, so it would be as well for the Government to consider what happens in Australia.

Legal powers to demand information relevant to an investigation form a crucial part of what the Australian commissioner does—note that that includes the public as well as the private sector. That is an important reminder that as the office of the small business commissioner in this country develops, the opportunity to continue to learn from the very best practices in the world remains available. The amendments are probing ones designed to allow the Government to do just that. We have discussed such matters previously, so I need say no more. I will wait to hear the Minister’s response.

[Anna Soubry]

It is really important that the commissioner wins the trust of small and large businesses. We need to ensure that we do not take an overly heavy-handed approach at the outset.

The commissioner will seek to change the culture of payment. The best way to do that is to take an approach that balances disincentives to encourage larger businesses to behave reasonably towards smaller businesses with support for those smaller businesses, so that they may become more savvy contractors. To do that, the commissioner needs to build trust.

The commissioner may publish a report about the inquiry, consideration and determination of a complaint, or any of those aspects. This could include reporting on whether or not a party provided information and should be sufficient to obtain engagement on all sides. In other words, it uses the huge power of naming and shaming. Compelling the production of information—I do not like that as an idea—from the parties or third parties will get us into an awful quasi-judicial situation and bring an adversarial flavour to the process, and it will invite legal argument and therefore delay. That is why I resist that.

The key issue from consultation responses on alternative dispute resolution is the need to raise awareness of what it is and what it can achieve. The commissioner will do that, as we have described. Adverse costs inferences can already be drawn by the courts, as I described in my previous comments, in the event of an unreasonable refusal to participate in mediation. I think we have got the balance right. I am grateful for the probing nature of the amendments, and I hope that what I have said will satisfy the hon. Gentleman. We have made it very clear that if things need to come back in some way after the commission has been set up—if it is not working—we are always here to listen, but we want this person to work for the benefit of small businesses in relation to late payment.

[Bill Esterson]

I agree that there needs to be trust and the right relationship between businesses of all sizes. I have used the term level playing field a number of times. I am not against the concept of naming and shaming, either. But there is the matter of what happens if it does not work. To be fair to the Minister, she has acknowledged that we might have to come back to some of these points. The prompt payment code is not compulsory, and perhaps we will revisit that. So, there is the question of businesses that do not co-operate and provide information and do not go through mediation. Equally, we still have the challenge of those businesses that feel unable or scared of the consequences, or feel that it will disadvantage them if they complain. We do not know what will happens then, so I think there is a long way to go. This is the start of a process, and the amendments, as I said in my earlier remarks, are about drawing on the good practice from Australia.

I am reassured that the Minister has every intention of this being a learning organisation and that it will continue to evolve. With those remarks, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Stephen Barclay.)