Oral Answers to Questions

Bill Esterson Excerpts

Tuesday 12th December 2017 Commons Chamber

[Margot James]

The hon. Gentleman raises a crucial point of concern to communities across the country. Although there is limited action the Government can take on how banks run their businesses, we have worked with the Post Office to enable it, through its 11,600 branches nationwide, to run a full complement of services

[Bill Esterson (Sefton Central) (Lab)]

Despite having the fifth biggest economy in the world—soon to be the sixth—the UK is ranked only 48th in the global enterprise league; 48th out of five really takes some doing. But this is not just about the lack of support for start-ups. Among small and medium-sized enterprises business confidence is falling and costs are rising, and, as the Bank of England’s figures show, access to finance is still at its lowest level since 2010. Do the Government have any excuse for their woeful failure to support our smallest businesses?

[Margot James]

The hon. Gentleman really should stop talking small businesses down, and he is absolutely wrong in his estimate. The UK is No. 4 in the world for being the best place to start a business, and the OECD figures show that we score highly on enterprise. He does raise a valid point about growth, and we need to improve our record in supporting small businesses to grow, which is precisely why the Chancellor has made available a vast amount of money in this year’s Budget to support the growth of small businesses.[Official Report, 8 January 2018, Vol. 634, c. 2MC.]

Draft Small Business Commissioner (Scope and Scheme) regulations 2017

Bill Esterson Excerpts

Tuesday 21st November 2017 General Committees

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I, too, welcome the appointment of the commissioner. I know Paul Uppal from his time in the House. He has a strong business background. Having been a member of the governing party may have helped him, of course, in securing the post—I could not possibly comment on whether there is any truth in that scurrilous accusation.

The Minister pointed out that there are £26.3 billion-worth of late payments in the private sector according to the latest figures from Bacs, but she did not mention that the time businesses wait is 72 days on average. Members on both sides of the Committee have mentioned the sadly all-too-common game playing by larger companies in dealing with their smaller suppliers. It is fair to say that a reduction in that kind of game playing is one of the many things that I would like to see Mr Uppal and his team address. If he is to repay the faith that has been shown in him, perhaps that is something he can take on board and investigate, to see what recommendations he can come back with on how to address some of those endemic problems.

The relationship damage done when a small supplier challenges a larger customer is a serious block in challenging late payments. It is one of the reasons why, in the Enterprise Bill Committee, we pushed the Government extremely hard on alternatives to the very mild voluntary system that has been set up, which the Small Business Commissioner has before him and his team. The Australian system of binding arbitration, with proper fines behind it, appears from the evidence we discussed in Committee to have been a significant success in bringing down the number of days that small companies waited to be paid. I again urge the Minister not to rule out moving to such a system over a period of time, and urge the commissioner to consider whether that is the sort of system we should consider in this country as well at some stage.

I have previously raised concerns that the system is restricted to the private sector, and I raise them again. The public sector is a source of significant late payment concerns for smaller businesses. The Minister mentioned the prompt payment code; signatories to the code tend to be in the public sector, with some larger private sector firms, but they do not cover the entire public sector and it is too early to say how effective they have been in reducing the time that small companies must wait to be paid.

There are examples of Governments in other parts of the world—the United States is one that springs to mind—using the procurement system to ensure prompt payment. The rules in the United States are that if a company trades with the federal Government, it has to pay its suppliers promptly. I wonder whether that is something the Minister would take on board. Again, that is something we said in the Bill Committee during the passage of the Enterprise Act 2016 that created the post. All too often in this country, companies that procure from Government are paid within 30 days, often as quickly as five days, and then delay their own payments. That is an opportunity within the commissioner’s terms of reference and something else for him to investigate, because those are private sector companies potentially using their position to improve their own cash flow at the expense of their smaller suppliers, and using Government money to do so. That is a particular area where the Government should be interested and could act. As I say, if it is part of the agreement in America, why not in this country?

[Mr Prisk]

I am grateful to the hon. Gentleman for raising an important point. My understanding is that most transactions in America are for payment on receipt of goods or services, so there are no 30-day or 60-day terms in most common business practice. Is that something he recognises? It would change the nature of his question.

[Bill Esterson]

The hon. Gentleman is more familiar with what goes on in America than I am in that case. Certainly, the evidence that we were presented with when we discussed the matter in the Bill Committee suggested that that was not true of every contractual relationship in America. Perhaps we could discuss that outside and look further at the evidence. Payment on delivery is one way of addressing the point we have just been discussing.

Some questions emerge from the regulations before us. My understanding is that the commissioner, as constituted, has the power to name and shame. I wonder whether the Minister can shed some light on what the intention is for the use of those powers, and how quickly she feels the commissioner should look to set up some kind of naming and shaming system.

How many complaints does the Minister envisage the commissioner will be investigating every year? How many complaints does she expect him to receive every year? How many complaints could his office deal with every year? That relates to how many staff he has and what his budget is, which the Minister could perhaps address.

From some of the representations I have received, it appears there is a question mark over whether the construction sector will be included in the Small Business Commissioner’s work. Given that a significant number of the problems of late payment lie in the construction sector, can the Minister clarify whether that is true? The concerns around retentions of 5% or even 10% over a number of years are a very important part of why construction should be included.

[Faisal Rashid (Warrington South) (Lab)]

My hon. Friend mentions the construction industry. Does he agree that small businesses in the construction industry are more vulnerable to late payments because they do not qualify for some of the services available to alleviate them, such as invoice finance and invoice discounting?

[Bill Esterson]

Yes, there are opportunities, as there are in other sectors, to use other forms of invoice finance. One of the big concerns is retention, and I should have thought the commissioner would want to look at concerns about the very lengthy delays that often happen with retentions.

One of the questions we raised in the Bill Committee is how to raise awareness of the commissioner’s existence and the services his office can provide. One way is through a website, but not every small business uses a website; actually, quite a lot of them do not use the internet. What proposals does the Minister have to ensure that all small businesses know that this facility exists? One route is through advisers, including accountants, but that is not an answer for everybody. We will have to wait to see how effective the commissioner is after a period, but can the Minister tell us the process for review of the commissioner’s effectiveness and how that will be carried out?

The regulations talk about a limit of businesses with a headcount of fewer than 50. How many businesses does the Minister’s Department estimate will be covered by the regulations, and how many businesses will not be covered? While I recognise that 50 is a figure for a small business, a business with 51 members of staff is still not particularly big, and when it trades with a larger customer, there is still a power imbalance. Will she give some thought to support for the next grade of businesses above those covered by the regulations? One of the reasons these regulations come in is the cost of going to court. For a business with 51 or even 101 members of staff, it is still an exceedingly big expense to take somebody to court.

I want the Small Business Commissioner to be effective in tackling the scourge of late payments. The success of small businesses is crucial for the overall economy. We do not have enough small businesses that are able to grow and become larger businesses—it is one of the structural weaknesses of our economy—and the delay in payment is one of the reasons that businesses find it difficult to do so. In fact, talking to the accountancy and insolvency professions, the main reason for business failure is cash flow, and late payment in particular, so anything that can be done to improve that situation must help individual businesses, those who own them, those who work in them and the wider economy.

However, the commissioner has to be effective if those goals are to be achieved. The title of commissioner suggests a responsibility and a scope that goes beyond the single goal of tackling late payment in the private sector. At the moment, a small business late payments signposting service is being created. I hope that it becomes a commissioner in time and can achieve far more as a support for small business. I look forward to the Minister’s answers and assurances that, in a very short time, that support, advice and guidance, as well as the single role of tackling the scourge of late payments, is where the Small Business Commissioner can and will end up.

[Margot James]

I thank the shadow Minister for his thoughtful comments and I am grateful for his encouraging words about the choice of Paul Uppal to take up the post. I will do my best to answers the questions he posed about some of the details.

He mentions that the average late payment is 72 days, which was also part of the figures that I gave from Bacs’ data. That is quite unacceptable; it is effectively two and a half months, and if it is the average, we have a lot of work to do. On a more positive note, and as testimony to some of the voluntary work that has already been established through the prompt payment code, there has been a substantial improvement in Bacs’ data. The latest figures show an average of what is owed to small businesses at any one time of around the £14.2 billion mark, as opposed to £26.3 billion the year before. I have chaired roundtables of small businesses around the country and found some enthusiasm for the prompt payment code, and some companies reporting that they have been able to deploy accounts staff in more productive functions than simply chasing up late payment all the time as a result of the improvement that they have seen. As I say, there is clearly still a long way to go, but I think the prompt payment code and other measures the Government have introduced have started a change in culture.

The hon. Gentleman mentioned the Australian model and a more punitive function, and asked me to comment on whether that might be an end point for what we are setting up here today. I do not see it is a logical extension. The business support landscape in Australia is very different from that of the United Kingdom and I think that we can achieve more by trying to bring about a cultural change, rather than introducing hard-hitting measures and fines and going down that route straight away. I would not rule out such an approach if that does not work, but I am quite optimistic that, given the progress we have already made—as well as the progress of interventions in other sectors, such as the Groceries Code Adjudicator—we can achieve more with an approach that tries to take business with us. However, as I say, I would not rule out in the long run something of the sort that the hon. Gentleman described if it became clear that it was needed.

The hon. Gentleman asked about the public sector. There is perhaps a difference between what is required and what is seen as standard, by way of the letter of the law, and what is actually carried out in practice. Under the letter of the law, all public sector contractors are mandated to pay within 30 days and ensure that the 30-day policy applies all the way through the supply chain. I am sceptical about whether that always happens in reality, but that is the goal. The public sector is therefore not incorporated in the regulations.

[Bill Esterson]

The Minister says that payment within 30 days is mandated all the way through the supply chain, but that she is sceptical about whether that is really happening. What are she and her colleagues doing to enforce it?

[Margot James]

I became aware of the issue only a few months ago, and I have not decided yet whether we need to do more than we are doing already. We fund a mystery shopper service that checks how public sector contracts are complied with, particularly in respect of late payment, and I will look closely at its findings. It is encouraging that payment within 30 days throughout the supply chain is the standard, but I will need to satisfy myself that it is being complied with and adhered to. The mystery shopper service may inform that process.

[Bill Esterson]

If the Minister finds that there is still a widespread problem with payment not being passed down the supply chain, is she prepared to take enforcement action? The mystery shopper service may identify the problem, but I am not convinced that it will stop it.

[Margot James]

I shall have to return to that question once I have investigated what the service has identified. I cannot prejudge what we will do based on what we find out, so I hope the hon. Gentleman with bear with me to that extent. In answer to his question about the number of complaints on which the system is predicated and the resources at its disposal, the establishment cost of the Small Business Commissioner’s office is £1.1 million and the anticipated running costs are £1.4 million a year, based on an estimate of 70,000 companies referring just under 400,000 disputes, of which 500 result in full-blown complaints.

The hon. Gentleman also asked about construction. Construction is certainly included in the commissioner’s remit, but I would like to go further, because I recognise that there are special problems with late payment in the sector. Two weeks ago, we announced a consultation on the culture of late payment and payment retention in the construction sector. I urge individuals and companies to respond to that consultation, because there is widespread anecdotal evidence of a big problem of unfair treatment of small businesses in the construction sector.

I think I have answered the hon. Gentleman’s questions, so I thank hon. Members for their time and commend the regulations to the Committee.

[Bill Esterson]

rose—

[Margot James]

In a spirit of generosity, and since Mr Sharma has not called time, I give way.

[Bill Esterson]

It was only that I asked the Minister how she would raise awareness of the service.

[Margot James]

The hon. Gentleman did ask that, and I failed to answer. We will promote the service’s launch heavily through all media, including traditional media—as he mentioned, a lot of businesses are not online. We will also use the routine communications of other Government agencies with businesses to alert them to the importance of this new development.

Question put and agreed to.

Oral Answers to Questions

Bill Esterson Excerpts

Tuesday 7th November 2017 Commons Chamber

[Margot James]

I suggest that the right hon. Gentleman hold fire until the Financial Conduct Authority has decided on what action it may still take. It is empowered to take action, and I totally agree with the sentiments behind his question.

[Bill Esterson (Sefton Central) (Lab)]

What happened at RBS’s Global Restructuring Group is a scandal of the highest order. Businesses were ruined; families were torn apart; and people took their own lives. The Minister must know that the FCA cannot deliver justice for the GRG’s victims on its own, because most business banking is unregulated. I have asked Ministers this question six times already, and I will ask it a seventh time: will the Government set up a judge-led inquiry into RBS GRG, or do they have something to hide?

[Margot James]

I can assure the hon. Gentleman that we have nothing to hide. I share the concerns about the practices of the Global Restructuring Group at RBS and the devastating impact on people’s businesses, which represent a lifetime’s work for many people. I am sure that we have not yet heard the last of this inquiry.

European Union (Approvals) Bill

Bill Esterson Excerpts

3rd reading: House of Commons & Committee: 1st sitting: House of Commons & Report stage: House of Commons
Tuesday 10th October 2017 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

This is a short Bill. As I explained on Second Reading, the purpose of the Bill is to approve four draft decisions of the Council of the European Union. All four draft decisions rely on article 352 of the treaty on the functioning of the European Union, and therefore require the approval of Parliament. Section 8 of the European Union Act 2011 provides for exemptions in order to avoid the requirement for an Act of Parliament, but the decisions with which we are dealing do not fall within any of the exempt purposes.

The first two decisions will enable two countries, the Republic of Albania and the Republic of Serbia, to be granted observer status in the European Union’s Fundamental Rights Agency. The third and fourth decisions are necessary to implement a co-operation agreement between the EU and Canada on competition enforcement. Clause 1 provides for approval by Parliament of those four draft EU legislative decisions. Clause 2 concerns the territorial extent of the Bill, its commencement date and short title. Subsection (1) provides that the Bill extends to the whole United Kingdom, subsection (2) provides that the Bill will come into force on the day it receives Royal Assent and subsection (3) provides for the Bill’s short title.

We are content that all four decisions are reasonable and proportionate, and that they will not result in any additional financial burdens on the UK. I urge hon. Members to agree to clauses 1 and 2 standing part of the Bill.

[Bill Esterson (Sefton Central) (Lab)]

The European Union (Approvals) Bill is a two-clause Bill, as the Minister has said. It will approve four draft decisions of the Council of the European Union in relation to the participation of the Republics of Albania and Serbia as observers in the work of the Agency for Fundamental Rights, and the signing and conclusion of a new agreement between the EU and Canada regarding competition law, including the exchange of information between the EU and the Canadian Competition Bureau. Approval of those decisions by means of an Act of Parliament is necessary under the European Union Act 2011 in order for a Minister to vote in favour in the Council.

The Fundamental Rights Agency replaced the European Monitoring Centre on Racism and Xenophobia in 2007. As the Europa website states, the agency advises EU institutions and national Governments on fundamental rights, particularly in the areas of discrimination, access to justice, racism and xenophobia, data protection, victims’ rights and children’s rights. The agency’s areas of work have been determined through a five-year framework, and the main priority areas include the fight against racism, xenophobia and related intolerance. EU candidate countries can participate in the FRA as observers. The Bill approves two draft decisions on the participation of the Republic of Albania and the Republic of Serbia as observers in the FRA’s work. We support the draft decisions concerning the participation of Albania and Serbia in the FRA.

Competition is vital to our economy, the success of our businesses and the prosperity of the people of our country, and the encouragement of healthy competition is vital. National Governments have a vital role in ensuring that a fair market exists, and not just a free market. The way in which Governments work together is also crucial in determining whether markets are free, fair or otherwise. The decision of the Trump regime to impose punitive tariffs on Bombardier will have a disastrous effect on the workers and communities of Northern Ireland, and on the economy. Such tariffs, if they are allowed to stand, exemplify the use by companies such as Boeing of market dominance to destroy competition.

[Mr Bob Seely (Isle of Wight) (Con)]

I am not sure that I like Donald Trump any more than anyone else does, but does the hon. Gentleman understand the difference between a regime and an Administration? He calls the Trump regime a regime, but in fact the Trump Administration is an Administration. It is a democratically elected Administration, not some sort of hard left Venezuelan or Cuban-style regime.

[Bill Esterson]

I do not think there is any danger of confusing Donald Trump’s Administration or regime with anything of the hard left.

That Boeing can act as it has done—initiating trade disputes in a segment in which it does not compete—with the full support of a protectionist US Administration demonstrates the need to ensure that every effort is made to deliver healthy and fair competition. The reliance of some Ministers on the US for trade and for our own economic success has been brought into sharp focus by the actions of the Department of Commerce. Notably, this applies to the International Trade Secretary, who seems to think that our relationship with the US is the answer to all our prayers, but it clearly is not.

European Union (Approvals) Bill

Bill Esterson Excerpts

2nd reading: House of Commons
Tuesday 4th July 2017 Commons Chamber

[Bill Esterson (Sefton Central) (Lab)]

The Bill was included in the Queen’s Speech. The background notes refer to helping to grant Serbia and Albania observer status at the EU’s Fundamental Rights Agency, and an agreement for enhanced co-operation between competition regulators in the EU and Canada. However, I will not be the only one who was somewhat surprised that it was chosen as the second Bill to be given a Second Reading in the new Parliament. Why was it given such a high priority, given what might have happened, and given what was, at one point, in the Conservative party manifesto?

We could have suggested some alternatives. For instance, the Government could have addressed the pay cap. Members of the Cabinet and members of the Conservative party are now doing that, and quite an argument seems to be going on, but we could have been debating the subject in the House today.

[James Cartlidge]

The hon. Gentleman will know that the civil war in Yugoslavia was an horrific, scarring experience for our whole continent. We should not belittle it by underestimating the importance of those nations’ reaching our level in terms of human rights and so on.

[Bill Esterson]

Of course the hon. Gentleman is absolutely right, which was why it was right for the Bill to be in the Queen’s Speech. I was merely questioning why it had been given such prominence. Given that it consists of only two lines, why was something weightier not presented first?

I have mentioned the pay cap, the turmoil in the Conservative party, and the agonising over whether public servants should be given a pay rise. There is also the debate about tuition fees, the debate about whether there should be more police and firefighters—

[Michael Tomlinson]

rose—

[Bill Esterson]

I will give way again.

[Michael Tomlinson]

I am grateful to the hon. Gentleman for giving way, but I fear that he may be being a little bit churlish. He has the opportunity now to set out the Labour party’s position in relation to the Bill. He is, of course entitled to go on speculating about what might or could not or should have been debated at this time—as long as you allow him to do so, Mr Speaker—but he has the opportunity to debate this subject now. What does he have to say about it?

[Mr Speaker]

Order. I am grateful to the hon. Gentleman for his inquiry. I could not know what the hon. Member for Sefton Central (Bill Esterson) would say until he had said it, but now that he has said it, I can tell him that he should not have said it.

It would be advisable now for the hon. Gentleman to return to the subject of the European Union (Approvals) Bill. I very gently remind the hon. Gentleman, who is quite a seasoned parliamentarian, that it consists of two clauses, of which—and I say this not least for the benefit of those who are attending to our proceedings elsewhere—the second is “Extent, commencement and short title”. The only substantive clause is clause 1. The question of the pay cap is a matter of enormous interest, but it is wholly irrelevant to the question of clause 1 and consideration of the Republic of Albania, the Republic of Serbia, the European Union Agency for Fundamental Rights, and the relationship between the European Union and the Government of Canada in respect of competition law.

[Bill Esterson]

Thank you very much, Mr Speaker. You may even have stolen parts of my speech.

Anyway, we have the European Union (Approvals) Bill, with its four draft decisions and two clauses, the second of which—as you pointed out, Mr Speaker—consists of the name of the Bill. Members will be pleased to learn that Labour will not oppose the Bill at this stage. We on the Labour Benches are committed to ensuring that the UK fulfils its responsibilities as a member state of the EU, not least in the very important matter of the progress made by the former member states of Yugoslavia. We will do so until the time of withdrawal from the EU; we will continue to scrutinise EU matters that come before Parliament.

This Bill is the enactment of provisions under the European Union Act 2011 and addresses draft decisions of the Council of the European Union. The first of those relates to the participation of the republics of Albania and Serbia as observers in the European Union Agency for Fundamental Rights, and the second to the signing and conclusion of an agreement between the EU and the Government of Canada regarding the application of their competition laws, which includes the exchange of information between the EU and the Canadian Competition Bureau.

The European Union Agency for Fundamental Rights replaced the European Monitoring Centre on Racism and Xenophobia in 2007. As set out on the Europa website:

“It advises EU institutions and national Governments on fundamental rights, particularly in the areas of: discrimination; access to justice; racism and xenophobia; data protection; victims’ rights; children’s rights.”

The agency’s areas of work have been determined through a five-year framework. The main priority areas include the fight against racism, xenophobia and related intolerance.

EU candidate countries can participate in the European Union Agency for Fundamental Rights as observers. This Bill approves two draft decisions on the participation of the Republic of Albania and the Republic of Serbia as observers in the work of the agency. The decision will not in itself confer observer status on Albania and Serbia, but it will establish that the Stabilisation and Association Councils for Albania and Serbia can determine the conditions of the two countries becoming observers.

As the House of Commons Library explains, under the draft Council decisions, Albania and Serbia would both appoint an observer and alternate observer in the work of the agency’s management board, on an equal footing with the member and alternate members appointed by EU member states, but without a right to vote. They would also participate in initiatives undertaken by the agency and make a financial contribution to it.

In an explanatory memorandum to the European Scrutiny Committee on 22 March 2016, the hon. Member for Esher and Walton (Dominic Raab), who was then and is now a Ministry of Justice Minister, said that the Government support Serbia and Albania becoming observers in the European Union Agency for Fundamental Rights, agreeing that it would assist their accession to the EU which the UK also supports subject to “firm but fair conditionality”.

Albania and Serbia will both make a contribution to the EU budget in order to participate, ranging from €160,000 to €183,000 a year. The draft decisions have been cleared by the European Scrutiny Committee and the Lords European Union Select Committee. The Minister said that this is an opportunity for us to support the progress being made on human rights in the two countries in question, and I completely agree on that.

[Mr Liddell-Grainger]

As the hon. Gentleman knows, Labour and Conservative Members and other Members of this House work through the Council of Europe with Albania and the Balkan states to make sure they are monitored and understood. An enormous amount of work is done by this place with parliamentarians across Europe to continue the efforts the hon. Gentleman is talking about. I commend the hon. Gentleman and our Front-Bench team, and I know he will praise the fact that there are MPs here doing the work already.

[Bill Esterson]

The hon. Gentleman is absolutely right to make that point, and I thank him for it; I join him in praising colleagues across the House for their work on these important matters.

However, I have a particular question for the Minister, which also came up in some of the interventions: what would be the nature of our involvement in the agency both immediately after Brexit in handling transitional arrangements and in the longer term? A similar question would apply to a number of other agencies. Perhaps the Minister can address that in her concluding remarks.

There is already an agreement between the EU and Canada on competition. This decision extends the powers so that both sides will be able to exchange evidence collected in the course of their investigations.

[Paul Scully (Sutton and Cheam) (Con)]

I would like the hon. Gentleman to repeat his question in a little more detail, as my understanding of the European Union Agency for Fundamental Rights is that it is there to help to interpret and work on Community law in its member states, so presumably if we left the EU it would no longer be relevant in that context to the UK itself.

[Bill Esterson]

I had moved on to the second part, but I will come back to the hon. Gentleman’s question. We need to know what our relationship will be, given the important work—as the hon. Member for Bridgwater and West Somerset (Mr Liddell-Grainger) rightly described it—carried out by Members in this House over many years, which has been extremely important in making progress in the countries named in this Bill and others. It is important that we have a sense from the Government as to how we will stay involved in the work of such agencies. I am sure all Members will agree that this country still has a very important role to play whether or not we are in the EU.

[Alex Chalk (Cheltenham) (Con)]

Does the hon. Gentleman agree that a key bulwark of human rights in this country, and indeed across Europe, is the European convention on human rights, which is not affected by this Bill at all? That has to remain the key and most important element.

[Bill Esterson]

I completely agree.

The EU Commission states that there is a danger that the absence of a power to exchange information with the Canadian Competition Bureau will become an impediment as co-operation between the two parties increases; the Minister made that point. Co-operation with other competition authorities is now standard practice in international competition investigations. The EU has co-operation agreements with the USA, Japan, South Korea and Switzerland. The most advanced is the one with Switzerland; it is very similar to the Canada agreement and has proved, as the Minister said, uncontroversial. Many worldwide or transatlantic cartels include Canada in their operations, and the Canadian commission will get a good opportunity via this agreement to gain additional information concerning these cartels and whether practice is anti-competitive or not.

[Ian Paisley (North Antrim) (DUP)]

Does the hon. Gentleman agree that this Bill serves as an interesting template for taking forward competitive activities post-Brexit? If we can get this right, it might serve to enable other members of the Commonwealth to look at how we can pattern a similar relationship.

[Bill Esterson]

That is a good point, and I will come later to further questions about arrangements after we leave the EU, so that we can continue to benefit from the sort of arrangements set out in the Bill. We certainly need to make sure arrangements are in place to address anti-competitive practices in this country and involving our interests across the world. The Minister might want to address that very good point in her concluding remarks.

[Ian Paisley]

Does the hon. Gentleman agree that the question of establishing such a pattern impacts greatly on our nearest neighbour, the Republic of Ireland? If we can get the relationship right between ourselves and Canada, it might help in getting it right with the Republic of Ireland, which will help us to bolster our trade.

[Bill Esterson]

I think we are in danger of wandering away from the subject—[Interruption.] I have no idea why Conservative Members find that funny, but there we are. Obviously, the hon. Gentleman and the Democratic Unionist party are particularly exercised by that matter, among others, but I dare say that this is something that the Minister can pick up on, perhaps on another day.

Competition delivers benefits to consumers, to businesses and to society as a whole. Competition policy therefore contributes to boosting jobs, growth and investment. The Commission pursues this objective by enforcing competition rules, sanctioning breaches and promoting a competition culture internationally. The proposed agreement will improve the administrative co-operation between the European Commission and the Canadian Competition Bureau. Ultimately, consumers in the European Union and in Canada benefit from competition policy and from the sanctions that contribute to a stronger deterrence of anti-competitive behaviour. More effective competition enforcement results in more open and competitive markets in which companies can compete more freely, enabling them to generate wealth and to create jobs. It also gives consumers a better choice of products at lower prices.

This new agreement is substantively the same as the existing one, which has been in place since June 1999. This agreement just adds new provisions on the exchange of information. Even after we have left the European Union, UK companies operating in the EU will still be subject to the jurisdiction of the European Commission in anti-trust and merger investigations, as all non-EU countries are. Information on UK companies will still be transferable after Brexit. After Brexit, the European Commission will still share information about UK companies with Canada but will not be bound to share the information about the UK it receives from Canada with the UK. I would like the Minister to address that point.

This agreement relates to administrative co-operation between the European Commission and the Canadian Competition Bureau, so public consultation and an impact assessment were not considered necessary by the Government, and, as the Minister has now said on a number of occasions, she does not think that there will be financial implications. The Government have noted in the explanatory memorandum that this new agreement will have no impact on UK law and no financial implications.

The European Scrutiny Committee did not at first clear the proposal. The Chair of the Committee, the hon. Member for Stone (Sir William Cash), who I dare say will make a contribution to the debate, requested further information about whether and in what way the United Kingdom could participate in the agreement following withdrawal. The Minister responded to the Committee on 24 October, stating that

“the Government will ensure that the UK is in the strongest possible position to cooperate on competition matters with our international partners...There are a number of options for securing the means for international cooperation…As the form of any cooperation agreement will depend on our negotiation with the EU and negotiations with other countries such as Canada it is too early to say what exact form international cooperation will take.”

That raises a number of questions about transitional arrangements in the longer term. In response to that letter, the Committee subsequently cleared the documents.

That brings us to the question of what arrangements will exist after we leave the EU. The Minister referred in her letter to seeking to extend the current arrangements. For how long does she think that will be necessary? What guarantee is there that it would be possible to extend them? UK companies operating in the EU will still be covered by this agreement. The difference will be that, while the European Commission will continue to share information with Canada about UK companies, that information will not be shared with the UK unless a further agreement is reached. She said in her letter that any co-operation agreement would depend on negotiation. How long does she think those negotiations are likely to take? What will she be seeking to achieve in them? We have now reached the point at which Ministers need to start answering the questions about transitional and longer-term arrangements for these and many other matters.

There is no doubt that competition is vital to our economy, to the success of our businesses and to the prosperity of the people of our country. Encouraging healthy competition is vital. The role of national Governments, and of international co-operation, is to create a fair market, not just a free market. It is also to avoid anti-competitive practices, including the creation of cartels through mergers and acquisitions which distort the market; the undercutting and exploitation of workers and smaller businesses; the use of zero-hours contracts where workers have little choice; the treatment of smaller businesses by banks that will only fund those with liquid assets; and the delays in the payment of invoices by larger firms. Those are all examples of anti-competitive and exploitative practices in which Governments—nationally and internationally—should find ways of intervening to set a level playing field. Governments should be a partner to business and to the workforce. They should encourage those wishing to start and grow a business. They should be investing, and they should have the right strategy for infrastructure and skills. They should have an industrial strategy. Underpinning all that should be the right approach to competition, which is what this part of the Bill is all about.

We need answers to the questions about what happens after we leave the EU and about what transitional arrangements will be in place. The nature of the Minister’s comments in her letter to the European Scrutiny Committee show just how complex these questions are, and it is time we started to get some answers.

[Michael Tomlinson]

I am following the shadow Minister’s speech closely. He has mentioned the European Scrutiny Committee several times. Will he join me in calling for the Committee to be reconstituted as soon as possible? His speech has demonstrated the important work it does, and it needs to get going straight away.

[Bill Esterson]

I do not know whether the hon. Gentleman was in the Chamber before this debate started, when my hon. Friend the Member for Bootle (Peter Dowd) made an impassioned plea to you, Mr Speaker, for the Select Committees to be reconstituted as soon as possible. Of course I agree with the hon. Gentleman.

Labour accepts the referendum result and recognises that Britain is leaving the European Union, but we need to negotiate for strong transitional arrangements to ensure that there is no cliff edge for the economy. We also need to give much greater priority to retaining the benefits of the single market and the customs union than we have seen from the Government so far. We should not accept any watering down of workers’ rights and environmental standards as a result of Brexit. We will seek significant improvements to the repeal Bill to ensure that there is proper oversight of the use of new powers and no drop in EU rights and protections.

In that context, the discussions that we are having this afternoon are really important. We on the Labour Benches will seek—as, I believe, will the Minister—a strong, collaborative new relationship with the EU, not as a member but as a partner. We will seek to remain a member of common European agencies that benefit the UK, such as Europol, Eurojust and the Erasmus scheme. Perhaps the arrangements we are discussing today can be added to that list. We have to get this right, but we are not in a strong position as we enter the negotiations. I want to see the Prime Minister change her approach. She must drop the idea that “no deal” is a viable option. She must also put a much stronger emphasis on jobs, on the economy and on retaining the benefits of the single market and the customs union, and she must bring Parliament back into the Brexit process, as we have seen happening today. The fact that we are debating this Bill shows that we must retain the benefits of the co-operation and relationships that we currently have with the EU.

I said at the start that this was a Bill with only four draft decisions, but it is indicative of what is to come as we address the challenges of Brexit. As far as this Bill goes, the Minister really does need to answer the questions about transitional arrangements and negotiations so that we can continue to share information to the benefit of our economy and of the people of this country.

--- Later in debate ---

[Ian Paisley]

I am quite happy that the hon. Gentleman has clarified his comments, but given what has happened in the past week in this House—the passing of the Queen’s Speech and the amendment that was not moved—I think reference has already been made to that. It should be absolutely clear that, in my view and in the view of my party, the unborn is—even in the words of Hillary Clinton—a “human being”. According to science, it feels pain, it knows emotions and it is faithfully and wonderfully made. My party will take a stand on that issue irrespective of the political agreements that are reached. I say that as a warning to others who may seek to raise the issue in the House in the weeks, months and, hopefully, years ahead.

Turning to the issue of competition, which is mentioned in this Bill, and the competitive rights, which have been identified, I welcome what has been put on page 6 of the Labour party manifesto, because it emphasises the importance of what we are discussing today. It says that the Labour party will make sure that we leave the European Union. I welcome that because, when we leave the European Union, we do not half leave it or partly leave it; we get out. It is essential that we get out of the customs union and the single market. We cannot address the competition matters identified in this Bill with Canada, for example, if we do not get out of the customs union. It is absolutely crucial that we leave the customs union. We cannot make free trade agreements with any other country unless we are free to do so, so the quest for freedom is incredibly important. That was driven home to me recently in a piece of correspondence that I received from a large steel processor here in the United Kingdom.

[Bill Esterson]

The hon. Gentleman is raising some really important points relating to the competition element of this Bill. He touched on an earlier intervention. Will he say a little bit about how he sees the relationship between the north and south of Ireland working?

[Ian Paisley]

Certainly. I will comment on it after I have made my point about the steel industry. I received a note from the managing director of John Reid and Sons. It is a massive company that has been in existence for 98 years. It said:

“to remain in the customs union would mean that we cannot do our own trade deals with the rest of the world. We have exported to over 140 countries throughout our 98 years in business; we have an idea of what we are talking about…The customs union is a terrible tragedy for Third World agriculture and fisheries, and prevents proper trade.”

That was written by someone who is at the coalface every day and knows what they are talking about. It is important that that point is reflected in this debate.

The hon. Member for Sefton Central (Bill Esterson) has asked me to comment on some of the points that were made about how this matter impacts on the Republic of Ireland. While you would show me great leniency, Mr Deputy Speaker, if I were to speak at length today on the Republic of Ireland and on what a future trade deal would look like, I think that, even though you like me considerably, you would probably rule me out of order. I will try to touch on the point. I recommend to all Members of the House that they go to the Library and get a copy of the Policy Exchange document that was published earlier this month. It was written by Ray Bassett, a former ambassador from the Republic of Ireland to the United Nations. The title is: “After Brexit: will Ireland be next to Exit?” It is a very important policy paper that sets out compelling reasons why the Republic of Ireland must follow the United Kingdom out of the EU. If it fails to do that, its trade will be ruined. We have something in common with Canada on that point. For example, Canada has great fishing waters, and it protects those fishing waters for its fishing fleet and fishing companies. In the past 48 to 72 hours, the fishing rights of the United Kingdom have been discussed at some length in the media.

Of course, the Republic of Ireland’s fishing waters are currently underfished, because the Republic of Ireland is able to encourage the rest of the EU to fish in our waters. Once we claim back our fishing waters, Mr Deputy Speaker, do you know what will happen? The rest of the EU will want to fish in Ireland’s fishing waters, putting great pressure on the Republic of Ireland and stealing its catch. It is for such reasons that it is essential that we understand the commercial reasons why it is important for Ireland to exit the EU. I think that I have probably pushed you just enough, Mr Deputy Speaker, with my comments on the Republic of Ireland. I wish that the shadow Front-Bench spokesman would encourage me again, perhaps by asking me another question on the issue, as I would certainly push the matter even further—then we might not get the red flag.

We must make it absolutely clear, as I said earlier, that agreements such as that which we are discussing today impact tangentially on the pattern of how we should do commerce in the future. The Canadian agreements and aspects are very important, because if that is how Canada will be treated by the EU after we leave, we need to take cognisance of what is in the Bill regarding the relationship that we will have with Canada.

In response to the points made by the hon. Member for Henley (John Howell), let me say that when the UK leaves and Albania and Serbia join—well, I almost feel like saying, “Good luck with that. It will be some club to be a part of,” but I think that would be unfair—those will, ultimately, be matters for what is left of the EU. By the time the accession rights are achieved, the EU will be a very different club from what it is now. When the UK leaves and, as I have predicted, Ireland leaves, although Serbia and Albania wish to join, the EU countries might at that point consider what is in their greater interests. The charges for membership of the EU will be immense. For example, since 2014 the Republic of Ireland has had to pay more than £1 billion to be a member of the EU. It previously paid nothing. If that is what Ireland will have to fork out, what will countries such as Serbia and Albania have to fork out under the new arrangements?

I leave those points for the House to consider and hope that the Minister can reflect on them when she sums up.

Oral Answers to Questions

Bill Esterson Excerpts

Tuesday 27th June 2017 Commons Chamber

[Greg Clark]

I am sure that my hon. Friend will be an assiduous contributor to the scrutiny of the repeal Bill. The approach is to transfer into UK law that which was part of EU law precisely so that this House can scrutinise and consider what should be continued.

[Bill Esterson (Sefton Central) (Lab)]

The Government said yesterday that EU citizens will be able to apply for what they called “settled status”, so that they can continue to live and work in the UK. Application processes can be time-consuming, not to mention complicated, expensive and off-putting, especially when this Government are involved. How can the Secretary of State guarantee that all EU nationals working in the UK will be allowed to stay not just in theory but in practice, to the benefit of the many businesses that rely on EU workers?

[Greg Clark]

I welcome the hon. Gentleman back to his place. In fact, I think that Labour’s whole Front-Bench team has been reappointed. It is nice to see loyalty rewarded. The hon. Gentleman is absolutely right, and I thought that he would welcome the Prime Minister’s very positive statement. It is important that the process is implemented with no bureaucracy so that people can apply with confidence.

draft Deregulation Act 2015 and small business, enterprise and employment act 2015 (Consequential Amendments) (Savings) regulations 2017

Bill Esterson Excerpts

Monday 27th March 2017 General Committees

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Flello.

The Minister has set out the provisions of the draft regulations concisely, but I wish to ask her to clarify a number of points. She mentioned, as do the explanatory notes, that the draft regulations will update the Administration of Insolvent Estates of Deceased Persons Order 1986 and the Insolvent Partnerships Order 1995. Will they update only those two measures or will they affect insolvency legislation more widely?

Some questions spring to mind about the creditors meeting. As the Minister said, creditors often do not attend creditors meetings. Will she set out the circumstances in which it is envisaged that a decision will be taken not to hold a creditors meeting, and on whose authority such a decision will be taken? There are reasons why creditors meetings are sometimes beneficial—it is not entirely out of the ordinary for creditors to feel that they would prefer to replace the nominated insolvency practitioner at those meetings—so it would be helpful to understand the circumstances exactly.

Will the Minister tell us the expected savings from the use of electronic communications and the anticipated increase in payments to creditors in the form of dividends? Is a review likely to be held of the success in delivering those savings and that increase in dividends once the regulations are in force? If so, in what way?

I agree that the proposals will save time and money. Using electronic processes makes perfect sense, although there are always questions about how creditors are guaranteed to receive communication electronically. What checks will be in place and what assurances can she give that all creditors will receive their correspondence in that way? What confirmation will be made that they are receiving electronic communications?

The Minister made the point that if a dividend is secured, all creditors will be notified, whether or not they have chosen to receive communications. Will that notification be made on paper, electronically, or by a combination of both methods? I look forward to her response.

[Margot James]

In response to the hon. Gentleman’s questions, physical meetings may be requested when 10% of the value of creditors have deemed that they would prefer to take decisions via correspondence and electronic communications. On the changes to how decisions are made, he asked what saving the Government think they can achieve by abolishing physical meetings. We estimate that the total benefit to creditors will be approximately £6 million or more each year from including the removal of the requirement to hold a final meeting as well as of the default physical meeting as a way of agreeing decisions.

To answer the hon. Gentleman’s first question, it is just the two regulations that we are discussing today. I am grateful to him for his questions, and I hope that we can agree that the regulations will bring important benefits. I said that it is just the two regulations that we are discussing; that covers legislation on the main insolvency elements relating to administration and the deceased and insolvent partnerships order.

[Bill Esterson]

I asked whether the Minister could give an example of the circumstances in which the creditors meeting would not be held. I am not entirely sure whether she answered or not; she might have done right at the start. Perhaps she would clarify that point for me.

[Margot James]

I hope that I understand the hon. Gentleman’s question correctly. The physical meetings will not be required when 10%, in terms of the value of the creditors, decree that it is acceptable to go ahead without physical meetings and to revert to electronic communication. I hope that I have understood him correctly in that regard, and I hope that we can agree that the regulations will bring benefits in updating the legislation to ensure that it is efficient and effective and delivers the best returns possible for those affected by insolvency. I commend the regulations to the Committee.

Question put and agreed to.

Intellectual Property (Unjustified Threats) Bill [Lords]

Bill Esterson Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 21st March 2017 Commons Chamber

[Bill Esterson (Sefton Central) (Lab)]

I beg to move, That the clause be read a Second time.

Intellectual property makes a significant contribution to the UK economy each year. In 2014, UK firms invested an estimated £133 billion in knowledge assets, compared with £121 billion in tangible assets. As the Intellectual Property Office notes, UK investment in intangible assets that are protected by intellectual property rose from £47 billion in 2000 to £70 billion in 2014, and is estimated to represent 4.2% of total GDP. What is more, the UK system of regulating intellectual property is considered to be one of the best: it was rated No. 3 by business in the 2016 Taylor Wessing global IP index in respect of obtaining, exploiting and enforcing the main types of intellectual property rights. It is clear that intellectual property is of great importance to the UK economy, so the impact of leaving the European Union on IP and the provisions in the Bill is vital to the economy. It is of great interest to businesses, which value certainty, and it is crucial to potential investors in businesses in the United Kingdom.

The Bill will apply to patents, trademarks and designs. The Minister stated in Committee, and in a written answer on 20 October last year, that the European Patent Office was established by international treaty and that our participation in its work will be unaffected by our leaving the EU. The suggestion is that patents will be relatively untouched by Brexit; it is to be hoped that the Minister’s confidence is not misplaced. Several IP rights that derive from EU regulations will no longer apply to the UK, and the impact of Brexit is far from clear at this stage. As the Chartered Institute of Patent Attorneys recently commented:

“The continued validity of these rights in the UK is uncertain. Transitional agreements may be negotiated to allow time for rights holders to convert these into national rights or to file separate national rights... The government has remained silent on whether or not it intends to implement the new Trade Mark Directive into UK domestic law.”

The Minister signalled in Committee the Government’s intention to ratify the unified patent court agreement by the end of April. The court will deal with disputes relating to European patents and help the business that the Bill seeks to assist by removing the threat of unjustified litigation—a point made by my hon. Friend the Member for Garston and Halewood (Maria Eagle) in Committee. Will we still be members of the court after we leave the EU? The court is part of the effort to reduce costs across jurisdictions and make it easier to do business. As we prepare to leave the EU, the last thing we need is additional costs on businesses, so clarity is needed about our membership of the court. The Minister said in Committee that decisions had not yet been taken, so will he provide an update and confirm that he understands just how important it is that we minimise costs across jurisdictions, including those relating to intellectual property rights? What is his view on our potential membership of the patent court after we leave the EU?

The CIPA said:

“For the UK to continue participating after Brexit, there would need to be a new international agreement with the participating Member States and the UK to provide compatibility with EU law... If the UK does not remain a member of the UPC…there will be a need for further transitional provisions to protect any rights acquired or cases in progress at the time the UK leaves. It is still unclear whether UK European Patent Attorneys will be able to represent parties in the different Divisions of the UPC after Brexit.”

It went on to say:

“CIPA has a strong preference for the UK to participate in the UP and UPC system, if a solid legal basis for this can be agreed.”

Given the UK’s leading position in patents and patent law, it makes sense to do all we can to maintain our position and to ensure that confidence in our position remains as high as possible. It is important that we avoid taking a step backwards on IP law and losing the potential benefits that the development of single European patent protection will bring. The economic and competitive advantages of such protection are clear enough. The alternative of having a separate UK system, with the likely need for rights holders to apply for UK and EU protection separately, will mean additional burdens for UK businesses and for our economy, compared with the UK remaining a central part of the European-wide patent system.

As my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) said in Committee, it is vital that the Minister takes all steps to ensure that patent law and IP law more generally do not take a retrograde step following Brexit. IP is how innovation is rewarded; it is fundamental to ensure our ability to deliver a high-pay economy and prosperity, and to Britain’s promise that the next generation is better off than the previous one. Since 2010, we have seen living standards fall while the economy as a whole has grown. The people of this country cannot afford to miss opportunities, including this one. The alternative of a race to the bottom, a low-wage economy and our competing as some kind of tax dodger’s paradise off the coast of continental Europe will not deliver better living standards.

Intellectual property is one of many ways in which we must build on our success as a country and not allow decline. How intellectual property rights are protected, and how they are seen to be protected during the Brexit negotiations, will be crucial to delivering and enhancing business and investor confidence and to getting the best possible outcome from the negotiations. The Prime Minister may not wish to give a running commentary, but she and her Ministers need to reassure businesses, their staff and the whole country that everything is being done to secure our future. That is why I tabled the new clause to call for the Government to review the impact of Brexit on the IP provisions in the Bill.

A report after a year would not only help to bring sovereignty back to Parliament—something we heard a great deal about during the referendum debates—but help UK businesses and foreign investors to understand the post-Brexit intellectual property world with respect to the provisions in the Bill. The protections being harmonised in the Bill are important to help to protect our businesses, ensure a fair market and encourage entrepreneurs and inventors, and especially to ensure opportunity for smaller businesses. Nevertheless, those businesses, entrepreneurs and inventors all want to know, as far as possible, what the arrangements and relationships with the EU will be like post-Brexit.

The law firm Charles Russell Speechlys says:

“Discussions are taking place regarding the post-Brexit options for IP. National IP rights are unlikely to be affected post-Brexit. Pan-European IP rights will be affected. Trade marks and designs are likely to be the IP rights most affected but it will impact on other IP rights as well.

On leaving the EU, the UK will no longer automatically be covered by EU trade marks. An orderly transitional period is expected with the potential to split existing EUTMs into UK national and EUTMs post-Brexit (subject to negotiation and relevant supporting legislation). Trade mark owners will need to reinstate lapsed UK marks which have been subsumed into EUTMs by seniority but it is not yet clear how that will work.”

--- Later in debate ---

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

This new clause would require the Secretary of State to issue a report on the impact of the Government’s plans for exiting the European Union on the provisions in the Bill within 12 months of it coming into force.

The Bill does not take forward any EU obligations. The IP unjustified threats provisions do not derive from EU law. They are “home grown” provisions that were first enacted for patents back in the 19th century. The important protections provided by the Bill will not in themselves be changed by Brexit. Businesses pushed for clarity and certainty about how they can contact others over IP disputes, and the Bill will deliver that. Our leaving the EU does not alter that. Of course some IP rights are EU-wide, and the Bill will apply properly to those rights. The threats regime will be consistent across all relevant rights that have effect in the UK.

Furthermore, the Bill will ensure that our UK threats regime works appropriately with the proposed unitary patent and unified patent court when they come into effect. The hon. Member for Sefton Central (Bill Esterson) asked about the UPC following our exit from the EU. The options for the UK’s intellectual property regime after our exit, including our relationship with the unified patent court, will be the subject of negotiation, and it would be wrong to set out unilateral positions in advance. None the less, our efforts will be focused on seeking the best deal possible in negotiations with our European partners, and we want that deal to reflect the kind of mature co-operative relationship that close friends and allies enjoy.

As long as we are members of the EU, the UK will continue to play a full and active role, and making sure the IP regime continues to function properly for EU-wide rights is an example. The UK’s involvement in the EU IP framework after exit is not a matter for the Bill; it will be part of the EU exit negotiations, which of course have not yet begun. It is likely that those negotiations will still be in progress at the point at which the new clause would require us to report. Publishing the suggested report would be unnecessary and could well undermine our ability to negotiate the best deal for Britain in this area.

The hon. Gentleman asked about EU-wide IP rights on Brexit. Of course we are already talking to businesses and to other stakeholders about this important issue. There will be time to address it fully and properly during exit negotiations. Naturally, we will want to see the best outcome and one that supports our innovative businesses. He asked also about EU trade marks and designs. We recognise that users will want clarity over the long-term coverage of those rights. We acknowledge the importance of involving users in the consideration of these issues, and we are working with stakeholders at the moment to gather views on how to address their concerns.

The hon. Gentleman asked on a number of occasions about the EU trademark reform package and the directive. On balance, we think that the reform package is a good one, with modernisations that will make the overall system easier and cheaper for businesses to use.

We are committed to getting the right deal for the UK and we will work with Parliament to ensure a smooth and successful exit. The new clause would not help us in any of this work; it is unnecessary and potentially harmful to the UK’s interests. For that reason, I ask the hon. Gentleman to withdraw the new clause.

[Bill Esterson]

I am glad that the Minister said that he was already having discussions with businesses; that is incredibly important. I urge him to make it clear very publicly, sooner rather than later, exactly what the nature of those discussions are. Businesses are already exceedingly worried about the consequences for intellectual property. I thank him for picking up the points that I made about the relationship between EU patent law and UK patent law. I think that he understands that a great deal of reassurance is needed. I do not agree that we would make life more difficult by having this requirement on Government. In fact, it is a sensible move. I would be surprised and very concerned if we did not see a degree of reporting back during negotiations on these and many other matters. None the less, he has put forward the Government’s view in response to the points that I have raised, so I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.



Clause 1

Patents

[Bill Esterson]

I beg to move amendment 1, page 2, line 15, after “do,” insert “or claims to do,”.

This amendment deals with people or companies who hold themselves out as the primary infringer: ie, they claim to be the manufacturer or importer of a product (and therefore can be written to freely) when, in fact, they are not. A definition is provided in amendment 3.

[Mr Speaker]

With this it will be convenient to discuss the following:

Amendment 2, page 2, line 19, at end insert—

“(4A) A threat of infringement proceedings is not actionable if the threat—

(a) is made to a person mentioned in subsection (4), and

(b) relates to—

(i) potential future acts of infringement, or

(ii) other acts of infringement

which are fundamentally similar to the current alleged act of infringement.”

This amendment would allow communications from the rights holder to the primary infringer to also refer to secondary infringing acts (by the primary infringer), without it constituting a threat.

Amendment 3, page 2, line 24, at end insert—

“(7) In subsection (4)(a) “claims to do an act” means the person makes an explicit claim in public that they are the manufacturer or importer of the product or process.”

This amendment provides a definition of “claims to do” in amendment 1.

[Bill Esterson]

Amendments 1 and 3 are related to primary infringers and those who claim “to do”. Amendment 1 addresses the concern about the impact on those who claim to make a product and the potential for action to be taken against them. Amendment 3 defines “claims to do”.

We are dealing here with communication and threats. As the Bill stands, the onus is on a rights holder not to communicate with a party that claims to be a primary infringer of rights. The example that springs to mind is that of an own-label brand in a supermarket. Under the Bill, a manufacturer who believes that a product contravenes their rights may not communicate with the supermarket unless they are confident that there is no other way of finding out who the manufacturer really is. The problem is that smaller manufacturers wanting to challenge the bigger players may not have the expertise or access to expertise needed to comply with the provisions of the Bill. They do not have the staff, time or money to engage legal services or to search for the true identity of the manufacturer. The Minister said in Committee that if action were taken against a rights holder, they would be able to defend themselves in court. Now, that is entirely accurate in legal terms, but the problem is that smaller organisations lack the resources to be able to do so.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

As I think I said.

[Bill Esterson]

As my hon. Friend may well have said in Committee.

The problem is one of imbalance. Our court system necessarily favours those who have the deepest pockets and the greatest resources, and that does not mean smaller businesses. Will smaller businesses risk winning or losing in court? Will they have the money to defend themselves against an action, or will they think it is worth defending their intellectual property in the first place? It will be for the courts to decide whether a rights holder could have found out who the primary infringer was. For smaller businesses, it could well be a tough choice as to whether they believe the court will back them when they say in court that they did not realise that they should not have contacted the apparent infringer.

If not through what I am proposing, and what my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) proposed in Committee, how does the Minister propose to ensure that there is a level playing field between protecting the rights holder, especially the smaller rights holder, and preventing unjustified threats, especially where the rights holder is the smaller party? How does he propose to guarantee smaller businesses the ability to operate on a level playing field? To be entirely fair to the Minister, I completely understand that that is the purpose of the whole Bill. My thanks go to the Law Commission for its work in delivering to such an objective. The Bill very much has in mind the need to balance protection and encouragement for innovators, entrepreneurs and investors with the need to ensure a fair market and to prevent unfair and exploitative competition. However, there appears to be a degree of ongoing potential for imbalance in the legislation regarding those who claim to be the manufacturer or the primary infringer, and the Minister’s answers in Committee did not go far enough to guarantee that smaller businesses will be protected.

Amendment 2 would address some further concerns of smaller businesses that lack the resources for legal advice and that may fall foul of the Bill’s narrow remit. The amendment addresses the problems where a rights holder challenges not just the primary infringement but secondary acts of infringement. The rights holder may wish to prevent future infringement or to comment on related infringements of a similar nature. The amendment would minimise the fallout from inadvertent infringements. The amendment would not penalise a rights holder for mentioning secondary infringements when such communication was about potential future infringements or similar current infringements. The Chartered Institute of Patent Attorneys raised the concern that future infringements are excluded as the Bill is now drafted.

It seems reasonable to ask an infringer to stop now and in the future, and not to carry out similar infringements, so amendment 2 also deals with the concern of smaller businesses that lack the resources or expertise to ensure that all their communications are strictly compliant with the Bill’s provisions. I agree with the Minister that rights holders ideally should get their communications right, and that is a large part of the thrust of the Bill, but my concern is that the lack of access to legal expertise for smaller businesses could be a real problem.

--- Later in debate ---

[Joseph Johnson]

One of the key purposes of the Bill is to simplify an important but complex area of intellectual property law, making it more accessible and easier to use. One way in which it does this is by setting out a clear statement of those acts that a rights holder can safely refer to in a communication, and that will not trigger an unjustified threats action. This helps to encourage rights holders to communicate with the trade source of an alleged infringement. It would include those who manufacture or import patented products or use patented processes, for example. Such acts are known as primary infringements.

Amendments 1 and 3 seek to make it allowable to approach someone who explicitly claims to be a primary infringer. I am not convinced that there is problem that needs to be solved, but, in any event, there are two key points. First, under the reforms as they stand, a rights holder can already communicate with potential infringers of all types, including those identified by amendments 1 and 3. The Bill provides clear guidance on how this can be done. The provisions therefore make it easier for parties, including small and medium-sized enterprises, to communicate and resolve issues without the need for litigation. Secondly, it is perfectly allowable to make a threat to anyone so long as that threat refers only to manufacturing and importing, or other primary acts. Someone making such a threat would not be at risk of being sued, even if the recipient was falsely claiming to do those acts. For these reasons, as well as the additional complexity introduced, I do not accept that amendments 1 and 3 are appropriate.

Moving on to amendment 2, I agree it is important that issues of infringement can be raised early, before real commercial damage is done. For that reason, the Bill already allows threats to be made in relation to future or intended acts of primary infringement, so amendment 2 adds nothing in that regard. Furthermore, the Bill already allows the rights holder to refer to certain secondary acts when communicating with an alleged primary infringer. When someone is manufacturing an allegedly infringing product, the rights holder can also discuss the retailing of that same product. Users wanted this, as it is pragmatic and helps to save time and money, but it would not be right to extend this further and allow threats to be made to that same manufacturer about the retail or stocking of other products that they did not make themselves. That could damage businesses that retail products acquired from a legitimate manufacturer, and would disrupt the ability of that legitimate manufacturer to operate in the marketplace—an outcome that the threats provisions exist to prevent.

Finally, it is highly uncertain for businesses what would be considered to be “fundamentally similar” acts of infringement, as set out in the amendment, and litigation on the meaning would no doubt ensue. If the intention is to capture only similar products, I do not think that is achieved.

These amendments would introduce additional and unwelcome complexity. They would blur the line between who is protected from threats and who can safely be approached. Rather than benefiting rights holders, this could instead make getting legal advice more difficult and costly. For those reasons, I ask the hon. Gentleman to withdraw his amendments.

[Bill Esterson]

We appear to have rehearsed, more or less word for word, what happened in Committee. I am disappointed by the Minister’s responses, because he does not appear to have picked up on the concern about the imbalance between larger and smaller businesses—a fundamental element of what we think is missing from the Bill as drafted. I would like greater clarity from him, but perhaps that will come as the Bill is implemented. I urge the Government to consider the impact on smaller businesses. On own label, apparently once the rights holder has found out that an own label product is not made by a supermarket, such action would have to cease or it would be covered by the legislation. That was certainly our intention in the amendment.

I hope that our points about the need to protect smaller businesses have been well made. I thank the Minister for his responses, and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Third Reading

--- Later in debate ---

[Bill Esterson]

I join the Minister in saying that the provisions of this Bill are, overall, exactly what is needed to create a level playing field and support and encouragement for innovation and creativity. Those who develop ideas need to have their ideas protected and supported, and bringing together the different elements of intellectual property legislation in the way that this Bill does is very much the right way to go. I mentioned on Report some of the figures and the benefits derived from the fact that the UK has one of the finest IP systems in the world. We must do all in our power to ensure that that continues because it is one of the reasons that this country is an attractive place for investment, and that is one of the reasons we must be optimistic about our future, despite the many challenges that we currently face, particularly the uncertainty around Brexit.

However, we have raised concerns throughout this process. It is a shame that there was not more in the Bill about alternative dispute resolution. The opportunity to tighten things up in relation to smaller businesses would have been welcome, but that has not happened. We need to reward innovation and entrepreneurs, and to balance that against the creation of a fair market and a successful economy. The Minister mentioned the industrial strategy Green Paper. It is critical to the success of the industrial strategy that our intellectual property system functions as well as possible. I hesitate to say that I look forward to how this will develop during the Brexit negotiations, but we certainly need to work extremely hard to make sure that the success of our IP system is retained during those negotiations because of the very close linkage between IP in this country and across the European Union. The Minister mentioned the protection for legal advisers. That is a welcome step forward, as is the clarity and consistency achieved by this Bill. We certainly support its core principles and the overall aims and objectives that have been achieved.

I add my thanks to the Law Commission, to those who have worked on the Bill, and to those who served on the Bill Committee. I hope that the Bill will achieve what is intended for it.

Question put and agreed to.

Bill accordingly read the Third time and passed, without amendment.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

I must say that that is the most efficient debate on a Bill I have ever seen in this House, and I think that somebody somewhere ought to be commended for it.

Oral Answers to Questions

Bill Esterson Excerpts

Tuesday 14th March 2017 Commons Chamber

[Margot James]

As my hon. Friend knows, I am a great lover of small businesses and entrepreneurs, and I think that I can speak for the rest of the Government in that regard. He knows that the EU governs time limits and caps on the EIS at the moment. What happens following the Brexit negotiations will be a matter for the Treasury.

[Bill Esterson (Sefton Central) (Lab)]

I do not think that small businesses are really feeling the love after last week’s Budget. A report by the Federation of Small Businesses entitled “37 problems and tax is one” states that the

“proposed National Insurance tax grab on this group is an absolute kick in the teeth, just at a time when we need to create more entrepreneurs, not fewer.”

The Minister says that the Government consult the Federation of Small Businesses, but perhaps they might listen to it in future and do what it suggests as well.

[Margot James]

The small business world must feel more love from this Government than it would from Labour, were it to take our place in government.

On the hon. Gentleman’s specific question, I know that the FSB lobbied hard on a number of points, including national insurance, business rates and the quarterly reporting of tax accounts. On the latter two, it was very pleased with what the Chancellor provided. With regard to national insurance, the hon. Gentleman knows that more than 60% of people who are self-employed will actually benefit from the changes mooted by the Chancellor last week.

Draft Reporting on Payment Practices and Performance Regulations 2017 Draft Limited Liability Partnerships (reporting on Payment Practices and Performance) Regulations 2017

Bill Esterson Excerpts

Thursday 9th March 2017 General Committees

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Turner. The Minister quite rightly said that it is important that we do all we can to support business in this country, and in particular smaller businesses. That is exactly what improving payment practices should achieve. There is, of course, a big irony here, the day after the Budget, when many people who run small firms and are self-employed are scratching their heads, comparing the Prime Minister’s previous comments about the UK being the best place to start and grow a business with the broken promise on not increasing national insurance contributions.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

On that point, it would be very helpful if the hon. Gentleman could inform us of the Labour party’s policy.

[Bill Esterson]

The Conservatives are in government. It is a shame that they promised in their manifesto not to put up national insurance contributions and then went and did exactly that.

We have better news today. As the Minister rightly said, according to the Bacs report, £26 billion is owed in late payments. She mentioned the importance of attacking that, which the regulations will contribute to. She also mentioned the potential cost to business of the regulations of £17.7 million. The latest Bacs report cited a figure of £2.5 billion a year for the cost to business of late payments, and said that 50,000 business deaths will result if we do not do something about it. She quite rightly said that the investment of £17.7 million will reap an extremely positive return to the UK economy and businesses. That is why we broadly support the proposals and will not oppose the regulations.

There has been a delay in bringing forward the regulations, but I am glad they are now here. This is not a silver bullet; it is one of a number of tools needed to change a UK business culture where it has been seen as acceptable to pay small firms late. There has been systematic poor practice in the day-to-day business approach of some larger firms, which use it for their own credit management and to their own benefit, to the detriment of their smaller suppliers.

We need two things to address the imbalance of power in supply chains. First, the regulations must be robustly enforced, with substantial fines and consistent sanctions against businesses that pay late and/or fail to report fully. Secondly, we need the published reports to be accessible and easily searchable, which would follow through on the “name and shame” element behind the regulations, as well as allowing small businesses to review potential clients’ payment practices.

We also want more robust, wide-ranging action on late payments that goes far beyond the encouragement or very veiled threats to late-paying large firms that have typified the approach of Conservative Governments —not just this one, but in previous years. That includes having the right person appointed to the role of Small Business Commissioner, which the Minister mentioned—someone with a background in small business and an expertise in the supplier side of business contracts. The Government also need to push forward with the corporate governance Green Paper, which has been discussed, ensuring that small business suppliers are represented at board level in large firms. That is a crucial element in making sure that the kind of level playing field hinted at can be achieved.

Who and what do the regulations affect? Companies and partnerships fall within scope of the two sets of regulations if they are medium-sized or above, which means having more than 250 employees. Contracts fall within scope if they are for goods, services or intangible assets—although I think I am right in saying that they do not include financial services—and if they are covered by the law of any part of the United Kingdom, unless they are specifically excluded from that by both parties. What happens if a firm falls below or goes above the threshold of 250 employees during the reporting period? Will that firm have to report on their payment practices for the whole or part of the period?

The regulations mean that qualifying companies and partnerships will have to report descriptions of their standard payment terms and of their dispute resolution process, where there is a payment issue with a supplier. What will happen in the event of some of the sharp practices that have led us to need these regulations—for example, where a company queries an invoice on the last day before payment is due and then the clock starts to run again, which is a well-known tactic used by some larger companies? What will the impact of such challenges be? How will the regulations affect the reporting in that kind of example? How will the reporting be policed? Without proper teeth, who is to say whether the reporting by companies is accurate? Will it be policed through the audit process, and how detailed will that policing be?

The regulations also require statements about payment practices and policies, including the availability of electronic invoicing, supply chain finance and whether businesses are members of a payment code of conduct—the Minister mentioned the prompt payment code, which I shall return to later—and statistics about performance for each reporting period, including the proportion of payments due in the reporting period that were not paid within the contractual payment period. Again, what is the mechanism for ascertaining whether that is happening? There will also be statements about the proportion of payments made in the reporting period that were made within the timeframes of one to 30 days late, 31 to 60 days late and more than 60 days late. I will come back to the point about more than 60 days, as there is a potential inconsistency with existing regulations.

Another reporting requirement is the average number of days taken to make payments, which is calculated by adding the number of days it took to make all the relevant payments and dividing it by the number of payments. Successive Governments have tried and failed to tackle the problem. Various approaches have been tried, from praising good payment practices, creating intra-industry codes, setting up a Small Business Commissioner and introducing the innovation of a right to interest on late-paid bills. The latest initiative is to require large firms to disclose their payment practice and performance.

Conservative Governments in the 1990s opted for what was described as moral encouragement—naming and shaming—and shied away from more concrete steps, such as statutory rights to interest on unpaid bills. In the 1990s, businesses were able to claim interest only if a term to that effect was included in the contract or if the courts decided to award interest in their favour in the course of the recovery proceedings. When the Labour Government came to power in 1997, they introduced the Late Payment of Commercial Debts (Interest) Act 1998 to give companies legal remedies beyond those of the normal commercial courts. EU legislation followed that approach and extended creditors’ rights further. However, none of those changes, whether voluntary or on a statutory footing, changed the tide on late payments. Will the measures that are being finalised today change the situation?

In 1993, the Forum of Private Business estimated that 89% of small and medium-sized businesses were paid late. On average, they were paid 51 days after the due date. Twenty three years later, the Federation of Small Business, in “Time to Act: the economic impact of poor payment practice”, reported that 61% of small businesses are paid late, with an average payment delay of six weeks. Moreover, in 2016 the Federation of Small Business found that 30% of payments are typically late. That number was up from 2011, when it was only 28%. Hon. Members who are paying attention will have noticed that some of those figures say slightly different things. That is because different organisations use different data and baselines.

The 2011 EU directive on combating late payment in commercial transactions already states that the period for payment in a business-to-business contract should never exceed 60 calendar days—I said I would come back to that point. In these regulations, the Government are asking businesses and partnerships to report what percentage of their payments are made after 60 days. Is it not inconsistent merely to ask businesses about their payment practice after 60 days when the legal framework already says it is illegal to go beyond that 60-day period? It does not sound like a very good sign to me.

Another example of where more needs to be done is the prompt payment code. Although the total number of signatories is 1,936, according to the Government website, very few of them are medium-sized or large private sector firms. When NHS trusts, councils, Government Departments and so on are taken out, there are just 184 signatories with a turnover of more than £500 million a year, a further 84 with a turnover of between £100 million and £500 million year, and 110 with a turnover of between £25 million and £100 million. That means that only 378 firms with a turnover of more than £25 million have signed up to the prompt payment code. According to figures from the Department for Business, Energy and Industrial Strategy, there are 7,000 large firms in the United Kingdom. How will the regulations help us to move from the 378 that have signed up to the prompt payment code to all 7,000 carrying out the practices in the regulations, which is what we all want to see?

Is the duty to change what we need? While we are supportive of any measures to tackle late payment, in particular requiring larger firms to lay out their payment practices, all this prompts the question whether we are throwing another policy at a problem that has persistently withstood the “moral encouragement” approach. The duty in the regulations has the potential to do a lot more than that, but only if specific actions are taken. The reports will be published, to use the Minister’s words, on a Government web-based service, and they are due to be published within 30 days after the last day of the reporting period, which I assume means the tax-reporting period.

How will simply saying, “It will be published online,” help the smaller companies, which need to understand their potential customers’ payment practices before deciding whether to contract with them? The web-based service needs to be easily searchable. It needs to show how different companies compare with each other and to show what the industry standard is. For small businesses to benefit from the regulations and for us to create the kind of balance between large and small firms that the Minister rightly referred to, the system needs to operate effectively. How the web-based service is run will be crucial, so can she say more about how it will work? If it works properly, we could see a step change in the way that smaller firms are treated by their larger customers.

This is not just fine detail. The danger, as we have seen, is that attempted actions on late payment amount to just moral grandstanding, rather than creating effective tools to tackle this scourge, which, as the Minister and I have both said, delays payments amounting to £26 billion at any one time. The regulations require companies to provide a statement on whether their payment practices and policies allow them to deduct money from payments as a charge to a supplier to remain on the qualifying company’s list of suppliers or potential suppliers. That is clearly a step forward, but there is another problem, which has not been addressed in these regulations, namely the ability of companies to award themselves a discount for early payment. That has been excluded from the regulations, and I will come on to what the Government response to the consultation said on that point.

The courts have a fairly broad take on what standard payment terms are, and obviously they will be the terms used in the vast majority of contracts. It would be for the company to prove in dispute that tweaks such as discounts are standard and known to all their contracting partners. I would be surprised if deductions for paying on time were considered to be so standard as to be not worth recording, but we can be reasonably certain that where there is wooliness, some of those most likely to cut corners will do just that. If we are going down the route of closing off loopholes, as the stipulation on deductions for remaining on a supplier’s list suggests, we ought to go the full way and explicitly include deductions that allow companies to pay less for paying early.

The draft regulations were going to include a requirement to report on interest owed for late payments. However, that requirement has been dropped. The Government response to the consultation says:

“Several issues emerged through further engagement with businesses. Feedback suggested that most businesses do not routinely record how much late payment interest they may be liable for, and would therefore require costly upgrades to software in order to report the total liability. Linked to this is the fact that a claim for interest under the Late Payment Act may be brought up to six years later. Businesses felt that requiring reporting to cover the previous six years would be particularly difficult because the data may not have been recorded in a way that allowed extraction. The costs associated could be substantial and could result in a figure that would be difficult for users of the data to interpret, as it would cover a different time period to other metrics which are limited to the six month reporting period.

We believe that businesses should focus their efforts on not incurring interest by paying on time, rather than calculating potential interest. This will be kept under review. We will also take into account the lessons that the introduction of reporting on interest liable in the public sector can teach us, once it has been introduced in April 2017.”

Perhaps the Minister will give us some more information on what is meant by “kept under review”.

The business response to the consultation was, “We don’t record that”, but that is a pretty poor excuse. Previously we have made the case, including during the Committee stage of what became the Small Business, Enterprise and Employment Act 2015, that interest should be applied automatically to late payments, because it is too onerous for small businesses to go after much bigger clients themselves. First, they do not have the internal resources to do so or to take legal action. Secondly, and probably more to the point, such action could damage a major contract, which might represent the majority of the supplier’s revenue. That has always been one of the problems, but the commercial reality is that a supplier challenging its big customers runs the risk of losing them for future business. That is one of the key challenges in dealing with the problem.

The Government response, quoting business submissions to the consultation, drives that point home. Businesses do not record such matters and they do not have the software to manage interest on late payments, because the threat of a small supplier slapping interest on their late payments is so remote that there is no incentive for them to do so. Perhaps the Government should consider such an incentive. After all, records have to be kept for seven years for audit purposes—I think it is 10 years for plcs; the Minister can correct me if I am wrong—so that kind of recording would sit naturally alongside existing requirements to record account information.

The good thing about the draft regulations is that they start to recognise that, because of the deep imbalance of power in supply chains, we cannot simply leave the problem to suppliers to fix. Obviously, automatically applying interest to late payments would be preferable, but a decent first step would be to require the recording and reporting of interest owed. That would serve as a wake-up call for large firms about how much they might find themselves out of pocket because of their behaviour, and as an easy way for suppliers to see how much they could collectively be entitled to, in particular from persistent late payers.

We broadly support the aims of the draft regulations. I have posed a number of questions. My sense is that this is the start of the process and not the end, and that there is room for improvement, adaptation and addition to the regulations, not least when the Small Business Commissioner is in post. Will the Minister tell us when that will be? I look forward to her response.