Academy Status

Debate between Bill Esterson and Lord Cryer

Thursday 31st October 2013 Commons Chamber

[John Cryer]

I have no hesitation in agreeing with the hon. Gentleman about that, and I was about to praise him for his work in supporting the campaign for the school to remain a maintained school. A number of children from his constituency are at the school and we have worked together successfully on a number of issues in our area, of which this is the latest. I have no hesitation in praising Redbridge council for doing an excellent job. As I said, it has managed to invest £110,000 in the fabric of the school. That is pretty unusual given the scarcity of resources at the moment, yet the council managed it, and the local councillors deserve praise as well. I also thank the Department for Education.

There are, however, issues relating to the processes that lead to academisation—to use a fairly modern sort of phrase. Before I raise those with the Minister, let me make it clear that I am not making a party political argument. I was not a fan of academies when the Labour Government were in power—in fact, I was not a fan of quite a few things they did. I have not checked this, but a while ago I was reliably informed that I voted against my own side 84 times when we were in government. That must be some sort of record and it goes to show that I am not above having a crack at my own side if I think it necessary.

It is widely agreed that two things contribute to improvements in schools—good leadership and good teaching—but neither necessarily arises out of academy status. I am sure there are academies with good leadership and good teaching, but there are also state maintained schools that have both those things. Serious concerns have been highlighted in various media reports about the governance and accountability in academy schools and free schools, although we are focusing on academies.

We have seen stories in the press about chains of academies that are starting to form and which have been accused of moving investment from the schools to other things. Their chief executives are earning very high, perhaps inflated, salaries, and large sums are spent on hospitality and junkets. The Select Committee on Education is yet to look at the record of academies. I am sure it will find that there are good ones, but also that there are question marks over accountability and democratic processes, which are not in place.

The process by which schools become academies raises questions for the Department for Education. There are, for instance, conflicts of interest. On 20 December last year, the BBC revealed that at least four advisers contracted to work on the sponsored academies programme by the Department for Education are also Ofsted inspectors, which I would say was a conflict of interest. There are also a number who, according to the same report, have financial interests with academies and free schools but also work for the Department—again, there are questions to be answered.

On 13 February The Independent reported that the Department was busy offering money—in other words, inducements—to schools, which seems to have happened mainly in the north-west. It was reported that 32 schools in Lancashire were offered sums of £40,000, or slightly less, for that purpose. They were told, “If you become an academy, you will receive a cash injection of £40,000.”

[Bill Esterson (Sefton Central) (Lab)]

I am glad my hon. Friend has mentioned what is going on in the north-west, because there has been a lot of concern in schools in Lancashire, Merseyside and elsewhere about the approaches made by brokers—not just financial inducements, but a lot of pressure put on to a school to convert to academy status. Does my hon. Friend agree that one reason there is so much opposition to these conversions is the concern among parents, and others, about the use of unqualified teachers? That has been allowed in academies since July last year.

[John Cryer]

We had a debate earlier this week about the use of unqualified teachers. My view is that teachers should be appropriately qualified, and there is a question about that. Parents also have serious concerns about admissions. Once the local education authority is taken out of admissions, who co-ordinates that? Will there be an element of anarchy because no central body is controlling admissions? In other words, will it be a free-for-all?

On 11 February, The Guardian reported a claim by the National Association of Head Teachers that academy brokers—that phrase is new to me—are given targets by the Department for Education on the number of the schools they must convert. One question I wanted to ask the Minister is whether those targets exists. Are academy brokers told, “You have to convert so many schools by such a point in future”? The same story recorded one head who claimed she had gone to a meeting and been told she was not allowed to leave until she had made a decision on the future of her school. Clearly, that is an unacceptable way to treat anybody, including a head teacher.

There are also examples of head teachers and governors having to concentrate on demands placed on them by the Department rather than concentrating on improving the school. I am thinking of schools that have problems—failing schools in special measures or schools that are given an Ofsted verdict of requiring improvement. They might find that their time is taken up engaging with the Department in discussions on the future status of the school rather than engaging in improving the school.

I have seen a number of Ofsted reports that make it clear that that is happening. For example, one report—I cannot mention the local authority or the school because it is in another constituency, and mentioning it would be a contravention of parliamentary convention—states:

“Another significant barrier to improvement has been the amount of time the headteacher has been involved in the discussions about transferring to an academy…Lengthy and time-consuming meetings with parents, unions, staff and external agencies have taken leaders’ and governors’ focus away from school improvement”.

I have a feeling that, over the next few years, we will see in the media stories of financial mismanagement arising from a lack of accountability, checks and balances, and democracy in the governance of academies and free schools. A parallel can be drawn with the situation when the Government introduced co-operation for further education colleges in 1992. Some of the colleges were fine and worked perfectly well but, because of the lack of accountability, a series of scandals followed—they were documented pretty closely by a number of publications—in which some principals, because they were given a free hand, abused their position. They got up to all sorts of things, financial and otherwise, that were deeply questionable.

To conclude, I have a number of questions for the Minister. I should like him to answer them, but if he does not have answers to hand, I should like him to write to me with the information. Are any contractors who are paid by the Department also Ofsted inspectors? Is anybody working in any way for the Department who has a financial interest in academies and/or free schools? Are academy brokers required by law to abide by the civil service code of conduct? The answer to that last question was given some time ago in another Adjournment debate, and it seemed to be that they are required to abide by the code of conduct. However, in a later Question Time, the Secretary of State equivocated and did not say whether they must abide by the code of conduct or not.

I asked whether brokers are given targets for converting schools to academy status. Is it legitimate for schools to ask academy brokers to declare any conflicts of interest at the outset of their engagement? In other words, would it be legitimate, at the first meeting, for the schools to say, “Is there any conflict of interest you would like to bring to our attention or of which we should be aware?”

As I understand it, when the Academies Commission reported in January 2013, it found that there was no evidence that academies performed significantly better than maintained schools. Is that so? Will the Minister confirm that TUPE rights apply to all staff who are transferred from maintained schools to academies?

I thank the Minister for replying to the debate. He has drawn a bit of a short straw by getting the Adjournment debate on a Thursday afternoon. By the way, it appears that the massed ranks of Parliament have turned out for it, compared with previous Adjournment debates I have introduced. That shows what an important issue this is. I have been to Adjournment debates on Thursdays with the Minister and one Whip, and no one else. Today, there is a magnificent turnout on both sides of the House. I pay tribute to the hon. Members who are here and the Minister.

Payroll Companies

Debate between Bill Esterson and Lord Cryer

Wednesday 16th January 2013 Westminster Hall

[John Cryer (Leyton and Wanstead) (Lab)]

It is a pleasure to speak under your chairmanship, Mr Hollobone. I thank Mr Speaker for allowing this debate to go ahead. It essentially comes down to a simple issue—the division between people who are employed and people who are self-employed. That division traditionally was quite firm; there was a definite line between the two, but in recent years it has become blurred. Certain disreputable employers have had a very strong interest in blurring that line, on the basis that they can divest themselves of responsibilities if they transfer their work force into self-employment. For instance, they do not have to pay employers’ national insurance, holiday pay, sick pay and redundancy pay. They do not have to pay into a pension scheme. Also, the workers are relieved of many if not all of the rights that people have at work.

What we have seen in the recent past—this is a comparatively recent development—is the advent of what are now called payroll companies. Those companies will say to employers, “You give us the responsibility for your payroll and the responsibility for the relationship with the work force, and we will make sure that you don’t have to pay tax, national insurance”—and all the other things that I have mentioned. In some cases, they also say, “Do a deal with us and we’ll get Her Majesty’s Revenue and Customs off your back for good.” I will say more about that later.

Payroll companies seem to be active in all industries, and trade unions and other bodies have long raised objections to their activities. However, the building union UCATT—the Union of Construction, Allied Trades and Technicians—recently commissioned a report by Jamie Elliott, a freelance investigative journalist, which has brought some extremely interesting and worrying developments to light. To launch the investigation, UCATT set up a fake building company called Fairbrother Builders. Jamie Elliott then approached a number of payroll companies. The biggest of these was Hudson Contract.

I should point out that the report makes it very clear that the majority of the payroll companies agreed to help to shift workers from being employed to what I would regard as bogus self-employment. Some did not, but the majority did. The biggest one, and the biggest one in the country, is called Hudson Contract. It made no attempt to conceal what it wanted to offer. It wrote in an introductory letter to Fairbrother Builders:

“We can save you money, 20% of your labour costs, by reclassifying PAYE staff, paying them through CIS.”

For hon. Members who do not know what the CIS is, it is the self-employed scheme in the construction industry; it stands for Construction Industry Scheme. The letter continued:

“Self Employed operatives, paid under CIS deduction through Hudson are not entitled to holiday pay, redundancy or notice. We are helping companies to move their PAYE labour over to CIS…Last year this saved our clients over £25M in Employers NIC, placing tax and employment law liabilities with us.”

That seems pretty disreputable to me, but what then happens, if the employer decides to go down the route of using a payroll company to transfer the work force into self-employment, is that the work force are asked to sign a contract with the payroll company. That is often sweetened slightly by a small rise in pay, but that will never compensate for all the other benefits and rights at work that in the meantime have been lost. It is particularly the pension rights that spring to mind, because pensions are so crucial in all industries, but particularly in the construction industry.

Once the contract is signed, the former employee no longer has a relationship with the original company but only with the payroll company. But of course on the ground, in the workplace, the payroll company has absolutely nothing to do with the direction of operations —in this case, in construction. The client company—by that I mean the building firm—issues directions and engages with the work force, who in all practical ways remain employed but technically are not. That is a perverse situation. The contract used by Hudson states that the worker

“has no contract of any type whatsoever with the client”

and

“he neither has nor shall make any contractual claim of any type against the client”.

Yet the contract also makes it clear that the new relationship between the freelance operative—I am using its words—and the client has little to do with the way that work is agreed on the ground. In practice, it has nothing to do with the way the work is carried out and agreed on the ground. The contract continues:

“The terms upon which that labour shall be supplied shall be negotiated directly between the freelance operative and the client...upon the conclusion of those negotiations, Hudson will step into the shoes of the client and contract with the freelance operative on the terms negotiated.”

Reading that, I have just noticed that Hudson do not know the difference between a verb and a noun, but that is by the by.

The Hudson website also makes very bold claims as to Her Majesty’s Revenue and Customs:

“Say goodbye to HMRC status issues and employment tribunal challenges.”

It is a bold statement, but to a large extent, Hudson is justified in making that claim. HMRC challenged Hudson in 2007—when I say challenge, I mean a legal challenge—and took the case to the High Court. HMRC argued that, despite what the contract stated, there was an implied relationship between the construction company and the freelance operative because of the reality of the relationship between the company and the operative, which is denied by the contract and the services offered by Hudson and other such companies. It makes perfect sense; there is an employer, which employs people to do a certain job, and that job and that relationship do not change, and yet people are told, “You are now self-employed. Despite the fact that you work for the same people and despite the fact that you do the same job, you are now technically self-employed.”

Incredibly, the High Court rejected the argument, and on top of that rejection, the past three years have seen the number of employer compliance reviews conducted by HMRC fall dramatically. The cumulative effect is that firms in all industries, not only construction—this has spread to other industries as well—have little to fear from Government agencies, because HMRC is powerless to do anything.

[Bill Esterson (Sefton Central) (Lab)]

I congratulate my hon. Friend on securing an important debate for all Members’ constituents affected by the worrying trend of payroll companies in many sectors. Does he agree that it is about time the Government looked at the practice, certainly to benefit the workers who are losing out, but also because it affects workers’ confidence to spend money and therefore the wider economy? That is why the Government need to look at this in detail.

[John Cryer]

I thank my hon. Friend for that intervention. He makes an important point. Creating economic uncertainty—and there is enough of that about anyway—and payroll companies spreading it around by making people self-employed so that they do not have rights at work or confidence in the future, is hardly an incentive to spend money. If people are not spending money, there will be even less economic confidence or confidence in other areas.