Subsidy Control Bill (Eighth sitting)

Debate between Bill Esterson and Michael Tomlinson

Thursday 4th November 2021 Public Bill Committees

[The Lord Commissioner of Her Majesty’s Treasury (Michael Tomlinson)]

Very good.

[Bill Esterson]

I say to the hon. Member who spoke from a sedentary position that it was not very good. As we have said throughout the—

[Michael Tomlinson]

For Mid Dorset and North Poole.

[Bill Esterson]

I think he is trying to intervene. I would not take an intervention from him anyway, because he does not wear a mask.

I rise to reiterate our concern about the lack of transparency throughout the Bill and how subsidies cannot be called in when they are under schemes. That is a continuous thread. The real concern is that potential abuses can be missed as a result of that approach. The clause exempts subsidies under schemes from a review, from post-award referrals and from voluntary referrals. We agree that schemes provide a quicker and easier route to provide subsidies, but that should not mean that subsidies awarded under those schemes should escape due scrutiny. If there is not a problem with a subsidy, there is nothing to be concerned about, but if there is a problem with a subsidy awarded under a scheme, there needs to be a mechanism, and I hope the Minister will explain what that mechanism will be, because I do not think we have heard during our deliberations about the scrutiny of potential problems with subsidies awarded under schemes.

There is the potential for a back door of free, unscrutinised public cash being opened up. We have seen problems throughout the pandemic where scrutiny was removed. I will not go over them in too much detail. We have heard about them already, such as the Health Secretary’s pub landlord, advisers to the Board of Trade, and the problems of Randox and the now former right hon. Member for North Shropshire (Mr Paterson)—I understand, hot off the press, that he has resigned. Some £3.5 billion-worth of covid-19 contracts were awarded to firms with links to the Conservative party, according to Government procurement data. That is an example of why we need adequate scrutiny.

Subsidy Control Bill (Fourth sitting)

Debate between Bill Esterson and Michael Tomlinson

Thursday 28th October 2021 Public Bill Committees

[Michael Tomlinson]

It was a great effort.

[Bill Esterson]

I think I understood my hon. Friend’s excellent intervention. She was correcting me: actually, one can get a ticket for £25 from London to Glasgow, not £45.

Ending Seasonal Changes of Time (Reasoned Opinion)

Debate between Bill Esterson and Michael Tomlinson

Monday 12th November 2018 General Committees

[Bill Esterson]

Well, what an interesting set of sub-questions. We made some progress and got answers in the end; I thank the Minister for that. I will offer just a few additional thoughts.

I was surprised that the Minister said that the Government had not carried out an impact assessment. I gently suggest that they might need to do so because, on the basis of her other answers, we do not appear to be in a position to stop the Commission issuing the directive if it decides to go ahead. That might be helpful to the whole country, whether on the island of Ireland or not.

Opposition Members were trying to be helpful with some of our questions. The questions my hon. Friend the Member for Blaenau Gwent asked about the safety of putting the clocks forward and daylight saving time are actually part of the argument to the Commission. They make the point well that we have concerns about what the Commission is proposing. We were being helpful.

There are some health studies about this matter, and I hope that the Government will look into them. A Nobel prize was awarded to chronobiologists this year, and additional work will be carried out to indicate the health benefits or otherwise of changing the clocks—whether the clocks should change or not. I hope that the Government look at that. One issue is disruption to the circadian rhythm—did I pronounce that correctly? [Hon. Members: “Yes.”] Good; I got that one right. The issue is whether moving the clocks helps or not. What is the impact on the circadian rhythm and health? These are important points.

There are points about the impact on the economy. When we were initially looking at daylight saving time and double summer time, for example, we were in a different era. The importance of the agricultural sector in this country and the impact on agricultural workers were of a different nature, but we still have to consider that. We still have to consider the impact on postal workers, on children going to school and on commuters in the early mornings and whether there is an increase in the number of road traffic accidents when the clocks change. These are all important points that need to be taken on board.

We can start to look at evidence from those countries that have made the change that the Commission suggests. The one piece of evidence that my researcher was able to find relates to Iceland, which has been in a position of removing daylight saving time for some years now. Concerns were raised, in the one English language commentary we found on the matter, about the gap between solar and social time and teenagers dropping out. There is a whole other debate to be had on whether teenagers should go to school later in the day, but that is for another Committee on another occasion.

However, there are concerns about health and about the impact on workers. There is some evidence of small energy savings to be had, whichever way round we go.

[Michael Tomlinson]

The hon. Gentleman raises some interesting points about whether we should change the clocks and consider any safety aspects, as was suggested earlier, but this debate is about whether we should issue a reasoned opinion and whether we agree that it should be this House that determines that, or the EU. What is his position on that?

[Bill Esterson]

This debate is about those things, but it is interesting that the documents that we were given cover in some detail all the points that I have raised—without the background, it is very difficult to go forward. I was about to move on—the hon. Gentleman’s intervention was quite timely—to quote paragraph 1.16 of our papers, where his own Committee quotes the Commission, which

“acknowledges, ‘evidence is not conclusive as to whether the benefits of summer time arrangements outweigh the inconveniences linked to a biannual change of time’, leaving room to doubt that a fully harmonised approach is necessary.”

The reasoned opinion that we give back must be as strongly evidenced as possible, if we are to have as much influence as possible. In the absence of certainty of evidence that a change is a good thing, we want to be as strong as possible, along with our allies and partners across the European Union, in influencing the Commission’s final decision.

My hon. Friend the Member for Walthamstow was absolutely right to push as strongly as she did the points about what happens in Ireland. She might also have mentioned Gibraltar, of course. It would be very difficult to see differences on either side of those two land borders. These points should go back to the Commission in as strong a manner as possible.

We are due to leave the European Union on 29 March, as the hon. Member for Mid Dorset and North Poole said—I know that he is very passionate that we do leave on that day. As things stand, we are leaving on 29 March. I hope that there will be a good deal, not the inadequate one being put forward by the Prime Minister—it has little to no support from anybody in her own Cabinet, let alone anywhere else—but we absolutely must not have no deal. If we do get a deal, there will be a transitional period. If this goes ahead, we will have to be ready for it, as with so many requirements coming from the European Union. I hope that the Government will do the work necessary to prepare us for that eventuality.

These questions were raised by the European Scrutiny Committee and are set out in paragraphs 1.19 and 1.20. The Minister is well aware of the concerns raised today. I hope that she will go away and ensure that the Government do that preparatory work and carry out their own impact assessment. Perhaps she will write to members of the Committee with her findings as soon as possible, so that the work we have done today is followed up as thoroughly as possible.

Parental Bereavement (Leave and Pay) Bill

Debate between Bill Esterson and Michael Tomlinson

3rd reading: House of Commons & Report stage: House of Commons
Friday 11th May 2018 Commons Chamber

[Bill Esterson]

Yes, I agree. I believe that bereavement pay rightly has the support of the whole House. It is important that it is state funded and that HMRC is liable. That will minimise the risk of people not being paid—the point was made by my hon. Friend the Member for North West Durham in Committee—which is necessary because of the exceptional nature of the leave and the pay that needs to come with it. For those reasons, I also agree that there should not be a qualification period before a bereaved parent is qualified to receive the pay.

I want to pick up on some of the points raised by the hon. Member for Torbay (Kevin Foster). There is a challenge in ensuring that everybody benefits from the Bill, for example self-employed people who are currently not able to receive social security. This week the Federation of Small Businesses pointed out that it often takes two to three years to fully establish a business. The current rules on universal credit, which apply for only one year, are a very real concern in supporting self-employed people. There is a similar challenge here in supporting self-employed people through parental bereavement pay.

The flipside, of course, is the impact on employers. As someone who has run a small business, I can say from experience that when a key member of staff is not available it impacts the business. That is also true for larger businesses, but it is easier for them to make alternative arrangements. We need to recognise the impact on small businesses. This is about getting the balance right. It is only right that members of staff receive bereavement pay and that the statutory minimum is recoverable by the employer. The ongoing challenge will be how smaller firms in particular are supported when a key member of staff is absent.

My hon. Friend the Member for Lincoln (Karen Lee), from her own very sad experience as a nurse, demonstrated just how difficult it is for a member of staff who has suffered a bereavement to return to work and to carry out their normal duties. It is not straightforward to say that for a smaller firm staff should have to get back to work. Sometimes it is simply not possible for people, when they have suffered a bereavement, to return to work and carry out their duties. The challenge is very difficult for both the employer and a bereaved member of staff, and I hope the Minister will pick up on that point in his response to the debate. I do not say that there are any easy answers, but it is right that we are able to discuss the issue.

It was surprising to see the contradiction between some of the amendments tabled by the same Members. One asks that no notice be necessary for leave, while another asks that reasonable notice be given.

[Michael Tomlinson]

I am grateful to the hon. Gentleman for giving way. I remember serving on my very first Bill Committee when he was my equal and opposite. Is it not often the case that amendments are tabled to be probing? Alternatives are put forward that would be equally suitable and that is a perfectly logical and rational way to have a sensible debate.

[Bill Esterson]

If the hon. Gentleman thinks that by doing so he can waste time and delay the debate on the next Bill, and that that is a reasonable way to proceed, he is entitled to his opinion. I will give him this: it is logical to do so for the reason he outlines, but I sense from Government Members that my suspicions have been confirmed. I understand there is a reason to have a discussion on some of the points raised in the amendments, but I think it is a shame if they are being used to delay or scupper the next Bill. It is very important that we get the notice period right and I am sure the Minister will pick up on that in his response.

Foreign Direct Investment 2016-17

Debate between Bill Esterson and Michael Tomlinson

Tuesday 12th September 2017 Westminster Hall

[Bill Esterson]

The evidence is mixed on whether the fall in corporation tax since 2010 has had benefits in attracting inward investment. Under our proposals, we would still have the lowest corporation tax in the G7. Although investors like the idea of a low-tax economy, they equally dislike the consequences. Recent research by the London School of Economics shows that the downside implied by a low-tax economy of poor public services is profoundly unattractive. The approach that the Prime Minister set out at Lancaster House may be the preferred route for many Conservative MPs who want to shrink the state, but as well as continuing to damage our NHS, schools and pensions, such a policy will restrict the Government’s ability to deliver the very infrastructure and skills that foreign investors want and need.

The view of our investors is set out starkly in EY’s UK attractiveness survey. EY said that it has been a “mixed year” and that it is

“difficult to make a clear assessment of the UK’s performance attracting foreign direct investment and maintaining its appeal to investors since our 2016 attractiveness reports, because every positive indicator is offset by an equivalent negative development.”

It added that,

“the UK’s share of European R&D projects slumped from 26% to 16%, its lowest since 2011. With software projects also slipping despite a Europe-wide increase, these results raise concerns over the UK’s future performance in key growth sectors.

Europe was the leading origin for projects into the UK…Cross-border investments in Europe grew in 2016, with Central and Eastern Europe becoming an important area for higher value-added FDI such as R&D. As European value chains become increasingly integrated, investors appear concerned about the UK’s future access to these value chains.”

The EY 2017 global survey of investors’ perceptions

“reveals a split between current plans and future expectations…Some 31% of investors expect the UK’s FDI attractiveness to decline over the next three years, while 33% expect it to improve.”

Before we get too excited about the net positive figure, EY states that those figures are

“significantly worse than the long-term average, and 50% of investors based in Western Europe expect the UK to become less attractive.”

[Michael Tomlinson]

I have listened carefully to the hon. Gentleman’s speech. If I may say so, it is a rather glass-half-empty sort of speech compared with some of the other contributions. He is absolutely right about some of the notes of caution in EY’s attractiveness survey, but does he accept that there are also positive noises coming from it, including that the UK remains hugely successful in attracting FDI?

[Bill Esterson]

I read out the key point about the mixed picture. We must do everything we can to retain our existing successes as well as build new ones—that is the thrust of what I am saying—but there is no point in the hon. Gentleman or any of his colleagues pretending that there are not great challenges and causes for significant concern. I was tempted to say in response to his earlier comment that he has rose-tinted glasses half full. [Interruption.] It is too early in the morning for that, isn’t it? That one is a work in progress—I will leave it in the locker.

The hon. Gentleman is quite right about a positive attitude; I do not disagree with him. Of course we have to be positive and do everything we can—some of my questions for the Minister are along those lines—but it is worrying that the EY report shows a sharp fall in how global investors rank the UK’s attractiveness on key criteria, such as education, transport infrastructure, local labour skills, political stability and access to the European market. There has been a year-on-year decline of up to 30% in some of those criteria, which is unprecedented in the past decade. Bank of England Governor Mark Carney said just last month, as the Bank reduced its growth forecasts, that Brexit uncertainty was holding back investment. Of course, in the past year we have grown more slowly than our competitors—a fact that supports that comment and some of the other analysis I have described.

Mr Carney’s comments go alongside AIB’s decision to suspend investment in the UK due to uncertainty about the UK’s future. Two Japanese banks are establishing European bases in Frankfurt, and reports suggest that JP Morgan and Goldman Sachs are considering relocating significant business operations. Japan is a major investor in the UK, with some 1,000 UK businesses under Japanese ownership generating an estimated £72 billion of turnover last year. The Japanese ambassador estimates that 10,000 Japanese firms operate in the UK, employing 140,000 people. Many of those jobs are in the UK’s flagship automotive industry with big players such as Nissan, Toyota and Hitachi.

European Union (Approvals) Bill

Debate between Bill Esterson and Michael Tomlinson

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

[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.

--- Later in debate ---

[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.

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

Debate between Bill Esterson and Michael Tomlinson

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.

Budget Resolutions and Economic Situation

Debate between Bill Esterson and Michael Tomlinson

Thursday 17th March 2016 Commons Chamber

[Michael Tomlinson]

I disagree with the hon. Gentleman, and I can give him three examples. Local authorities in Doncaster, Barnsley and Leeds will all benefit under a fairer funding scheme. There is no rhyme or reason to the current scheme. I understand what the hon. Gentleman is trying to say, but the present funding formula is in place due to an historical anomaly. The right hon. Member for Enfield North (Joan Ryan) mentioned levels of deprivation, but it must be understood that that is not the basis for the funding formula. For example, funding can differ by up to 50% in two areas that share exactly the same characteristics. That is neither right nor fair. Indeed, the top 10 schools receive £2,000 more per pupil than the bottom 10 schools. If the formula were based on areas of deprivation, I could understand that and I could explain to my constituents why their funding was in the bottom two and in the bottom 11, but that is not the case. I therefore welcome the changes.

I also welcome the fact that there is to be a consultation and I invite Opposition Members, who are still chuntering, to join in the two stages of that consultation and to make their case. I also welcome the announcement on timing, and the fact that 90% of schools can expect to have this funding by the end of this Parliament. I shall be inviting all schools in my area to contribute to the consultation, and I urge all hon. Members to do the same.

Turning to the subject of academies, I am a parent governor at my local primary school and I know that there will be concerns about academisation. I pay tribute to the teachers in Poole and Dorset, who work so hard.

[Bill Esterson]

Has the hon. Gentleman had a chance to read the White Paper? Paragraph 3.30 states that there will no longer be parent governors. Does he realise that he would have to stand down as a parent governor as a result of that?

[Michael Tomlinson]

Doubtless there are many on the governing body who would be relieved if I had to stand down, but I am sure that there would be opportunities for others to step forward. I have not yet had the opportunity to read that paragraph, but I am grateful to the hon. Gentleman to drawing it to my attention. I shall look at it in due course.

I was about to pay tribute to the hard work of our teachers in Poole and Dorset, and indeed across the country. They work tirelessly. The school of which I am a governor recently went through an Ofsted inspection and I saw the hours that the headteacher and everyone else in the school put in. It is right to pay tribute to our hard-working teachers. There is a risk that the rhetoric from the Opposition Benches will come across as talking down the teaching profession, and that must not happen. It will certainly not happen here, because every time I stand up to speak on this subject I pledge to pay tribute to the hard work of our teachers.

However, academisation will be unsettling to our teachers. I urge the Secretary of State to reassure the teaching profession about the structuring and the process involved and to offer support. I know that she will do this. Dare I say that communication will be absolutely vital in this regard, as will setting out the positives—including the financial positives—that can result from academisation. It will be critical for our schools to be supported.

I want to touch briefly on the sugar tax. My hon. Friend the Member for Gainsborough (Sir Edward Leigh) went into great detail about a previous sugar levy, but I do not share his pessimism that we risk such disastrous consequences this time round. Instinctively, I too am a low-tax Conservative and therefore cautious about this measure, but I warmly welcome the direction that this money will go in. I am passionate about sport and I believe that the additional funding for sport in primary and secondary schools will be warmly welcomed. I will invite secondary schools in my area to bid for funding so that they can be among the quarter of secondary schools to benefit from these measures.

Sport is vital in our schools. I hugely benefited from playing sport on Wednesday afternoons and on Saturdays, and I miss those days. I miss the opportunity to play sport at the weekends. Perhaps, Madam Deputy Speaker, there should be time on Wednesdays for parliamentarians to play sport and to show the way. I put in that mini-bid to you today in case it is within your gift to make that happen. Perhaps time could be found in our busy lives to play sport. There is a serious point here: sport benefits our children and it can benefit everyone.

I support this Budget. In particular, I support the measures on education, especially those relating to a fairer funding formula for our schools, which will be vital for Poole and for Dorset.