SportsDirect (USC Dundonald)

Brian H. Donohoe Excerpts

Tuesday 27th January 2015 Westminster Hall

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

It is good to see you in the Chair, Mr Hollobone, and the Minister in her place. Of course, Mr Hollobone, you and I served in the same police force for 10 years, and I think that you still serve in the police, so it is good to see you here—after this debate, we might need your services.

I would like to make a few remarks by way of background to the reason why I asked for the debate. This year is the celebration of the 800th anniversary of the sealing of Magna Carta, one provision of which was that no free man should unreasonably be deprived of his livelihood. I am speaking on behalf of 245 workers in my constituency who question whether they are treated as free men and women.

USC is a clothing distribution company providing goods to retail distribution outlets. It opened in 1989 in Edinburgh. The company was worth £43 million by 2004, when it was purchased by Sir Tom Hunter, a constituent of mine, but it went into administration in 2008, after which 43 of the 58 stores were bought by Sir Tom. That happened through something called pre-packaged administration, whereby a deal is struck to sell parts of the business before it is put into administration, minimising losses and cherry-picking the most profitable part of the business. At the time, MPs, through the Commons Select Committee on Business and Enterprise, raised serious concerns about that practice. In particular, the hon. Member for Mid Worcestershire (Sir Peter Luff) said:

“The principle of administration is sound but you’ve got to make sure that the administration process is working in a way that doesn’t disadvantage people and impose other costs on the economy”.

In 2011, SportsDirect bought 80% of USC, and it completed the purchase of the remaining 20% in 2012. In 2013, SportsDirect bought the company Republic—more of that later—out of administration and merged it with USC. USC’s headquarters have long been in Dundonald in central Ayrshire. On 28 December last year, 245 people —79 permanent employees and 166 agency or zero- hours contract workers—were employed at the Dundonald site.

On Wednesday 7 January, senior managers arrived at the site early in the morning and informed staff that the business was not making money and was going into administration, and that all the stock would be removed to SportsDirect’s central depot in Shirebrook. There then followed a pantomime: staff were not told that they were being made redundant and were asked, would you believe, to assist with the removal of the goods. I am told that some 100 journeys were made by heavy goods vehicles between then and when the process was completed, on Sunday 11 January.

It is not clear whether USC/SportsDirect’s actions were initiated by the companies themselves or as a result of creditors, a clothing company called Diesel, seeking a winding-up order because of unpaid bills, to which USC/SportsDirect responded by moving the company towards administration, presumably resulting in Diesel joining the list of creditors that would have to wait for payment. I have heard it said that there was a one-week delay in the court process, which I am told means that the timetable followed by the company is even further out of kilter with what staff were told at the time. I seek clarification from the Minister on that point.

No information was given to staff about the future of Dundonald and their jobs until Wednesday 14 January, when Philip Norvell from Gallaghers dismissed all the staff, telling them that they would not receive any money at all from SportsDirect and that anything owed to them would have to be claimed from the Government via the administrator.

On Friday 16 January, Republic, a wholly-owned subsidiary company of SportsDirect, bought the USC business, apart from the Dundonald warehouse and operation, from the administrators. At the same time, billionaire Mike Ashley is well known for his love of football—he owns Newcastle United—and his company, the very same SportsDirect, has just bought a 26% stake in Rangers Retail Ltd, in return for £10 million of credit, adding to his previous 49% stake and making a total of 75%. Rangers football club gets a very small percentage of the profits from that retail activity. The worrying thing is that that is very much the pattern that he adopted in buying USC: he built up a majority stake in stages before finally assuming control of the company.

Of course, there are rules governing the ownership of football clubs, especially as there have been some notorious multiple owners such as the pensions robber Robert Maxwell. There must be a question whether Ashley’s activities are a precursor to a greater involvement in Rangers football club itself. Is it right for an individual to have a serious financial stake in more than one side? Is this man more than just a shareholder? Has he become the banker of the club?

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Does the hon. Gentleman feel, as I do, that the behaviour of Mike Ashley is damaging to him, and that the contrast between his wealth and the way the workers were treated is appalling?

[Mr Donohoe]

I am coming to that, but he does not care a damn. That is clear, given what I am about to say.

The USC Dundonald situation is a murky affair. It leaves unanswered a lot of questions about the way some businesses are allowed to operate. For instance, did Diesel seek a winding-up notice on USC as a result of unpaid bills, as claimed in some reports? That is an answer that I need this afternoon. If so, what alternative courses of action were considered by SportsDirect—such as, for example, paying the bill to its loyal workers at Dundonald? Was USC/SportsDirect’s action in seeking administration a response to the claim made by Diesel or was it initiated by the company separately? Was there a delay in the timetable for granting administration and, if so, what was the impact on the work force and the potential timetables for redundancy and required consultation on both redundancy and business plans? Was that brought to the notice of the Department for Business, Innovation and Skills? What will the cost to the public purse be of supporting the 245 people who are out of work without back pay, holiday or redundancy payments and who have bonuses of as much as £12,000 outstanding?

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

I congratulate my hon. Friend on obtaining the debate. He is working hard on the issue, and he knows that many of my constituents were also employed in the business, and have lost their jobs because of this debacle. Yet again, a company in Ayrshire has behaved disgracefully —my hon. Friend knows what happened with the former coalfield sites. Is there a need to look at the way companies are allowed to do such things, treating employees so despicably, and to hold them accountable?

[Mr Donohoe]

I am grateful to my hon. Friend, whose constituency neighbours mine, as does that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson). I thank them for their support. I do not see any difference between the cases referred to, which is why there is a need to examine the law to protect workers in such circumstances. It is blatantly obvious that that does not happen now.

How long is it likely to take for the employees to receive payments from the administrators? Will employees get 100% of the money due to them? I doubt it. What sanctions can be imposed on the company for failing to consult employees about the future of their roles at the Dundonald site, or about redundancy? Given that all the companies in the exercise are owned by SportsDirect, is not it just a scam to let SportsDirect off its financial responsibilities to a less successful part of Ashley’s estimated £3.3 billion fortune?

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I thank my hon. Friend for securing the debate; people in my constituency are, as he mentioned, also affected. Does he agree that it is particularly disgraceful that everything he described was happening over Christmas and the new year, when it was almost impossible for employees to get the advice and support they needed, which they might have been able to get in other circumstances?

[Mr Donohoe]

I agree with my hon. Friend wholeheartedly. I spent most of the Christmas period attempting to contact the company, and I was treated with total and absolute contempt.

[Mr Jim Cunningham (Coventry South) (Lab)]

I congratulate my hon. Friend on getting the debate. We had a similar one last Thursday, about City Link. He has spoken about changes to the law, and with City Link the pattern was the same. Workers were told over the Christmas holiday period that their jobs had gone. More than 1,000 men contracted to it could not take their jobs, because of the law. We have been pressing the Minister on those points. This is very similar.

[Mr Donohoe]

I am grateful to my hon. Friend for that intervention. The Scottish Affairs Committee is about to call that company to book, or has already done so, and has approached me to ask whether to call Mr Ashley to the Committee for what he has done to the company for which he is responsible. Do we agree with the BBC’s 2009 quote from a self-confessed asset stripper that the law in such circumstances is a pirates’ charter? I wonder whether that description could apply to Mr Ashley.

Has the Magna Carta principle that no citizen should unreasonably be deprived of their livelihood been breached by Mike Ashley and SportsDirect? Given how he has behaved on the issue, is Ashley, SportsDirect’s supremo, a fit and proper person to buy shares and give loans to Glasgow Rangers football club, and to appoint his men to the board? Should not the Scottish Football Association look more closely at this person’s credentials for involvement in a team that is not just a business venture, but a Scottish—indeed, a UK—institution? His track record, particularly his treatment of USC workers, shows that he has scant regard for anything but balancing the books and maximising profits, even if loyal staff are thrown on the scrap heap as a result.

[Mr Iain McKenzie (Inverclyde) (Lab)]

I congratulate my hon. Friend on securing this important debate. Does he agree that it is wholly worrying that someone of Mr Ashley’s background, employment and business practice is moving into the highly delicate area of Scottish football, especially with a football team that is having difficulties at the moment?

[Mr Donohoe]

I agree. Glasgow Rangers is an institution, and some 25% of the population of Scotland follow that team. It is wrong that that individual should be allowed anywhere close to the team. As I will request of the Minister in a moment, I hope that the SFA gets to the bottom of this and does not allow him further into the club’s business.

Will the Minister set up an inquiry into the affairs of Mike Ashley in relation to the USC Dundonald situation affecting my constituents and his interest in Glasgow Rangers? Such a move would be welcome to the former employees of USC Dundonald and, I am sure, to the great bulk of Glasgow Rangers supporters. We need to bring some transparency to the affairs of Mike Ashley and of Glasgow Rangers. I look forward to the Minister’s response.

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

I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this timely but unfortunately necessary debate. I do not think that any of us wish the situation to be as it is—particularly those who have, sadly, lost their jobs.

The concerns about the events leading up to and surrounding USC’s failure, particularly some of the allegations made about the company’s treatment of its creditors and employees, are valid and genuine, and I assure the hon. Gentleman that they are shared across the House. It is important that answers are found. As with any company failure, it is important to establish the facts of the case: what occurred in the lead-up to the administration of USC, the reasons for the failure and whether the company has been a victim of circumstance, as sometimes happens with companies, or whether the conduct of its directors has fallen below the standards that we rightly and reasonably expect. Those standards include treating creditors and employees of the company fairly and in accordance with the law.

Based on the information that we have been given, USC’s administration seems to have been due to the company’s failure to pay its rent and suppliers when they came due. On the specific questions asked by the hon. Gentleman about the winding-up orders and so on, I understand that, according to the administrators, a statutory demand had been issued to USC by a key supplier on 17 December 2014, payable by 31 December. That would have allowed the creditor to seek a winding-up order if the debt was not paid. On 6 January, the company gave notice of entering administration, and it did so on 13 January, but I am not aware that a petition for a winding-up order was made.

[Mr Donohoe]

As a local MP, the Minister knows something about Glasgow Rangers, but she might not know as much about USC. Is there an urgent need for a change in the law if, on the one hand, a creditor can seek a winding-up notice and, on the other hand, the company can frustrate that by making an application to the courts for administration?

[Jo Swinson]

This case raises many questions. We are making several changes to insolvency law, and particularly to the pre-pack regime, where there are particular concerns. The hon. Gentleman is right to say that I have some familiarity with Glasgow Rangers—indeed, Murray park, their training ground, is in my constituency. I confess that I am not a football fan, but my late grandfather was a very proud and longstanding season ticket holder and supporter of Rangers. He enjoyed many trips to matches on the supporters’ bus.

We all have to think about the context. USC was not just a small company on its own; it was just one part of a large retail group. The events are particularly concerning in that context.

[Jo Swinson]

There are a couple of different issues within that question. We will need to wait to see the specific facts that come out of the investigation. Obviously, the administrators will provide information to the Insolvency Service, and they have to file a report within six months, although the general practice is to file such reports much more quickly. Indeed, we will be shortening that time to three months.

On whether there are loopholes, action has been taken on the pre-packs issue, which I will address in a moment. The hon. Gentleman is absolutely right that employment law is not negotiable. Employment law is not something that is optional or that a company can decide to take or leave; it is the law, and it needs to be followed. Enforcement is particularly important. A range of issues have been raised, including some of the issues surrounding zero-hours contracts, which I will also address.

One of the key questions is why USC, which was wholly owned by SportsDirect, was allowed to reach the point at which its key suppliers and landlords were not just threatening but taking enforcement action. SportsDirect purchased USC’s business through another company, Republic. We have been told that USC’s key suppliers have been left out of pocket, so it seems odd that they would continue to supply Republic. There are, therefore, a lot of unanswered questions.

The law is clear that employees should be consulted where 20 or more people are being made redundant at the same establishment, and it can be a criminal offence to fail to notify the Secretary of State of proposed redundancies. Tribunals can make protective awards where employees are not properly consulted.

[Mr Donohoe]

Will the Minister and her Department do that through the criminal courts in this case?

[Jo Swinson]

I am not going to give the hon. Gentleman that assurance in the Chamber today, but I reiterate that we will be looking very carefully at all the facts that emerge and at the picture created from the information that comes from the administrators. There is a wide range of both investigation and enforcement powers, and it is important that they are used wherever it is found that companies have not behaved properly, and particularly when directors have not behaved properly.

--- Later in debate ---

[Jo Swinson]

I will be happy to look into the specific issues that the hon. Lady raises. Although the powers already exist, we recognise that making it more explicit that breaches of law can be considered in the disqualification process will make such cases easier. That is why we are changing the law. I will happily look separately at the specific case that she is pursuing.

I turn now to pre-packaged administrations, or pre-packs. They have been discussed in this House on many occasions, because there are understandable concerns about them. In a pre-pack, the sale of the viable parts of an insolvent company’s business is arranged before the administration starts and concludes shortly after the administrator is appointed. In the case we are debating, the administration has allowed the majority of the business, including more than 600 jobs across the UK, to be transferred to the purchaser, Republic, although unfortunately another 84 employees have lost their jobs.

It is important that we establish whether the pre-pack represented a necessary step to save an insolvent business, or if, as has been suggested, it was an abuse of the insolvency process. I reassure hon. Members that officials are looking at that as a matter of urgency. The changes that we are making, following the review of pre-packs by Teresa Graham, will mean that by spring there will be new checks and balances on pre-pack administrations where the sale is to a connected party, so that there is independent evaluation of whether that party is a viable business with a viable underlying business model that will not simply run into the same problems as the business in administration; there will also be evaluation of whether the sale represents the best value.

[Mr Donohoe]

May I ask to be kept posted, within reason, on anything that happens in the Department and whatever action or otherwise is taken by BIS?

[Jo Swinson]

I happily give that assurance. Obviously, certain elements remain confidential because of specific legislative requirements, but I am happy to keep the hon. Gentleman updated on the issue.

I will touch on the important matter of the employees and support for them, before coming to some of the specific issues raised about Mike Ashley. Obviously, whenever people are made redundant, support is crucial. That is why the Jobcentre Plus rapid response service is available and can provide everything from information to help with job search, identifying skills gaps and, ultimately, training to update skills or learn new ones to ensure that people can move back into employment. That is particularly important for those individuals.

In terms of redundancy payments, employees are guaranteed to receive their wages and other payments owed, subject to certain limits. That money comes from the national insurance fund.

[Jo Swinson]

I will certainly come to that issue. The redundancy payments service has begun processing claims—I understand something in the region of 30 claims have already been put in. It aims to pay 80% within three weeks of receiving the claim form and 93% within six weeks of receipt of the form.

Obviously, within the group of people who have been made redundant, there is a mix of those who were on fixed-hours permanent contracts and those who were on zero-hours contracts. However, it would not be accurate to say that somebody on a zero-hours contract has no right to a redundancy payment. The calculation for the payment tends to be made on the basis of an average of, I think, the 12-week period running up to when they were made redundant. I hope that will provide some reassurance to the hon. Lady’s constituents who may find themselves in that position. Guidance on redundancy pay for any employer affected is available on gov.uk.

Hon. Members have raised significant concerns about the behaviour of Mike Ashley, and I share those concerns. He seems determined to show that rules are for other people. We know that he bought nearly 10% of Rangers football club, and in doing so rather skirted the edges of the SFA’s rules on owning two clubs. Despite being blocked by the SFA from increasing his shareholding further, he appears to be looking to expand his influence. The rules that prevent the same person from owning two clubs are there for a good reason: to prevent conflicts of interest and to safeguard the integrity of the sport.

We are talking about a man who, according to media reports, forced through a £200 million bonus scheme at SportsDirect and subsequently withdrew his own participation amid speculation that he introduced the scheme simply to show his investors who was in charge. Some 90% of SportsDirect employees are reported to have zero-hours contracts, so they would not be eligible for the scheme. At least one worker was allegedly told that a zero-hours contract meant that she would not receive holiday pay. I cannot emphasise enough that that is against employment law.

There are serious questions to be answered about USC and many of its practices. I have outlined that the Insolvency Service has the power to receive information from the administrators and to investigate any company that it believes has questions to answer. I welcome the suggestion that Select Committees may also wish to ask questions.

I believe that zero-hours contracts have a place in a flexible labour market, but they are not a substitute for proper business planning. I fail to understand how a retailer can get away with employing the majority of its staff—up to 90% of the work force of 20,000 at SportsDirect—on zero-hours contracts. Apparently, SportsDirect operates some 420 stores, but it has a permanent work force of perhaps only a couple of thousand people. I do not see how a retailer can reliably open its stores every day if the workers on zero-hours contracts genuinely have the power to say that they will not take any given shift. A zero-hours contract should mean that the employer is free to offer work or not to offer work, and the employee is free to accept or decline that work.

I am at a loss to see how such use of zero-hours contracts can be deemed to be in any way responsible, and I think there are even questions about whether it is in line with employment law. Certainly, exclusivity clauses, which must be part of the way in which SportsDirect operates zero-hours contracts, will soon not be legal in such contracts as a result of the action we are taking in the Small Business, Enterprise and Employment Bill, and rightly so. Using zero-hours contracts to fill the gaps by requiring people to turn up for work but not giving them guaranteed hours is not a responsible use of such contracts.

Cases have been brought against SportsDirect by people such as Zahera Gabriel-Abraham. That case was settled out of court, but some of the media reports were concerning. The Guardian reported that

“the retailer will have to make clear in job adverts, contracts and staff rooms that it does not guarantee work, sick pay or holiday pay”.

I do not believe that that is the full story, because it is not for an employer to decide whether their employees get sick pay or holiday pay; it cannot simply opt workers out of their statutory rights. One of the barristers from Leigh Day summed it up well:

“Zero hours workers are not second class workers. They have the right to be treated fairly and with respect. They have the right to take holidays and to be paid when they take them. They have the right to statutory sick pay. They have a right to request guaranteed hours. Sports Direct will now have to make that crystal clear to staff.”

I hope that the reports do not suggest that those staff have not been getting sick pay, holiday pay or their other statutory rights. I encourage anyone at SportsDirect or anywhere else who thinks that they have not been receiving their proper rights to contact ACAS or the pay and work rights helpline on 0800 917 2368. Breaking employment law is absolutely unacceptable, and compliance will be properly enforced.

There are certainly questions to be answered about the matters in the USC administration and pre-pack sale, and the Insolvency Service will be looking at the information that it has received. The hon. Member for Central Ayrshire asked a wide variety of questions, and I appreciate that time is short—

[Mr Donohoe]

Will the Minister write to me?

[Jo Swinson]

I will happily write to the hon. Gentleman in full to pick up on any points that I have not addressed, and I will write further to keep him updated. I thank him for giving us the opportunity to debate these important issues.

Question put and agreed to.

Small Business, Enterprise and Employment Bill

Brian H. Donohoe Excerpts

Wednesday 19th November 2014 Commons Chamber

[Ian Murray]

I haven’t finished yet—just you wait!

Let me go through why not being able to enforce these rights is a real problem. If, as the Minister suggested, people go through the normal employment tribunal channel, there would be a two-year qualification period for unfair dismissal. They would then have to go through compulsory early conciliation at ACAS. If that failed, they would have to pay a disproportionately high fee to enter the employment tribunal system. If they were found to have been wronged in the workplace, they could receive a compensatory award, but in up to 50% of cases those awards are no longer paid, and the chances of them getting their job back, or any job, would be much diminished.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

When I used to deal with what were then known as industrial tribunals, I understood that someone had to earn a certain wage before they could make any application to a tribunal. In those circumstances, how does someone on a zero-hours contract get into the position of being able to apply?

[Ian Murray]

That is part of the problem of enforcement, in that we do not know what mechanisms could be used for it. That is why we tabled the amendment to ask the Secretary of State to bring forward proper proposals for enforcing these rights. My hon. Friend is right. If an employer has offered someone a zero-hours contract containing an exclusivity clause, I suspect that most will have done so on a take-it-or-leave-it basis. Does that person then have the qualification period needed to enter the employment tribunal system? The answer is clearly no, because they have not worked for two years. Do they have the status of being a worker or an employee? The chances are that the courts would probably deem them not to be in employment at that stage. That is why it is important for the Government to come back with proposals on how they will prevent exclusivity clauses.

Sarah Veale from the Trades Union Congress said in one of the evidence sessions:

“It is actually quite extraordinary to have a breach of employment rights proposed in a Bill without any kind of penalty—or rather, without any compensation for the individual, because that is largely the way it works in employment law.”––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 14 October 2014; c. 71, Q162.]

The Government need to be clear about how individuals can enforce the provision against exclusivity. We cannot just hope that employees who refuse to work exclusively for an employer will not subsequently be discriminated against in the workplace.

It is very easy to construct a scenario in which that might be the case, and I have already mentioned one to my hon. Friend. In future, if an employer offers a zero-hours contract with an exclusivity clause, the employee might be incredibly knowledgeable about employment rights, and say, “Under section 145 of the Small Business, Enterprise and Employment Public Act, an exclusivity clause is against the law.” However, the employer could turn round, and ask, “Well, what are you going to do about it? You can either take or refuse the job and the contract, but if you do not abide by its terms, we’ll zero you out,” meaning that the employee would not be offered any hours at all. The employer could in effect have exclusivity by threatening the employee with losing their employment altogether.

That is a very real issue for the economy. I am not talking about businesses or individuals that welcome the use of zero-hours contracts, but mainly about people at the lower end of the employment scale who need to be properly protected. We need to ensure that there is effectively no exclusivity and that people are not zeroed out.

We need the Government to make a proper proposal about how they will enforce the prevention of a practice that is against the law. If someone driving down the motorway at slightly over the speed limit is caught doing 75 or 77 mph in a 70 mph zone, they receive a ticking off and a fine, but if there were no need to pay the fine or if no fine were levied, where would be the deterrent against breaking the law? I shall be interested to hear the Minister’s response on that point.

Amendment 10 is about compensation. People often go to great expense to turn up at work: they arrange child care or pay train or bus fares, and that takes time to organise and costs money from their much-reduced resources. Having been told that they are needed for work, people sometimes get a text a couple of hours beforehand or on arriving at their workplace saying that they are not needed that day. In a modern workplace, that is completely and utterly unacceptable.

The CBI has recognised that point and has expressed its support for it. In its March 2014 zero-hours briefing, it stated:

“a ban on offering short notice for work…is not in the interests of the workers on zero hours contracts, whose interests are best served by always being offered work opportunities with the freedom to decline them. An intervention which creates a simple formula for compensation due to zero hours employees when a shift is cancelled at short notice—two hours’ pay for example—would be better targeted.”

I think that everyone in the House would agree that there should be some kind of compensation if people are unable to do their shift at short notice because the employer has changed the particular shift pattern.

The House needs to look seriously at this matter. It is quite clear that the vast majority of employers in this country are respected for looking after their employees as their business’s No. 1 asset. Many businesses that do the right thing spend an inordinate amount of time—I did when I ran my own small business—making sure that all employees get the hours they want and are contracted to do, so that they can gain the salary they are contracted to earn and can pay their rent or mortgage and maintain their standard of living.

Most reasonable people would say that it was unacceptable for such businesses to be undercut by companies that decide to take on a vast number of workers on zero-hours contracts without offering them regular hours and regular pay. That is why I think that the Government have really missed an opportunity by not going slightly further on zero-hours contracts.

I now move on to the right to fixed hours. My right hon. Friend the Leader of the Opposition said last week:

“We are going to change…the zero-zero economy…Under Labour, if you work regular hours you will have a legal right to a regular contract.”

Iain Birrell, a partner at Thompsons Solicitors, said in his evidence in Committee:

“The Chartered Institute of Personnel and Development research of last November noted that 83% of staff on zero-hours contracts have been engaged for longer than six months and 65% have been engaged for two years or more. We have a situation, then, in which 65% of staff on zero-hours contracts have been there for two years or more. That is not short-term need”.––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 14 October 2014; c. 27-28, Q54.]

We appreciate that there are situations in which employers require workers on a zero-hours basis. However, employers should be able to refuse an employee’s request not to be on a zero-hours contract only if they can demonstrate that their business needs cannot be met by any other form of flexible contract. For example, seasonal work may be a legitimate exemption. In the United Kingdom, someone who makes ice cream might require people on zero-hours contracts to deal with seasonal needs.

--- Later in debate ---

[Sheila Gilmore]

That allegation is made frequently. In the years up to 2007 when I was a local councillor, I did not see these things happening in the care industry. I really did not see huge numbers of zero-hours contracts being used in my area. I do not think that what the hon. Gentleman said was a factual statement.

[Mr Donohoe]

In my constituency—I am sure the same is true of my hon. Friend’s constituency—the words “zero-hours contract” did not exist until very recently. In the past two or three years, I have heard more and more of my constituents talk about these contracts. It is because of the policies of this Government that we are in that position, is it not?

[Sheila Gilmore]

I agree with my hon. Friend.

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

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[Bill Esterson]

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

[Mr Donohoe]

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

[Bill Esterson]

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

[Mr Donohoe]

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

[Bill Esterson]

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

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

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

Small Business, Enterprise and Employment Bill

Brian H. Donohoe Excerpts

Tuesday 18th November 2014 Commons Chamber

As will become clear during the debate, one subject on which almost the entire House agrees is that pubs are part of what makes Britain great and that we should do all we can to support them. The series of votes that we expected to face today—they are disappearing in front of our eyes—mark a historic, watershed moment in the licensed trade.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Surely at the very kernel of any amendment is the fact that we are losing pubs every week right now. As a consequence, the Government clearly need to focus much more on that aspect of the problem, so that it does not continue to recur, as it very regularly does in all our constituencies.

[Toby Perkins]

I am grateful to my hon. Friend for making that point and precisely expressing the passion which so many of us feel for the pubs in our communities. It is precisely because so many of us are concerned about the changing face of the pub trade in our communities that the issue of the contribution of pub companies to pub closures has been so fiercely debated. It is because so many of us believe that the model under which pub companies operate is the cause of many of the pub closures that the Opposition have brought this matter to the House on many occasions, and many other Members have made that case. My hon. Friend is absolutely right that this debate is all about the strength of the industry, but it is also about having a sense of what exactly is being done to support it, and the question of pub companies is a key part of that debate.

I suspect that much of this debate will be about what divides Members, but there is real value in reflecting on what we are all agreed about, including the fact that this Government Bill contains provisions for a pubs code. The very fact that we are debating an issue that for so long seemed destined to elude this Parliament is a tribute to the dogged work not just of the Business, Innovation and Skills Committee, but of Parliament itself. Today still has potential to be a great day for this Parliament.

In reflecting on the contribution that Parliament has made on this question, notwithstanding my reservations about how the Government are handling this incredibly important debate, I want to pay tribute to the many hon. Members whose work has brought us to this point. In no particular order, those who deserve great credit include the hon. Member for Mid Worcestershire (Sir Peter Luff) and my hon. Friend the Member for West Bromwich West (Mr Bailey). They have both chaired the Business, Innovation and Skills Committee, which produced diligent research on this issue in 2004, 2009, 2010 and 2011.

In 2011, the Select Committee finally came to the conclusion that the industry had had enough time to get its house in order and that the time had arrived for a statutory code with an independent adjudicator, open market rent assessments and a free-of-tie option. It is disappointing that it has taken more than three years to get from the Select Committee’s conclusion to the Bill before the House. It will be an even greater disappointment if we have to move away from the Bill and are told that there will be a further review in two years’ time to debate the whole thing again and decide whether we then need the free-of-tie option. What is more important than anything else is that Members do not let the opportunity to take real action through the Bill pass us by.

I want to acknowledge other Members. My right hon. Friend the Member for Wentworth and Dearne (John Healey) was the pubs Minister who empowered the Select Committee to be the arbiter of when the time for action had arrived. The hon. Members for Leeds North West and for Northampton South (Mr Binley) and my hon. Friend the Member for Easington (Grahame M. Morris) led a cross-party campaign to ensure not only that we had a pubs code, but that it would make a real difference for tenants and create competitive pressure on pub-owning companies to ensure that they offered their tenants a fair deal.

I also want to recognise the Minister’s contribution. Notwithstanding what I said about how the Government have handled this Bill and how she has been badly let down on a Bill that appears to be changing in front of our eyes for what appear to be political considerations, the fact is that she did at least end the prevarication—at least, that is what I wrote down in my speech—that we endured under her predecessors. If this was Prime Minister’s questions, I would be told off for writing my script in advance, but that helps when we are going to be on our feet for a while.

To be charitable for a moment, at least we are here to debate the pubs code. The fact that the Minister’s predecessors constantly pushed for review after review and did not take action, while she came forward to say that there would be something in statute, is a source of tremendous credit. It is a shame that she has unfortunately been forced to come to the Dispatch Box to propose a review in two years’ time, with all the uncertainty that that will create. However, she has at least made an effort to get something on the statute book.

There are many other such hon. Members, but the strength of this campaign has been due to the fact that the push inside the House very much reflects the broad coalition in favour of the measures outside it. The case that we and other hon. Members are making today has been supported by a tremendous range of organisations, almost all of whom come under the Fair Deal for Your Local banner.

Just listen, Mr Deputy Speaker—not that you would ever not listen while in the Chair, but perhaps you will do so with particular attention—to the breadth of organisations that support this case. Such breadth makes the case more powerfully than anything else. The organisations include the Federation of Small Businesses, which does not usually demand regulations or that the business relationship between two parties should be put on a statutory footing; the all-party save the pub group, which is so ably chaired by the hon. Member for Leeds North West; the Campaign for Real Ale and the Fair Pint campaign; the trade unions Unite and the GMB; and the Guild of Master Victuallers and the Forum of Private Business.

There are also two support groups, Justice for Licensees and Licensees Supporting Licensees, which were set up to support licensees affected by what had happened in their relationship with the pub company. Such licensees have often been bankrupted or are facing bankruptcy as a result of having chosen to pursue their dream of running a pub. Who would have thought that a support group needed to be set up for people who have chosen to pursue a particular profession or work in a particular industry?

In some ways most significantly of all, the Punch Tenant Network, made up of tenants who run pubs owned by Punch Taverns, has come out in support of new clause 2. Those tenants’ business success hinges to a large degree on the strength—or weakness, depending on how they see it—of their relationship with their pub company, and they are saying that the hon. Member for Leeds North West and 90 other Members are right that the code should be put on a free-of-tie basis. If the network believed the scare stories that the industry is putting about—that the proposed changes will lead to an increase in pub closures, less choice for punters or increased unfairness in the industry—it would hardly be calling on hon. Members to support the new clause.

The House has heard in recent years from literally dozens of Members who are desperately trying to support pubs in their communities that are under threat—all victims of the great pubco scandal.

National Minimum Wage

Brian H. Donohoe Excerpts

Wednesday 15th October 2014 Commons Chamber

[Mr Brown]

I thank my hon. Friend. Yes, we have moved on, but the fear among Opposition Members is that we are starting to slip back. In those days it was women, in particular, who were having to hold down two or three jobs in order to make ends meet. I see the same thing returning but, more worryingly, it is not only women, but men who are having to hold down two or three jobs.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Zero-hours contracts.

[Mr Brown]

Yes, this is about the whole employment method. We cannot deal with this just with a stand-alone national minimum wage. When we came to office we had the windfall levy on the privatised utilities, which allowed us to introduce the new deal programme for young unemployed people, the long-term unemployed, the disabled and lone parents, and then we introduced the tax credits system. It was about pulling together two or three strands to make things work, and that led to a step change in people’s standards of living.

[Mr Brown]

I refer to the coalition Government in that regard—credit where credit is due—and I will come to that point later.

With regard to the reduced levels of unemployment, we need to look at the figures from the Office for National Statistics for the weekly average number of hours worked across the country and compare them with the number of people working over the past 12 to 18 months. Although more people are working, we have not seen an increase in the number of hours being worked on a pro-rata basis. What we are seeing—this relates to the point about zero-hours contracts—is that more people are in part-time work or working shorter hours. Some people are desperate to grab four or six hours in order to supplement a job they are doing elsewhere. The unemployment figures might be falling, but the overall number of hours being worked across the country is not increasing at the level we would have expected for the number of people now in employment.

People need job security, but we are seeing a scale of job insecurity in this country that we have not seen for many years, so I challenge Government Members to say that we have not gone backwards in some respects. I hate to say it, but there are some unscrupulous employers who are prepared to exploit zero-hours contracts and short-term working for people who are prepared to do a hard day’s work if given the chance. I also want to mention migrant workers, because I was talking about that with three or four guys I met five or six weeks ago. They were very angry, and not about the migrant workers they were working with, but about the fact that their employer was exploiting the situation in order to keep wages low, with local indigenous workers paying the price.

I want to mention the personal tax allowance again, because it is a big issue. I applaud the aim of taking people out of tax. I have challenged Treasury Ministers on this, as has my hon. Friend the Member for Edinburgh East (Sheila Gilmore), because many people are not working enough hours to come anywhere close to paying tax. The fact is that it is the rich, or those in well-paid jobs, who reap the benefits of the personal allowance changes. I also recognise that there is always a narrow band of people who benefit, and if we shift or change tax bands and tax rates, some people will be more heavily penalised than others.

[Mr Donohoe]

This is an increasingly important subject. We must also consider the fact that north of the border, as my hon. Friend will know, many local authorities are talking about not only a minimum wage, but a living wage, because of the problems associated with the minimum wage. Does he agree?

[Mr Brown]

Yes, I think that it is about a step change. We need to recognise that we should do whatever we can to increase the quality of life and lessen the impact of the cost of living on households. My local authority will be looking long and hard at that issue and imploring the businesses it offers contracts to—we know that we cannot demand it—to pay a living wage.

In 1997, we were told that we would lose millions of pounds as a result of a national minimum wage, but my party had clearly done our homework while in opposition, because the figures showed that when we give £1 million to the lowest-paid people in any community, they will go out and spend it, which creates 35 to 40 jobs in the community. That is what we saw. Some people in my area saw businesses shedding jobs, because the type of work they were doing was coming to the end of its life, and they could not understand why unemployment levels were still low. Unemployment was falling simply because we were putting money into the local economy.

I will return to a point that was made when we were discussing the benefits increase earlier this year. The figures clearly show that freezing benefits for the lowest-paid people over a three-year period took £6 billion out of the local economy. Giving some of the poorest paid extra money stimulates the local economy.