Small Business, Enterprise and Employment Bill

Catherine McKinnell Excerpts

Wednesday 16th July 2014 Commons Chamber

[Vince Cable]

Anything that raises wages takes people out of the tax credit net. There are, of course, other ways of dealing with this problem, one of which is taking people out of tax, and that is what the Government have been doing through their tax threshold. This Bill builds on the minimum wage system—I will say a few words about that in a moment—and does not relate to the living wage. The living wage presents all kinds of practical problems, not merely that it is way in excess of the current minimum wage and therefore presents problems for employment levels. There is a perverse feature that the recommended level of the London living wage, which would introduce a regional differential, is highest in London, which is an area with the highest levels of unemployment. If we are concerned with maximising employment, pursuing the living wage may not be the best of way of doing that. None the less, I have given guidance to the Low Pay Commission on how we increase real wages, and that is a major policy objective. I think we are better doing that by strengthening the minimum wage regime.

I assure the House that the Government are taking a series of steps to ensure proper penalties for employers who fail to comply with the minimum wage. In 2013-14, 650 employers received penalties totalling £815,000 for failure to comply with minimum wage law, and we have increased the penalty percentage from 50% to 100% of underpayment. A naming and shaming regime has come in since the new year, and we have increased the maximum penalty from £5,000 to £20,000, which came into effect in March. The Bill goes one step further. The maximum penalty will now apply on a per worker basis, rather than per notice. As a result, in future overall penalties will be substantially higher for employers that owe high arrears to multiple workers.

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

I appreciate the points that the Business Secretary is making, but is he aware just how vulnerable some of the workers affected by these arrangements are? Constituents have come to me who dare not go to an employment tribunal. They are already in a vulnerable position because of their employment and dare not pay the costs of that tribunal in case they are unsuccessful. Has the Business Secretary really considered the reality for workers affected by the policies he is introducing today?

[Vince Cable]

The point of access for people who have such concerns is the pay and work rights helpline, which is free, so the first stage of remedying those faults and getting an investigation into illegal activity does not cost anything. The tribunal is a different process as that involves dismissal, but if we are concerned with remedying abuses of the minimum wage, we have a system in which complaints can be made free of charge—there is access to the system—and in which there is effective and prompt enforcement.

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[Vince Cable]

Yes, I give that assurance. We have thought hard about the balance that must be struck between the protection of privacy and openness. Many of us have had examples in our constituencies—I certainly have—of individuals who were shareholders in companies that were targeted because of animal rights issues and suffered enormously. Naturally, we wish to protect people’s individual addresses, for example, and we will take steps to ensure that the exemptions are carefully thought through and are of that kind. In general, however, the principle of openness is absolutely right.

The final element in the transparency agenda will be to prohibit companies from acting as directors—again, with exemptions—because in the past that was often used to conceal illegitimate transactions.

[Catherine McKinnell]

I thank the Secretary of State for the work that has been done in this area, but one concern that has been raised is that, although the penalties in relation to maintaining the records of the person of significant control are relatively high at a maximum of two years’ imprisonment, the sanctions for not providing that information to the public register are relatively low at £250 a day, given, as the Secretary of State has said, the staggeringly high amounts of money that are potentially involved. Has he considered whether the deterrent is sufficient?

[Vince Cable]

We will obviously consider the hon. Lady’s points, but it is worth bearing in mind that the vast majority of companies that register are extremely small and that sums of money that may seem trivial for a big international company may be quite onerous for a small company. We need to keep that proportionality in mind.

Before I leave the issue of transparency, let me deal with two other issues dealt with in the Bill, the first of which relates to director disqualification. We want to modernise and strengthen the disqualification regime, giving the business community and consumers confidence that wrongdoers will be barred as directors. To give an example of the kind of problem that currently arises, it is very difficult in disqualification proceedings at present to take into account serious abuses that have occurred overseas when individuals have been directors of companies abroad. In other cases, directors have often had multiple failures, which is perfectly reasonable in entrepreneurial culture, but some have done it with bad intent. We are familiar with the problem of phoenix companies, which deliberately fail in order to be reborn and exploit consumers. We want to make sure that those considerations are borne in mind in the director disqualification regime.

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[Catherine McKinnell]

My hon. Friend is making a powerful argument. Further to the Secretary of State’s response to my inquiry about a constituent who came to me, I just want to clarify that she had already gone to the helpline and been told that she had to go to tribunal, but she did not want to do that because she was frightened of the costs.

[Mr Umunna]

That is an example of the effects of what this Government are doing, which I think is truly reprehensible.

The other issue about tribunals is that there is a serious problem of non-payment of employment tribunal awards. We therefore welcome clause 136, which will allow for the imposition of financial penalties on employers who fail to pay the compensation that is awarded at tribunal. Indeed, the Department’s own research indicates that in 2013 just 49% of people successful at tribunal were paid all the compensation due to them, with 35% receiving none of their compensation at all. However, I am not too sure how these provisions are intended to be enforced or what will happen to those seeking redress from a company that has gone insolvent, for example. That is another issue for Committee.

Let me move on to where I believe there will be real disappointment at the modesty of the Government’s proposals, starting with the national minimum wage. We know what the Conservative party’s argument is going to be at the next general election—all this nonsense about Labour ruining the country. Let me remind Conservative Members that, when we entered government in 1997, some people in this country were earning as little as £1 an hour. We are proud to be the party, along with an entire labour movement, that saw to it that a national minimum wage was introduced. For that reason and many others, I am more than happy to debate our record and the real difference we made to the country when we were in office. We left it in an immeasurably better situation in 2010 than we found it in 1997. [Interruption.] As I said to the new Minister for Business and Enterprise, I am happy to debate these matters with him in future.

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[Ms Margaret Ritchie (South Down) (SDLP)]

I welcome the general intention of the Bill to support small businesses, but I worry that it does not go far enough. In Northern Ireland, small businesses form the heart and the backbone of our local economy, and they have faced an extremely challenging economic environment over the past six years. I agree with those right hon. and hon. Members who have said that the unwillingness of banks to lend to individuals has resulted in many of those people’s businesses going to the wall. I recall hearing about conversations between a bank and a local farmer who lost his business, and between a bank and a local shop owner who sadly had to close his business. In both cases, this was a result of the banks’ unwillingness to show a level of mercy and compassion.

I hope that the measures in the Bill will go some way towards helping businesses to compete and grow and, in doing so, to create jobs. I know that the Federation of Small Businesses is encouraged by the measures to strengthen the prompt payment code and to force larger businesses to publish their payment terms. Today, however, I would like to take this opportunity to focus on another element of the legislation: the issue of zero-hours contracts contained in part 11 of the Bill.

The Bill at least acknowledges that the wide-scale use of zero-hours contracts can present a problem, but I fear that it will do little seriously to reform the practice. It is predominant in the lower-skilled sectors of the economy and in manual work, but just yesterday I heard reports of a university lecturer post being advertised on a zero-hours basis. The practice has become more and more common, and it represents a gradual erosion of the important connection—and the concept of a fair settlement—between an employer and an employee.

This is not some abstract problem on the fringes of the economy; it is becoming increasingly prevalent. Last year’s excellent “Channel 4 News” report on care home staff showed the reality for people on such contracts. My hon. Friend the Member for Sefton Central (Bill Esterson) has already referred to this issue. Those people have no economic power; they live day to day with little ability to manage their own finances or plan for the future. They have their hours texted to them, often with little notice, and they have no flexibility or rights. They have little possibility of negotiating any form of pay rise because they have minimal employment rights and there is always someone else ready to do their job.

[Catherine McKinnell]

My hon. Friend is making a powerful speech about the individuals who face those challenges. Is she also aware of constituents like mine who even have trouble accessing housing benefit and other forms of support because their hours fluctuate so much from one week to the next? That makes it very difficult for them to access the state support that should be there for them.

[Ms Ritchie]

I agree with my hon. Friend’s fine intervention and compelling point. I have had similar instances of people who, because of the fluctuating nature of their contracts and their lack of access to money on a continuous basis, have found themselves outside the housing benefit bracket and in trouble, so to speak. The nature of zero-hours contracts removes any sense of stability from people’s personal or family life, and leaves them on a treadmill with no hope of promotion, a pay rise or progress. How can people be expected to manage a tight family budget on such a basis?

I welcome the fact that the Bill will ban exclusivity clauses for zero-hours contracts, which prevent people from working for another employer even when no work is guaranteed. I issue a caution, however, as that is only a start and does not get at the underlying problem represented by the low-wage, temporary and fragmented nature of large parts of the economy. Retail prices index inflation has tracked above wage growth for five years, and more and more people are being pushed into shadow jobs that offer no security and leave them precariously perched on the bottom rung of the employment ladder. Is that correct? Is that proper? Is it fair? More concrete measures must be put in place to change those practices and re-establish the connection and fair agreement between an employer and employee. I hope that progress made during the Bill’s passage through this House will enable that to happen, and that the Minister will provide us with some solace in that regard this evening.

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

Speaking in my capacity as co-founder and co-chair of the all-party group on anti-corruption, I welcome the proposals in the Bill to create a public register of beneficial owners known as the register of people with significant control. That move will mean that the UK is the first major economy to have a public register providing details of who really owns and controls what are currently anonymous shell companies. That is important because, although businesses play an important role in developing thriving societies around the world, some companies abuse global corporate structures. Secret ownership structures allow wealth to be hidden away. Many companies and individuals avoid or evade tax by keeping their money in a complex network of trusts and shell firms, which are often based in secretive tax havens. That deprives developing countries of much needed tax revenue that could be invested in public services and infrastructure.

It is secret company ownership that makes most cases of large-scale corruption, criminal money laundering and terrorist financing possible. A World Bank review of 213 big corruption cases between 1980 and 2010 found that more than 70% of them relied on anonymous shell entities. Many of the company service providers were registered in the UK or in our Crown dependencies and overseas territories.

The cost of this activity to developing countries is vast. The best recent estimates suggest that between $21 trillion and $31 trillion in private financial assets is held in tax havens, which is greater than the entire global aid budget.

That is why the all-party parliamentary group has been lobbying hard and speaking to Ministers about how we can ensure that the public register does the job that it sets out to do. We want to ensure that a number of issues are taken into consideration. We want to ensure that the information on beneficial ownership is available to the public as open data, that it is machine-readable and that it conforms to the Open Knowledge definition. We want to ensure that the information can be verified and that there is sufficient information to distinguish one individual from another. For example, a date of birth might be necessary. We want to ensure that there is a legal responsibility for companies to acquire and declare information on the identities of beneficial owners, as well as a legal requirement on beneficial owners to declare to companies that they are the ultimate owner. As I said to the Secretary of State, we want to ensure that there are significant penalties for failure to comply to ensure that everybody complies with the requirements. People must not think that it is worth while ignoring the requirements and they must not get away with doing so.

I want briefly to raise the concerns of Public Concern at Work about whistleblowing. The proposals go some way towards addressing those concerns, but do not go far enough. There are still concerns about gagging clauses. Many people who receive severance payments believe that they are gagged, but in law they are not. There are concerns about blacklisting and job applications. There is no cause of action in law if somebody who has blown the whistle and has been put on a blacklist is not recruited on that basis. There is currently no protection for armed forces and national security whistleblowers who raise concerns about wrongdoing or malpractice. We need greater protection for individuals who seek advice from trade unions. For example, people who raise concerns but do not take the matter forward still need protection under the law. We all welcome greater support for whistleblowers, so I would be interested to hear the Minister’s views on the concerns that have been raised.

Finally, it would be remiss of me not to touch on the proposals in the Bill on pub company regulation, particularly as I am due to meet members of the Tyneside branch of CAMRA at the Millstone pub in South Gosforth on Friday. Many of the issues have been discussed by hon. Members, but Tyneside CAMRA believes that the Government need to go further in protecting community pubs. Its members are particularly disappointed that the Bill does not include market rent only and guest beer options, because it believes that requiring the big pubcos to provide tied licensees with those options would be the simplest means of ensuring fair play. Those options would support not only community pubs, but microbreweries across the country, such as the excellent Big Lamp brewery in Newburn in my constituency.

[Andrew Griffiths (Burton) (Con)]

Will the hon. Lady give way?

[Catherine McKinnell]

I will give way.

[Madam Deputy Speaker (Dame Dawn Primarolo)]

No you will not, because your time is up. You just missed it by a second, I am afraid.