Enterprise Bill [Lords]

Chris Stephens Excerpts

Tuesday 2nd February 2016 Commons Chamber

[Ms Eagle]

The Bill has a particular phrase attached to it—public sector fat cats—and when we look more closely at it, we see that it applies to non-public sector workers and non-fat cats. We will be taking a close look at that.

[Chris Stephens (Glasgow South West) (SNP)]

The term “public sector fat cats” surely does not apply to a civil servant who earns less than £25,000 a year, whose length of service may be 30 years or more. The unintended consequence of the policy is that it will impact on the longest-serving employees.

[Ms Eagle]

There are what I have rather politely and generously, in my view, referred to as unintended consequences of the cap, and I noted with some distaste the Secretary of State’s use of a pejorative term such as “public sector fat cats” to justify the existence of the proposed cap. It is clear that the cap could impact, as the hon. Gentleman says, on those on moderate and even lower pay with long service, and it could impact on pension “strain” payments for workers, rather than on those on the highest salaries with much shorter service.

The Cabinet Office has confirmed that some civil servants earning less than £25,000 a year could be affected by the cap because they have long service. Surely this was not the intention. Again, the Opposition will explore some of the consequences. We have even heard that essential restructuring in some public services is being held up by the unintended consequences of this crude measure.

--- Later in debate ---

[Hannah Bardell (Livingston) (SNP)]

I rise to speak for the SNP, and, unfortunately, against the Enterprise Bill, which contains the typical Tory agenda of the privatisation of public assets, and the penalisation of public sector workers. Although we support the long-overdue creation of a small business commissioner, the action to support small businesses does not go nearly far enough. The Bill is, in our view, a wasted opportunity to back small business, incentivise investment and innovation, and encourage entrepreneurship.

The ill-conceived and badly drafted nature of some aspects of the Bill are particularly disappointing. Our key concerns lie in three areas. First, we are concerned about the level of support for small business. We welcome the concept of a small business commissioner, and it is important that the office has real power and teeth to address critical issues facing small businesses. The picture on private sector late payments is getting worse, and the SNP will press for further protections for small and supply-chain businesses around late payments and retentions. The SNP Scottish Government have a proud record of supporting small and medium-sized businesses, and we want the UK to do all it can. Unfortunately, a commissioner with no powers of reprimand is of little value, and it comes at a significant cost to the taxpayer.

Secondly, we feel strongly that the UK Green Investment Bank has acted as a core investor in the UK’s green economy, and it should continue to do so by sticking to its green objectives. The SNP opposes plans to privatise it, which would result in the loss of a significant public stake and of the bank’s green objectives. The GIB is an established means of managing the pressing and vital transition towards a low-carbon economy.

Sadly, the UK Government are not only failing to give the right support to our oil and gas sector, but simultaneously pulling the plug on renewable technology subsidies and projects, while also privatising the very bank set up to help the UK to meet its green objectives. That is a triple whammy of destruction for the future of our energy industries. The SNP support the Government maintaining a significant public stake in the GIB. Given the impact of devolved law, any privatisation of the GIB in part or in full will require a legislative consent motion in the Scottish Parliament.

Thirdly, one of the more poorly thought out and drafted parts of the Bill is the capping of exit payments for public sector employees. Despite the UK Government’s rhetoric, that will affect many public servants on low and moderate salaries—midwives, nurses, librarians and social workers—who have given long service to the public sector, as we have already heard. Some parts of the Bill are so poorly drafted that they make little sense. The Bill does not properly reflect the results of the consultation undertaken by the Government or the initial plans drafted following the consultation.

[Chris Stephens]

Does my hon. Friend share my concern, and that of the Public and Commercial Services Union, that the consultation period did not follow the Cabinet Office consultation principles, under which there should be a 12-week consultation? The consultation on the exit payments lasted four weeks and took place during a peak holiday period for the civil servants involved.

[Hannah Bardell]

I share my hon. Friend’s concern. If we are going to have consultations, we should let them run for the full period and take proper cognisance of their results.

The SNP opposes the Government’s plans for caps on public sector exit payments. We note the specific concerns raised in the other place regarding the complete lack of an impact assessment alongside the Bill. That is regrettable, but not unsurprising, as this Government seem to lurch from one piece of disastrous legislation to another.

A small business commissioner may be a great idea on paper, and perhaps even in practice, although I am not entirely sure that, at a cost of about £1.1 million, we will get value for the price paid. If the commissioner has no powers to reprimand, how can decisions be enforced? In 2011, research by the Federation of Small Businesses found that 73% of small businesses had experienced late payment in the previous 12 months, with half having outstanding invoices of £5,000 and a fifth of £20,000. The Department’s own impact assessment sets out research by the payments service BACS, undertaken in January 2015, which shows that the average small business is waiting for £31,900 of overdue payments and that late payment is costing small and medium-sized businesses nearly £27 billion every year.

In Scotland, research released by the Bank of Scotland at the end of January 2016 showed that the amount the typical Scottish SME is owed has ballooned by about 60% in the past two years alone. The research found that the average amount owed to Scottish SMEs on invoices has increased from £50,000 in 2014 to £80,000 in 2016. Late payments were identified as the biggest challenge facing firms. FSB Scotland’s Colin Borland has said:

“One in four smaller businesses will go bankrupt if the amount outstanding grows to £50,000.”

We need stronger and more stringent legislation in this area.

The picture on private sector late payments is therefore getting worse. As I have said, we welcome the Bill’s creation of a small business commissioner, who would assist small businesses. However, the SBC does not have the necessary powers to do the job. We share the FSB’s concerns that little detail has been provided about the exact powers and resources the commissioner will have at his or her disposal—for example, the powers to refer cases to the Competition and Markets Authority or to make legally binding rulings. The UK Government could do much more in the Bill to remedy problems in the private sector caused by moneys being withheld from the supply chain.

I recently met those involved with the Specialist Engineering Contractors Group, which represents 60,000 specialist engineering firms in the UK construction industry. They have called for the Bill to provide for a retention deposit scheme. They explained to me that withholding retentions is a common feature of construction contracts and the devastating impact that has on small and medium-sized businesses. At any one time, £3 billion is held in retentions, and £40 million was lost by UK construction firms in retentions in 2015 due to the insolvency of the main contractor.

We believe that a retention deposit scheme could take the form of the project bank accounts piloted by the Scottish Government. I urge the Minster to engage with my colleague Fergus Ewing MSP, the Minister for Business, Energy and Tourism, to hear how well that scheme operates in Scotland. Our Deputy First Minister, John Swinney, announced in April 2013 that we intend to trial project bank accounts. Trials are taking place in NHS Lanarkshire, Transport Scotland’s Inveramsay bridge project and the Scottish Borders Council’s Galashiels transport hub project.

The Scottish Government have also taken action on prompt payment in public procurement. We implemented our prompt payment policy in 2009 by introducing a contract term for all public bodies to ensure that supply chain firms were paid within 30 days under all public contracts. We expect all public bodies in Scotland to follow our lead by implementing and enforcing prompt public payment policies that deal fairly and transparently with businesses, and to publish their results. We hope that they will follow suit and consider those points. Our action on private sector late payments has been supported by the chief executive of the Scottish Chambers of Commerce, Liz Cameron, who said:

“In the current economic climate, businesses need the confidence to invest and grow. Late payments can hold this back and the culture must be tackled from the top down.”

The SNP Government will continue to support the small business bonus scheme, which is delivering rates reductions for more than 100,000 firms across Scotland. We heard earlier at Business, Innovation and Skills questions that there is pressure on the UK Government to look again at that issue. We know that they are considering it and we look forward to hearing the results.

Since its inception, the GIB has acted as a core investor in the UK’s green economy. The SNP wholeheartedly opposes the plans for yet more privatisation, which in the case of the GIB will result in the loss of a significant public stake and the bank’s green objectives. The UK Government must provide assurances that the bank will remain headquartered in Edinburgh and that the full £3.8 billion commitment to the bank will be carried through. We also seek assurances that the UK Government will remain committed to maintaining a significant public stake to ensure that the GIB retains its original purpose as a green bank.

Industry experts have warned that the move to privatise the GIB could deter private sector investment in the UK’s low-carbon economy. Concerns have further been raised over the potential impact that it could have on the tension between the GIB’s longer-term, higher-value projects and the temptation to invest in projects that create short-term returns.

We are particularly conscious of the concerns raised by the Environmental Audit Committee in its 2015 report, which said that

“two key risks to GIB cannot be avoided merely by protecting its green purposes: first, the risk that GIB will move its focus away from novel and complex projects which struggle to find funding in favour of easier and less complex projects, and second, the risk that a privatised GIB could invest in areas which may damage its reputation and undermine its role and leadership in the green economy.”

If a Committee of this House is so concerned, why are the Government not concerned and why are they not taking action in this regard?

It is the firm view of the SNP that the Enterprise Bill’s removal of public sector controls on the GIB would require a legislative consent motion in the Scottish Parliament, given the impact on devolved law. That view is supported by Aileen McHarg, the professor of public law at Strathclyde University, who said it was “incontrovertible” that the green purposes included in the legislation related to devolved matters and that Scottish consent would be required for any change that might

“have implications for future investment in green technologies”.

I hope that the Minister and the Government heed that point and remember that we have devolution for a purpose, not just to mitigate the dire decisions of this UK Government and to pick up the pieces of Tory policy, as is so often the case.

A number of the bank’s investments are relevant to Scotland, including a £2 million investment in a sewage heat recovery system installation programme in locations across Scotland; nearly £30 million of equity investment in the construction of Levenseat Renewable Energy Ltd’s energy waste recycling plant; and a £6.3 million loan to Glasgow City Council to enable the replacement of its streetlights with lower-energy lights. The list goes on. All those projects are significant to the local communities of Scotland and to Scotland as a whole. We do not want any of these opportunities to be lost to yet more privatisation.

Finally, I turn to the plans in the Bill to cap exit payments for public sector employees, which will, despite the UK Government’s rhetoric—and it has been poor rhetoric at that—affect many public servants on low to moderate salaries. The SNP shares the concerns of the union Unison, which opposes the Government’s plans for caps on public sector exit payments. The Cabinet Office has confirmed that some people who earn less than £25,000 a year could be affected because of their long service—that is, serving the public, often for salaries below those in the private sector.

The trade union Unison has pointed out that the proposed cap would affect redundancy payments for a wide range of NHS staff and would not be limited to groups that the public view as executives. Because, as we have heard, redundancy calculations are made on the basis of length of service and earnings, and because a significant number of NHS staff work unsocial hours, capping the payments could affect staff in band 6 and above. The jobs that fall into band 6 include nurses, midwives and paramedics. Are we really saying that those people are fat cats and that they do not deserve such payments at the end of very long, difficult and challenging careers?

In January 2015, the Minister for Employment promised an exemption for low-paid public sector workers. She said:

“This commitment, which will be included in our 2015 General Election manifesto, will cap payments for well-paid public sector workers…Crucially, those earning less than £27,000 will be exempted to protect the very small number of low earning, long-serving public servants”.

Unfortunately, the Bill does not reflect the promise made by the Conservative Government.

The Government’s plans have also failed to take account of inevitable inflation and earnings growth. If this cap is introduced, there must be a commitment to index-link the cap, to ensure that it meets its original intention without becoming more and more punitive over time. The Local Government Association has criticised the Government’s plans, stating:

“The consensus among the respondents to our consultation exercise felt that the policy as drafted with a cap set at £95,000, which includes strain on fund costs, unjustifiably penalises older, longer serving, junior to middle ranking employees in local authorities.”

Unison highlighted a particularly poorly drafted and concerning section of the Bill—well, perhaps it was intended. Under section 5, payments made in respect of death are outlined as exempt, but in the Government’s hurry to introduce those harsher regulations at the last possible moment before the Bill is enacted, they seem to have decided that dead people might be worried that their exit benefits might be affected if they decide to return to work in the public sector. That does not make sense, and it needs reviewing and proper thought.

The rhetoric of the Tory Government on the pay and conditions of our vital public servants stands in stark contrast to the record of the SNP Scottish Government. The Scottish Government introduced the living wage to the public sector pay policy in 2011, initially helping 6,000 public servants and benefiting around 3,000 workers each year. The living wage of £8.25 per hour is now paid wherever the Scottish Government control the pay bill.

In Scotland, the SNP Government highly value our NHS staff. We have not imposed the same unfair contractual changes on junior doctors that the Tories at Westminster are attempting to impose, and we have protected the nurses bursary, which the Tories have scrapped in England. We have maintained a no-compulsory-redundancy policy, while in NHS England there have been more than 17,000 compulsory redundancies since 2010. Overall, there may be some good intentions buried among some bad ideas in the Bill, but the SNP feels that it is a missed opportunity to back small business, incentivise investment and innovation, and encourage entrepreneurship. It is more “bits and bobs” than the bigger picture.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

As other SNP Members have said, the Bill is a typical Government effort. It claims to be ambitious, but does not do enough. It has too much of a scattergun approach and includes too many subjects, although it does allow the Tories to squeeze in old favourites, including privatisation and attacks on public sector workers.

Let me start with the Green Investment Bank—another supposed Better Together demonstration of the merits of Scotland’s staying in the UK, given the decision to site the bank in Edinburgh. Here we are a few years down the line, and it looks like that might go the way of the onshore renewables subsidies, which were also originally provided on the UK Government’s so-called broad shoulders. It beggars belief that a publicly owned green initiative should be deemed suitable for sell-off and privatisation. We therefore need to know what the Government’s commitments are to environmentally beneficial projects and specifically to Edinburgh.

On public sector payments, I have been contacted by constituents who want me to oppose part 8. Those hard-working public sector workers see it as yet another attack on their terms and conditions. We have heard about fat cats, but I can almost bet that the so-called civil servant fat cats will be the ones who get the waivers and their big lump sums. Meanwhile, lower-paid public sector workers with long service will get no waivers, and their lump sums will be limited.

We have heard a lot recently about the Women Against State Pension Inequality campaign and women who took early retirement and who are now struggling to get back into the workplace and struggling financially. That demonstrates that we should not limit people’s choices. Some women have just discovered that they need to work six years longer. They will be looking at the options, and at whether they can take early retirement and leave the workplace. The caps in the Bill could affect their choices.

[Chris Stephens]

My hon. Friend is emphasising the discrimination that could come from the exit payments. Does he agree with me and with trade unions such as Unison and the Public and Commercial Services Union that, before these changes are implemented, an equality impact assessment should be carried out?

[Alan Brown]

I fully agree with my hon. Friend. The Lords asked for an impact assessment to be undertaken, but that has not happened, so I hope the Minister will take note of that.

To finish on the public sector payment cap, what we need is good governance, not Whitehall-imposed caps. We heard earlier that this is all about devolving power to local government, and this issue is an example of where we could follow that through, rather than allowing Westminster to hit care workers, teachers, nurses and emergency workers.

Let me turn to an issue that other Members have raised: prompt payments and their effect on small businesses. Once again, I would suggest that the UK Government could take a lead from the Scottish Government. The Scottish Government have commissioned a review on public sector procurement in the construction industry, where cash flow can be a major issue.

I am a civil engineer, so I am well aware of the problems late payments can cause, particularly when companies have to make large outlays on materials as part of a job specification. I have actually been a client and a consultant, so I have been at both ends—I have received begging phone calls from companies that are desperate for money, and I have had to go cap in hand to chase up money that a company needed for its cash flow.

That is why I welcome the Scottish Government’s current project bank account trial for public sector procurement projects. Project bank accounts are ring-fenced and underpinned by legal trust status. They allow subcontractors to receive their money at the same time as contractors, rather than having to wait for it to be channelled through the main contractor, which leads to delays and allows the main contractor to withhold moneys to have leverage over the subcontractor.

Another omission from the Bill, which was raised in the Lords, is cash retentions in the construction industry. For too long, that has been the elephant in the room. The Government have not wanted to talk about it, and that seems to have been the case again today. From my experience in the construction industry, I understand the need for a mechanism to deal with snagging at the end of a project or during the maintenance period. I know how difficult it can be to get a contractor back on site once they have moved on to the next job. Equally, however, no contractor should have to wait years to get their retention money back, because that hits cash flows. The 5% retention money is also often the contractor’s profit margin on the job, which shows how important that money is to contractors. With up to £3 billion held in retentions at any one time, and with £40 million lost in 2015 alone due to insolvencies, we can see how important cash retentions are in the construction industry.

The cash-flow problems that can be caused manifest themselves in different ways, such as an inability for companies to bid for other projects because the risk is too high, or borrowing from banks being impeded. Banks do not recognise retentions as a future income because of the uncertainty that goes with the release of retention moneys. That completely impedes companies’ ability to invest in training and apprenticeships. That is counter-intuitive considering that, while one section of the Bill is about encouraging apprenticeships, it does not tackle the issue of cash retentions that stops companies taking on apprenticeships. It seems incredible that the Government recognise cash-flow issues in general, yet avoid dealing with retentions being paid years late.

We can also imagine the administration time that is wasted in chasing these retention moneys up. I mentioned main contractors using payments as leverage over subcontractors, and it is absolutely the same for retention moneys. Specialist engineering contractors have correctly observed that a scheme could be implemented without impeding the Government’s ongoing review. That review is completely reactive in terms of amendments tabled to the Bill in the Lords, and not proactive. Again, that is indicative of the UK Government’s approach.

The suggested model is a retention deposit scheme based on the tenancy deposit scheme. That seems logical, and it would easily align itself with the trial currently being operated by the Scottish Government. A constituent has said to me that he has given up on this issue being addressed in his lifetime. We can deal with it in this Bill.