Chuka Umunna
Main Page: Chuka Umunna (Liberal Democrat - Streatham)
Vince Cable
I thank my hon. Friend for his positive response. The Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for North Norfolk (Norman Lamb), who will guide the Bill through Committee, will be able to develop that a little more, and any insights that my hon. Friend has for improving that new idea will be warmly received.
Mr Chuka Umunna (Streatham) (Lab)
Of course, if an employee and an employer have “without prejudice” discussions that involve an offer to pay off and for the employee to depart on that basis, at present that cannot be adduced at tribunal. The Secretary of State will know that a relationship of trust and confidence is essential to the existence of an employment relationship. How does he see that working if an employer’s offer to pay off has been refused by the employee who feels that there is no reason why they should leave?
Mr Chuka Umunna (Streatham) (Lab)
I beg to move,
That this House, whilst supporting the principles of the Green Investment Bank and affirming its belief that active government should work in partnership with business to encourage long-term sustainable economic growth, facilitate enterprise, protect the rights of all, particularly low-paid, workers and simplify regulation where necessary, declines to give a Second Reading to the Enterprise and Regulatory Reform Bill because it does not provide a strategy for economic growth; believes that the Bill contains inadequate measures to boost business confidence, enhance this country’s international competitiveness, increase competition in consumer markets or protect consumers from powerful vested interests; further believes that the Bill fails to provide sufficient support to empower shareholders, investors and employees on executive remuneration to bring to an end excessive rewards for corporate failure; and is concerned that the Bill grants the Secretary of State additional powers to alter compensatory awards for unfair dismissal and contains provisions relating to the conciliation process that could dilute the rights of people at work.
I will deal with each element of the Bill in turn and, in so doing, explain our amendment. Given the very varied nature of the Bill, that will take some time, but I will do it as swiftly as possible because many others want to take part in the debate.
First, I want briefly to consider what the Government claim the Bill will achieve overall. In January last year, not long after the Government’s spending review, the Secretary of State told this House:
“economic growth is now strong. It will become stronger as a result of the work that the Government are doing in stabilising finances”.—[Official Report, 13 January 2011; Vol. 521, c. 429.]
Quite the opposite has turned out to be the case. Since the spending review, the economy has shrunk by 0.4%, we have been tipped into a double-dip recession, over 2.6 million people are now out of work, and 50 businesses are going under every single day. That was not the case back in May 2010; it is now, thanks to the policies of this low-growth Government. When my party left office, the World Bank ranked the UK fourth in the world and first in Europe for ease of doing business. This year, we have slumped to seventh place. Businesses face an increasingly difficult operating environment, not least because of the problems that sound and successful firms have found in accessing finance, with net lending to business contracting year on year in every month since this Government came into office.
In fairness to the Secretary of State, he has recognised his and the Government’s failings. He said that they have no “compelling vision” for the country, that they lack
“a confident message on how we will earn our living in the future”,
and that there is
“no connected approach across government”
to driving growth. He suggests that the Bill will change all this. Indeed, on the day of its First Reading he said:
“The measures in the Enterprise and Regulatory Reform Bill will help make Britain one of the most enterprise-friendly countries in the world.”
He said that it would resolve the ongoing issue of no growth. That remains to be seen. I sincerely hope that that will be the case for the sake of our country, but I and many businesses doubt it.
Julian Smith
I challenge the hon. Gentleman’s point that Labour left the country in a good regulatory state. The CBI states that 107 of the 152 employment regulations were put on the statute book during Labour’s period in power. Was that leaving the country in a good regulatory state?
Mr Umunna
What I cited was the World Bank’s assessment of the state in which we left the environment for businesses to carry out their work. If the hon. Gentleman reads the guidance that has been issued by his Government, he will see that we have been praised for doing things such as introducing the primary authority scheme, which was supposed to, and did, reduce the regulatory burden on businesses.
Perhaps the Secretary of State’s most damning criticism of his and his Government’s actions is that they are “frankly, rather piecemeal”. At first sight, that is precisely what the Bill is. It is a hotch-potch of measures that provides no discernible overall vision or confident message. There is no evidence of a connected approach across Government to drive growth.
Business was straight off the blocks with its criticisms of the Queen’s Speech, the centrepiece of which was this legislation. The director general of the British Chambers of Commerce said what many people have been saying for many months:
“There is a big black hole when it comes to aiding business to create enterprise, generate wealth and grow.”
He is right. Our amendment makes it clear that the Bill, viewed as a whole, does not change that assessment.
I will quickly go through the parts of the Bill and set out our position on each.
Mr Umunna
I will make a bit of progress, because I want to ensure that there is time for others to get in.
Part 1 will set up the green investment bank. I have stated on many occasions, as has the Leader of the Opposition, that it is crucial to long-term economic growth to have an active Government working in partnership with the private sector. In our view, the Government should work with business to identify the sectors from which future demand will come and to ensure that companies are set up to meet that demand. There is and will continue to be a growing demand for green technologies, so we need an active industrial strategy to support the low-carbon economy, as I and my right hon. Friend the Member for Don Valley (Caroline Flint) have argued.
A critical component of that is the green investment bank. That is why we set up the green investment bank commission in 2009 with a view to establishing such a bank, and why we committed ourselves to establishing such a bank in our 2010 manifesto. We will therefore not oppose the bank—our amendment makes it clear that we support it in principle. Also, I do not want to add further long-term policy uncertainty in this area, after the huge uncertainty that the Government have heaped on the low-carbon sector since coming to office. I note that the deputy leader of the Liberal Democrats, who has left his place, conveniently ignored the decision on feed-in tariffs, which is perhaps the most glaring example of the uncertainty that has been created.
As the Secretary of State said, Lord Smith of Kelvin and Sir Adrian Montague were appointed as the chair and deputy chair of UK Green Investment Bank plc during the Whitsun recess. We welcome their appointment. Having heard what the Secretary of State has said, I suggest that until this entity is given the power to borrow and to lend, allowing it to leverage its initial equity to make more capital available, it will not be a body that most people would recognise as a bank. It is a fund, whereas it is an operational bank that the country needs. The Secretary of State made has made it clear that it will not be allowed to borrow—he repeated this today—unless public sector net debt is falling as a percentage of GDP in 2015. The earliest it is likely to be able to borrow is therefore 2016. That is a delay of four years from now. Ed Matthew, the director of Transform UK, the business alliance campaigning for the bank to be set up, put it well:
“Allowing the bank to borrow is the key to generating growth and rebooting the UK economy. Delaying this power until the economy has recovered is like a doctor waiting for a seriously ill patient to recover before giving him life-saving medicine”.
David Mowat (Warrington South) (Con)
I am listening carefully to the shadow Secretary of State’s comments on the green investment bank. He has talked about the importance of low-carbon industries. Does he agree that the scope of the green investment bank should include the nuclear supply chain, which is far and away the biggest low-carbon industry in our country? That would enable us to lend to Sheffield Forgemasters, a company that I have heard him talk about many times.
Mr Umunna
We will wait to see the detail that the Government come forward with in Committee. We are clear that the bank needs to step in to fill the funding gap if we are to green our economy. It is with that in mind that we will decide our position, as and when the Secretary of State comes forward with the detail.
Joan Walley
To go back one step, what my hon. Friend just read out about the need for borrowing powers was exactly the recommendation of the Environmental Audit Committee. In the Public Bill Committee, will he explore with the Government what progress has been made in respect of state aid rules to ensure that there is no impediment to getting this off the ground?
Ann McKechin (Glasgow North) (Lab)
Does my hon. Friend agree that the green investment bank must not be a bank of last resort that simply takes the projects that no one else is prepared to take, but must drive investment forward, taking the private sector with it, particularly in areas such as offshore wind, tidal power and carbon capture, which we have plenty of opportunity to develop further?
Mr Umunna
I could not agree more. The Government have committed to additionality and we will look to ensure that that occurs.
Part 2 of the Bill relates to employment law, which has attracted much public concern. As I have said before, we are not in a double-dip recession because of the rights that people in this country enjoy at work. No amount of sabre rattling and nonsense from Government Members about the need to allow employers to fire employees at will is going to get us out of recession. That is a simple fact. We are in a double-dip recession because of a lack of demand. Watering down employee rights will not boost demand. In fact, it is highly likely—
Mr Umunna
I was wondering when a Government Member would seek to intervene. I will give way shortly.
Watering down employee rights will not boost demand but is highly likely to do the opposite. As the Chartered Institute of Personnel and Development said last week, increasing job insecurity is more likely to damage growth and consumer confidence than increase them. I say to the hon. Member for Bedford (Richard Fuller) that the Federation of Small Businesses has been in contact with us today about the Government’s proposals to allow no-fault dismissal, with fewer employment protections for those working in small businesses, for which he has argued. It has said that
“those who do take employment in small firms could be lower skilled, less productive workers willing to accept lower protection, making it even more difficult for these firms to grow”
and that
“there is a question that with weakened rights, employees in small firms would find getting access to credit more difficult. If so, that would make labour recruitment for small firms even harder.”
Mr Umunna
I say to the hon. Member for Bedford and to the hon. Member for Northampton South (Mr Binley), who says that that is absolute nonsense, that I have quoted the Federation of Small Businesses word for word. It has made it clear that replacing the need for good management with a hire-and-fire culture does not fit with its views on good employee relations.
Mr Gyimah
There is a fundamental misunderstanding here. It is a misrepresentation to say that any conversation about making it easier for both employers and employees to exit a relationship that is not working is an attack on workers’ rights. That is simply not true and it is not what the Bill tries to do. The shadow Secretary of State has mentioned that we need growth. It is important to remove everything that stops investors being confident enough to invest. Access to finance is one such thing, but so is the confidence to hire people. That is why the Bill seeks to simplify the employment tribunals system.
Madam Deputy Speaker (Dawn Primarolo)
Order. A lot of Members are waiting to speak, so interventions must be brief.
Mr Umunna
I will expand on that point in more detail later, but what I can tell the hon. Gentleman now is that when I ask businesses what is currently holding them back, most say a lack of orders and demand, not the rights that their employees enjoy at work. If we are looking to encourage businesses to hire people, why not give all micro-businesses a national insurance break—I believe he has a seat in the south-east—when they take on extra workers? That would do more to help them grow their businesses.
Mr Binley
I know that the shadow Secretary of State admires experience. He knows that I founded two companies that collectively employ 260 people. He knows that we deal with many, many small businesses, and I am involved with them on a weekly basis. I can tell him that many small businesses are frightened to take people on because they are frightened of being blackmailed, should it not work out. That is a real problem, which his party needs to face up to.
Mr Umunna
I acknowledge the hon. Gentleman’s great wisdom and experience, but I respectfully disagree with his overall depiction of employees blackmailing their employers willy-nilly. I say that as a former employment law solicitor who has advised business people like him, but employees too.
Richard Fuller
May I point out that this is the Secretary of State’s Enterprise and Regulatory Reform Bill, not mine? I am sure that mine would be somewhat different. The shadow Secretary of State talks about job protection, and about the recession and demand, but does he accept that it goes a little deeper than that? Recent experience in the UK and the US shows that when we have recovered from recessions, we have not created jobs as swiftly as we did in the ’50s, ’60s and ’70s. In that context, does he not think it is worth looking at the recommendation made by Beecroft?
Mr Umunna
I am not sure exactly which proposal the hon. Gentleman thinks it is worth having a look at. If he is talking about the proposal to allow no-fault dismissal in firms of fewer than 10 employees—which I believe is what he spoke about earlier—the answer is no. I do not agree that it is worth looking at, partly because there is no evidence that having no-fault dismissal encourages or helps firms to grow, as was previously made clear in business questions by the Minister responsible for employment relations, the Under-Secretary of State, the hon. Member for North Norfolk (Norman Lamb).
I do not deny that employment law and regulation more generally are matters of concern for small businesses. It would be absurd of me to make such a claim, and I am not making it. However, it is the state of our economy that has been consistently identified by small and medium-sized enterprises as the main barrier to their success. We know this because that is what they have been telling Ministers. In the Government’s latest “SME Business Barometer”—which I think the Secretary of State mentioned earlier—32% of SME employers said that the state of the economy was the main obstacle to the success of their business, followed by issues such as cash flow, taxation and finance. Just 7% cited regulation as the main obstacle to their success.
Let me be absolutely clear: we on this side of the House will not countenance watering down the rights that every constituent of every Member of this House enjoys in the name of growth. I should also note that Conservative Members—nobody has made this comment today, but they have before—have been keen to present this as solely a union issue. It is not: it affects just about every working person in this country, regardless of whether they are a member of a trade union. While everyone else has been worrying about losing their job—thanks to the Government’s economic incompetence in my view—their rights at work have, frankly, been used as a political football in the Government, among Departments and between the two governing parties. That does nothing to dispel the overall impression of shambles that hangs over the Government. However, Minsters and those who have been briefing the media on their behalf should also reflect on the huge worry that such briefing on employment law is generating among those who work in our businesses, with all the talk of further liberalising our labour market, which is one of the most liberalised labour markets in the western world.
Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)
Will my hon. Friend give way?
Mr Umunna
Yes it is: it is precisely what they have been doing with the promotion of the Beecroft report by the Prime Minister and others. I should say that the Secretary of State is no innocent bystander. His little chat with The Sun on Saturday evening generated an article in that paper yesterday carrying the headline “Quick Cash for Sack”. This hardly reassures vulnerable employees who are anxious about their job security.
That article was, of course, the pre-spin for the new measure—which has been mentioned today—to prevent employees from using a pay-off offer as evidence in a tribunal. The measure will presumably be inserted in the provisions in the Bill that deal with the new settlement agreements. We were notified of the proposal only when I read my copy of The Sun yesterday, as it did not appear in the Bill or the explanatory notes, so we have not had proper time to consider it. At first sight, it is questionable whether it would work in practice. As a former employment lawyer like me, the Minister responsible for employment relations will know that essential components of an employment relationship are trust and confidence between the parties. How on earth can trust and confidence continue to exist if a pay-off offer is made out of the blue when the employee has done nothing wrong and decides to reject the offer? What happens then? This needs further clarification. So too do the Government’s intentions in relation to the employment law provisions of the Bill and the Beecroft report, because, further to the questions that Labour Members have asked the Secretary of State, I am no clearer about how many parts of the Beecroft report will potentially be inserted in the Bill.
Julian Smith
I assume that the hon. Gentleman, as a former employer lawyer, was involved in negotiating compromise agreements. Surely the proposals that we are discussing this evening are just simplified compromise agreements for smaller companies which will be much easier to administer and will not involve payment of the fees that I am sure he earned advising bigger companies on such agreements.
Mr Umunna
No, the hon. Gentleman is wrong. As things stand, the position in law is that if a pay-off offer is made during a “without prejudice” discussion between an employee and an employer—which would take place if there was an ongoing dispute—that cannot be adduced as evidence in court. However, if a pay-off offer was made out of the blue where there was no pre-existing dispute, that could be adduced as evidence. What I discern from what is being proposed is that the Government are seeking to ensure that that situation is covered too, so that such an offer could not be adduced in evidence in court either. [Interruption.] I believe that the Minister responsible for employment relations is agreeing with my interpretation. My issue with that is that if an employee in a firm is quite happy and believes that they have done nothing wrong, but the employer does not like them for some reason, decides that they are going to get rid of them and offers them a set sum, the employee should be able to adduce that as evidence to show that the employer was intent on getting rid of them come what may. That is the point that I am seeking to make.
Further clarification will be needed. However, let me once again ask the Secretary of State—I will give way to him on this point—how many parts of the Beecroft report are going to be inserted in the Bill by way of amendment, if any. He has—I think—been clear with us today that the proposal for a no-fault dismissal measure, on which the consultation has just closed, will not feature in the Bill. How many other parts of Beecroft are likely to feature in the Bill through amendments? I am happy to give way to him if he is willing to answer that question.
Vince Cable
As far as I am aware there is none, but the hon. Gentleman will be aware that the Beecroft report covers a wide range of activities, including things such as immigration control, which clearly do not belong in this Bill. However, as far as I am aware, no other provisions are allowed for in this case.
Mr Umunna
I am slightly surprised by that answer because of the equivocation. The Secretary of State commissioned the report—it was his report—and this is his Bill, so surely he can provide us all with a categorical assurance now that no elements of Beecroft will feature in the Bill. I am happy to give way again, if he wishes to clarify that point. No? I think that people will note his failure to reply.
With regard to what is in the Bill, our amendment makes it clear that the proposals to grant the Secretary of State new powers to vary the limits for compensatory awards in unfair dismissal cases are totally unacceptable. Clause 12 proposes to give the Secretary of State the power to cap the compensatory award, which is currently capped at £72,300, at a maximum of between median earnings and three times median earnings—that is, between £26,000 and £78,000—or one year’s earnings, or whichever is the lower of the two. No advance warning of this measure was given, and there has been no consultation on it. Why? It is also hard to see the justification for the proposal when we consider that the median award for unfair dismissal came in at just over £6,000 in the past year.
The practical effect of the proposal would be that those on average or above-average earnings—middle income earners in particular—would not be properly compensated if they were treated unfairly by their employers. Let us be clear who we are talking about. This would affect accountants, architects, chartered surveyors, insurance brokers, lawyers and mechanical engineers, as well as many other public service professionals. Those people are all in occupations that attract average or above-average earnings. Lower income earners in this country have already been hit hard by the Chancellor’s Budgets since this Government came to office. It is middle income earners who stand to suffer most from this change. Of course, those earning millions every year—who have just been given a huge tax break by the Government—no doubt have plenty in the bank and will not have to worry about this, but that does not apply to the majority of earners in this country.
Julian Smith
Does the shadow Secretary of State think it reasonable that, in 1999, the compensatory award level was £12,000 and that it is now £72,300? Does he think that it has gone up by a reasonable amount over that period?
Mr Umunna
I think it is reasonable, when people have been treated in an appalling and unfair fashion by their employers, that they should be properly compensated.
The Bill contains a related measure to give the Secretary of State the power to vary compensatory awards for employers of different descriptions. The Employment Lawyers Association, of which I used to be a member, said last week that having different rules for micro-businesses, for example, would make people think twice about working for small businesses, knowing that they would have less employment protection than if they worked for a large employer.
We have no objection in principle to the proposal to introduce early conciliation by ACAS in advance of the full submission of a claim to the employment tribunal. I understand, however, that the Government intend to spell out more of the detail in secondary legislation. It is therefore essential that any future regulations be subject to the proper scrutiny of the House. Early conciliation will result in a claimant who is seeking redress having to go through two different processes, with different time limits and different forms to fill in, before instituting a claim. It will therefore be important to ensure, particularly in relation to unrepresented claimants or those with poor literacy and numeracy, that the new regime does not act as a barrier to justice for those seeking redress. Above all, it will be important to ensure that ACAS is properly resourced to carry out its proposed new expanded role. We know that its resources have already been reduced. The Secretary of State and his Ministers will need to give proper assurances and guarantees that it will be properly resourced to carry out this work.
The Bill also contains measures relating to the composition and workings of employment tribunals. As I have said before, we are not opposed to reforming the way in which employment tribunals work, given the frequent problems that employees and employers experience while navigating their way through the system. That is why we supported the establishment of the Underhill review. However, that is quite different from tampering with people’s fundamental rights at work, which we oppose.
Geraint Davies
Is my hon. Friend aware that, in Wales, 70% of procurement goes to small and medium-sized enterprises, half of which are based in Wales? In England, however, the figure is around 7%. Would it not be a better strategy for rejuvenating small businesses in England if we were to focus the power of procurement—green procurement in particular—on those businesses, rather than slashing the rights of the people who work in them?
Mr Umunna
I certainly agree that we should increase the procurement opportunities for our SMEs. When we were in government, we put in place a number of targets, which this Government have sought to build on. We should certainly ensure that those businesses have better access to those opportunities; I speak to many such businesses that tell me that they do not.
Stephen Pound (Ealing North) (Lab)
Further to my hon. Friend’s point about the additional costs and duties that will descend upon the shoulders of ACAS, does he agree that this Government have a poor record, particularly in the area of the fitness to work test? What might seem to be a saving often ends up costing them an enormous amount of money. I do not wish to distract him with the good news that has just reached us of the inspirational leadership of Roy Hodgson in Donetsk—I believe that 1-1 is the precise figure—but does he see a need for primary legislation or orders to provide the additional sums that ACAS will inevitably require, or does he think that an amount of money been put to one side for the purpose? ACAS will be facing a heavy demand and will require a great deal of money.
Mr Umunna
I stand corrected. On my hon. Friend’s point about the resourcing of ACAS, we do not know what its budget will be for the next three years. We shall study that question carefully in the light of the, I think, £12 million reduction in its budget over the recent period.
I shall return to the composition of employment tribunals. The Bill envisages simple or low-value claims being decided by a legal officer without the need for a hearing. That might assist in the rapid resolution of disputes, which would be welcome, but it is important that any decision made by those officers should be able to be reviewed by an employment judge if either party so wished. We are currently considering a four-track system: simple claims covering issues such as amounts of holiday pay could be dealt with outside the tribunal, perhaps by a legal officer; standard unfair dismissal claims would be dealt with by tribunals in the usual way; complicated equal pay claims could be dealt with by a specialist court; and high-value claims could automatically be dealt with by a higher court.
We do not welcome the Government’s proposal that all employment appeal tribunal cases be heard, in the main, by a judge alone, instead of by a panel including lay members. We oppose that—[Interruption.] The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for North Norfolk (Norman Lamb) says, “For goodness’ sake”, but lay members are very much welcomed by employees and employers as they provide balance and perspective to deliberations. That extends to deliberations in the employment appeal tribunal on legal issues.
Before I move on to the competition aspects of the Bill—I am aware that I am going on—I want to mention that there are other employment proposals that we will address in more detail in Committee.
Mr Umunna
I will make some progress, so that the hon. Gentleman will have more time to speak later.
Principally, those proposals include: the provision of financial penalties to be paid by employers where there are aggravating features to their wrongdoing; the introduction of a public interest test to whistleblowing—which we have concerns about—to clear up the uncertainties in that area; and changes to the annual increases to the limits to statutory redundancy pay.
I will now deal as quickly as possible with the competition aspects of the Bill. Healthy, competitive markets reward the innovator, the insurgent, and the risk taker. They keep incumbents on their toes, benefiting consumers, and they create the disciplines at home that drive success abroad. That does not happen by itself, however, because markets are not always efficient. I know that that view is not shared by all Government Members. So even when policy frameworks can correct market failures, markets require active stewardship, constant vigilance against unhealthy concentrations of power—News International —and, above all, the deliberate promotion of competition through a strong, robust competition regime.
The Government said in their consultation paper on options for reform published last year:
“The Government acknowledges that it has inherited a competition regime which has been independently assessed as world class.”
In 2010, the Global Competition Review awarded the Competition Commission its highest rating of five stars, and the Office of Fair Trading was awarded four and a half stars, with both bodies appearing in the top five agencies in the world. We Labour Members are rightly proud of the legacy our Labour Government bequeathed to the current Conservative-led Administration.
In principle, we support the Bill’s proposals to improve our competition regime. There is definitely some sense in combining the OFT and the Competition Commission into one body, removing duplication and concentrating expertise in one place. However, the yardstick against which we will measure these reforms is whether they will improve on the existing regime. The OFT estimated that in ensuring a level playing field, our competition regime benefited businesses and consumers to the tune of £700 million last year. As the Financial Times has pointed out, the expected savings of £1.3 million a year from the merger could be smaller than the cost to consumers and businesses if these reforms change our competition regime for the worse.
In addition, the lack of competition is, sadly, nowhere more stark than in the small and medium-sized enterprises lending market where 85% of SME lending is concentrated in the hands of our four biggest banks. This can be contrasted with Germany, where just 14% of business loans come from its biggest banks and 60% come from its smaller local and co-operative banks, which I met when I was in Germany in February. It is a shame that the Government have shown no interest in pursuing the idea that we have been promoting for some time—of having a British investment bank to help address this issue. It is a concept that enjoys the support of the British Chambers of Commerce, among others. We are also concerned about the withdrawal of consumer competences entirely from this new body. Indeed, we have argued that the Queen’s Speech should have delivered a fair deal for consumers with a consumers Bill that would give new powers to the Financial Conduct Authority and the Competition and Markets Authority to stop rip-off surcharges by banks, low-cost airlines and pension firms.
Let me move on to part 5, which deals with the reduction of regulatory burdens. We should seek to reduce regulatory burdens where we can, but—very importantly—not by compromising the rights of employees or the health and safety of employees and customers. This is an issue not just of the quantity of regulation, but of its quality, too: regulations should be drawn up with the small guy in mind—people who do not have the resources to pay for an army of lawyers, accountants and risk managers to advise on how to ensure compliance. As I said earlier, with that in mind, when in government, we introduced the primary authority scheme so that any business operating in multiple local authorities could, to ease the regulatory burden locally, form a partnership with a single local authority to access advice and support for its regulatory responsibilities. I welcome the fact that the Government seek to extend the scope of the scheme through the Bill.
What are far less welcome in part 5 are the measures touching on the Equality and Human Rights Commission, which the Secretary of State has just referred to as “regulatory tidying-up”. This Bill seeks to amend the Equality Act 2006 by repealing the commission’s general duty to exercise its functions with a view to encouraging and supporting the development of a society in which people’s ability to achieve their potential is not limited by prejudice or discrimination, in which there is respect for and protection of each individual’s human rights and respect for the dignity and worth of each individual, in which each individual has an equal opportunity to participate in society, and in which there is mutual respect between groups based on the understanding and valuing of diversity and on shared respect for equality and human rights.
This Government have an image problem. They are seen as out of touch, and they are seen as implementing policy changes that adversely impact particularly on vulnerable and poor people. Just yesterday, the Prime Minister’s former speech writer said the Government’s latest proposals on immigration policy showed that the Conservatives were a “nasty party” that risked losing votes among ethnic minority communities. In this context, why on earth are this Conservative-led Government seeking to repeal this general duty that seeks to promote fundamental values of humanity and decency in our society? I am at a complete loss to understand why they should seek to do this when that duty enjoyed cross-party support when the Equality Act 2006 progressed through Parliament.
The Government also want to change the commission’s statutory remit, contract out its helpline, stop its grant programme and slash its budget by 60%. This is not regulatory tidying-up; it is undermining the effectiveness and independence of the organisation. If what we are seeing here is the beginning of the end of the commission—and in the light of what I have said, it is entirely reasonable to raise this as a question—for the avoidance of doubt, let me say that this party will fight tooth and nail against any such move.
Finally, I shall deal with part 6, which puts in place additional measures to deal with executive pay. In order to build a more productive and responsible capitalism, it is important to ensure that we bring an end to excessive pay and rewards for failure, which are bad for our economy and for our businesses. The Prime Minister and the Chancellor have sought to insinuate that proponents of reform in this area are being “anti-business”, but the recent wave of shareholder revolts has shown just how out of touch they are with business and investor opinion on these issues. Shareholders at Citigroup, Credit Suisse, Barclays, Mann Group, Aviva and other companies have all either been protesting or voting against remuneration packages over this last couple of months. WPP shareholders will be voting on the remuneration of that company’s senior executives later this week.
In fact, the highly respected business leader, Sir Michael Darrington, the former group managing director of Greggs plc, has founded a pressure group—“Pro-Business, Against Greed”. Its aim is to reduce the excessive and growing difference in net pay between the highest paid and the majority, which he says
“is intended to help promote a happier, healthier and fairer society as well as being better for pensioners and investors.”
We congratulate him on that initiative because change and reform must be led by people like Sir Michael, who is also a shareholder in Aviva and Trinity Mirror, with Government backing.
In government—it is a shame that the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) is not in his place to hear this—we started to improve corporate governance in this area and to empower shareholders. We introduced advisory shareholder votes on remuneration reports, which are creating so many headlines at present. It is not fair to say that we did nothing about this matter in government.
Currently, there is a prohibition in statute on the remuneration of executives of quoted companies whose pay is contingent on the outcome of a shareholder resolutions. This Bill will remove that prohibition, paving the way for further reform. It will enable the Government to build on our reforms by, for example, having an annual binding vote on future remuneration policy, increasing the level of support required on votes on future remuneration policy and so forth. I was glad to hear the Secretary of State confirm that he intends to bring those reforms forward as amendments to the Bill as it passes through this House. That is welcome.
On the annual binding shareholder vote in particular, we agree with the suggestion put forward by asset managers Fidelity Worldwide Investment that a 75% majority should be required in respect of a binding vote on future remuneration policy. I would be interested to hear what the Secretary of State thinks of that, as I must say that it was with great disappointment that we read that he is likely to row back not only from that proposal, but from the one to have these votes on an annual basis. That represents quite a watering down of his initial proposals. If he would like to disabuse me of that, I would be happy to give way to him now.
Vince Cable
Current thinking—we are yet to report back to the House formally on the consultation—is that there will be annual votes if pay policy is changed by companies. The investor community made it absolutely clear that it sees that as a much more productive way of progressing its concerns.
Mr Umunna
I am glad to hear that, but I wonder where all the briefing in the Sunday newspapers yesterday, including The Sunday Times, The Sunday Telegraph and others, came from. I am sure that the Treasury had absolutely nothing whatever to do with that. We, of course, have already called for the full implementation of the High Pay Commission’s recommendations, including the proposals for employee representatives on remuneration committees, which the Government continue to refuse to implement.
On copyright, the proposals in clause 56 to amend the Copyright, Designs and Patents Act 1988, which I think the Secretary of State mentioned, are broadly drawn and, in our view, need greater clarity, not least to indicate that this power cannot be used to weaken the copyright regime.
Let me conclude. It has admittedly been something of marathon working through this Bill because it is such a hotch-potch of measures. As I have explained, there are parts of the Bill, taken separately, that we support in principle and will seek to improve in the later stages. However, other parts, particularly relating to employment, are, as drafted, simply unacceptable. Yet again, after going through all this, we find ourselves back where we started: in a big black hole when it comes to helping businesses to create enterprise, generate wealth, and grow. There is no compelling vision, no confident message about how we are to pay our way in the world, and no connected approach across Government to drive growth. That is the point that we sought to make in our amendment, which I commend to the House.
Mr David Ruffley (Bury St Edmunds) (Con)
It is always a pleasure to listen to the hon. Member for Streatham (Mr Umunna), who invariably makes his case with courtesy and rationality, but on this occasion I do not agree with the thrust of his speech.
Making the United Kingdom economy much more competitive is vital if we are to weather the storms following the fallout from the eurozone catastrophe while also facing the inexorable rise of far-eastern economies. Deregulation is a key part of that.
All Governments launch initiatives to create bonfires of regulation and to slash red tape. But is it not remarkable that the intended beneficiaries of such anti-regulation drives so rarely tell Members of Parliament that they believe that the regulatory burden has been reduced? After 15 years in the House, I have yet to meet a business constituent who has said that. In each year of the last Parliament—this will be the only instance of my straying into the realm of party-political knockabout—the Labour Government created six new regulations every working day, and as a result the coalition Government have a massive burden of over-regulation to identify and, in my view, eliminate.
The changes relating to employment in part 2 of the Bill are certainly needed. The number of unfair dismissal claims doubled from 100,000 in 2002-03 to 218,100 in 2010-11. That is a staggering increase, and, according to the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for North Norfolk (Norman Lamb), it costs businesses an average of £4,000 to defend each claim. It is hardly surprising that employers say that they are discouraged from taking on new employees at the margin, especially at a time when business confidence is so low.
Let me give a parochial example. Two self-made businessmen, one working in food retail and the other in furniture retail—both started with nothing, and both are very good employers—told me that the chief factor in the decision whether to take on new employees this year was the problem of unfair dismissal claims and vexatious claims. Both had had unfortunate experiences in the last year. I visited their companies, and I do not think that they were telling porkies.
We should not accept the caricature presented by some Opposition Members who have suggested that liberalising the labour market even further is an exclusively right-wing idea. Those who follow these matters carefully rather than jeering in the cheaper seats in the back will know that, according to the distinguished left-of-centre employment law professor Pietro Ichino—he is very much on the left of Italian politics—there is an equality issue between the very well-protected employed and the unemployed who stay unemployed because of over-regulation in the market.
Unfortunately, although the Secretary of State has already raised the qualification threshold for unfair dismissal from one to two years, he has ruled out exempting small businesses—micro-businesses—from various employment laws. Perhaps the Minister will explain why the Government have turned their face against exempting businesses that employ fewer than 10 people from the full panoply of unfair dismissal law when it comes to young workers. The high cost of youth unemployment surely suggests that we should try that, if only for a limited period, to see what the results are. I should have thought that those who are worried about youth unemployment could not disagree with such a proposition for a minute, but if they are not satisfied with my argument, what about the evidence?
In 2004, businesses in Germany with fewer than 10 employees were exempted from the requirement to provide cause when letting an employee go. Before that, the threshold was only five employees. Did unemployment rise as a result? No, it did not. In 2005, overall unemployment in Germany was more than 11.5%; now it is 7.5%. Among those under 25, it has fallen from 12.5% to 6.3%. That is due not only to the slightly more relaxed regime for small businesses in Germany, but to the fact that mini and midi-businesses were subject to much more generous and simpler social security contribution regimes. The hon. Member for Streatham suggested national insurance breaks for small businesses employers, and I am sympathetic to that idea, but the evidence shows that the exemption system worked in Germany.
Mr Ruffley
No, I want to make some progress.
Part 5 deals with legislative burdens more generally. Clause 49 proposes an increase in Ministers’ power to introduce sunset provisions, and I welcome that. We may be one of the first countries to use sunset clauses as a matter of course in all regulatory policy. Some states, such as Germany, use them sporadically, but no EU states use them systematically, and not even the United States uses them across the board. Our Government are leading the way in reducing regulatory levels by providing for their use in all legislation, as far as possible, throughout Whitehall.
Finally, let me say something about one in, one out. There has been some early modest success in that regard, but I should be grateful if Ministers would consider a proposal which the last Government toyed with, but did not proceed with, in 2008. I refer to regulatory budgets, which would set a figure for the value and cost of regulations in any particular Department. That proposal was not included in the 2008 Labour consultation, but many of us have been considering ways in which, if a budget went bust because too many regulations were being imposed on business, the Department would be subject to the sanction of reductions in its public expenditure settlement with the Treasury. That would certainly hold Ministers’ and senior civil servants’ feet to the fire. Perhaps the Minister will tell us whether the Government will consider it.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Norman Lamb)
I have to say that I did not agree with much that the shadow Minister, the hon. Member for Hartlepool (Mr Wright), said, but I do agree that it has been a good debate, with many reasoned contributions from Members on both sides of the House, which I very much welcome. I will try to address as many of the points made as I can. There will obviously be further opportunities at subsequent stages to discuss detailed points.
Contrary to what the Opposition have argued, the Bill contains important measures that will encourage long-term growth. As my right hon. Friend the Secretary of State explained in opening the debate, part of the Government’s wider strategy is to promote growth, support business and create jobs. The Government inherited a wholly unbalanced economy based very much on consumer debt and a housing bubble. It created six new regulations every working day. Those are not the actions of a business-friendly Government.
I shall deal first with the green investment bank. I am glad that Members support its creation. As my right hon. Friend made clear in his opening speech, the bank’s expertise will break new ground in the financing of green infrastructure projects, while demonstrating to the market that such investments can deliver commercial returns. The Government have made good progress in building the bank, so that it can make investments as soon as state aid approval is received. The establishment of the bank is testimony to the leadership of this Government in rebalancing the economy and putting the green agenda at the heart of that project.
The shadow Secretary of State and the hon. Members for West Bromwich West (Mr Bailey), for Stoke-on-Trent North (Joan Walley), and for Glasgow North East (Mr Bain) raised concerns about the funding, and the borrowing powers, of the bank. The Government have committed to the bank having £3 billion of funding up to 2015. The bank will have borrowing powers thereafter, subject to public sector debt falling—an entirely reasonable proposition. That deferred ability to borrow from 2015 will not affect the success of the green investment bank, as it first needs to focus on consolidating its expertise and developing a credible track record.
UK Green Investments has already made investments in waste infrastructure projects, and is considering major investments in priority sectors such as offshore wind. Private sector investors have responded very positively, and it is already clear that the bank will make a major contribution to the ability and willingness to invest in the green economy.
I turn now to the measures aimed at reforming the employment tribunal system. I welcome the acknowledgement by the hon. Member for Streatham (Mr Umunna) on a previous occasion that improvements can be made to the way in which the system operates, but the shadow Secretary of State today seems set against any reform and fails to recognise that other countries, including a social democrat Government in Germany, have made reforms to make their labour markets more flexible. We cannot afford to be complacent. Labour in government recognised the value of a relatively flexible labour market. Our labour market already performs well, but if we want to remain competitive, it is imperative that we are aware of what other countries are doing.
Norman Lamb
As my hon. Friend the Member for Bury St Edmunds (Mr Ruffley) said, we must balance the interests of those who are in work with the interests of those who have no job and no prospects. We have to provide a mechanism to ensure that employers have the confidence to take on new employees.
Norman Lamb
I am afraid I do not have time. I need to get through the responses.
This Government are determined to support parties to resolve their disputes between themselves, rather than relying on a costly and time-consuming employment tribunal. A tribunal is an admission of failure and everything must be done, where practical, to prevent having to resort to it. The mediation of disputes retains employer flexibility while preserving workers’ rights and dignity, and our measures aim to encourage that further.
There has been much discussion today and in the past weeks about the proposal contained in the report prepared by Adrian Beecroft on compensated no-fault dismissal. I have made my views on the proposal very clear. This is not a measure in the Bill and therefore is not a matter on which I propose to dwell in the limited time available to me. Suffice it to say that the call for evidence has closed and my officials will be considering the responses received. I am clear, however, that we need to take action to improve the way in which businesses, especially small businesses, manage and end their relationships with employees. By addressing the fears that small businesses tell us they have about ending up in an employment tribunal, we can help unlock the growth that we so desperately need.
By extending the qualifying period for unfair dismissal from one to two years, we have already taken action to increase the period that employers have to decide whether a new employee is the right one for the job, but we need to provide a solution where problems occur and where the qualifying period has been exhausted.
The shadow Secretary of State asked whether any more elements of the Beecroft report would be implemented through the Bill. We do not intend to table any further amendments prompted by the recommendations in the Beecroft report.
My hon. Friend the Member for Bury St Edmunds raised the question—the case, as it were—of exemptions from employment regulations for small businesses. I am not sure whether he is in the Chamber. The evidence from Germany is that when the reform was introduced to reduce employment protection for companies of up to 10 employees, it had no impact on the number of people employed in small businesses. It therefore seems that the evidence in favour is highly questionable.
On the measures we are proposing on settlement agreements, the all-party group on micro businesses, in its response to the call for evidence on compensated no-fault dismissal, for which I am extremely grateful, supported the idea that employers should have the option of using
“a new simpler route to end employment relationships”.
The all-party group states that in return for compensation employers should
“be able to terminate a contract with an employee without going through a performance review and dismissal process. … this should be an option that is voluntary but which employers are freely able to propose to employees without fear of being taken to court.”
We agree almost entirely with that sentiment. I appreciate the comments of the hon. Member for Skipton and Ripon (Julian Smith) in the debate today. I say “almost entirely” because there is one important difference: we do not think that this option should be available only to micro-businesses. Therefore, we will table a new clause in Committee to ensure that an offer of settlement cannot be used against an employer, any employer, in an unfair dismissal case, which will give businesses the confidence to talk to their employees about bringing the relationship to a swift end through the use of a settlement agreement.
The shadow Secretary of State raised a concern about trust and confidence in the employment relationship, but he will be aware that many businesses, probably including his former clients—big companies that probably paid him substantial hourly rates—regularly use compromise agreements. We want to ensure that all businesses, including small and medium-sizes businesses, can use those agreements. If there is no agreement, the employee’s rights are still protected. They have to work together to ensure that the employment relationship is maintained.
My hon. Friend the Member for Northampton South (Mr Binley) raised concerns about SMEs. We will shortly consult on a suite of proposals to help small businesses use settlement agreements to ensure that they have the confidence to deal with employment problems. I hope that that reassures him.
Reference was made to unfair dismissal compensatory award proposals. There has been debate about the power to amend the limit on unfair dismissal compensatory awards. The Labour party wants to make mischief on the issue, but I should point out that it is a matter of common ground that there should be a limit on the amount of the compensatory award. Having proposed removing the limit back in 1998, the then Government backtracked and elected instead to have a large, one-off increase from £12,000 to £50,000 and introduce a formula for future increases. As a result, the limit has increased rapidly in recent years and now stands at £72,300. That is greatly in excess of the median award for unfair dismissal, which is less than £5,000. Realism about potential awards is clearly important for encouraging the settlement of employment disputes and the greater use of settlement agreements.
I want to say a few words about competition. The Government believe that creating a new competition and markets authority will ensure that resources and specialised competition expertise can be deployed to best effect while reducing the burdens on business, and I was pleased that the shadow Secretary of State supported that principle. This matters for the taxpayer and for businesses and consumers at the wrong end of anti-competitive practices. The Government recognise that a great strength of the current regime is the two-phase approach to markets and merger cases and wish to preserve it. We will therefore retain the separation of decision making; the board will have responsibility for the initial investigation and phase-1 decisions, and groups of independent panellists will continue to make final decisions at phase 2. When making those decisions, the groups will be required to act independently of the board, which will ensure that decisions are robust by giving cases a second look and bringing in the use of experienced business people and other outside experts. There will also be scrutiny by the Competition Appeal Tribunal.
The Bill is pro-growth and pro-business. We have listened to small and large businesses across the country, the businesses on which this country’s recovery depends. They have told us that fair and speedy ways of resolving disputes matter to them. We have listened and are delivering the measures that matter to them. A strong and effective competition regime matters for business. Reducing the excessive burden of regulation, much of which was introduced under the previous Administration, and the cost of compliance with regulation matters for business. The Bill will help businesses to grow and succeed. It will boost consumer and business confidence and help the private sector create jobs. It will promote fairness and support our green economy. I commend it to the House.
Question put, That the amendment be made.