Chuka Umunna
Main Page: Chuka Umunna (Liberal Democrat - Streatham)Small Business, Enterprise and Employment Bill
Chuka Umunna Excerpts(9 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
The Minister for Business and Enterprise (Matthew Hancock)
Have you been to see the Queen?
Mr Umunna
No, I have not been to see the Queen yet.
I will be as quick as I can, Mr Deputy Speaker.
It is good to see the Secretary of State back in his place after the reshuffle, leading this debate. I note that he has acquired some new Conservative minders. He no longer has three, but five. [Interruption.] Somebody behind him says that he needs them.
Mr Umunna
For the record, the Business Secretary says that he has seven minders. I am sure that he will not let them get him down.
It is also good to see the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson) back in her place. I know that her shadow, my hon. Friend the Member for Edinburgh South (Ian Murray), has missed their exchanges and looks forward to the lengthy exchanges that they will have in Committee.
The Bill is a long one and comes in 11 parts. The House will be glad to know that I will not go through all 11 of them, but I will deal with the key parts in turn as quickly as possible to allow the maximum time for other Members to get in. First, I will address the purported purpose of the Bill, which was set out by the Secretary of State.
Our wealth creators—our entrepreneurs and particularly our small businesses—are fundamental to growth in this country and create almost two thirds of private sector jobs. They are crucial to the success of large firms and vice versa—the relationship between the two is symbiotic. We recognised that in government and were determined to build an environment in which business could flourish. I am proud to say that by the time we left office, the World Bank ranked the UK the best country in Europe for the ease of doing business and the fourth best in the world, ahead of the US. I am glad to see that where we led, this Government seek to follow with this Small Business, Enterprise and Employment Bill.
We are told that the Bill is designed to reduce the barriers that hamper the ability of small businesses to innovate, grow and compete, and that it seeks to pave the way for the Government to be more supportive of small business. After four years of this Government, it is about time too. We support the purported general purposes and principles of the Bill—how could one not?—but the detail is everything and we will scrutinise it.
However, the Bill and the Government’s policy more broadly do not resolve the underlying structural issues, which I have discussed on many occasions with the Secretary of State, that hold businesses and employment back in our economy. He and I agree that we need a different model of capitalism—one that is more inclusive, productive, responsible and long-term in outlook. The fact is that our economy is still grossly unbalanced by sector and region; short-termism is still endemic in business and government; we still have a dysfunctional finance system; and we have a stubborn and increasing trade deficit. Meanwhile, the use of food banks has soared and many people still struggle. In some wards of my constituency, one in three children is living in poverty.
The recovery is not what we would want it to be, and it looks a lot like the model of growth that we need to get away from. It is a business-as-usual recovery, based on a rising housing market and consumer spending; it is not the export and business investment-led recovery we were promised. Therefore, now is the time to intensify the pace of reform of the economy to build a better-balanced, sustainable economy. It should also be said that the Bill is not just about building an economy with flourishing businesses. We must remember that, if we want to be pro-business, we cannot continually beat up on the rights of the people who work in businesses. I will return to that later.
The first key element is access to finance. Any scheme that helps small businesses to access finance is welcome, but the Government’s record in getting the banks to lend to small businesses is lamentable. Flagship scheme after flagship scheme, from Project Merlin to funding for lending, has failed to deliver. Net lending to businesses is down by £14.2 billion in the past 12 months. In fact, net lending to businesses by banks participating in the funding for lending scheme fell by £2.7 billion in the first quarter of this year.
If part 1 of the Bill does anything to help affairs, for example by making it easier for businesses to seek loans from challenger banks, and lenders other than high street banks and by opening up access to credit data, such measures will have the Opposition’s support. Equally, the measures to ensure that support is available for those who wish to export are welcome, particularly given our need to get more of our small businesses exporting—it looks like the Government are nowhere near reaching the target of getting 100,000 more companies exporting by 2020.
However, we know that increasing late payment, to which the Secretary of State referred, is becoming a more significant challenge than access to finance. In a recent Institute of Chartered Accountants in England and Wales survey, almost twice as many businesses cited late payment as a bigger challenge in managing their cash flow than access to finance. We must end the national scandal of small businesses being effectively forced to bankroll large customers that persist in refusing to pay them on time. According to the Federation of Small Businesses, 51% of the invoices of its members are persistently paid late by large companies. That is wholly unacceptable. The Forum of Private Business has cited the example of Marks & Spencer, which extended payment terms to some suppliers to 75 days, for no apparent defensible reason.
In 1998, the Labour Government responded to that growing problem by introducing the Late Payment of Commercial Debts (Interest) Act 1998. Towards the end of our time in government, we worked with the British Chambers of Commerce, the Institute of Credit Management and others to get FTSE 100 companies signed up to the then new prompt payment code, but we need to go further, because for all our hard work, we were not successful in fixing the problem, and this Government have also not been successful. At this juncture, I congratulate my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), who is in the Chamber, on her work as chair of the all-party parliamentary inquiry on late payments, along with other members of the group. The two measures in part 1 of the Bill are good, but the problem is that, when there is late payment, it is still for the business to pursue and have a row with its customer for payment, potentially losing the customer in the process. We must square that circle. We will return to that provision in more detail in Committee.
I will not say much about the regulatory reform in part 2. Of course, the Opposition support the general principle that we need to be mindful of the quantity of regulation we impose on business, but equally important is ensuring that the quality of the regulation is up to scratch, and that it is written with the small guy in mind, so that they do not need to employ an army of accountants, lawyers and risk managers to tell them what they need to do to comply. We support the publication of a target for the removal of regulatory burdens in each Parliament, which is provided for in part 2. We also support the proposed statutory review provision for new regulations that affect businesses. However, unless the Secretary of State addresses the way in which the Department for Work and Pensions—I spoke to him about this the last time we were in the House—is massively increasing the burden on people in receipt of benefit who wish to start a business, the Government’s credibility will be sorely lacking.
We were told that part 3 aims to remove barriers and help small businesses to gain fair access to the £230 billion of Government procurement contracts through a more efficient process that is more small business friendly. We are broadly supportive of these measures. It is a shame that the hon. Member for Norwich North (Chloe Smith) is not in her place. It is deeply disappointing, and she might recognise this as a former Treasury Minister, that one of the worst offenders in ensuring that small businesses get a look-in on Government contracts is the very Department she used to work in. Just 5% of the Treasury’s direct procurement spend is with small business. If this measure kicks the Treasury into touch, then good.
Before turning to part 4 and measures relating to pubs, I would like to pay tribute to the shadow small business Minister, my hon. Friend the Member for Chesterfield (Toby Perkins), and the coalition of people, including Government Members—the hon. Member for Leeds North West (Greg Mulholland) is in his place—who have worked on this too. It has to be said that I can think of no better day for a pint in a pub beer garden, given the hot weather.
The Opposition have had to force three votes on this issue in the House since 2012, demanding a statutory pub code to put the relationship, between tied pub licensees in England and Wales and the large pub companies, on a fairer statutory footing. Every time we did this most, though not all, Government Members voted against, and in the meantime 28 pubs a week have closed. We are pleased that the Government have finally accepted the need to legislate for a statutory code. We will work with them to help to protect our community pubs, which are national institutions, but we are far from convinced that what they propose goes far enough. We are not convinced that the limited transparency envisaged by the Bill will deliver the Government’s own principle that no publican should be worse off than if they were free of tie. We will also seek to ensure that the Secretary of State gets the right to introduce the mandatory rent-only option for tied tenants in the near future, if these reforms do not deliver.
Part 7—I am trying to go as fast as possible—seeks to increase transparency on who owns and controls UK companies. I very much welcome the measures to create a public register of beneficial owners of companies. A prerequisite to maintaining a register of beneficial owners, of course, is knowing in the first place that companies exist. The Business Secretary and I have had exchanges on this. Never mind the new measures that are envisaged, it is very important that we ensure compliance with existing requirements, for example on disclosing overseas subsidiaries. The Secretary of State kindly wrote to me last year, outlining how 40% of the FTSE 350 had failed to disclose overseas subsidiaries in the first instance. Enforcement is therefore key to ensuring that data are accurate and up to date, and that sanctions of sufficient gravity can be applied to ensure that people comply in the first instance. We must do all we can to persuade others around the globe to comply and adopt public registers too, particularly UK overseas territories and Crown dependencies. Let us send a clear message: what our overseas territories and Crown dependencies do in this area affects the UK’s reputation as a whole, and we will not sit idly by while our reputation is damaged.
Part 9 seeks to strengthen the rules of disqualification for directors, and we have no problems with the measures suggested here. As I think the CBI has said, they will help to boost the UK’s internationally recognised company law regime and promote even higher standards of corporate governance.
That brings me—it is connected—to the measures the Secretary of State mentioned on streamlining insolvency law. Among the changes the Government intend to implement is a measure to abolish the requirement to hold physical creditor meetings in an insolvency situation. I have to say that R3, which represents insolvency practitioners, and a number of creditor representative groups have very serious concerns that this will reduce creditor engagement and undermine the insolvency regime.
Creditor meetings serve an important function, as I know from my professional experience. For example, the insolvency practitioner engaged may have limited knowledge of the company’s history at the outset, but in a creditor meeting they can get useful information about the company and its financial affairs that it might otherwise not have occurred to them to think about. We are therefore not convinced that the proposal to do away with creditor meetings is at all sensible, so in Committee we will carefully scrutinise these proposals and the others on insolvency.
Before I finish up by looking at the employment law reforms in part 11, I want to turn to the measures on public sector workers receiving large pay-outs if they go on to work in other parts of the public sector. Let us be clear what has prompted the inclusion of that measure in the Bill. The Prime Minister promised that there would be no top-down reorganisation of the NHS and then he broke that promise. When the Government embarked on that top-down reorganisation, we warned them about the huge amount of taxpayers’ money that would be wasted, but we were told that our claims were unfounded. What happened? More than 4,000 have been made redundant and then rehired in the NHS since 2010. As the shadow Health Secretary, my right hon. Friend the Member for Leigh (Andy Burnham), has said, that has meant the Government handing out cheques like confetti to people who were rehired. Some £1.4 billion has been spent on redundancies in the NHS alone, at a time when NHS budgets are stretched. That is a complete disgrace. Pay-offs for managers and pay cuts for nurses—that is what we are seeing.
The Secretary of State will no doubt say, “This has got nothing to do with me, guv. It’s not my brief; it’s those terrible Tories sat behind me.” Well he can say what he likes, but everyone knows that he voted for all the changes in the Health and Social Care Act 2012—in fact, he was a sponsor of it—when it was going through Parliament, and now he is having to clear up the mess in this small business and enterprise Bill. What a total and complete shambles.
That brings me to the employment aspects of the Bill, covering employment tribunals, the national minimum wage and zero-hours contracts. If anything demonstrates that this Government have run their course and are running out of steam, it is the employment provisions in part 11. The Government have done the minimum in this part that they thought they could get away with or that they could reach agreement on. I will deal with the points of agreement first. There are measures in the Bill seeking to limit the number of postponements that parties can be granted in a case, with judges being given the power to make cost orders where late applications for postponements are made. Based on my experience of practising as an employment lawyer, I think those measures are sensible, as do others, such as the TUC, which points to the difficulties that witnesses face in getting time off work to attend hearings.
However, improving the process once people get to tribunal will be no more than an academic exercise for those claimants who frankly cannot afford to pay the tribunal fees instituted by this Government. What the Government have done with those fees is erect a barrier to justice for some of the lowest-paid people in the country. They have simply priced them out of the system. That is the reason for the 79% drop in employment tribunal claims that was referred to earlier. It is women and low-paid workers in particular who seem to be the principal losers.
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.
Susan Elan Jones (Clwyd South) (Lab)
My hon. Friend speaks of people earning as little as £1 an hour. I wonder whether he can recall that at the Conservative party conference before the 1997 election, a prospective Conservative party candidate stood up and boasted that in Conservative Britain, he could get away with paying 74p an hour.
Mr Umunna
I thank my hon. Friend for that contribution, which is a reminder of the huge difference our Government made during our time in office and of why we should be very proud of what we achieved.
The Bill will increase the fines for employers who fail to pay the minimum wage and amend the maximum penalty, as I think the Secretary of State mentioned, so that it can be calculated on a per worker basis. We have been calling for that for some time, so of course we support it. The fact is, however, that the Government should be going much, much further as it is estimated that more than 250,000 people who should be in receipt of it, still do not receive the minimum wage. It is disappointing that the Government have refused to match our plans for more robust enforcement, including by giving local authorities new enforcement powers and increasing maximum fines—not to £20,000 but to £50,000.
Robert Flello
We should also bear in mind those people on zero-hours contracts, who do not get paid for travelling between care jobs, for example, which means that their wages are effectively below the minimum wage.
Mr Umunna
I thank my hon. Friend for that intervention; I shall quickly be coming on to zero-hours contracts.
In the context of the national minimum wage having become disconnected from levels of growth and productivity, there is a wider problem, because it has led to a squeeze on wages and a fall in the real value of the minimum wage. That is why we would set a long-term ambitious target for the Low Pay Commission to increase the minimum wage to a more stretching proportion of median earnings over the next Parliament. It is a shame that the Secretary of State has set his face against that. We also want to promote—I think the hon. Member for Bedford (Richard Fuller) mentioned it—the payment of a living wage through “Make Work Pay” contracts, but there are no provisions at all that touch on the living wage, which is disappointing once again.
Let me turn to zero-hours contracts, which my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) mentioned. There are 1.4 million such contracts in use in the UK at present.
Richard Fuller
Before the hon. Gentleman moves on from the living wage and in the context of the important issue of Government contracting, will the Labour party table amendments to ensure that, when local authorities contract, there is the potential for companies to pay the living wage?
Mr Umunna
I may have the figures wrong, but I think that at least 29 Labour-run local authorities have become living wage employers, and I think we should absolutely do all we can to encourage them to pay the living wage. That may take time because current contracts are left to run, but the more who sign up to become living wage employers, the better.
On zero-hours contracts, it is worth reminding Members what we are talking about. Let me quickly tell the story of a lady I met last year who was on such a contract—I have, of course, met many others, including my own constituents, since. She worked in the care sector and had to be available to visit clients in their homes on at least six days a week, including evenings. Her rota could change in a flash. If visits were cancelled at short notice, she would often not be paid. If visits were added at the last minute, she would have to manage her child care commitments as best she could. That was because she had a zero-hours contract which did not oblige her employer to offer guaranteed hours of work.
Thankfully, that lady has managed to find a permanent job, but she has left behind several hundreds of thousands of other care workers who are still on zero-hours contracts in England. She featured in an excellent report produced by my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), my right hon. Friend the Member for Knowsley (Mr Howarth), and my hon. Friend the Member for Wirral South (Alison McGovern). Her experience illustrates the reality of life on zero-hours contracts for many people. Such contracts put a strain on families who cannot plan and do not know when the next pay cheque is coming. They create a huge obstacle for people who aspire, for example, to obtain mortgages so that they can own their homes and do things that many others take for granted. And what is the Government’s answer to all that, in the Bill? To ban exclusivity clauses.
Mr Umunna
I will give way shortly.
The Government’s answer is simply not good enough. Do they really think that, on its own, that will stop the exploitative use of such arrangements?
As well as ensuring that the terms and conditions of employees on zero-hours were made clearer and that they were free to work for other employers, we would give employees the right to demand regular contracts if they were, in practice, working regular hours for a certain period, with an automatic right to a fixed-hours contract after a year. We would also ensure that employees on zero-hours contracts were not obliged to make themselves available outside contracted hours, and that they had a right to compensation if shifts were cancelled at short notice. That is what the Government should be doing. If they did what we are proposing to do, they would be able to clamp down on these exploitative practices.
Jonathan Edwards
I am heartened by some of what the hon. Gentleman is saying, but can he explain why, during recent deliberations in the Welsh Assembly on the Bill that is now the Social Services and Well-being (Wales) Act 2014, the Labour Government voted down my party’s proposals to ban zero-hours contracts in the social care sector in Wales?
Mr Umunna
No. I must make a little progress, because otherwise the hon. Gentleman’s speaking time will be reduced to three and a half minutes, and he will blame me.
Let me now say something about takeovers, which I had absolutely no idea would feature in the Secretary of State’s speech. He made two announcements on the BBC’s “The Andrew Marr Show” over the weekend. First, he said that he wished to introduce measures that would ensure that commitments given by bidders for British companies had some teeth, and that a sanction could be applied if those commitments were reneged on. Secondly, he said he believed that the Government should have a backstop power to strengthen the existing public interest tests if that proved necessary.
I support the thrust of the Secretary of State’s proposal in relation to commitments given by bidders in takeover circumstances. As I said earlier, I suggested at the weekend that he should include such measures in the Bill. According to the legal advice that I have received, primary legislation would be required; simply amending the City code would be insufficient. I think that that is sensible, and I am happy to work on it with the Secretary of State in the context of this Bill.
As for the proposal to strengthen the public interest test, my own view—based on the legal advice that I have received—is that, if the Secretary of State wishes to change the current set of criteria, there will be no need for primary legislation. He has expressed concern—as did we, some months ago—about the need to protect our science and research and development bases in the national interest. Obviously, the way in which any provisions were crafted would be important—in particular, we would need to ensure that there was clearance from the European Commission—but, as I have already said on several occasions, we are happy to work with the Secretary of State on that.
I think that I have gone on for long enough. The Bill contains other measures—relating to company filing requirements, child care and schools, and education—with which we have no major issues, and the details of which we will examine in Committee.
This is not a terrible Bill but, to refer to what the Secretary of State has said about the Government’s economic policies before, it is all rather piecemeal. Given the challenges we face as a country—a country with huge potential—our constituents were entitled to expect a bit more from this Government in this Bill. The only way to get that is to change the Government and vote Labour next year.