Enterprise and Regulatory Reform Bill
Debate between Chuka Umunna and Julian Smith
Mr Chuka Umunna (Streatham) (Lab)
It is good to see you back in your place, Madam Deputy Speaker.
Before I turn to the four issues covered by this group of amendments, it is worth revisiting the supposed purpose of the Bill. It is supposed to be an enterprise Bill that will generate growth. It was referred to as a Christmas tree of a Bill when it left us, but it has since become something of a forest.
Let me deal with each of the four issues in turn. The first is the Government’s move to repeal the general duty for the Equality and Human Rights Commission contained in section 3 of the Equality Act 2006. The Lords wished to reverse the Government’s move to repeal section 3 of the 2006 Act and we agree with them. The general duty sets out the mission and vision of the commission. It is worth repeating that duty, which is for the commission to encourage and support
“the development of a society in which…people’s ability to achieve their potential is not limited by prejudice or discrimination…there is respect for and protection of each individual’s human rights…there is respect for the dignity and worth of each individual…each individual has an equal opportunity to participate in society, and…there is mutual respect between groups based on understanding and valuing of diversity…equality and human rights.”
The Government wish to repeal all of that as part of their red tape challenge, on the basis that it is a
“vague, unnecessary and obsolete provision from the Equality Act 2006”,
as the Minister put it in her letter to me yesterday. I could not disagree with her more.
I made the point on Report that this is not red tape. Vision and mission are important. The reason that the Government have failed on all manner of fronts is that they lack vision and mission. As Baroness Campbell, who sponsored the amendment in the Lords, said, the duty imports the cultural and ethical principles of equality and human rights into the commission’s remit. It makes it clear that the commission is there not just to enforce rules but to change culture.
Personally, I believe that we as a country have made a great deal of progress in this regard since I grew up here and since members of my family arrived here from abroad. However, Baroness Campbell also said:
“We would not wish to risk slipping back to the time before the Stephen Lawrence inquiry, but if Section 3 goes and the equality duty is weakened or lost shortly after, I feel that is precisely where we will be heading.”—[Official Report, House of Lords, 4 March 2013; Vol. 743, c. 1278.]
Indeed, Doreen Lawrence has resolutely opposed the removal of section 3. Baroness Campbell enjoyed overwhelming support from most of the others who spoke on this issue in the Lords, and numerous others outside Parliament have objected to the repeal, fearing that the changes will result in a much weaker body. Those who have objected include Justice, the Fawcett Society, Mind, the Refugee Council and the Equality Trust.
Having listened to the arguments on this matter in both Houses and outside Parliament, the commission itself has now said that unless the Government can provide additional robust reasons for removing the general duty—which they have not done—the case for removing the Lords amendments in the Commons will not have been made. The commission therefore continues to support the retention of the general duty and the maintenance of the position established by the Lords. I put it to the Minister that if the commission is content to support the retention of the duty—which is doing no harm; indeed, it is doing quite the opposite—why does she think that she knows better?
Let us not forget that the Government are not only seeking to water down the commission’s remit; they have also cut its budget by more than 60%. The cut was so great that the United Nations High Commissioner for Human Rights was moved to write to the Government in June and July last year to express concerns.
Julian Smith
How does the shadow Secretary of State account for the evidence given by John Wadham, the chair of the commission, when he appeared before the Committee? He stated:
“I do not think that it is so problematic, because other parts of the legislation provide sufficient clarity on what our job really is.”––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 19 June 2012; c. 79.]
How does the hon. Gentleman account for the chair of the organisation—[Interruption.] How does he account for a board member of the organisation saying that in Parliament, yet now doing a flip-flop? Which is true? What does the organisation believe, and what does the hon. Gentleman’s party believe?
Mr Umunna
With the greatest respect to the hon. Gentleman, our party has made it very clear what we believe. Mr Wadham can speak for himself, but I must first point out that he is not the chair of the organisation. Secondly, the Equality and Human Rights Commission has made it clear that it has changed its position on this matter. Thirdly, we are hardly going to find a senior member of an agency such as the commission seeking to have a public row with its Minister. However, I think we all know exactly what people in the commission think. I was told that the last time we discussed this matter in the House, Opposition Members were being cheered on by employees of the commission who were watching the debate. I am sure that they are watching this debate right now, and that they will have listened with interest to what the hon. Gentleman has just said.
The Minister should also reflect on what the majority of her party’s members think about this issue. They cannot fathom why she and the Business Secretary are making all these changes to people’s rights at work, to the role of the commission and so on. My hon. Friend the Member for Edinburgh South (Ian Murray), the shadow Minister for employment relations, has told me about his trip to the Liberal Democrats’ spring conference last month. He spoke at a fringe meeting on employment rights—I did not know he was going to do that—at which the Minister tried to justify all these changes. My understanding is that people walked out of that room in disgust at the measures that she is trying to push through today. I have, of course, castigated my hon. Friend for forgetting to take Labour party membership forms with him to dish out; he will take a big box of them next time. We support the Lords amendments in this respect.
Let me turn now to deal with caste discrimination, a matter that has attracted considerable interest outside this House. Labour has a proud history of tackling injustice and discrimination. We believe that people should be able to make the most of their potential opportunities—whatever their race, gender, family background or social circumstances. In recent months, organisations such as the Anti-caste Discrimination Alliance have campaigned for stronger action to tackle caste discrimination, and their case has been powerful. Every community group and every faith group to which we have spoken—on either side of the debate in recent days—has been united in the belief that caste discrimination has no place in our country.
We Labour Members thus believe that we must send a strong and clear message today—that caste discrimination is completely unacceptable, and that we support taking more action. That is why we will support the amendment. We need to do more to ensure that the small number of people who face such injustice have access to the redress they deserve and have somewhere to turn to for support.
It is fair to say, however, that some have raised legitimate concerns about the practicalities of how the legislation would work—about its drafting and implementation. We take those practical points seriously and we agree that any new action we take must over time reduce rather than increase the number of people being identified by their caste, eliminating discrimination in the future.
Enterprise and Regulatory Reform Bill
Debate between Chuka Umunna and Julian Smith(12 years, 1 month ago)
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Mr Umunna
My hon. Friend hits the nail on the head and identifies the Government’s real motivation. We are in the third quarter of a contraction, which we will hopefully come out of in the next quarter. We were promised many things in relation to the economy that have not turned out to be the case. In their desperation to get the economy moving, and with their complete refusal to stimulate the economy, the Government are now doing the traditional thing and looking to water down people’s rights at work as a substitute for a proper growth plan.
New clause 13 would abolish discrimination questionnaires, which employees can submit to their employers to obtain further information and make up their minds about whether to institute proceedings, or maybe to assist them in reaching a settlement with their employer. I know those questionnaires well, because I was professionally involved in drafting them on behalf of employees. I was also involved in drafting the responses on behalf of employers.
From the employees’ point of view, there is no doubt that those questionnaires help them access evidence at an early stage, which is incredibly important so that, as I said, they can determine whether to litigate or precipitate a settlement. They will now be all the more important because of the large fees that the Government are levying on people who wish to institute claims in an employment tribunal.
Turning to the employers’ point of view, the Government’s own Equalities Office carried out research on the questionnaires and found that only 2% of private sector employers had had to complete one in the past three years, and that most of those who had done so agreed that responding to them had been straightforward. We do not need to abolish the questionnaires, and I do not accept the reasons for doing so that have been put forward by the Minister. I say that not only from a political point of view but in the light of my professional experience of working for a number of years on these matters.
Mr Umunna
I want to make some progress; I have given way a few times now.
I welcome the addition of new clause 17 to the Bill. It will enable tribunals to recommend that an employer who loses an equal pay or sex discrimination case be required to carry out an equal pay audit. I simply want to raise one question about the scope of the measure. Is my understanding correct that it will apply to private sector employers only? Perhaps the Minister will expand on that point.
Enterprise and Regulatory Reform Bill
Debate between Chuka Umunna and Julian Smith
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
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.
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.
Business and the Economy
Debate between Chuka Umunna and Julian Smith(12 years, 6 months ago)
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Mr Umunna
If only the Foreign Secretary’s comments had been limited to those that I have just cited. There was more, however. Asked whether they amounted to a modern-day call to our people to get on their bikes, echoing the call from the noble Lord Tebbit back in the 1980s, the Foreign Secretary said:
“Well no, it’s more than that. It’s ‘get on a plane, go and sell things overseas’…It’s much more than getting on the bike. The bike didn’t go that far. ‘Get on the jet.’”
I know that senior members of this Government have a penchant for hanging out with people who own yachts and jets, but most business people in this country do not have those things or mix in such company. Chris Romer-Lee, the director and co-founder of an award-winning architecture practice here in London, said to me yesterday that his firm is working flat out and has been doing so through these bad economic times. He said that
“to suggest we could work harder is insulting.”
That is what a business person said to me yesterday.
Julian Smith
The legislation that we are discussing today deals with deregulation. Will the shadow Business Secretary tell us about his proposals to lift the burdens on British business?
Banking (Responsibility and Reform)
Debate between Chuka Umunna and Julian Smith(12 years, 10 months ago)
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Julian Smith (Skipton and Ripon) (Con)
Will the shadow Minister confirm that at that time he was an employment lawyer and was involved in structuring the compensation packages of investment houses? Does he have any regrets about how he behaved at the time?
Mr Umunna
I am glad that the hon. Gentleman brought up that point, because I anticipated it. First, I think it is good that Members of this House have experience in working for business. Secondly, my experience of advising different companies and financial institutions on such arrangements has convinced me that we must reform the way in which the system works—[Interruption.] I would also say to Ministers, who are crowing, that they might wish to reflect on the fact that my ultimate boss at the time when I was more deeply involved in drafting such arrangements was the senior partner of Herbert Smith, whom the Prime Minister ennobled in the first tranche of peers at the beginning of this Parliament—no doubt because of his services to the legal profession and the City of London.
As the Leader of the Opposition said last week, we are still dealing with the aftermath of the moment to which I have referred and the recession it caused. Many thousands of people lost their jobs and now face the biggest squeeze on their living standards in a generation. Thousands of robust, profitable businesses have struggled to access finance or have gone under. At this juncture, I want to tackle head on the accusation that to raise those issues and criticise the financial services sector is to be anti-business—some have even referred to it as indiscriminate business bashing. That is an utterly absurd notion given that among the most vociferous critics of our banks are the small and medium-sized businesses that make up the overwhelming majority of businesses in this country. The people making those outlandish claims of anti-business sentiment talk as though large financial institutions are the only businesses in this country. Yes, those institutions are an important part of our business community, but there is so much more to British business than big finance. Indeed, we need to rebalance our economy not to diminish our competitive edge in financial services but to grow other sectors so that we are not so reliant on that one sector.
Businesses in other sectors are struggling right now. The most recent Bank of England trends in lending show that net lending to businesses has fallen in nine out of the past 12 months and lending has fallen by more than £10 billion in the past year. A report published by the Department for Business, Innovation and Skills last week states that the stock of lending to small and medium-sized businesses declined by 6.1% in November 2011 compared with a year earlier.
It is not just that the banks are failing to get the money out of the door to successful, profitable businesses with robust business models. There has been a move away from relationship banking, where banks saw it as their duty to get to know and understand their business customers properly. Yesterday, I met a number of successful export businesses in the home counties—businesses that help us pay our way in the world. I was told by the overwhelming majority that when it came to getting help from their banks to export and expand, their banks simply did not want to know.
Some have suggested that that is all the result of increased capital requirements on the banks, but Robert Jenkins, a member of the Bank of England’s interim Financial Policy Committee, told the Treasury Committee last month:
“Making the banks safer through greater resilience in their balance sheets and more capital does not, in and of itself, prevent additional lending.”
Despite all that, people and businesses have had to watch as billions in bonuses have been paid to bankers since 2008-09. It is worth stating that we are not talking about the sums earned by the average bank employee—the cashier, say, in a local branch—but about the enormous sums paid to investment bankers and a select few senior executives in the sector. Those bonuses have continued to be paid as a matter of course, regardless of the fact that many of the institutions, all of which directly or indirectly benefited from the interventions of the Government over the past five years and continue to benefit from an implicit subsidy, have been making thousands redundant, have seen their share prices and profits falling and have been found guilty of mis-selling payment protection insurance on a grand scale. To add insult to injury, Robert Jenkins, commenting on bank balance sheets, told the Treasury Committee:
“Every £1 billion of less bonus would support £20 billion of additional small business lending.”
It is no wonder that Sir Philip Hampton, the chair of RBS, himself said last week:
“Pay has been high for too long, particularly in the banks, particularly in the investment banks".
Mr Umunna
On guaranteed bonuses, there is an element of contract in that, in terms of the arrangements between individual banks—[Interruption.] Will the hon. Gentleman listen and let me finish the point? There is an element of contract that provides for a bonus, but also an element of discretion. The fact that large bonuses were being paid out regardless of performance is, of course, what people outside Parliament object to.
Julian Smith
In order to create a balanced view, will the shadow business Minister confirm the tens of billions of pounds paid from those bonuses in income taxes and other taxes, such as employment taxes, during the period he is discussing?
Mr Umunna
Ultimately, the taxpayer had to put about £1.2 trillion into the system to support it. Juxtaposing that with the amount paid in tax by the sector, I am not sure that it comes to the same sum. I get the point that the hon. Gentleman is making. I do not deny that the financial services sector has contributed in tax receipts, but that is not outweighed by what we have had to pay out to save it from itself.
The status quo will not do. Change is essential. In November last year, Bob Diamond, chief executive of Barclays, said in his BBC “Today” business lecture that
“the single most important thing for banks and for businesses now is to focus on helping to create jobs and economic growth; and being able to do that requires us—banks in particular—to rebuild the trust that has been decimated by events of the past three years; and that rebuilding trust requires banks to be better citizens.”
I agree with Mr Diamond, but actions matter far more than words to people and businesses.
At the Business Secretary’s instigation, the Government established the Independent Commission on Banking, for which he deserves credit. If its recommendations are implemented, they will help to deliver a banking system that supports our economy’s interests in the long term. However, a number of things must happen to address the issues in the short term, not least of which is the matter of remuneration, which can be corrosive of public trust in our banks.
First, greater transparency on pay in the banking sector is needed. A good place to start would be immediate implementation of the Walker review. In 2009, Sir David Walker recommended new rules on the disclosure of bankers’ remuneration within pay bands above £1 million. In government, we legislated for that fairly modest scheme to be put in place so that irresponsible remuneration practices could be identified and rooted out. So modest were the proposals that the now Business Secretary told the House at the time that Sir David had produced
“an embarrassing mouse of a report”.—[Official Report, 30 November 2009; Vol. 501, c. 900.]
In the June 2010 Budget, the Business Secretary and his coalition partners pledged to take forward these modest proposals, but in November 2010 the Chancellor suddenly declared that he would not countenance implementation unless he could secure international agreement for the measures. In giving evidence to the Treasury Select Committee in December 2010, however, RBS’s Stephen Hester indicated that unilateral adoption of the Walker review proposals would not put the UK financial services sector at a significant disadvantage. Given the modesty of the Walker review proposals, why on earth will the Government not implement them?
Secondly, to increase accountability, we have said that an ordinary worker should be placed on the company remuneration committees setting pay. I do not understand why the Government have been so resistant to this idea. The Business Secretary has said that he is very sympathetic to the idea but has raised practical objections on the basis that there are many FTSE companies whose employees are predominantly overseas. These practical obstacles can be overcome, however, not least through technologies such as telephone and video conferencing, which in this day and age are a common feature of board meetings.
Economic Growth and Employment
Debate between Chuka Umunna and Julian Smith(13 years ago)
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Mr Umunna
I completely agree with my right hon. Friend. Of course, another question for the Government is why they will not listen to business organisations that have been calling for action. The CBI is calling for infrastructure spending to be brought forward, the Federation of Small Businesses is calling for a one-year national insurance break for every small firm taking on extra workers, and the Federation of Master Builders would like a targeted cut in VAT to 5% for home improvements, maintenance and repairs. Business organisations, from those representing the food and beverage sectors to those representing businesses on our high streets, which are suffering, are calling for a reversal of this year’s hike in VAT. What do all those measures have in common? They are all part of Labour’s plan for growth and jobs. As our motion stated, the Government must take action now to increase demand and growth and give immediate help to the high street—[Interruption.] The Minister of State, the hon. Member for Hertford and Stortford (Mr Prisk), chunters from a sedentary position. If he wishes to ignore all the various business organisations, people might put a big question mark over his judgment. It is clear that the Government need to back our plan and that they must do so now.
Julian Smith (Skipton and Ripon) (Con)
Does the hon. Gentleman not agree that the Government have been listening to businesses organisations with regard to employment law and deregulation? I am surprised that he, as a former employment lawyer, has not included in the motion a single proposal to make it easier for small businesses in Britain to take on staff.
Mr Umunna
I have given way several times, and I want to make a bit of progress.
Instead of reverting to the tired old mantras and doing over the people who work in this country, perhaps the Secretary of State could tell us what he will do to get banks lending to small and medium-sized businesses that are, by his and the Chancellor’s own admission, currently being starved of credit. We know that the Project Merlin accord between the banks and the Government failed. The Secretary of State more or less admitted as much when he said:
“Merlin was necessary but it was never going to be sufficient. I don’t think any of us pretended it was enough.”
We know that the figures published under Merlin are entirely misleading, because under the agreement between the banks and the Government a gross lending measure was adopted, not the more meaningful net figure used by the Bank of England. The truth is that Project Merlin was really no more than a public relations gimmick designed to get the Government out of a hole when banks’ declarations of bonuses were in full flow earlier this year.
For real businesses, the failure is real. The Bank of England’s “Trends in Lending” publication for last month showed the stock of lending to UK businesses contracting overall in the three months to August. The Bank’s latest agents’ summary, for this month, stated that small businesses were still reporting that credit conditions
“remained tight, and in some cases had become tighter.”
That is supported by the figures released this morning by the British Bankers Association, showing lending by the high street banking groups to non-financial businesses contracting this month.
To resolve that problem, the Government first need to change their overall economic strategy, to give businesses the confidence to borrow and grow. The small and medium-sized enterprise finance monitor published last week showed that the main barrier to future borrowing by SMEs was the economic climate, but that the other major barrier was the lending practices of the banks. The Government need to use their influence with the banks, particularly through United Kingdom Financial Investments in the case of the banks in which the state has a stake, to insist that they get money out of the door to responsible businesses that have sound business models but are struggling to access finance. In addition, they must urge those banks to adopt a better lending culture—for example, by ensuring that they have local relationship managers on the ground who get to know the business concerned.
Mr Umunna
When will Government Members take responsibility? I wish that we were still in government, but we have not been for 18 months now. It is about time that they got used to the fact that they are in government and took responsibility.
Business is crying out not for a Government who step aside and fail or refuse to act but for one who adopt an active approach, using all the tools at their disposal to create the conditions for private sector growth. For all their claims about our record, such as the ones that we have just heard, the Government have kept in place some of the support measures for business that we left them on leaving office. I should point out that under Labour, 1.1 million businesses were created. When we left office, the UK was rated fourth by the World Bank for the ease of doing business, and first in Europe. Under this Government, the UK has dropped to seventh in the global rankings. We will take no lectures from the Government on support for business.
In government, we set up the Better Regulation Executive and the Regulatory Policy Committee to improve the quality, and where appropriate reduce the quantity, of regulation on business. I note that the Government have continued with them.
Julian Smith
Will the hon. Gentleman clarify the top five deregulatory measures that his party took in the 13 years it was in government?
Mr Umunna
I cannot name the top five, but the whole reason the Better Regulation Executive and the Regulatory Policy Committee were set up was to reduce regulations by a huge number and improve their quality.
In government, we also conceived the technology and innovation centres, to promote innovation. The Government are now rolling them out across the country, and they have sought to build on the measures that we put in place to reduce the bureaucracy of Government procurement and increase SMEs’ access to it.
In many other areas, however, there has been a disorderly retreat from an active approach. The Government have undermined certainty for investment, cut the science and research funding budget by 15% in real terms and abandoned the 10-year funding plan, and they have abandoned sector strategies such as the defence industrial strategy. The Automotive Council continues, but the RDAs, which could have helped make a reality of the ambition to strengthen companies’ supply chains, no longer exist.
The Government have undermined new industries, such as green industries, as my right hon. Friend the Member for Don Valley (Caroline Flint) will outline in the debate that will follow this one. They have delayed the roll-out of universal broadband and undermined the collaborative institutions that we set up to work with businesses, such as the Office for Life Sciences and the Technology Strategy Board, which are widely respected. The higher education sector, the seventh-largest export industry, has been put in disarray by the Government’s visa changes. Support for the digital, creative and educational sectors has been scaled back. Then there is the decision to award the £1.5 billion contract for new Thameslink trains to a manufacturer that will make them in Germany, which means that Bombardier is reviewing its activities in Britain.
The Government have retreated from action, undermined confidence, failed to unlock investment, failed to deliver a credible plan for growth and failed to use action to back business. They need to back our five-point plan for growth now and put in place a credible plan to build for our long-term success. These are difficult and challenging times for businesses and people in this country. They deserve better from a Government who say, “We are all in it together”, but who, time and again, show that they have absolutely no understanding of the concept.
Policy for Growth
Debate between Chuka Umunna and Julian Smith
Julian Smith (Skipton and Ripon) (Con)
As a small business owner, dealing with employment law took more hours of my time than any other management responsibility. Since 1997, employment laws and regulations have been piled on to British business from both Labour and Brussels, but for the employer, particularly the many small businesses in my constituency, that has meant a major cost in time and money. The intense focus on employee rights has ended up with the employer spending a huge amount of time ensuring that he or she is abiding by the law, and wary of the consequences of even the most innocent error.
Under the previous Government, the cumulative effect of employment law fundamentally changed the playing field and left employers feeling defensive, rather than confidently hiring new staff. The other day I saw a friend of mine who is setting up a new business. She told me that she had been advised to take her staff on short-term contracts rather than hiring them as permanent staff to avoid all the pitfalls. Therefore, at the key moment when we need more jobs—in fact, hundreds of thousands of jobs—the advice to a budding entrepreneur is to avoid permanent staff if possible.
According to the World Bank’s “Doing Business” report, employing workers in the UK has become harder every year since 2007. We have slipped from No. 17 to No. 35.
Julian Smith
I am sorry, but I will not.
Statistics do not take into account the effect on small businesses of the sheer worry of all those burdens, nor the reality of a world where Britain will be under increasing pressure to attract internationally mobile jobs.