Cavity Wall Insulation: Wales

David Nuttall Excerpts

Wednesday 19th April 2017 Westminster Hall

On resuming—

[Mr David Nuttall (in the Chair)]

The debate may now continue until seven minutes past 5.

Magnox: Early Contract Terminations

David Nuttall Excerpts

Monday 27th March 2017 Commons Chamber

[Greg Clark]

I will. It is important when there is such a serious set of consequences for public money that the conclusions should be publicly available, and available to this House and to other Government Departments that may want to reflect on them.

[Mr David Nuttall (Bury North) (Con)]

Will the Secretary of State confirm that the Holliday inquiry will have reached its final conclusions and issued its final report in time for any lessons learned to be taken into account before the new contract process begins?

[Greg Clark]

One reason I have asked Mr Holliday to make a report by October is so that that can happen. I will meet him in the coming days, as he sets out the scope and timetable, but that is one of the key reasons for the report, and I am sure he will want to make his recommendations available for the new process.

Energy Prices

David Nuttall Excerpts

Thursday 16th March 2017 Commons Chamber

[John Penrose (Weston-super-Mare) (Con)]

I beg to move,

That this House deplores the big six energy firms’ treatment of out-of-contract energy customers on default tariffs; believes immediate action is needed to protect those consumers, and that pushing customers to start switching will not fix the problem sufficiently quickly or completely on its own; and calls on the industry, regulators and the Government to consider solutions which recognise that many people lead busy lives and that switching their energy supplier may not always be a high priority.

I thank the Backbench Business Committee for finding the time for us to debate this important and topical motion today. I also thank my two co-sponsors, the right hon. Member for Don Valley (Caroline Flint) and the hon. Member for North Ayrshire and Arran (Patricia Gibson), and the 50 or so MPs from across the political spectrum who all feel that the treatment of most energy customers is sufficiently outrageous and unjust to merit raising it here, in the mother of all Parliaments.

Most industries believe that customer loyalty is hugely important; an asset to be prized. Most businesses reward their most loyal customers with special treatment to keep them coming back—whether it is a supermarket’s loyalty card, an airline’s air miles scheme or just the coffee card that gives you a free cuppa after it has been stamped 10 times. Energy is an exception. What other industry does not give its most loyal customers any discounts or special deals, but instead charges them higher prices than anyone else? Which companies believe that loyalty should be exploited, not rewarded? Which one of them treats their longest-serving customers as chumps, to be quietly and secretively switched on to expensive, unfair deals when they are not looking, and then milked—ripped off mercilessly for as long as possible? The answer is the big six energy firms. The rest of the energy industry is pretty good. There are 30 or more newish energy firms snapping at the heels of the big six, and they understand that customer loyalty matters if they want to grow.

[Mr David Nuttall (Bury North) (Con)]

As my hon. Friend will know, there has been a huge roll-out of smart meters, which is one way of people keeping an eye on their energy bills. Unfortunately, though, when people do switch providers, they find that their smart meter has to be replaced at the same time. Does he agree that that is one reason why perhaps some people are becoming unwilling to change providers?

[John Penrose]

There are many reasons why switching has not caught on to anything like the degree that we need it to if we are to transform the sector. I understand that one factor may very well be this problem with the introduction of smart meters, but there are others, too. My hon. Friend was quite right to point that issue out, and I will mention some others later on in my speech.

As I said, there are 30 or more newish energy firms snapping at the heels of the big six, and they understand that loyalty matters. Obviously, some are more impressive than others, but they all have one thing in common: they are hungry. They know they have to impress and delight their clients, because they cannot rely on exploiting a “back book” of long-term customers to stay fat and happy. The figures are stark. Roughly two thirds of all customers—at least 20 million households—are on the expensive, rip-off deals: the standard variable tariff. A minority of customers switch to a different energy supplier regularly, but most of us do not. The amount of switching has been creeping upwards, but much of the change has come from the same bargain hunters churning round and round in ever faster circles between different energy firms. The number of households that have rarely or never switched remains stubbornly high, which suits the big six just fine. So, what is the answer? How do we put energy customers in the driving seat? Do we give them the same power to choose a new supplier as easily as we switch to a different brand of toothpaste or coffee? How do we make them compete to delight us, rather than quietly exploiting us?

First, we have to make switching a lot easier. Choosing that different brand of toothpaste in a supermarket is easy: we just pick a different tube off the shelf. Too many people find switching to a different energy firm scary and stressful, and are frightened off as a result. Even the price comparison sites, which have an interest in making the process as simple and as easy as possible, say that huge numbers of customers abandon their search when they are asked a basic, essential question such as what is their current energy usage. Others think that switching is likely to go wrong, and that they might end up cold and shivering in a home without power if the move does not happen smoothly.

My hon. Friend the Member for Bury North (Mr Nuttall) has already mentioned the impact on some households of the new smart meters. Others simply have not got the time to switch. Many of us lead busy lives, juggling careers, childcare, school runs and goodness knows what else. Switching our energy supplier can easily become one of those things that we all know we should do, like washing the car or joining a gym, but we never quite get round to doing. The difference is that other products do not automatically switch us to a super-expensive brand of toothpaste or coffee unless we tell them not to. They do not expect us to be on our toes all the time to stop them changing the terms of our deal and ripping us off when we are not looking. For toothpaste, coffee and almost everything else, loyalty and inertia work in the customer’s favour; they are on our side. That does not apply to energy. If we relax, they will have us.

Fortunately, there are some simple things that make switching easier, less stressful, simpler and not so scary. The main one is making our customer data easily available to a new energy firm if we give them our permission. That way we do not have to fill in endless online pages with information that we cannot remember or that we have not got. At the moment, the information can take days to come through, and the big six throw all sorts of obstacles in the way. They have no interest in making it easy or simple.

In future, we should just be able to ask our new firm to get it from our existing supplier in a few seconds, with a click of a mouse or a tick of a box—simple, quick, easy and safe. The number of people switching will go through the roof if we do that.

Oral Answers to Questions

David Nuttall Excerpts

Tuesday 14th March 2017 Commons Chamber

[Mr Speaker]

The hon. Member for Taunton Deane (Rebecca Pow) looks as though her cup has runneth over. What a happy day for her and, indeed, for Taunton Deane—not to mention the Minister.

[Mr David Nuttall (Bury North) (Con)]

One advantage for small businesses of the United Kingdom leaving the EU is that the House will be free to repeal unwanted EU regulations. What steps is the Minister taking to consult small businesses so that she can identify those regulations?

[Margot James]

I assure my hon. Friend that we consult small businesses all the time. The Department for Exiting the European Union regularly engages with the Federation of Small Businesses. We will, in due course, ask that Department to hold a roundtable for small businesses to discuss the very issues that he raises.

Oral Answers to Questions

David Nuttall Excerpts

Tuesday 31st January 2017 Commons Chamber

[Mr Speaker]

I call Mr David Nuttall. I thought that he was interested in this question. Has his appetite diminished? [Interruption.] No? Go on. Get in there, man.

[Mr David Nuttall (Bury North) (Con)]

I had not planned to stand for topical questions, but may I urge my right hon. Friend not to be swayed by the arguments from the Opposition to spend a specific amount of our GDP on research for scientific projects? If the private sector is unwilling to fund those projects, we should ask serious questions about whether the public sector and my hardworking taxpayers should be asked to foot the bill.

[Greg Clark]

Happily, the private sector—British business —is an enthusiastic and increasing supporter of investment in science and research. Sometimes that is done jointly with important publicly funded institutions such as our universities, and that is one of our strengths as an economy.

Oral Answers to Questions

David Nuttall Excerpts

Tuesday 13th December 2016 Commons Chamber

[Mr Hurd]

High-value manufacturing is extremely important to our future—it presents many opportunities but also presents risks that we have to manage—and so will be an important part of our industrial strategy. On the broader concerns about tariffs, the hon. Gentleman has heard it often enough, so he should start believing it: the Government are listening carefully, as I witnessed yesterday, to manufacturing and other sectors about their priorities and concerns as we shape and finalise our negotiating position.

[Mr David Nuttall (Bury North) (Con)]

Will the Minister, or one of his ministerial colleagues, meet me and representatives from M+W Group and DBD from my constituency, which are part of a consortium bidding for a vitrification project in China’s nuclear sector? It would give them a lot of confidence if he and his team could meet them and help them to win the contract, which would create hundreds of jobs in this country.

[Mr Hurd]

The Government are committed to supporting successful British business to win contracts and generate jobs, so the answer is yes.

National Minimum Wage (Workplace Internships) Bill

David Nuttall Excerpts

Friday 4th November 2016 Commons Chamber

[Mr Nuttall]

Before the urgent question, I had just set out some of the ways in which the present Government are enforcing the national minimum wage. It appears, at least on the face of it, to be a system that would benefit those on low pay, but all is not as it seems.

Not content with the introduction of a national minimum wage, pressure groups began to press for what they termed a “living wage”, and in April this year a national living wage was actually introduced. As far as I can see, however, what it amounts to is the creation of an extra tier of the national minimum wage, payable to those aged over 25. At £7.20 an hour, it represents a 50p increase on the minimum wage.

The living wage was described as a pay rise for over a million low-paid workers across the UK, many of whom would be in low-income households. While that is true, it is worth pointing out that the belief that when a minimum wage is increased the benefit goes to all those in the lowest income groups is far from the truth. In reality, 44% of low-paid workers are in the top half of the household income distribution, because, in many cases, their spouses are earning much more. The fact that one person is on the minimum wage does not mean that the household income as a whole is very low.

Let me return to the question of definitions. Those who are defined as workers are already covered by the minimum wage legislation. That applies to everyone, whether they are working as apprentices or not. On 1 October, the minimum hourly rate paid to an apprentice was increased to £3.40. The rate for those under 18 was raised to £4, the rate for those aged between 18 and 21 was raised to £5.55, and the rate for someone over the age of 21 who was not on the national living wage was raised to £6.95.

The crucial question is this: what is the position of volunteers? They work, surely, and is an intern not a volunteer? That question goes to the heart of the dilemma that faces my hon. Friend the Member for Elmet and Rothwell. After all, no one forces anyone to take up a position as an intern, so by definition they are all volunteers. At present, section 44 of the National Minimum Wage Act 1998 excludes voluntary workers from the national minimum wage. On 9 March 1998, during the debate on the Bill, the former Labour Minister Ian McCartney said:

“it does not cover volunteering in non-charitable commercial enterprises. To include that would undermine the Bill, and would go against the principle that volunteering should be for social good rather than a form of cheap labour for commercial profit.”—[Official Report, 9 March 1998; Vol. 308, c. 24.]

A company can become liable to pay the national minimum wage if the individual receives any payment beyond expenses or benefits in kind. That could include, for example, free tickets to a show if the individual is volunteering in that sector, or a festival or concert in the case of an arts charity. It is clear that the introduction of the national minimum wage has resulted in a raft of new rules and regulations that businesses must be conscious of and abide by. They must be aware of their responsibilities even towards individuals who are, on the face of it, just volunteers. As always, it is relatively easy for big businesses with large human resources departments to comply, but this Bill is intended to cover all employers, large and small. Companies need to be very aware of the responsibilities towards individuals who volunteer.

One important issue for a company to determine is the status of those who are providing services for them. Ultimately, it is the nature of the actual relationship between a worker and an employer that defines whether someone is a worker or not. This is the key point, and my hon. Friend the Member for Elmet and Rothwell skated over it when introducing the Bill. One can perfectly well envisage a situation where an individual is nominally termed an “intern” but in reality is a worker. In fact, one does not have to imagine anything, because fortunately there is case law on this point, which I will come to shortly. In such a situation a person would not need to rely on any new provisions contained in this Bill; they would simply be able to rely on the existing national minimum wage legislation, and could seek help and guidance from organisations such as ACAS. It is worth putting on record that reporting an alleged breach of the legislation is very simple. Any employee, volunteer or intern who believes that an employer is not complying with the minimum wage legislation and who wishes to report a problem with working hours or the minimum wage can do so by simply filling in a pay and workers’ rights complaint form, which is available on the Government’s website and can then be emailed to HMRC.

Let us be clear about one thing: the National Minimum Wage Act 1998 contains no reference to interns or internships. Even under the Labour Government of the day, it was clearly the intention that someone doing work experience—or, if we prefer the term, an internship—should not be entitled to the national minimum wage.

As I have said, we are fortunate that there is case law on situations where an individual is called an intern but where in reality a contractual relationship exists between them and the employer. In 2009, Nicola Vetta brought a case against a company called London Dreams Motion Pictures Ltd. It was heard at Reading employment tribunal on 20 November of that year. Nicola was engaged by the company on an expenses-only basis as an art department assistant. The position was advertised as expenses-only and as an opportunity to gain experience. In email correspondence the claimant, Nicola Vetta, was described by the defendants as

“full-time and our main assistant”.

In another complimentary email from the respondents to the claimant they said:

“We are very surprised that you have dived right into the action and within weeks become a key member of the team.”

Other emails were referred to at the hearing, including one in which it was said that Ms Vetta was running things and assembling a team. After considering all the evidence, the tribunal held that, despite the respondents’ defence that Nicola was not an employee and was merely engaged on an expenses-only basis, in reality she was nevertheless entitled to be paid the minimum wage as she was considered to be a worker. She was awarded £2,174.53 in unlawful deductions of wages, plus accrued holiday pay of £220.91.

This could very easily have been one of the internships my hon. Friend the Member for Elmet and Rothwell has been talking about this morning. There are many such cases, but I will touch on one other.

[Mark Pawsey]

My hon. Friend has given an interesting account of an industrial tribunal case, illustrating what we do not want to see happening. My grave concern about the Bill is that it would prevent many of our young people from getting valuable experience.

[Mr Nuttall]

I fear that if the Bill becomes law there is a danger that what now appears to be the settled law as laid down by these cases will be thrown into doubt and there might be a whole raft of new cases with new definitions to be challenged in the courts. As I will say later, although this Bill refers to “employment practice”—a new term to me, which I will come on to—there is no clear definition, as far as I can see, of what is meant by that, and I anticipate it will have to be tested in the courts and in industrial tribunals.

Let me turn to the case of Hudson against TPG Web Publishing Ltd in 2011. It was also held in this case that the claimant was a worker. Keri Hudson worked eight hours a day between 10 am and 6 pm for a publishing company and supervised a team on a website. The employer had considered paying her but decided not to. The tribunal concluded that she was a worker with a contractual relationship existing between herself and the employer and was therefore entitled to be paid the minimum wage. The reneging on the payment was a key factor because it demonstrated that the respondent recognised that the position at least could be a paid position.

At that time the National Union of Journalists said of the judgment:

“This sends a clear message to media companies that if they treat interns like cheap labour, the NUJ will take you through the courts.”

It is clear from this case that the issue of interns who are actually carrying out work has been tested in industrial tribunals, which have found that if someone is working, they are liable to be paid. Unions have, to be fair to them, taken up this cause and are alert to the problem, and in appropriate instances take cases to a tribunal.

[Alec Shelbrooke]

I am listening carefully to my hon. Friend, and this draws into comments I made, as do his opening comments about the legalities around national minimum wage law. I said at the opening of my speech that we still have people not being paid when they should be. Does my hon. Friend feel that people have the courage to go forward, even with union backing, or might they be worried about the effect it could have on the future of that industry?

[Mr Nuttall]

I rather suspect that any individual who brings a case is more concerned about their own contractual position than the wider industry. They might be concerned about their position within the industry, and I wonder whether that is what my hon. Friend is driving at. But I imagine the industry would respect the judgments of tribunals and accept that an individual who had the confidence to challenge an employer on the interpretation of an Act of Parliament and was able to demonstrate to the satisfaction of the tribunal that they were on the right side of that would be someone employers should be looking to engage, because it would be someone who had the confidence, willingness and ability to take on a larger employer. If they manage to win that case, I would have thought that would only enhance their opportunity of being given a job.

[Alec Shelbrooke]

It is nice to think life should be like that, but I am not sure that it is like that.

[Mr Nuttall]

My hon. Friend is entitled to his view, but as a former employer myself that is the view I would take—although others might come to a different view.

In the Hudson case, as in the Vetta case, the tribunal determined that essentially this was not an internship, but was a job for which Ms Hudson should be paid, and it awarded her unpaid wages and holiday pay. I submit that on the basis of the findings in those cases the Bill offers nothing new to protect workers. If someone is actually working despite the fact that they might be called an intern, they are covered.

We should consider how many people would be covered by this Bill, even if it were to be of any value and brought into law. A written parliamentary question of 24 June this year by the hon. Member for Copeland (Mr Reed) asked the Business Secretary whether there were plans to gather data on the prevalence of paid and unpaid internships. At that time the then Skills Minister was my hon. Friend the Member for Grantham and Stamford (Nick Boles), and I am sure I speak for the whole House when I say we sincerely hope he is soon able to rejoin us in the House.

He replied:

“The Government has no current plans to quantify the number of paid and unpaid interns. There is no legal definition of an intern, but all those who qualify as ‘workers’ are entitled to the National Minimum Wage and National Living Wage.”

Let us reflect for a moment on why the Government were unable to provide a more specific answer to that relatively straightforward question. I submit that it would entail reporting by businesses, small and large, on the details of the thousands of interns who are employed in offices, shops and factories right across this country. Some companies would have hundreds in the course of a year and, given the nature of internships, which can often be for short periods of time—sometimes for a week or two weeks—can the House imagine the practical difficulties in trying to ascertain an accurate number?

In 2010, a briefing note on interns and the national minimum wage was sent to the then employment relations Minister, Ed Davey, and the then universities Minister, David Willetts. Sadly, that briefing note has been heavily redacted. I wish it had not been, because it would have been very interesting to read the whole document. Perhaps we could speculate about why it was so heavily redacted; the House will be pleased to know that I will not so speculate. The briefing note, which was released on 15 July 2010 following a freedom of information request, said:

“No single data source can provide an accurate estimate of the number of paid or unpaid internships. Unpaid workers are particularly hard to capture in national surveys as they are not on the PAYE system. Given the paucity of data, we have had to construct an estimate for the total number of interns based heavily on reports from the Chartered Institute of Personnel and Development (CIPD), combined with a number of other assumptions. This estimate is 50-70,000 internships, of which 10-15,000 are unpaid, but due to data limitations any figures should be treated as purely indicative.”

The Sutton Trust estimated in November 2014 that 31% of graduate interns in this country had reported working for no pay. Those data were based on the Higher Education Statistics Agency’s leavers survey of 2012-13. More recently, the Low Pay Commission said in spring this year regarding non-payment of the national minimum wage:

“This year we received fewer responses from stakeholders on this issue. While this in itself could be interpreted as evidence of an improving situation, the feedback we have received from stakeholders who have responded indicated that the issue remains live.”

To be fair, the report also referred to discussions with unions and expressed concerns about non-payment of the minimum wage in the arts and entertainment industry in particular. Clearly, however, there are real difficulties in quantifying the size of the problem. Although we do not know whether it is getting better or worse, if fewer stakeholders are contacting the Low Pay Commission about concerns over unpaid internships, maybe it is not such a critical concern to people.

My hon. Friend the Member for Elmet and Rothwell posted on his website a call for evidence from the people of Yorkshire who had had experiences of unpaid internships. In his brief opening remarks, he was unable to expand on the sort of response he had to that call for evidence. I commend him for doing his research, but it seems to me that it would have been better to ask for the evidence first and then try to look for a solution only if a problem could be identified. I am not convinced that the problem is exactly what my hon. Friend thinks it is. Even if there is a problem, I am absolutely certain that this Bill will not solve it. In my view, it will create more problems.

[Alec Shelbrooke]

To put my hon. Friend’s mind at rest, the problem was identified many years ago, and some of the examples that I received were used in my speech today.

[Mr Nuttall]

I am grateful for my hon. Friend’s report of that. I have been completely consistent in my approach to the proposed legislation. I voted against the previous Bill when it was put to a Division a couple of years ago, so he and I have both been consistent.

As it happens, I was an employer when the national minimum wage legislation was introduced. At the time, I suspect I was employing about 30 or 40 people, so I know from first-hand experience about the impact that it had, not just on me but on many of my clients, which were small businesses. It undoubtedly took up some staff time; it was new legislation and we had to look at how to comply with it. To be fair, although rogue employers will do all they can to break the rules—that will always be the case—the truth is that most businesses and most small employers bend over backwards to try to comply with laws that emanate from this place. Although some extra administration was involved, I do not want to over-egg the pudding; it did not take up a huge amount of time or dominate our practice, but we did have to deal with it.

The biggest problem was not so much the administration but the economic costs of the minimum wage. I refer not so much to those who were not covered by the legislation—in our small practice, perhaps only one or two employees felt any benefit initially from the imposition of the minimum wage—but to the knock-on effect that it had on wage differentials. That was the economic problem for small businesses. If, for example, the salary of the lowest-paid worker—say, the office junior—is increased to the same level as, say, the junior typists, they can legitimately and understandably claim that in order to restore the pay differential, they should have a pay increase. That has a knock-on effect on the next grade up, and so on. The ripple effect of increasing the wages at one level can soon be felt much higher up the pay grade.

Turning to the engagement of additional staff, the fact is that if an employer has work that needs doing, they will engage a new member of staff. That may be part-time, of course—there might not be enough work to fill a full-time role, but the employer will engage either a part-time or full-time staff member. I accept that there might be unscrupulous employers who, seeing a short-term amount of work that needs doing, might seek to engage an unpaid intern to do that work. As I demonstrated earlier, however, my view—which, to be fair, is backed up by cases—is that that situation would already be covered if the person involved could demonstrate that they were carrying out work and were entitled to be paid the national minimum wage. So who would be covered by my hon. Friend’s Bill? People who are doing work are already covered, so the only other people who could be covered are those who are not working: the ones who are watching. Is my hon. Friend really suggesting that the national minimum wage should be paid to people who are simply watching someone else work?

I shall let hon. Members into a little secret. What goes on in this Chamber might be considered a spectator sport, and quite rightly, but I take the view that running a small business is not. When I was running a small business, I could not afford to pay people to come and watch me work. I did not mind paying them if they were carrying out work, but I could not afford to pay them simply to come and watch. I did not mind them coming to do work experience, and I got lots of requests—I still do, as a Member of Parliament—from people asking to come and spend time with me. I said, “Of course, there’s no problem. I will chat to you and I will give you advice.” But I could not pay them to do that. The reality is that an employer, and particularly a small business, cannot afford to pay people who want to sit and watch and then simply walk away having added no value whatever to the business.

Let us ask ourselves what determines a wage on the open market. It is an essential truth that work should be compensated according to productivity. A wage is the price at which a worker is prepared to sell his or her labour; the wage is the balance between what the employer is prepared to pay and at what level the labourer is prepared to sell. The employer will of course take into account the productivity of the labourer, and the labourer will consider how much they value themselves working for that employer. They will also take into account the experience of working there and the working environment. Someone who is prepared to spend time going on work experience—or an unpaid internship, if that is what we want to call it—is demonstrating that they value the experience of just being there and the contacts that they will make while they are there. In their eyes, those considerations cancel out the need for any monetary compensation. I believe that it is absolutely right that an individual should be free to decide for themselves the value of their own labour.

So what would happen if that basic arrangement were interfered with? What would happen if the law said—as I believe would be the case if the Bill became law—that an employer would have to pay to be watched? The obvious conclusion is that a black market would develop, as happens in any market where the price of a product or commodity is set at an artificially high level, higher than the genuine market level. If someone wants to do a few weeks’ work experience—whether it is called an internship or not—without being paid, the law should not prevent that from happening.

Let me deal briefly with the claim that unscrupulous employers are somehow exploiting a loophole. It seems to me that there is much more likelihood of an unscrupulous employer exploiting an individual who is being paid, because they will then expect a return on their payment. If someone is not being paid at all, it is surely far more difficult to exploit them and far more likely that that intern doing work experience would simply walk away.



I want to look in detail at the problems in the Bill. The first problem revolves around the definition in clause 1, which states:

“For the purposes of this Act, a workplace internship is an employment practice in which a person (“the intern”)—

undertakes regular work or provides regular services in the United Kingdom for—

(i) another person;

(ii) a company;

(iii) a limited liability partnership; or

(iv) a public authority; and”.

At the moment, the word “intern” has no legal definition. The official Government website, gov.uk, states:

“Internships are sometimes understood to be positions requiring a higher level of qualification than other forms of work experience, and are associated with gaining experience for a professional career.”

The key term in clause 1 is “employment practice”. Those two words are central to what I would call the obfuscation at the heart of the Bill. What is an employment practice? I venture to suggest that it is actually an employment contract. In other words, this clause is attempting to cover every employment contract in just about every conceivable working environment. Perhaps my hon. Friend would agree, and say that that is exactly what he is trying to do. Perhaps he is trying to make this so watertight and all-encompassing that absolutely no one could escape from it, but let us consider for a moment the problems that could arise from that.

Let us take the example of someone who is setting up a gardening business and regularly volunteering their time to maintain the garden of, say, an elderly neighbour. For the gardener, who wants to work, this is an opportunity not only to help the neighbour but to demonstrate to the neighbourhood that they are capable of the job, which could lead to paid work. Clause 1(b) states:

“(b) the purpose of the employment practice is—

(i) that the intern meets learning objectives or gains experience of working for the employer listed in section 1(a); and

(ii) to provide practical experience in an occupation or profession.”

We know from clause 1(a) that the intern could be working for a sole individual, which would cover the example of someone wanting to work for their neighbour. In that scenario, could the neighbour become liable to pay the national minimum wage? To me, that seems very likely. I submit that that would be an unintended consequence that could result in a financial cost when the person was simply trying to do someone a favour.

Nowhere in the Bill is there a definition of regular work or regular services, a point made earlier by my hon. Friend the Member for Shipley. While we are fortunate that the Bill comes with some explanatory notes, they do not give any further clues as to what actually amounts to regular work or regular services. When something is not specifically defined, there is the potential, as pointed out by my hon. Friend the Member for Rugby (Mark Pawsey) in an earlier intervention, not only for further references being necessary in order for an industrial tribunal to clarify the situation, but for terms to be widely construed. If someone is called in to do some filing in an office every Tuesday, is that regular? If a volunteer assists with a monthly live event, is that regular? It clearly means that something happens more than once, but there is no clear guidance.

I suspect that what would happen with the Bill is that the term “internship”, which has been adopted and is widely used and which this Bill seeks to outlaw, will be rapidly replaced by another term. People will try to get around the legislation by using another term—perhaps “work shadowing”. It may be that work shadowing is already covered by the Bill—we would have to see—but if someone has not been promised future work, that situation could be caught by the Bill. I would therefore submit that the Bill’s scope is too wide.

Clause 3 attempts to narrow that scope by setting out some exclusions. It excludes students who are required to do work experience as part of their course. In other words, the Bill recognises that work experience, when part of a wider course of study, does not have to be paid. To be fair, my hon. Friend the Member for Elmet and Rothwell touched on that in his remarks, but I did not intervene because he made it clear that he was not going to take any more interventions. However, the Bill’s true effect will be to discriminate against precisely those who have been told this morning that it seeks to help. If someone is lucky enough to go to college or university, the Bill says that it is fine for them to go on a placement or have 12 months’ work experience. If someone is not that lucky and just wants the opportunity to see what workplace life is like, the Bill states that an employer must pay them. That cannot be right. I am unsure whether that has been thought through by the Bill’s promoter, but it seems that that is exactly what would happen if the Bill became law.

The Bill also excludes those “of compulsory school age”, who are excluded from the National Minimum Wage Act 1998 anyway; those who are doing apprenticeships; and those otherwise excluded under devolved powers. However, I now want to comment on clause 3(1)(d). Clause 3 states:

“For the purposes of this Act, section 2 shall not apply if the person is—

(a) a student at a higher or further education institution…

(b) of compulsory school age;

(c) undertaking an approved English apprenticeship…

(d) meets the terms of a definition set out in regulations made by the Secretary of State or, as the case may be, the relevant Scottish, Welsh or Northern Ireland Ministers.”

Taken together, those words state that

“section 2 shall not apply if the person is-

… meets the terms of a definition”.

I gently suggest to my hon. Friend that there must be some words missing from clause 3(1)(d)—probably “someone who”. I think it should say that section 2 “shall not apply if the person is—someone who meets the terms of a definition”. It does not make sense as it stands.

The clause also runs the risk of different regulations being made in different parts of this United Kingdom. I hope that my hon. Friend will say that I have missed something and that that is not the case, but the clause seems to suggest that if regulations are made by the Secretary of State in this place or by relevant Ministers in the devolved Administrations, different classes of people would be excluded in different parts of the United Kingdom. Is that the case? Perhaps my hon. Friend will reflect on that and comment on it when he winds up.

I am conscious of the fact that many other Members wish to speak , but I want to talk about the many other people who have looked into this problem. In 2011, the policy group Perspective produced a paper called “Arguing for the introduction of paid internships”, detailing international comparisons of the action taken on this issue. It referred to the 2010 report from the International Labour Office “Global Employment Trends for Youth”, which looked at international comparisons. I do not know whether my hon. Friend, in drawing up the Bill, has examined the situation in other countries and whether the problem he has identified has been solved anywhere else in the world—it may well have been. Some countries, such as Canada and South Korea, have committed to funding internships in key sectors, which may be one way of doing this; we could simply throw Government money at it and say, “We will pay for people who need work experience.” South Korea extended its state-supported youth internship programme and introduced wage subsidies for small and medium-sized enterprises that engaged interns on regular contracts at the conclusion of their internship. I would not want to go down that road, but it has happened in other countries.

More interestingly, the Institute of Economic Affairs, perhaps spurred into action by the publication of my hon. Friend’s Bill, published a discussion paper in August entitled “And how much do you earn?”. One of its conclusions was that the current minimum wage legislation “should be simplified”, and I strongly support that. If this Bill were to be amended in Committee and to go down that road, there would be a lot of merit in that approach. The authors of that paper, Ryan Bourne and J. R. Shackleton, acknowledged that the national minimum wage has “broad public support”, but they said that

“the introduction of the National Living Wage threatens to lead to a populist arms race in terms of statutory minimum pay rates.”

The paper made a number of suggestions, including reducing the number of bands to just two, one for people 18 and over and the other for people 25 and over. It also suggested that the Government should:

“re-emphasise the independence of the Low Pay Commission, allowing it to continue to recommend changes to both rates in the new system according to the best evidence available on the pay-employment trade-off. This is particularly important given the pressure there will be to continue increasing wage rates even in economic recessions.”

In conclusion, the website Simple Politics calls this Bill “The ‘pay interns’ Bill”. I would argue that on closer inspection it is not that, but “The making work experience unaffordable Bill”. Even worse, it could be called “The denying young people opportunities Bill”. The growth in the number of unpaid internships has arisen as a consequence of the minimum wage legislation. I said earlier that I had not previously come across the term “internship”; it has arisen only since the arrival on the scene of the minimum wage, and with it has come the problem of elevating people who are doing work experience to the status of workers.

It was never the intention—the Minister actually said this, in terms—that businesses would have to pay wages to people who were not actually working, but simply experiencing the workplace. The most likely result, if the Bill became law, would be a reduction in the number of opportunities available to young people. Why? Perhaps because the law recognises that work placements do not have the same status as actual work. If an intern is actually working, it is already illegal not to pay them the national minimum wage; that is in the national minimum wage legislation, which Her Majesty’s Revenue and Customs is enforcing. The Bill is simply unnecessary.

[Mr Rees-Mogg]

I am interested in what my hon. Friend says. Will he talk a bit about the status of voluntary work? Some people want to volunteer, and lots of charities have business arms; there are charity shops and so on, which have a mix of employee and volunteer help.

[Mr Nuttall]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We do not want to hear too much on that, because the hon. Member for Bury North (Mr Nuttall) is coming to the conclusion of his speech. Do not worry: five other Members wish to speak. I want other Members to take part in the debate. I would not want to close the debate down too quickly.

[Mr Nuttall]

I am grateful to you, Mr Deputy Speaker, and I shall deal with the intervention fairly briefly. My hon. Friend the Member for North East Somerset (Mr Rees-Mogg) raises an important point, and I apologise for not going into as much detail on it as I perhaps should have. I said in an intervention that the Bill nowhere refers to volunteers. It is silent on the issue of volunteers. When I pressed my hon. Friend the Member for Elmet and Rothwell on that, he rather bizarrely started talking about the exclusions—the people to whom the Bill does not apply—but it does not say “a volunteer” anywhere in the list of exclusions. I think that volunteers are included in the Bill by definition, unless they are covered by the catch-all, get-out-of-jail-free card in clause 3(1)(d), to which I referred earlier. It sets out that a person is excluded under the Bill if they meet

“the terms of a definition set out in regulations”.

It may be that, for some reason unknown to me, my hon. Friend thought, “I’ll leave this problem to the Minister to solve”—and there is a real problem in the Bill: what do we do with volunteers? I will not attempt to go down that path and sort out the thicket of problems that arise from the point made by my hon. Friend the Member for North East Somerset. There is a genuine problem with those who do a mix of things—who sometimes volunteer, and sometimes work in a shop, or a charity’s commercial arm. That point is not clear. It is quite likely that those sorts of issues will finish up in the courts and before the industrial tribunals. It will be a bun fight, and a money-making scheme for lawyers. [Interruption.] My hon. Friend the Member for Louth and Horncastle (Victoria Atkins) is positively delighted by that.

I entirely accept that my hon. Friend the Member for Elmet and Rothwell is well intentioned in bringing forward the Bill. I have tried to draw out some of the genuine problems that I see with it, and I hope that on considering the arguments advanced against it, he will withdraw it. I will continue to oppose the Bill, and I urge the House to do the same.

--- Later in debate ---

[Philip Davies]

It was a long time ago, but I think I was 18 at the time. If anyone still at the newspaper can remember, I stand to be corrected.

[Mr Nuttall]

The journalists weren’t still using quills, were they? I assume from what my hon. Friend has said that he went in every day for “regular work” and that he received “practical experience”, so it seems to me that he would have been covered by clause 1 of the Bill. The local paper may not have been so keen on having him if it had had to pay him.

[Philip Davies]

I agree with my hon. Friend; that is the danger. Whether I was covered by the Bill might be open to interpretation, but my suspicion is that this would have a chilling effect on employers. Rather than getting in to some argy-bargy over whether someone needs to be paid, employers would prefer not to go into it. They would rather sit it out. There is nothing in it for them—and, to be perfectly honest, there was nothing in it at all for the employers in my case as it was all done for my benefit. That is my worry. It is great that newspapers take people on to let them see the ropes and find out what working for a newspaper is all about. As it turned out, to finish the story, I realised after doing my course at the Sheffield college that journalism was not for me. Perhaps I should have done a bit more work experience before I got to that stage, so that I could have learned that earlier.

My hon. Friend the Member for Elmet and Rothwell looks at this issue from one end of a telescope, but I look at it from the other end. If people doing unpaid internships get the chance to get a job in their chosen field as a result, it seems to me that not being paid for their work experience is a small price to pay. That, I am sure, is what the people who offer to do these internships think themselves. Some 75% of the workforce in this field could be without this vital experience if unpaid internships were banned, and 75% of the people who undertook an unpaid internship have successfully entered the industry in which they wanted to work. I think we should celebrate that.

My hon. Friend the Member for Elmet and Rothwell quoted Alan Milburn at length, but I am not sure that that is a particularly persuasive thing to do in order to win me round. Perhaps I was not his target audience. I am sure that we were all supposed to drop our objections the moment the name of Alan Milburn was mentioned, but it did not work for me. However, the report my hon. Friend mentioned, which was conducted by Alan Milburn was, I think, published in 2009—[Interruption.] I have been corrected, it was 2012. It used research conducted in 2004 by the University of Manchester, which found that about 80% of employers had employed former interns. Again, I think that is a cause for celebration today—that these internships are leading to jobs.

Intern Aware sent me a briefing at the time of my hon. Friend’s ten-minute rule Bill, saying that 40% of those who thought of applying for an internship had reconsidered because they did not want to work for free. Let us look at that the other way round. It means that 60% did apply for an internship. We have seen how successful these internships can be so we should celebrate them. People are not doing an unpaid internship thinking that there is absolutely nothing in it for them and that they are being exploited by an unscrupulous employer; they are doing it because they can see the future gain that they are likely to get from doing so. If they did not think it was in their best interests, they might as well have got a paid job doing something else.

It is patently obvious that the number of opportunities will decrease if all these people have to be paid the minimum wage. Why on earth would someone who is running a business take on someone with no experience and spend time helping them, when they could pay the minimum wage to someone who already had some experience and could crack on with the job straight away? If people have to be paid the same, irrespective of who is taken on, who would an employer be likely to take on? It will not be someone who has no experience whatever; it will be someone who can be up and running on day one. We are talking about fewer opportunities for people who want to enter the workplace. Although that is an unintended consequence of the Bill, I have to tell my hon. Friend that it is a completely foreseeable one and we should not fall into that trap.

It was a known consequence that the introduction of the so-called living wage was going to cost jobs. When the previous Chancellor, my right hon. Friend the Member for Tatton (Mr Osborne) announced to a great fanfare the introduction of the national living wage, we knew straight away that it was going to cost jobs—for exactly the same reason as applies here. The Office for Budget Responsibility clearly stated when the living wage was introduced that, by 2020, as a consequence of the living wage, 4 million hours a week would be lost. It said that half of those hours would be lost on account of reduced hours for workers and the other half because of the loss of 60,000 jobs.

I could not believe my ears when I first heard that, so I checked with the House of Commons Library and the chairman of the OBR, and they could not have made it any clearer that increasing the amount that people had to be paid at the bottom end would cost 60,000 jobs. I do not know whether that is a great cause for celebration, although I know that plenty of people were celebrating at the time, but I do not really see it as such, and I suspect that the 60,000 people who are going to lose their jobs will not be celebrating by any means. In any event, the OBR made it abundantly clear that increasing employers’ costs in this way would mean far fewer opportunities. That is what it said about the national living wage, and it is obvious that, as night follows day, the same would apply to work experience positions if they were subject to the same regime.

I am absolutely at one with the hon. Member for Huddersfield (Mr Sheerman). It is a shame that he is not present today. He opposed my hon. Friend’s ten-minute rule Bill back in 2014, saying:

“Most people who know me might think that I would support the Bill, but the unintended consequence would be to damage some important opportunities for young people in our country. I…agree with the overall purpose of the Bill, but it will not hit the target. I am against exploitation and I am for fairness and social mobility, but I am also in favour of young people getting the experience that they need to enter the workplace. We need a balance.”—[Official Report, 13 May 2014; Vol. 580, c. 595-6.]

I could not agree more with everything that the hon. Gentleman said. The House divided on the Bill, and I was a Teller alongside the hon. Member for Huddersfield. I opposed it then, and I still oppose it today

Another issue that will not, I suspect, be addressed by the Bill is nepotism. My hon. Friend speaks of ordinary kids with modest backgrounds finding it difficult to access top jobs. It seems to me, however, that the problem is not that they are not paid for the jobs, but that, in many cases, they do not get a look in to start with. I think I am right in saying—and I should make clear that I do not decry anyone to whom this applies—that about one in 12 MPs is related to another MP, either current or former. I am not entirely sure that the Bill will make any difference to that—perhaps it should not make any difference—

[Mr Nuttall]

There are one or two of those in the Chamber. [Laughter.]

[Philip Davies]

It was not for me to pinpoint anyone in particular, and I should say for the record that the ones who are in the Chamber are among the ablest and most effective. I would not have wanted to do anything that prevented them from being here. That is not my point. My point is that, in all circumstances, people will use whatever opportunities they have to further their aims and ambitions, and we should not criticise them for that. The notion that if we pass the Bill we will end up with a system that provides equal opportunities for everyone is for the birds. That is just not going to happen. I do not think that my hon. Friend would make many inroads with this measure even if it were successful.

It is commonplace in business, and in other spheres, for people to secure opportunities such as internships and placements on the basis of who they know rather than what they know. I would like to think that the fact that we in this place are able to offer unpaid internships, work experience or whatever we want to call it to all our constituents if they ask—I certainly would never refuse a constituent, and indeed I try to accommodate as many people as I can who are not constituents—means that everyone, not just people we know, is being given an opportunity. I think that unpaid internships are extending the opportunities to more people, and I do not think that it is simply a question of giving the opportunity to someone we know or to a relative. That is why I think that my hon. Friend is attacking the problem from the wrong end.

--- Later in debate ---

[Philip Davies]

I can understand the point my hon. Friend makes. The Bill makes it clear what a workplace is, but clause 3 deals with exclusions, and there is no mention of the charity sector in that clause. I absolutely understand what he is saying, but I am not sure that it is abundantly clear that that sector is excluded. A stated exclusion would have been helpful to clarify this point once and for all.

[Mr Nuttall]

My hon. Friend has drawn the attention of the House to the problem of volunteers. We have already established the fact that anyone who is doing work, whether or not they are called an intern, is covered by the national minimum wage legislation. If we are prepared to accept that volunteers will be excluded from the Bill, even though that is not explicitly stated, are we not left with a situation in which the only people who will be covered are the people who are doing nothing and who are simply turning up to watch?

[Philip Davies]

My hon. Friend is absolutely right.

The Bill’s attempt to expand opportunities seems to be all stick and no carrot. I have been looking at what happens in other parts of the world. My hon. Friend has touched on some examples of this as well. In a submission from Perspective in 2013 in favour of paid internships, Robina Longworth cited other practices from around the world. However, as far as I can see, none of the countries listed pays the minimum wage to interns. China and Hong Kong, for example, have subsidised internship programmes for university graduates and hiring companies are eligible for tax breaks and loans. Perhaps my hon. Friend the Member for Elmet and Rothwell might like to consider giving tax breaks to companies who take people on. That might be a better carrot to offer.

--- Later in debate ---

[Philip Davies]

I am grateful to my hon. Friend for that intervention. It is inconceivable to me that the Bill would not result in fewer internships being offered. There would undoubtedly be fewer internships and work experience places. Nobody could say that the Bill would result in more such opportunities for people; there would be fewer. My point is that we should encourage businesses to offer more opportunities, particularly for those who do not get a fair crack of the whip. I know that he and I, and many other Members across the House, would like to see that happening, and perhaps tax breaks would be the answer. Rather than telling companies that they had to pay extra for offering these opportunities, perhaps we should consider giving them a financial incentive to do so. That seems to be a much more sensible and conservative way forward. I welcome what my hon. Friend said about national insurance contributions, but perhaps he should also consider tax breaks.

In Poland, there is financial support for engaging young people on internships. In Korea, there are wage subsidies for small businesses that hire interns on regular contracts. Those subsidies are offered at the conclusion of the internship, so the business is given a carrot to take the person on after they have been given a go to see whether they are good enough. And that is not just about the company seeing whether the intern is good enough; it also offers the intern an opportunity to see whether they want to work in that company or industry. That system appears to work for both sides.

I have had an idea for another thing that would be far better, and I hope that my hon. Friend will take this on board because I feel strongly about it. I have wondered about extending student loans to young people who do not want to go to university but want the opportunity to do something else. We give student loans to people, and I am sure that my hon. Friend would say from a social mobility point of view that they often go to people who are already affluent. In effect, the state gives them a subsidised loan at a preferential rate to enable them to live while at university and get a degree, which will then in all likelihood lead to them getting a higher-paid job than if they did not have a degree. It could be argued that it is like throwing apples into full orchards and that we are subsidising the people who are best off.

However, people who do not go to university are often the poorest in the country and they get nothing. They do not get a subsidised loan to pursue their career ambitions. Why not offer something like a student loan to, for example, someone from a poor working-class background in Yorkshire—

[Mr Nuttall]

Or Lancashire.

[Philip Davies]

Certainly not Lancashire.

That person may want to pursue a career in which they have a great interest, and such a loan, at a preferential rate, could give them the opportunity to come down to London to do the relevant work experience. They could then pay the loan back, just as university graduate does, when they are in a job that pays a certain amount of money. That would extend opportunities to people who currently do not get them. I have never quite understood why the only young people who get subsidised loans from the Government are those who go to university. What about all the other people who want to do something different?

--- Later in debate ---

[Victoria Atkins (Louth and Horncastle) (Con)]

It seems appropriate that in a debate about working practices I should be multi-tasking, speaking as I am from the Parliamentary Private Secretary’s Bench. I ask that the aides to the Minister resist the temptation to send any notes to the Minister while I am on my feet.

It is a pleasure to follow the hon. Member for Sheffield, Brightside and Hillsborough (Gill Furniss), but it is a particular pleasure to follow my hon. Friend the Member for Shipley (Philip Davies), whose reputation for scrutinising Bills on a Friday precedes him, as does the reputation of my hon. Friend the Member for Bury North (Mr Nuttall). My hon. Friend the Member for Shipley made several references in his speech to my legal and familial antecedents, and as he was speaking I was reminded of the comment from my hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) about the need to be thick-skinned on these Benches.

The comments of my hon. Friend the Member for Shipley contributed to the debate to this extent: my experience of seeing my father work in this place meant that I understood how much good can be done here. Is that not the point of internships and work experience? It is about opening minds and giving young people and older people the chance to see work environments and job opportunities of which they may have no personal experience, and to see the opportunities available to them.

I pay tribute to my hon. Friend the Member for Elmet and Rothwell for bringing this debate and for bringing to life an area of law—employment law—which can be pretty dry at times. In his speech my hon. Friend has shown the real impact that it can have on people’s lives when they are trying to start out on their career. His speech and his Bill show just how important that is. For us to create a society that works for everyone, we must ensure that access to fulfilling or well-paid careers is not limited to the privileged few. Talent and hard work, not where one went to school or the size of one’s parents’ bank account, should determine one’s success.

I part from my hon. Friend, however, on the means by which we achieve this aim. The provision to pay interns already exists in legislation. Guidance, combined with steps to encourage employers to adopt best practice in their workplaces, is the best way to tackle the issue. I am pleased that it has been raised in the House, as work experience and properly constituted internships are an invaluable way of helping young people decide which career path they would like to take.

In September I held the first Louth and Horncastle jobs and apprenticeships fair. There are many successful local businesses in my constituency and many talented people looking for work, as well as students who are at the beginning of their careers and would like ideas about what they should do for the rest of their lives. I wanted to bring them all together. I am happy to say that at the jobs fair more than 200 people attended, with both local and national businesses showing at the fair, including Luxus, Polypipe, BAE Systems, Butlins, National Grid and Walnut Care. We had pretty much every opportunity one can think of covered by the employers on hand.

I hope that work experience and internships may help some of my constituents start fulfilling careers. Later this afternoon I am welcoming students from Somercotes Academy, who have come to this place to see democracy and debate in action for themselves.

Work experience can be an invaluable learning experience and allow young people to meet potential employers and colleagues, and it can even help someone realise that a particular career is not for them. I remember a couple of days of work experience I did, although I will not name the profession for fear of offending many people in my constituency. I walked into the office and realised within moments that this was not the career for me—I suspect the profession involved dodged a bullet when I made that decision. Internships can be just as valuable in showing people where their paths do not lie as where they do.

I concur with my hon. Friend’s laudable aim to ensure fair access to the opportunities created by work experience and internships. We must do all we can to ensure these opportunities are made available to talented young people from all backgrounds, because this is not just about the fundamental unfairness of refusing to pay someone for the work they have done; it is also about the impact on social mobility. Those from wealthy backgrounds have far greater resources on which to draw, in terms not just of income but of contacts.

My hon. Friend spoke at length about the experiences of students in the fashion world and the art world, and those anecdotes showed clearly the troubles we face. He also said that 40% of internships were turned down by people who felt that they could not do them. As he said, that cannot be the right way to go with this issue.

Another important point is that ensuring there is equal access to these opportunities makes good business sense; it widens the pool of talent to which businesses have access, making it far more likely that they will employ the best person for their organisation.

Now I turn to where I part company from my hon. Friend. The Bill states:

“An intern who enters into a workplace internship shall be remunerated by his employer in respect of his work at a rate which is not less than the national minimum wage”.

Under the National Minimum Wage Act 1998, interns who are genuine volunteers, who are under no under obligation to perform work or provide services, will not fall within the definition of worker and will not be eligible for the national minimum wage. However, if an organisation treats an intern as though he were worker, a contractual relationship may arise, and the person is then entitled to be paid the national minimum wage. Consequently, provision to pay interns already exists.

[Mr Nuttall]

Given my hon. Friend’s profession, is she aware of the case of Edmonds v. Lawson in 1999? Miss Edmonds was a pupil barrister, and she successfully claimed that, while she was on her pupillage, she was actually held to be on an apprenticeship. She sought a declaration from the Queen’s bench division of the High Court that she was a worker under a contract of apprenticeship.

[Victoria Atkins]

Indeed, as I mentioned, when I did my pupillage, which was just before that case was decided, pupillages did not have to be paid, so I spent the first six months of my pupillage not being paid while I was very clearly working. Happily, as I said, the Bar—I remind my hon. Friend that it is constituted of self-employed people, not companies—has now made it mandatory for pupillages to be funded. I forget the level at which they are funded, but it is well above the national minimum wage.

Small Shops Regulation

David Nuttall Excerpts

Wednesday 2nd November 2016 Westminster Hall

[Craig Mackinlay (South Thanet) (Con)]

I beg to move,

That this House has considered small shops regulation.

It is an absolute pleasure to serve under your chairmanship, Mr Gray. This is not a great new philosophical argument or something from Shakespeare, but it is far easier to regulate than to deregulate. Whether the regulation starts via EU institutions or is domestically derived, one need only look at the daily Order Paper of this place to see the direction of travel. For every perceived problem, the first call is for more government. This debate is perhaps a little unusual. It is an appeal for less government in order to free up our small businesses, which are so often at the heart of our communities, so that they can do what they are good at: serving the public, making a profit, operating efficiently, employing staff and, yes, paying taxes.

I refer to the 2016 “Local Shop Report” by the Association of Convenience Stores, which represents just a small part of the entire small shops sector. There are more than 50,000 convenience stores across the UK, with Scotland strangely having the highest density, with one shop per 995 people. Some 74% of these shops are owner-managed, and they have taken up many services that have been abandoned by state agencies or the more traditional post office, including mobile phone top-ups and bill payment services, such as PayPoint, that accept payments for a wide range of services that are important to Government, including council tax; they even accept payment of court fines and utility bills. Other valuable services are provided, such as sales of lottery tickets, newspapers, stationery, stamps, tobacco and alcohol, snacks and sandwiches and, of course, more traditional groceries.

More than half of customers walk to their local shop, with one in five visiting every day. Twenty-two per cent. of shop owners take no holiday at all, and 24% work more than 70 hours a week. Fully 70% of these shops open for more than 85 hours a week. The total value of sales is £38 billion a year, representing a fifth of the total grocery market, and the sector accounts for 390,000 jobs.

More than that, small shops are the heart of their community. Some 84% of these independent retailers take part in community activity every single year. By way of context, I am working with local traders and boat owners in Ramsgate in my constituency of South Thanet to make the Christmas lighting in and around Ramsgate’s royal harbour even bigger this year than last year. There are no prizes for guessing who are offering the prizes for the best-dressed shops and boats. Yes, it is the local shops. Whether the local hair salon, the coffee shops or the restaurants, small shops are very much at the heart of every single community in this country.

Small shops are often the birthplace of enterprise, where entrepreneurs’ dreams can become a reality. I come from a small shop background. My father had a small chain of greengrocers in north Kent from the 1950s until the 1990s. The rise of supermarkets caused a degree of suffering for such small shops, but who looks out for the elderly customer who comes in every day but has not been seen for a few days? It is often the independent retailer. Such retailers now face new competition from the new giants of online sales such as Amazon.

Unfortunately, many of the regulatory hindrances are driven by increasing compliance demand, often from Her Majesty’s Revenue and Customs and the ever-changing tax code. Currently at 22,000 pages, the tax code is simply out of control. Just one part of the tax code, the annual investment allowance, started in 2008 at £50,000 a year before going up to £100,000 a year from April 2010; it then dropped to £50,000 a year from 6 April 2012; from January 2013, it went up to £250,000 a year, and then up to £500,000; and now, since 1 January 2016, it is back down to £200,000. How can a small shopkeeper or a small business keep track of that background of uncertainty when trying to make long-term investment decisions?

VAT thresholds have very hard edges, which can be a disincentive to grow lest the business gain a new administrative burden and, depending on the type of trade, face the potential loss of margin and profitability. I hope that Brexit will allow us to rethink the structure of VAT, with simplification at its heart.

[Mr David Nuttall (Bury North) (Con)]

I am extremely grateful to my hon. Friend for giving way. Does he agree that, although each individual new regulation may seem fairly reasonable in itself, the cumulative effect of all these new rules and regulations, such as the tobacco display ban and the plain packaging of cigarettes, is a problem for small shops?

[Craig Mackinlay]

There is a ratchet effect. One at a time does not seem too bad, and individually these regulations are often imposed for good reasons, but when they are put together as a framework for how small businesses and retailers have to operate, they become a true minefield of problems.

Adding to that minefield, small retailers face the new burden of pension auto-enrolment for their staff. I have no criticism of the Government’s great ambition: auto-enrolment is essential so that people can build their own retirement funds in excess of the state pension. The roll-out thus far for larger business has been successful—I am a member of the Select Committee on Work and Pensions, which has looked at that—but for the smaller employer, and notably the smaller retailer, I have asked for a free software tool that overlays the freely available real-time information software for payroll management, and HMRC has steadfastly refused.

It is good to note that the latest figures, published just last week, show the greatest ever increase in the salaries of the lowest paid due to the rise in the minimum wage. However, for smaller shops there are concerns that as hourly rates increase ahead of inflation in the years to come, the owners of these businesses might earn less than the staff they employ.

Of all tax and regulatory reforms, business rates relief has been the most welcome among smaller businesses. There has been small business rate relief, charitable rate relief, rural rate relief and enterprise zone relief. However, because of the high value of business premises in London and the south-east, new valuation assessments are in some cases creating huge increases to the business rates of businesses that are already paying higher salaries.

A real problem on the horizon that is causing much concern to the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation—I am a member of both—and, I am sure, the other accountancy institutes is the proposed roll-out of Making Tax Digital. If the underlying desire is to advance tax cash flows to quarterly, the Government should simply say so. People go into small business to run a business and earn a profit. They do so for aspiration and lifestyle reasons, not to spend time complying with additional administrative burdens. The Making Tax Digital programme should simply be scrapped until HMRC can prove itself capable of dealing with existing workloads to an acceptable standard. It should at least start with bigger businesses—those above the VAT threshold—that are more able to cope.

Adding together the last few years of real-time information, in which businesses have to provide monthly returns for payroll, and the software costs of auto-enrolment, and now Making Tax Digital, the Federation of Small Businesses estimates the compliance cost in software and professional support to be £3,600 per business per year. That is some way in excess of the well received employment allowance of £3,000 a year that every business can claim against its national insurance contributions.

Finance raising continues to cause difficulties. We have seen the welcome expansion of new forms of lending driven by the internet, such as peer-to-peer, but banks remain cautious, requiring guarantees and often over-zealous security coverage requirements. The reality is that family and friends are still often the primary source of seed financing. In February I obtained a written answer from the then Financial Secretary to the Treasury, my right hon. Friend the Member for South West Hertfordshire (Mr Gauke), about the take-up of the seed enterprise investment scheme. I learned that the amounts raised nationwide were extremely and worryingly low: just £168 million for 2013-14. I will not go into the flaws in the seed EIS application process or HMRC’s labyrinthine rules on getting such applications approved, but it is clear to me as a chartered accountant and chartered tax adviser that we need a lighter-touch regime to encourage more of the “friends and family” type of investment.

For many of our shops, which are often located in historic town centres, planning regulations can prove a barrier to sensible growth and plans for the future. We have the rather daft situation in which a conservation officer in one local authority will have an entirely different view from a conservation officer in the authority next door. That adds to uncertainty and costs.

Government Departments and local authorities have large procurement budgets, but bureaucratic rules still exist, particularly on contracts over a certain size and when EU procurement rules come into play. Those rules make it close to impossible for smaller retailers and businesses to even consider facing the cost and complexity of applying for lucrative bids.

My hon. Friend the Member for Bury North (Mr Nuttall) mentioned cigarettes. I have been working closely with the Tobacco Retailers Alliance and the National Federation of Retail Newsagents on the issue of illicit tobacco. For many shops, tobacco sales drive footfall and lead to other sales, but the Tobacco Manufacturers Association suggests that because of the increasingly draconian rules on tobacco sales, plain packaging, hidden counters and the tobacco taxation escalator, 30% of UK smokers now buy from illicit sources. That is hardly surprising when a packet of cigarettes costs 50p in the Ukraine and still hovers around the £2.50 mark in much of eastern Europe. Local retailers are losing not only turnover from tobacco sales, despite the low margins, but other turnover through lost footfall.

Oral Answers to Questions

David Nuttall Excerpts

Tuesday 13th September 2016 Commons Chamber

[Greg Clark]

I will certainly take that point away, and I am happy to meet the hon. Lady if she would like to inform me about that outside the Chamber.

[Mr David Nuttall (Bury North) (Con)]

Does the Department intend to develop a single industrial strategy for the whole country or different industrial strategies for different parts of the country?

[Greg Clark]

My hon. Friend makes a good point. It seems essential to me that we should have a strategy for the whole country, but place is incredibly important, and the challenges of places such as Greater Manchester are different from those of Cornwall. We should reflect more clearly the different strengths and opportunities of different places in how we do business as a Government.