Small Business, Enterprise and Employment Bill

David Rutley Excerpts

Wednesday 16th July 2014 Commons Chamber

[Vince Cable]

Any employer foolish enough to go down that route would find themselves subject to multiple penalties and, eventually, to contempt of court if they were clearly malicious in their intention. I understand where my hon. Friend is going with this, and he might wish to pursue it in more detail in Committee.

The final employment aspect of the Bill relates to whistleblowing. If something is amiss in a company, those who step forward and blow the whistle take risks by doing so, and they want an assurance that action will be taken. Last year, a report by the university of Greenwich and Public Concern at Work found that 75% of whistleblowers expressed frustration that nothing was being done about the wrongdoing they reported. This is clearly unacceptable. The Bill will require “prescribed persons”—usually regulators—who deal with whistleblowing to report annually on reports received and actions taken, while maintaining confidentiality obligations for the whistleblower. In that way, we want to improve the general standard of best practice around whistleblowing procedures.

Company transparency has been one of the key themes of our work in Government over the past few years, including in relation to reforms of narrative reporting, reporting on executive pay, and, more recently, the directive relating to the declarations on natural resource payments. I now want to introduce measures that strengthen the provisions on corporate transparency. I will start with an area for which we have not previously had an opportunity to prepare the House. We have discussed the Bill with Opposition Front Benchers and with others, but this issue will be new to them, and it is important that we show them that courtesy. The issue relates to takeovers. I have made it clear publicly that we need to take action in this area that may well—not certainly, but very probably—involve legislation for which this Bill would be the vehicle. The approach we are adopting is that we continue to welcome inward investment as being good for the country.

We also continue to welcome merger activity as a normal part of market processes, although I have to say that the evidence on the benefits of mergers is somewhat ambiguous. What emerged as a result of the recent high-profile case of AstraZeneca and Pfizer was a lack of clarity around the enforcement of assurances. The approach we adopted in Government was to talk to the company where issues of wider public interest were involved—it was clearly involved in extensive research and development activity—to seek assurances. That is what should happen, but then the issue arises of how we make sure that any commitments given are clear and, absolutely crucially, binding. In order to ensure that that aim is realised, we are currently talking to the Takeover Panel. Legislation may well also be necessary to underpin cases where a commitment is not honoured. I will bring these proposals back to the House in due course.

[David Rutley (Macclesfield) (Con)]

I thank the Secretary of State for expressing his views on this important subject. Does he agree that although Pfizer put forward commitments that it regarded as unprecedented, it was by no means explicit about the number of employees it would have taken on should the takeover have gone forward? This sort of legislative approach—or at least a tightening of the takeover code—would help to improve the situation in future.

[Vince Cable]

I recall the major role that the hon. Gentleman played in trying to obtain commitments in relation to the north-west and, in particular, his constituency. The same issue will arise in other cases. He is right. Although commitments were made, there is an issue of enforceability. That is what we now wish to address by strengthening the rules.

Let me move on to company transparency. The OECD has reported that

“almost every economic crime involves the misuse of corporate vehicles”.

There are staggering sums of money involved. Organised crime costs the UK alone about £24 billion a year. The European Commission estimates that global criminal proceeds are in the order of $2 trillion. Of course, not all crime flows through companies, but much does. More specifically, in 2011 the World Bank carried out an exercise that suggested that 70% of grand corruption cases involved at least one corporate vehicle to hide beneficial ownership and the true source of funds. Very often, criminals create complex corporate structures spanning multiple jurisdictions to hide the involvement of a company. That is why the UK pushed the agenda for greater corporate transparency during our G8 presidency last year. We obtained agreement from G8 members that all would take action to increase corporate transparency. That is what we are now doing, thus demonstrating our commitment.

We wish to help to deter, identify and sanction those who hide their interest in UK companies to facilitate illegal activities, as well as generally creating a more trusted business environment. That is why we are going to require companies to keep a register of the people who have significant control over that company—their beneficial owners—and provide this information to Companies House, where it will be publicly available. We will lead the way within the developed economies in having an open register. Alongside that, the Bill abolishes the use of bearer shares, which can change hands without any record and have been open to abuse for tax evasion and money laundering purposes.

--- Later in debate ---

[David Rutley (Macclesfield) (Con)]

It is an honour to follow my hon. Friend the Member for Bedford (Richard Fuller), whose enthusiasm for small business I fully share.

Macclesfield has a great tradition of enterprise, from silk in the Georgian and Victorian days to pharmaceuticals today, with AstraZeneca producing 1% of UK exports, which is an incredible statistic. I welcome the Secretary of State’s announcement today that he will tighten up the takeover rules and ensure that any entity wanting to make a major acquisition in the UK makes stronger commitments and that penalties are enforceable. The company is a national asset that is vital to our local economy and science base.

I want to focus primarily on not just the major businesses in Macclesfield and north-east Cheshire, but the many small and micro-businesses that are the lifeblood of our community—those entrepreneurs who are helping to continue our rich tradition of enterprise. The Minister for Business and Enterprise is doing a tremendous job in taking the Bill forward and initiating all the work that it pulls together. Small business makes a big impact and the Bill acknowledges just how big that impact is. The Government have a long-term economic plan that is working—Government Members often mention it—and Ministers are right to use the Bill to roll out further measures in support of that plan. It is absolutely critical that we take away the barriers to success, create a level playing field for small businesses, promote exports and help employment growth. This is an unashamedly pro-small business Bill, which is what we would expect from this Government.

I am passionate that what we do in this place has to help the four Es of sustainable economic success: entrepreneurs, employers, exporters and, of course, employees. The vital measures in the Bill will help all of them. Part 1 will lower the cost of access to finance, which is absolutely critical not just to existing businesses, but to businesses that people hope to set up—Government Members are passionate about helping people who want to set up businesses. We are going to ensure an increase in competition in that marketplace as well. Clause 4 in particular will encourage new entrants by removing the barriers to knowledge. The situation has been too imperfect for too long. That knowledge has been available only to big lenders, so now it will be shared with a wider group of potential lenders.

Part 3 will make more available in terms of public procurement. A £250 billion market of public expenditure will be made available to smaller businesses. That will help to break down the tangible and psychological barriers that are holding too many businesses back from getting started in the first place.

It is incredible. We have received feedback from different outside enterprises and organisations and they are heralding the Bill. The Federation of Small Businesses, for example, has called it a landmark Bill, and it is—it is both symbolically and actually important for small businesses.

We need to help first-time employers in their work. We have done so with the employment allowance, but we can now go further. We must make sure that we can de-risk by enhancing what goes on in the tribunal system and by taking deregulation to a higher and more statutory level, which will ensure that such businesses are supported over the lifetime of the next Parliament. I wholeheartedly support the vital steps that are being taken, as I hope all hon. Members will this evening.