Economy and City Link: Coventry

Geoffrey Robinson Excerpts

Friday 23rd January 2015 Commons Chamber

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Thank you, Madam Deputy Speaker—[Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I hesitate to interrupt the hon. Gentleman, but I ask the Serjeant at Arms to investigate the fact that a bell is ringing somewhere.

[Madam Deputy Speaker]

I take back that request to the Serjeant at Arms and accept the hon. Gentleman’s apology. The mystery has been solved.

[Mr Robinson]

Thank you, Madam Deputy Speaker, for allowing me to take part in this debate. The Minister also agreed to my taking part, as did my hon. Friend the Member for Coventry South (Mr Cunningham), whom I congratulate on his initiative. I also thank Mr Speaker for granting this important debate.

The only mystery that remains to be solved is why exactly Jon Moulton made this acquisition in the way he did in an industry that was already in difficulty. One feared very much what the outcome would be for a company that had already experienced many years of extreme difficulty. The situation will no doubt be unfolded once the Department finishes its report and we have read its conclusions. Perhaps a further investigation will be necessary; indeed, my hon. Friend has called for one.

In the few minutes available to me, I want to address four aspects of concern. My hon. Friend has already said that we cannot be complacent in Coventry, but perhaps he will agree that the new leadership in Coventry has sent a very loud message that Coventry is open for business and to the new businesses of the 21st century. The internet and internet shopping are clearly going to generate a lot of such businesses. Indeed, we thought that that was what Mr Moulton was investing in and that there was a reasonable prospect for City Link’s future, although there was never any guarantee. It is a pity that the early venture has come to such a tragic and sad halt.

It is tremendous to see the approach being taken by Coventry’s leadership. After years of not making the progress we should have been making, the new leader, supported by her deputy, has made it plain that things have changed in Coventry’s approach to openness. We are looking to do things differently and are encouraging others to join us in a way that we might not have done in the past. It is in that spirit that we went down the City Link and other routes.

[Mr Jim Cunningham]

May I make it perfectly clear to my hon. Friend that in no way is this situation a reflection of the leadership of Coventry city council? I was analysing the general situation.

[Mr Robinson]

I take that point entirely and agree with my hon. Friend. Coventry has new leadership, but we have had a very bad setback. Some 400 jobs have been lost—which is a lot—on top of the other losses, to which my hon. Friend has rightly referred. We can ill afford such losses and we cannot and will not be complacent. That is why my hon. Friend wants to make sure that this has been properly handled.

I understand that Mr Jon Moulton, who guards his reputation jealousy—he has had a fairly good record up until now—is concerned that his motives be fully under- stood. The mystery is why on earth he invested to the extent he did in the first place, but that is for him to explain. He goes around saying that he has lost £20 million of his shareholders’ money—his company’s money—and £3 million of his own. That is a great pity, but he also caused the state to lose £20 million and—this is my second point, which I will come on to in a moment—1,000 drivers to lose their jobs. One can only ask: why would anyone put themselves in a position where ultimately they are held responsible for the collapse of their company? That will no doubt come out in the Department’s report.

The closure on Christmas eve was unpleasant. That is not a serious way for a businessman who guards his and his company’s reputation so jealously to run an enterprise for which planning is essential. That raises questions that should not have been raised, but Mr Moulton will now have to wait while they are investigated and we get answers.

I know that the Minister agrees with me. When we met the Business Secretary, he was very forthcoming and said that he wanted to make sure that nothing odd was going on. He was phoned on 23 December—one day before the announcement was made. The company had been trading with bad losses for months beforehand under Mr Moulton’s ownership and for years before that. What happened is hardly a surprise. The inevitable impression is that it was somehow or other contrived to be done in that way at that time. That impression will persist until we get the Department’s report in, I hope, the very near future.

If the report calls for an investigation, I know that the Minister—whom I am very pleased to see in her place—and the Secretary of State will approach it in the spirit of totally dispassionate and rigorous scrutiny. If such an investigation is needed, we shall, despite whatever embarrassment it might cause to those who agreed with Mr Moulton’s decision to make his investment, which has cost the taxpayer £20 million-plus, go to whatever lengths necessary to get to the truth of the matter. We have to do that for Coventry. We have made a new start and we are doing relatively well. We are certainly doing much better than we were. Frankly, we can do without setbacks such as this one, which came out of the blue on Christmas eve.

We look forward to the Minister’s response and I hope that she will answer the points that have been made about the report. Before I finish, I have one more important point to put to her. I am sure that everything about this incident will come out in the report, but I hope that it will also address a more general point that was alluded to by my hon. Friend the Member for Coventry South. It does not relate directly to this administration, but it does concern the 1,000 self-employed drivers. As I understand it, the drivers were self-employed but, under the terms of their contract, were not allowed to work for anybody else. They were self-employed, but they were really employed by the employer. This is a fine point of law. I am sure that the law is quite clear that the drivers were technically self-employed and that they were therefore not eligible for redundancy pay or jobseeker’s allowance, even though they had been paying in.

This is a wider point about self-employment. I know that the Treasury does not really like self-employment. It is not entirely right in that, but it is not entirely wrong either, as is always the case with the Treasury, damn it! This may be a narrow point, but the Treasury and the legal department should look at it in the context of the whole. It cannot be right that self-employed people who are making a contribution, paying their way and making no demands can end up in this situation.

There is good news about Coventry, with its new leadership. This is a setback, so we must have a report to clear it up and to see, once and for all, exactly what went on. Lastly, the position of the drivers has brought out a general point for us all to consider, and we wish to hear the Minister’s views on it.

--- Later in debate ---

[Jo Swinson]

Indeed, and individuals will be in different circumstances. As I said, for some people being self-employed works well depending on their circumstances, but the difficulty comes if that is used effectively to mask what is an employee-employer relationship. In addition to any concerns the Treasury might have, there are also issues about workers’ rights.

[Mr Robinson]

The point my hon. Friend and I are making is that those people are not allowed to work for anyone else. Generally, someone who is self-employed has the right to work at other places and build up other contracts. They can do other things and offload their risk. However, when they are obliged by their contract not to do that, we must consider that in the light of employment law.

[Jo Swinson]

I am not a lawyer so I will not give legal advice, but employment tribunals can consider the facts of any case in front of them. It is not simply what is declared in a written contract that determines the nature of an employment relationship; it is also about the facts of the case. Employment tribunals are able to interpret a case based on whether there is mutuality of obligation, and in previous employment tribunals, judgments on exclusivity clauses have been used to demonstrate that kind of relationship. I will not pronounce on any individual case, but there is flexibility in the employment law system for employment tribunals to consider individual facts. Because there is uncertainty about different types of employment—some of that is related to growth in zero-hours contracts and we are legislating to prevent the kind of exclusivity clause that has been outlined—we are undertaking that employment status review. I do not suggest that the solution is straightforward or simple, because a wide range of issues are being considered. Employment law and status have developed over many decades, and that review is an important piece of work.

The hon. Member for Coventry South mentioned the importance of quality jobs. Positive employment figures are a great good news story, but as the economy recovers we want to encourage employers to ensure that the jobs they create are quality jobs, and that where they can afford to they do not pay just the basic minimum wage. That safeguard and safety net is rightly there as a protection for the most vulnerable people in our labour market, but the minimum wage should not be a target. Responsible companies that are profitable and doing well generally want to pay above the minimum wage, and the Government encourage them strongly to do so.

On an investigation into City Link, the process after any company fails is that we ask whether it has been managed correctly, which is fair. We need to establish the full facts before coming to a judgment, as the hon. Member for Coventry North West (Mr Robinson) said. As a result, the administrators have a legal duty to report confidentially to the Secretary of State within six months of their appointment on the conduct of the directors. We are trying to reduce that time in legislation to three months. It is important to point out that we do not expect a report to take six months; they are often done earlier than that. Insolvency Service investigators are currently in contact with the administrators and expect to be able to identify any matters that should be investigated well before that final six-month deadline.

When the necessary information has been received from the administrators, the Insolvency Service is in a position to consider whether there are any grounds for bringing disqualification proceedings against the directors. The administrators’ view is a relevant consideration, although ultimately the assessment of whether grounds for the disqualification of directors exist will be based on the Insolvency Service’s independent view and conclusions. A director can be disqualified for anything between two and 15 years. It is important to set out that process. We need to wait for the information. On a point of clarity for the hon. Gentleman, the report that is produced on the directors’ conduct by the administrator is produced confidentially to the Secretary of State. That will be assessed by the Insolvency Service. On that basis, it will then decide whether further action should be taken.

We have discussed the importance of City Link, but the hon. Member for Coventry South set out wider issues in Coventry’s economy. We are dealing with the damaging City Link situation, but it is worth recognising that there is a lot to welcome in the local economy in Coventry and Warwickshire. It is one of the higher-performing local enterprise partnerships in terms of investment and jobs created through foreign direct investment. It is an important location for firms experiencing employment and growth. Last weekend, Newcross Healthcare Solutions announced plans to open a new base at the Middlemarch business park, where City Link was based, which will create 100 new permanent jobs.

Others have chosen Coventry recently, such as LeanNova Engineering, which is creating 60 jobs, and Sitel UK, which is set to create around 300 new jobs, with potentially more to follow. They sit alongside high-profile names such as Capita and Bupa, which are expanding within Coventry. That builds on Coventry’s major manufacturing and engineering base, including such major employers as Tata, Jaguar Land Rover, Aston Martin, BMW, Rolls-Royce and Alstom.

It is not just the Government and I who see signs of encouragement. Coventry’s success was highlighted in a Centre for Cities report published this week, which notes that Coventry has outperformed its west midlands counterparts over the past decade, achieving an 8% increase in jobs and a 22% increase in business stock, which is a third higher than the national average. It has the second-fastest growth in private sector jobs among UK cities. I appreciate the concern about other companies mentioned in the debate, but there are none the less reasons for optimism in the Coventry economy.