Economy and City Link: Coventry

Jo Swinson Excerpts

Friday 23rd January 2015 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

I congratulate the hon. Member for Coventry South (Mr Cunningham) on securing this debate at such an appropriate time. He called it to talk about City Link, obviously, but also about the wider issues relating to jobs in Coventry. I know that he has been a passionate supporter of businesses and workers alike in his constituency over the years.

We all agree that this is a worrying time for the individuals who were reliant on City Link for work, a significant number of whom were based in Coventry. There is a huge amount of sympathy for those who have lost their jobs through no fault of their own. The timing of the announcement has been mentioned. It is difficult for anybody to hear that bad news, but to hear it immediately before Christmas, when people hope to be celebrating with their families, is particularly difficult, so one cannot help but feel for those individuals.

That is why our focus is on ensuring that those who have found themselves out of work as a result of the City Link administration find new work as quickly as possible. We are helping the employees and subcontractors to do just that. We are also ensuring that City Link employees who are eligible for statutory redundancy payments get the money that is due to them as quickly as possible. The Jobcentre Plus rapid response service is available to employees and subcontractors at City Link. That is delivered at the discretion of each local district. That support is already being provided around the country. It can include things such as information, advice and guidance, help with job searches, CV writing, interview skills, identifying transferable skills or any skills gaps, and training to update those skills and to get certification to improve employability.

In Coventry, Jobcentre Plus is working with a local skills and employment company to provide extra support on employability and moving into work. Earlier this month, three sessions were held to support workers. In addition, the Coventry city council job shop and the local enterprise partnership’s growth hub are working closely with Jobcentre Plus to identify employers who have vacancies. It is positive that a number of local employers have expressed an interest in taking on City Link staff in Coventry. Although this remains a difficult time, it is encouraging to hear of City Link workers in Coventry who are already finding new work.

When the employer’s insolvency has led to dismissal, employees are guaranteed to receive—subject to certain limits—their wages and other payments they are owed, and that money comes from the national insurance fund. A dedicated team in the redundancy payments service is already processing those payments, and we will ensure that claims are processed as quickly as possible. Any City Link employees who want guidance on that redundancy pay can find that information at gov.uk.

Hon. Members mentioned those who are self-employed and could not necessarily work for any company other than City Link. They do not qualify for redundancy pay because of their self-employed status. We recognise that that issue is significant and has grown over recent years. We have protections for employees, a separate set of protections for workers that are not quite as enhanced, and then there are the self-employed. For many people, being self-employed works well, but some employers try to use different categories so that those people do not have the same level of employment rights. The Department for Business, Innovation and Skills is undertaking an employment status review to consider those issues in detail.

[Mr Jim Cunningham]

In one case that I am aware of, the individual is owed something like £90,000, which puts them in a terrible position.

[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.

[Mr Jim Cunningham]

I do not disagree with the hon. Lady. Lots of good things are happening in Coventry. I made that point, but I also considered other areas where we have got to do better.

--- Later in debate ---

[Jo Swinson]

The hon. Gentleman is doing absolutely the right thing as a constituency MP. It is important that we celebrate what is going well in an area, but we must also continue to strive and see where we can do more and provide further support for local economies. That is why the Government continue to work hard to improve conditions in Coventry and the rest of the country. The regional growth fund of £410 million has gone to 63 projects in the west midlands. Eighteen of those are in Coventry and Warwickshire, which is worth about £160 million of direct Government investment, and which should leverage in a total of £1.4 billion of private sector investment and create or safeguard more than 10,000 jobs. It is important that that continues. We are working with local enterprise partnerships throughout the country, and the Growing Places fund, the city deals and the growth deals are helping local enterprise partnerships to support their economies.

We have had a good opportunity to hear from Coventry Members about the challenging City Link situation and the importance of ensuring that the conduct of the directors is properly considered. Those processes are in place. There are positive signs within the Coventry economy, but it is important not to be complacent and to continue to work hard. The Government intend to continue to work alongside Members of Parliament, the local authority, the local enterprise partnership and other stakeholders to ensure that we continue to build a stronger economy in Coventry and the rest of the United Kingdom.

Question put and agreed to.