Enterprise Bill [ Lords ] (First sitting)

Kevin Brennan Excerpts

Tuesday 9th February 2016 Public Bill Committees

[Bill Esterson]

Small businesses are the lifeblood of our economy and are at the heart of communities up and down the country. There are more than 5 million businesses employing 10 people or fewer. It is vital that the people running such enterprises are given the opportunity to thrive and that their businesses can flourish.

The creation of a small business commissioner is a good step towards helping small businesses and follows the examples of the Small Business Administration in the US and the small business commissioner in Australia. In our manifesto, we proposed the idea of creating a UK small business administration and we support the principle of a small business commissioner as a step forward. The Enterprise Bill provides an opportunity to explore the proposed terms of reference of the small business commissioner and to look at how he or she can be as effective as possible in championing the cause of small business, in creating a level playing field and encouraging enterprise from the start-up to growth and beyond.

According to the Department for Business, Innovation and Skills impact assessment, the purpose is to

“make it easier, quicker and cheaper for small businesses to settle payment issues with larger companies by setting up a Small Business Commissioner. The Commissioner will give advice, provide information and refer businesses to services that can mediate in disputes. It will have the power to look into complaints about poor payment practices and report back on its findings.”

Small and medium-sized businesses, particularly new entrants to the market, drive economic growth by stimulating innovation, acting as a competitive spur to existing businesses. That occurs through the process of productive churn, when new entrants and existing firms become more and more enterprising, with new ideas for products and processes, and win market share, and less productive businesses exit the market. New and small businesses also complement larger firms by operating in local or niche markets and by being the first to enter new markets. Small and medium-sized businesses stimulate innovation with research, suggesting that such businesses in particular act as an important seed bed for innovations. Those businesses either grow in their own right or are taken over by larger businesses that take on board their ideas.

As global competition intensifies, the ability of businesses and individuals to identify and take advantage of entrepreneurial opportunities becomes increasingly important, hence the need for Government to ensure that support for small businesses is in place. It is in the spirit of the Government’s role in creating a level playing field that we approach the Bill, to scrutinise, challenge and propose amendments.

The purpose of the small business commissioner is to support small business. We want that commissioner to be as effective as possible and believe that he or she will therefore need to work independently of large business and Government. The small business commissioner is being set up to support small business, according to the BIS impact assessment. That includes making it easier to resolve commercial disputes, not least relating to late payment, and to resolve contract negotiations related to late payment or otherwise. It also includes having someone to turn to for dispute resolution and in respect of being treated unfairly in tendering for work, as well as being able to maintain business relationships while in dispute, ensuring that good mediation options are available and dealing with supply-chain matters.

We welcome the small business commissioner’s having a remit that supports small business in addressing those challenges. As the impact assessment says,

“…small businesses thrive and grow, to help support our economy, both locally and nationally”.

The impact assessment goes on:

“It is proposing to establish a service to complement existing provision and lead a culture change in how businesses resolve—and ultimately avoid—commercial disputes. It is proposed that the new Small Business Commissioner (SBC) would: empower small businesses to resolve disputes and avoid future issues through general advice and information, related to dispute resolution and contract principles; signpost to appropriate services eg sector ombudsman or regulator, existing independent advice service, approved alternative dispute resolution (ADR) provider or SBC complaints handling function and; consider complaints by small business suppliers about payment matters arising with larger businesses which they supply. These disputes may relate to pre-contractual negotiations as well as terms of the contract and new arrangements proposed once a contract is in place; for instance, if a firm feels it is being harmed by the other party’s unfair behaviour.”

Helping small businesses thrive and grow to help our economy is very much the right way for Government to intervene in support. The list of intended responsibilities I have just read out are all concerns shared by many small businesses. There are too many examples of larger customers treating their smaller suppliers in an unfair way, but one large group of larger customers is the public sector.

The Bill at present gives the Secretary of State the power to appoint and to dismiss. The Lords amended the Bill to allow the small business commissioner to appoint his or her own staff. However, the Secretary of State still has the power to appoint and dismiss the small business commissioner. This group of amendments seeks to make the appointment a Crown appointment, to ensure that the small business commissioner is in a position to help when the source of complaint or unfairness is the public sector. If the Secretary of State appoints and has the power to abolish, there may well be a reluctance on the part of the small business commissioner to challenge the very organisation that appointed him or her and which can abolish his or her role.

[Kevin Brennan (Cardiff West) (Lab)]

My hon. Friend makes a very interesting point. Perhaps there is a contemporary analogy with what the Government are currently doing in relation to charities: they are saying that where Government funding has been given to charities, those charities should not be able to use it to campaign in any way against Government policy. If the Government have such influence over the appointment and the very existence of the small business commissioner, does my hon. Friend think there is a danger, without our amendments, that the Government might seek to exert the same kind of influence on the small business commissioner as they do over the charities?

[Bill Esterson]

My hon. Friend makes a very good comparison. There are many examples where the closeness of the relationship means there is the potential for a conflict of interest. There are other examples, which I will come to, where there is an arm’s length relationship: our amendment attempts to forestall this potential conflict.

We certainly do not want the Secretary of State to have undue influence and the commissioner to feel constrained in his or her ability to act. After all, if we want small businesses to be as successful as possible, we want them to have independent support from the small business commissioner. People will rightly look to the commissioner to give a lead and give support, advice and encouragement to small businesses, which are, as I said at the start of my remarks, the backbone of our economy.

The Government do not intend the small business commissioner to have a role when it comes to disputes between small businesses and the public sector. As that is a source of much concern among small businesses, it seems certain that many complaints will go to the commissioner about the public sector. Even in relation to complaints against larger public sector businesses, if the Government do not like the way the commissioner is operating—this is at the heart of my hon. Friend’s intervention—the Secretary of State may decide to intervene and that implied threat could cause the commissioner to be less effective, through a reluctance to act.

--- Later in debate ---

[Anna Soubry]

I am not responding to that; the hon. Lady may be right.

I will address my comments to the amendment moved by the hon. Member for Sefton Central. I will rebut much of what has been said by establishing the history of how the small business commissioner came to be placed within the Enterprise Bill. I agree with everything he said about the value to the economy of small businesses. We are absolutely and utterly agreed on that. We understand their huge value and their importance to building a successful economy.

The idea started with the Conservative party manifesto commitment to consider setting up a conciliation service specifically on the point of late payment, which as we all know is a serious matter for concern, notably for small businesses. Having come into office, as I considered how to achieve that, it became obvious that there are already a number of ways to supply such a service. That is the sort of matter that we will undoubtedly debate in this Committee. Having learned of the great workings of the Australian small business commissioner—hon. Members will hear much about the work of Mark Brennan; I have spoken to him at length—I came to the conclusion, and I assure hon. Members that my Secretary of State absolutely agreed, that a small business commissioner should be created specifically to address the problem of late payment.

I put it on the record clearly: it would be utterly bizarre of this Government to want to positively create an office with the apparent intention of abolishing it at some later date. The idea has come from me and the Secretary of State; it is a position that we want. We would love for the position to abolish itself in time, because we would love it if there were no complaints about late payment. Unfortunately, we think that is an ideal that we will not achieve, however much we might strive.

[Kevin Brennan]

The Minister is making a reasonable point, but she knows that she cannot fetter what future Administrations of any party do. Neither can we, but we can ensure that the body cannot be abolished at the whim of a Minister rather than by going through some other due process.

[Anna Soubry]

It would not be abolished at the whim of any Minister.

--- Later in debate ---

[Anna Soubry]

I am not going to give way; otherwise, we will be full of interventions.

[Kevin Brennan]

She’ll just make a speech if you don’t.

[Anna Soubry]

I am sorry, but we need to make some progress. The appointment of the small business commissioner by the Secretary of State will not compromise his or her independence. It will be a public appointment, subject to all the usual public appointments rules and procedures. There would be little material difference to the appointment process if this were a Crown appointment.