Lord Cope of Berkeley
Main Page: Lord Cope of Berkeley (Conservative - Life peer)Enterprise Bill [HL]
Lord Cope of Berkeley Excerpts
Lord Cope of Berkeley (Con)
My Lords, I was interested to see this amendment, and I understand what the noble Lord is proposing and have some sympathy with what he says. There was one interesting aspect which caught my eye when I read it. I was not sure whether it was deliberate, but the noble Lord has left in place that although the commissioner will be appointed by Letters Patent, the Secretary of State will appoint one or more deputies to act for him, even though the commissioner appoints the rest of the staff. Is it the intention to leave a deputy commissioner—of one or more deputy commissioners within the commissioner’s office—as the representative of the Secretary of State, which is what one would assume from their appointment if all the rest of the staff are appointed by the commissioner? If the amendment were carried, would the noble Lord seek to refine those proposals?
Lord O'Neill of Clackmannan (Lab)
My Lords, the Minister has had a distinguished record in public service and in the private sector. I imagine that in both of those areas she has had responsibility for the appointment of people to significant positions. As my noble friend Lord Mendelsohn was going through the amendments, I thought about what kind of person we will have as the Small Business Commissioner. The commissioner will be someone whose terms of reference are quite clear. He will be the creature—the satrap—of the Secretary of State. He will be appointed by that Secretary of State with little security of employment. He will be capable of being thrown out at the whim of the Minister. He will have little or no say over the appointment of the staff who will be working under him or her. I am sorry if I slipped into sexist language and assumed that the individual would be a man. I should have thought that a woman would be too sensible to do the job.
The truth of the matter is that this is a bit of a non-job. For it to masquerade as the defender of business, without an iota of independence of the Minister, means that the commission is, in effect, a state-run citizens advice bureau for businesspeople. Unless the salary is fabulous and the hours and conditions are not very onerous, there is not much incentive to take this job. Frankly, one would immediately ask questions of anybody who took the job in the first place.
It is for all of those reasons that the amendments tabled by my noble friend would make this appointment worth while. It would afford the business community a sense of confidence. A small business that has problems with payment and other concerns about administration will find that this place-person is in a job that affords the small business little or no protection and little or no opportunities for redress of an independent character. At the end of the day the operation of this office will be subject to the most minimal scrutiny and the reports will be given not to Parliament but to the Secretary of State alone, which leaves one with grave concerns.
I return to my original point. If the Minister were working for Tesco and it was going to appoint a customer ombudsperson on the basis that he would be hired or fired at the whim of the Tesco management and that reports would not be subject to public scrutiny—not necessarily by all the account holders of that company, but perhaps by the people who work in trading standards offices in local government, for example, who make it their job to protect the customers’ interests—would the public have any confidence in a person of that kind? I doubt it. I doubt whether any business establishing a position of this kind would have the nerve to present it in this way. Frankly, it is not worth a light. One can have no confidence in the appointment of this nature under the terms of reference that the Government envisage. They are missing out a tremendous opportunity and bringing the appointment into disrepute by the manner in which it is being presented and the terms of reference under which the individual to be appointed would have to operate.
At this early stage in the Bill, and given the significance of this appointment, we are missing an opportunity which would be filled by the amendments which my noble friend has just introduced, with which I am happy to be associated.
Lord Cope of Berkeley
My Lords, at Second Reading I referred to this question of public authorities. I repeat my view that it would be helpful if public authorities were included as well as larger businesses. I understand some of the reluctance from my noble friend and the Government to include public authorities in this, because there are other arrangements to which people or businesses can go to complain and get mediation in disputes with local authorities. However, the powers of the Small Business Commissioner as set out in the Bill are, for example, to give “general advice and information” on these questions. In doing that, why should not the Small Business Commissioner also be able to provide general advice and information to small businesses about how to go about dealing with a local authority that is not paying them promptly? That is what this is about.
Of course, there is another angle to Amendment 2. The noble Lord, Lord Stoneham, would not only include public authorities here but also omit the words,
“relating to payment matters in connection with the supply of goods”.
The noble Lord’s amendment would widen very considerably the amount of complaints that the Small Business Commissioner might get and I am less sympathetic to that element of it. I accept the argument that my noble friend made about focusing the efforts of the Small Business Commissioner. In time, once the commissioner’s office is established and working well, it might be right to suggest increasing the elements of business relationships that the Small Business Commissioner was able to look into, but let them start off with what has been one of the most perennial problems I can recall for at least 40 years, where there have been political complaints about late payment, the problems of small businesses and so on.
We all know why there is this problem; it is because of the cash-flow pressures on larger and smaller businesses. It has been such a difficult problem that, to my knowledge, all successive Governments over the past 40 years have looked at and tried to deal with it, including me when I was a small firms Minister in Margaret Thatcher’s Government. Frankly, none of the solutions proposed has really been very successful. That is why I am happy for the Small Business Commissioner to concentrate, at least in the first instance, on this particular issue. I do not support that element of the noble Lord’s amendment.
While I am on my feet, I apologise to the Committee but I will have to leave before long because I am a member of the House Committee and we are having our first ever joint meeting with the House of Commons Commission at five o’clock, which I should attend in spite of attractions in other parts of the building. I wanted to make that point to reinforce what I said at Second Reading.
Lord Mendelsohn
I congratulate the noble Lord, Lord Stoneham, on his presentation of this amendment and the basket of amendments that it covers. It had strong support from the noble Lord, Lord Hodgson, and the noble Baroness, Lady Byford, and for exactly the right reasons. That is very powerful.
To try and encapsulate this, these amendments are about a couple of very obvious things. First, the brief is too selective because there are organisations outside the terms currently drawn in the Bill but for which the flow of late payments or other matters become an issue. Secondly, the issue of the public sector is an incredibly obvious one.
Two angles to this issue are hugely relevant: the issue around payments and the business environment. They are connected and relate also to the Small Business Commissioner as late payments are rarely about just the egregious actions of a particular company. As the noble Lord, Lord Cope of Berkeley, said, in many cases very difficult issues arise with cash flow. These will rarely be solved by treating this matter as just a singular dispute between two parties. You have to consider the wider impacts on the business environment and the fact that late payment can be remedied only by taking a wider view and taking into account the capacity of the Small Business Commissioner to act in relation to the business environment in general.
If there is a problem with cash flow, you can shout at the businesses for as long as you like, but it means that one and possibly both are struggling. All of a sudden, if you tilt the balance too much one way, it may lead to one of the businesses closing down. The Small Business Commissioner is meant to be an agent who can create the right solutions. The Australian model has evolved great skill in creating what is called in Australia “commercially realistic solutions” rather than just determining right and wrong. Its great attribute is its credibility and authority and the scope of who it can deal with, not just its focus. If you deal with late payments just in terms of the circumstances of the two parties, you miss the point about the ongoing cash flow. Whether it is a case of large company contracts or small company contracts, a dispute between two parties is part of the problem.
Amendments 13 and 18 address the fact that 70% of small business trade is with other small businesses. Satago is a fantastic company with terrifically rich data. However, it highlighted the fact that under the Bill it is very hard for small businesses to come forward with some of the complaints we are discussing. Our amendments would help to ensure that whether it is a case of small businesses, large businesses or the public sector, the Small Business Commissioner cannot just deal with payment problems but can also take a wider view of the business environment. As I say, this is not just about disputes between two parties but about making sure that the overarching view is the right one.
Government regulation of small businesses should focus on addressing information balance and creating fair competition. While small business legislation should protect small and medium-sized businesses, the net outcome should be an enhanced competitive and fair operating environment for all business. Government involvement in small business matters should aim at ensuring that both prospective and ongoing small businesses have sufficient knowledge to make informed business decisions. While any business has a fundamental right of control over positioning and maximising its business opportunities, this right does not extend to engaging in unfair business practices. Small business should be able to access a low-cost informal dispute resolution forum prior to any grievances proceeding to formal litigation. These things are crucially important.
The business environment covers everything from where you get credit, which terms you establish, to how the logistics support the delivery of goods. All those things are relevant to late payment. If you want to deliver with a practical solution, sometimes you can mediate between two parties. However, sometimes the Small Business Commissioner needs to draw on the experience of others. These amendments are not just about the disputes mentioned by other noble Lords and dealing directly with certain problems; they deal with payment matters in general rather than just specific payment disputes. These things are important even as regards how you design a procurement process and the flow of money that comes from it, as this can sometimes be part of the problem. We should allow the Small Business Commissioner to draw on wider experience to promote an environment where late payments are less likely to occur.
Lord Cope of Berkeley
My Lords, incidentally, the other meeting I was due to attend did not raise a quorum.
Nobody has so far spoken in support of Amendment 8 so it is perhaps unnecessary for me to speak against it. However, it has been formally moved. I think that inserting a duty or giving a duty to the commissioner that she or he should publish information about,
“tax rates, allowances and thresholds of relevance to small business”
would introduce a major distraction into the commissioner’s role. It is the duty of Her Majesty’s Revenue & Customs to publish the allowances, rates and everything else, and it does so with considerable vigour on its websites. There are large numbers of people, including people in the profession in which I qualified, although I have not practised for many years—namely, chartered accountancy—who do this kind of thing. If the commissioner finds himself or herself with a legal duty written into the Bill to publish this kind of information, I fear that it will be a major distraction from what we all want to see as the commissioner’s initial role, at any rate; that is, to deal with the late payment issues.
Lord Mendelsohn
My Lords, I support these amendments and will say a few words about Amendment 8, to address the comments made on it by the noble Lord, Lord Cope of Berkeley. Fortunately, the noble Lord is able to be present as the other meeting he was due to attend did not gain a quorum.
I pay tribute to the fantastic work of my noble friend Lord Mitchell on payday lenders. I disagree with the noble Lord, Lord Hodgson: this is not about the visible and invisible parts of an iceberg but about the devil and the deep blue sea. The problem is that the choice we are making is between two things that are broadly unacceptable. It was only through the great efforts of my noble friend Lord Mitchell that we understood that Wonga, which has completely changed its business model, operated in a market based on pushing people into failure to pay, rapidly increasing their debt burden over time and charging effectively a permanent rate of interest. That was its business model—to force people into continued and prolonged debt. To my noble friend’s great credit, Wonga has changed that model as it could not continue to function with it. This is relevant to the Small Business Commissioner as we should not accept the principle of choosing between one thing which is bad and another thing which is really bad. His job is to find an alternative. We all know that there are problems with people accessing finance and with debt and with our banking sector. The answer is not to say that it could get a whole lot worse but to enable someone to act as an agent or agency and make a difference. That is why I think this is a very sensible amendment.
Some years ago when I operated a small business, we had a tax issue and a little tête-à-tête with Her Majesty’s Revenue & Customs. There was a particular issue that we contested. Rather than pay—forgive me for saying this—the fees our accountants would charge to deal with this, we thought we would do it on our own. We had a particularly effective financial controller and he spent a considerable amount of time trying to research this. In fact, we funded him to go on a day’s seminar given by HMRC to look at the particular issue. He attended the seminar and came back with a series of materials that gave very clear advice on the problem. Subsequently, we wrote to HMRC saying that this was our case, completely consistent with its advice. It wrote back saying that it did not accept our arguments. We wrote to it saying that we could not claim the letter we had written was entirely our authorship but was based on advice we now enclosed, which came from HMRC. We got a letter back saying, “We are not bound by our own advice”.
That was a few years ago but I raise the point because it is relevant. Our experience in talking to small businesses in particular but also to some of the representative organisations is that their complaint is not that they must pay tax. There are some who do not like to pay tax—many of those live in Monaco and other sorts of places, but they are not the ones I am so concerned about here. For those who are concerned about paying tax, it is about paying the right tax and understanding the taxes that they must pay. In the same way, it is about not regulation per se but the burdens of regulation. These amendments address this question. They say that the Small Business Commissioner should be able to deal with those issues.
I accept that we have a particularly narrow focus for the commissioner, and it is what the prime focus should be. However, in that wonderful nirvana where the commissioner can extend its role, it would not be a bad thing to be able to assist small businesses to have a better understanding of and some degree of certainty about the issues that they must face and the taxes they must pay, as well as being able to make observations to others to be clearer so that there is better compliance and understanding of what these things are. I fear this constant sense that there is a huge amount of non-payment and total avoidance, and all sorts of scandals and terrible practices by business. Invariably, especially with small businesses, they are not fully aware of what they must do. These amendments allow a Small Business Commissioner to play a very effective role in that area.
Finally, on Amendment 47, I declare an interest as an investor using the EIS benefit. I hope that that does not become a tax problem and the Revenue starts to chase me on it. I am fairly confident at this stage that I am on the right side. I agree that the EIS is exceptionally useful and many small businesses know about it. We have somewhat cheekily tried to extend the EIS relief beyond individual investors to institutional investors. We put that as a role for the Small Business Commissioner in order to probe the Government about whether the commissioner could also play a useful role in how we grow small businesses, being able to make observations about how some of the government schemes that currently exist could be used further.