Enterprise Bill [HL]

Lord Stevenson of Balmacara Excerpts

Monday 12th October 2015 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank all the speakers who have contributed to this debate. It has been extremely interesting, we have had had a lot of expertise on display and a number of points have been made. It was great on our side of the Chamber to feel that we were all in this together, and it was not until about halfway down the list that we had the first attack on our “anti-business” feelings, which of course I utterly refute. In any case, I am allowed to say what I like, and I say clearly that we support business. We support many of the measures in the Bill and will be pushing very hard for the Government to go further on a number of points, because we think that is the right thing to do.

However, as my noble friend Lord Mendelsohn said at the beginning of the debate, we have been slightly misled by the aspirations for the Bill. In pre-briefings it came out as something that would put red meat back into the whole question of enterprise, but I am afraid that it is much less than that. I think that it was described as another “pudding” Bill—I did not catch the exact words—and as a “legislative herbaceous border”, although perhaps a “rockery” might have been more appropriate because there are many rocks and hard places into which sensitive plants might fall if we are not careful as we take the Bill forward. But enough of such metaphors; we should go on to the reality of what we are about.

Although the Bill in itself is not something that one could argue against, the problem is that it lacks a lot of the ingredients that I think would have been expected of a measure labelled “Enterprise Bill”. Indeed, if the Government are not careful, they may well end up with one or two of these things being argued for in Committee. For instance, a couple of noble Lords have mentioned the need for more management, expertise and leadership in small businesses, in particular. There is not much, if anything, in the Bill about that. There is nothing here about support for exports—something that we have talked about in your Lordships’ House on a number of occasions. There are still problems with getting small businesses to aspire to export and getting medium-sized businesses ready to export more than they currently do. There is nothing here about lending or investment, which is still a major problem for small business if we want to see growth there. If we are talking about where the markets are, why is there nothing here about our approach to the EU, particularly, for instance, in the digital single market, which I know is occupying a lot of the Minister’s time? It would have been nice to see something there, perhaps leading where in the past this Government and their predecessor have held back a bit.

The noble Baroness, Lady Wheatcroft, was sharp on the question of immigration and the need to get more support for the expertise gaps that are sometimes found. I hope that the Minister will respond on that. However, it all points to a lack of anything in the Bill that could be described as an industrial policy. That perhaps does not feature so large in the thinking of the current Secretary of State, but it could well be reflected on as we go forward. Some other points were made and I shall touch on those as I go through.

I am struck that Parts 1 and 2 deal with issues that were raised extensively in the previous Session. There were two Bills that could easily have taken the materials now before us but they did not. We have come back to them not so much to amend but merely to extend points that were made in previous debates and discussions. Those points were not always made from this side, but we recognise them in some of the wording before us.

The introduction of the Small Business Commissioner, in Part 1, has been widely welcomed. In a sense, we do not need to go over this ground because it is common between us: poor contractual practices—for example, unfair payment terms and breaches of contract such as late payment—reduce the economic and financial resilience of small businesses. Indeed, recent data from the Federation of Small Businesses confirms that late payments alone are costing small and medium-sized businesses £26.8 billion per annum. Of course we must do something about that. However, what we have here seems to be an investigation and a register of issues rather than anything that might tackle the problem. We welcome the potential contribution that a Small Business Commissioner might make to help change, in particular, the culture of poor contractual practices within supply chains and to enable small businesses to resolve contractual disputes quickly and easily, but I think that this is a very pale imitation of what is needed. We have heard from all around the House that what is now available in the Bill will not provide “good capitalism”, as it was described by the noble Lord, Lord Patten, and it will not provide the rod of steel by which we think the practices currently in play need to be tested. As the noble Baroness, Lady Wheatcroft, said, this is something that we will have to return to, if not in Committee then perhaps in later years.

The problem seems to be that the Government recognise the issue but do not agree on its scale. There will be one commissioner dealing with perhaps 500 cases a year when we are talking about roughly 5.4 million small businesses in the country. As we heard, when the situation is compared with that in Australia, one finds that the gap is substantial.

With regard to the powers, why does the Small Business Commissioner not have the authority to deal with regulators, big business, government and local government when they do not perform according to the standards that we want? Why is its scope so limited? Why is it not given the powers of a mediator? At the moment we are seeing the introduction of alternative dispute resolution right across our economic field. Why is there not some thought of linking up what is proposed for the Small Business Commissioner with the ADR system? As I have already hinted, I suspect that primary legislation will be required, with automatic costs and interest being applied to those who do not pay small businesses in time, because the code of practice simply does not work.

That is the sort of thing that we would like to come back to in Committee, but we think that two further things that have been represented to us are important. There should be a power within the commissioner’s office to name offending companies. Without that, I do not think that the actions that it takes will stick. Naming should be mandatory if the respondent is found to be at fault. I also think that it would be reasonable for the commissioner to have powers to make referrals to the Competition and Markets Authority if there is clear evidence of significant market distortion across the economy as a result of late payments and poor supply chain practice. These are very minor areas in terms of what I have already sketched out as being important to us in Committee, but perhaps they are things that the Minister could think about.

We welcome the Government’s move to include the broad range of regulators within the business impact target. Alongside requiring regulators to publish both an annual report on their performance against the regulators’ code of practice and a report on the impact on economic growth, that will help to give a sense of the administrative and inspection burden that regulators places on businesses. In Committee, we would like to get further information and clarity from the Government on the fees, charges and levies that might be introduced within the annual economic growth impact report. Increasingly, regulators are imposing fees and charges for providing advice and services which are much needed in the small business sector, but we need to know more about that.

However, we are very disappointed that the Government have not stepped up to the plate on the EHRC, and we have already heard concern expressed about that. This was raised during the passage of the Small Business, Enterprise and Employment Bill, when the Minister was very firm that she felt it right that it should be excluded from primary legislation. Why has she not done that for this Bill? Perhaps she could answer that when she comes to respond.

We support the extension of the primary authority scheme. This was originally introduced by the Labour Government and we think that it has worked. It will help considerably if smaller businesses and other regulators are included in that. However, we have been told by those who have written to us that the Government are not consulting as widely as perhaps they could, and I hope that they will pick up on this point in the remaining stages of the Bill. Some key issues are affecting councils and I think they feel that they have not been able to make this point. In Committee, we will also probe whether it is possible for councils to charge for the work that they do on this scheme. They should be able to charge reasonable fees that would be negotiated and agreed by the primary authority, rather than being limited to charging on a cost-recovery basis. At a time when local authorities are being very badly hurt by cuts, this is something where value for money might prove valuable to them.

We spent a lot of time talking about apprenticeships in our discussions here. We like the proposal to protect the term “statutory apprenticeship”, and the offence that is being created of providing or offering a course as an apprenticeship if it is not a statutory apprenticeship is appropriate. In many ways it parallels what was required to safeguard the gold standard of a degree. Presumably the lessons will be learnt from that and we will certainly be probing that point. There have been difficulties in getting it right over the years and that has led to a number of concerns. However, I am sure that the Government will be able to get it right.

The noble Lord, Lord Baker of Dorking, who unfortunately is not in his place, talked about the challenging nature of the 3 million target, and that was picked up by a number of people. However, the point that he made was really the subject of a different debate. It is a debate that I regret is not prompted by the Bill and I wonder whether there will be room for it in Committee. The point here is that you cannot just bring in a statutory requirement for a particular type of apprenticeship without, as the noble Lord, Lord Baker, said, thinking harder about the split between vocational and non-vocational education in schools, about the role of the colleges and about the way in which the integration of work takes place. This is not a new debate; it has been around for many, many years. One would hope that, in building next to the structures and changes that the Government have introduced in the higher educational sector by bringing in the statutory apprenticeship route, they would also allow time to develop a properly rounded appreciation of what we are offering the children in our country who progress through primary and secondary school and then have a choice to make—in the view of many people it is currently made far too early—between a vocational and an academic course of study, to build in flexibility so that those who take one route are not excluded from the other, and to allow for linkages between the various types of training so that we have the possibility of reaching a level 5 comparison between the academic and the vocational courses which does not label people as being in one section all the way through.

These are words that everybody has heard, and we have all paid lip-service to them over many years. However, we do not ever seem to be able to get them right in Britain. Why is that the case? I say “in Britain”, but in fact it is not strictly true in Scotland. The system there is much more open in terms of the ability to move between various subjects and different types of educational skills acquisition. We should take a humble approach to this in England, and learn from the experience that works, to allow the proper and right thing being done here about apprenticeships to bite properly for the benefit of our economy as a whole.

I think also that, if we are going to do this, we have to think harder about what it is that apprenticeships do in relation to the wider context of employment. By that, I am thinking about trying to bring people out of poverty—although that is not the only reason for this—and find the most productive way forward. We have to build into anything that comes out of this Bill a monitoring process for what is happening on the ground. We will need demographics about who is applying for apprenticeships, what is happening to them and what the good and bad things about it are. We should be able to think of apprenticeships not just as something that happens in itself but as something that creates a job at the end of the training—something that sometimes does not happen.

We should focus harder on the 18 to 21-year olds who are leaving the secondary education system and joining the workforce, but also continuing in training. Although it is much resisted by government, it is true that the majority of apprenticeships currently go to those in the older 22 to 25-year old age group. Have we done enough to think about gender and apprenticeships? There seems to be a large gender inequality in where apprenticeships are going. Are vulnerable groups getting access to apprenticeships in the way that they should be, particularly those leaving care? What about those from a BME background? What about disabled people? These are all important things; although they will not necessarily drive the system, it would be fantastic to get it right if we can.

Finally, I hope that during the discussions we have in Committee we can think about the sort of reports, which I have mentioned, that will be very necessary if we are to take this forward. The statutory duty for apprenticeships is an important step forward in a long journey, and we want to get it right. We will also be probing the requirement that trading standards teams should enforce protection of the term “apprenticeship”. It is not at all clear that that is the best body to enforce this—it does not do employment; it does process. It is important that we get that right. We should also think harder about the way in which the requirement to make apprenticeships happen in the public sector has at least an implication for the private sector as well. It may not be appropriate to do this in a top-down way, but certainly it is setting up a difference between the approaches that would not be sensible in the long term.

We have talked a lot about the late payment of insurance claims. The provision seems an obvious adjustment of a long-standing difference between the systems that operate in the United Kingdom. The question of whether an insurer should be liable to compensate for losses caused by the failure to settle a claim within a reasonable time seems right. However, we have a long way to go on this, and I look forward to picking it up again in Committee.

On the non-domestic rating issue, we had a very helpful intervention from the noble Earl, Lord Lytton, which will repay a lot of reading. I do not think that answers will be readily forthcoming to all the points that were made this evening, but I am sure that they will be picked up. It is important that we get this right. At the moment, the system seems rigged to go wrong. We will certainly need to try to get the best out of the Bill, while taking on board the points that have been made.

We are all slightly confused by the industrial development provisions in the Bill. I had not realised that broadband in Wiltshire was so bad that the issue had to be picked up by the Minister herself and forced into the Bill—perhaps I am overstating the point. At a time when we are hearing that BIS is going through a bit of a contortion act around its budget and may not do quite as much funding or activity as before, it seems a little strange that the Bill contains a provision to increase funding for the Secretary of State. I look forward to hearing more details from the Minister when she responds.

The question of whether the problems we have will be solved by money was raised well by my noble friend Lord Haskel. I will not repeat the points that he made, but he raised the important issue that it is competition that is the problem, not money.

Finally, my noble friend Lady Rita Donaghy and others covered the ground on the public sector employment restriction of exit payments very well indeed. Rather than go through the issues again, let me say that there is something that can be done here, and probably there is a will to try to get this right. However, if the system that is being proposed catches the lower paid, impacts on pensions and destroys good industrial relations, we have to ask whether it is worth it.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport (Baroness Neville-Rolfe) (Con)]

My Lords, we have had an interesting debate on the measures contained in the Enterprise Bill. I am grateful to the noble Lord, Lord Stevenson, for his comprehensive summary, and to my noble friend Lord Cope for his analogy with the herbaceous border. In an autumn when gardens have been flourishing, I hope that the sun will shine on this Bill, on our small businesses and on our plans for apprenticeships.

I am grateful for what seems to be virtually unanimous support for this Bill from the various business groups and this House; not necessarily for every detail, but I look forward to a constructive debate in Grand Committee.

Enterprise has been part of the British DNA since Elizabethan times—possibly before—and this Bill will provide a new range of opportunities. It is pro-market, pro-competition, pro-innovation and pro-investment in people and technology, and not pro-vested interests, as my noble friend, small business ambassador and judge on “The Apprentice”, Lady Brady said. My noble friend Lord Sheikh made similar points based on his own business experience.

I am pleased to note that a number of my noble colleagues, including my noble friends Lady Harding, Lady Wheatcroft and Lord Patten, and the noble Lord, Lord Curry, have expressed their support for the Small Business Commissioner. The Government are committed to helping small businesses, which unlike larger businesses do not always have the resource or expertise to fight their corner. By establishing a Small Business Commissioner we want to drive a cultural change to address late payment.

The noble Lord, Lord Mendelsohn, argued that the Small Business Commissioner should have a wider remit, referring to its Australian counterpart. The Small Business Commissioner is inspired by, but not the same as, the Australian Small Business Commissioner. That is deliberate. We want to adapt the Australian experience to our own circumstances. Here, the commissioner will focus on the key issue of late payment, which is of real concern to small businesses in the UK. I should advise my noble friend Lord Eccles that the definition of “small business” in Clause 2 is, in substance, consistent with the EU definition and that which we discussed during the passage of the Small Business, Enterprise and Employment Act.

I recently met the Australian Small Business Commissioner, Mark Brennan, to learn from his success. I concluded that finding a very good candidate for this job will be extremely important, as has been said. He told me that, in the last two years, he has had to use his power to name and shame an organisation only once. He is able to resolve most complaints informally and the threat of reputational damage encourages firms to work constructively with him.

Our consultation showed that the commissioner should not provide mediation directly. The real issue is awareness of mediation and of other forms of dispute resolution, which the noble Lord, Lord Stevenson, mentioned. We do not believe that yet more legislation, as he suggested, is needed, beyond the proposals that I outlined in my opening speech. What is needed is a change in culture. That means good, early decisions by the Small Business Commissioner.

The commissioner will seek to improve, rather than undermine, our business environment. He or she will complement existing dispute resolution services and lead a culture change in how businesses resolve and ultimately avoid commercial disputes, particularly around payment issues. It was good to hear of the positive experience that some had had of the Groceries Code Adjudicator.

Previous consultations showed that additional penalties would not solve the problem of late payment—that is what was felt—but stakeholders have demonstrated strong support for increased transparency. So we are also implementing a new reporting requirement. Our intention is for the Small Business Commissioner to be the custodian of the new reporting requirement. We will bring together this package of measures to drive a real change on the ground.

The public sector, a concern of the noble Lord, Lord Mendelsohn, is an area where we have been busy trying to lead in our own backyard. The Government have restated their long-standing commitment to pay 80% of invoices in five days and are required to report quarterly against this performance target. Where public sector invoices are not paid within 30 days and are not disputed, interest becomes payable. There are new reporting requirements for public sector contracting authorities over the next two years. The Government set out in their manifesto a commitment to strengthen the prompt payment code and ensure that all major government suppliers sign up to it. Sixteen of the 33 major suppliers to government have already signed up.

It is not just legislation which imposes costs on business; the actions of regulators do so as well. That is why we are extending the business impact target to regulators and introducing new annual reporting requirements for them. I welcome the support of the noble Lord, Lord Mendelsohn, for the principle of including regulators in the target and note his scepticism about the savings made under “one in, two out” in the last Parliament. The policies of the previous Administration saved businesses £2.2 billion a year, a £10 billion cumulative net saving over the course of the last Parliament. As the noble Lord, Lord Curry, said, these figures are validated by the independent Regulatory Policy Committee, whose strength is its independence. It is probably the best innovation in public administration that I found when I returned to government, and I would like to see one in Brussels. I am grateful to my noble friend Lord Lindsay for bringing his experience in the regulatory world to our debate today. The business impact target will cover the economic impact of new regulatory activity on business, including voluntary and community bodies—which I think answers my noble friend’s question—but it cannot apply to the public sector.

I stress that this Government are committed to matching that saving: another £10 billion of savings over the course of the Parliament. To help achieve this, we have just launched our first five reviews, in the energy, waste, agriculture, care and mineral extraction sectors. I welcome the support of the noble Lord, Lord Mendelsohn, for the growth duty. I want to clarify that this will not override or cut across regulators’ existing obligations but will sit alongside and complement them.

The noble Lord and the noble Earl, Lord Lytton, expressed concerns about the inclusion of the Equality and Human Rights Commission within the scope of the target. I assure noble Lords that the intention is to require regulators to measure and to report on the economic impact on business of the regulatory changes they make. We are certainly not seeking to fetter the independence of regulators, nor will we do so. While I understand the concern to protect the EHRC’s accreditation as a national human rights institution, I do not believe that being in scope of the target puts that accreditation at risk. I look forward to a meeting with the commission in November and I hope that it will agree that this is different.

[Lord Stevenson of Balmacara]

This is of such importance to the EHRC, but it is exactly the same argument as we had over the small business Bill. By implying any relationship to the governing authority, the list A status is jeopardised. If that turns out to be the case, does the Minister agree that it would be appropriate to put this on the front page of the Act?

[Baroness Neville-Rolfe]

I thank the noble Lord for his comment. As I have said, we will discuss this matter further. We will consult on the bodies that should be included, but I have stated the reasons why I see things differently in this case.

The noble Earl, Lord Kinnoull, asked whether the FCA would be in scope, and my noble friend Lord Leigh asked about the Financial Ombudsman Service. I intend to issue a Written Ministerial Statement before Committee in this House which will list the regulators that the Government currently intend to bring within the scope of the target. The necessary secondary legislation will also be subject to the affirmative procedure. I agree with the noble Earl on his point about historic gold-plating and would be delighted to find some rich pickings from 2005, as our ambitions are high. I would welcome any examples.

My noble friend Lord Flight talked about late payment of insurance, which I am sure we will return to in Committee, but Law Commission research suggests that late payment could occur in up to 10% of cases, which is not insignificant. Where late payment occurs, its impact on businesses can be devastating.

I am pleased to say that we all agree on the important role that apprenticeships play. I am most grateful to my noble friend Lord Baker of Dorking for sharing his compelling experience and to the right reverend Prelate the Bishop of London for sharing his experiences of apprenticeships in historic buildings—I speak as a Culture Minister and a lover of cathedrals. I especially liked his notion of the dignity of the makers, which I am sure we will return to.

On uptake, we are developing a comprehensive plan for growth including more work with large employers, more support for small business and a renewed emphasis on communications. On quality, I agree that it is crucial to improve the quality of apprenticeships. That is why we are pursuing reforms to content, assessment and funding. I also completely agree that higher levels of apprenticeships are important for both young people and employers. I look forward to the debate on apprenticeships in Committee and to talking about the various educational pathways that the noble Lord, Lord Stevenson, described, in different places.

On the question of the public sector target, we want the public sector to act as a model employer and lead by example by employing a significant proportion of apprentices. A number of noble Lords asked about the scope of the public sector duty. We will be consulting, but our current thinking is that public bodies with a workforce in England of more than 250 employees will be subject to the duty. This would be likely to include most local authorities, of course, and other organisations that are classified as public bodies. We do not believe that it is necessary to set targets for the private sector, but we are taking steps to promote apprenticeships and put employers at the heart of designing new apprenticeship standards, and of course the new levy. I also agree about the value of the growing number of university technical colleges, and as my noble friend Lady Harding said, in partnerships between employers and universities in offering sandwich courses and in work experience. These other areas are also very important.

The noble Lord, Lord Stoneham, suggested that we do more to increase the number of apprenticeships generated in businesses through public sector procurement. I am happy to say that all bids for government contracts worth more than £10 million and lasting more than 12 months must demonstrate a clear commitment to apprenticeships. Many public bodies in central and local government already build skill considerations into their procurement on a voluntary basis. We certainly want to see more. Heathrow, as the noble Lord, Lord O’Neill, said, and Crossrail have both played important roles in promoting apprenticeships, as have many others.

The noble Lord, Lord Mendelsohn, raised concerns about trading standards enforcing the measure to protect the term “apprenticeships” from misuse. We are in active discussion with the Department for Communities and Local Government and the Local Government Association about this issue to make sure that it works. As regards the level of business rates in the UK, a topic mentioned by the noble Earl, Lord Lytton, it is important to note that looking at one tax in isolation presents a skewed picture. We are cutting corporation tax further to 19% in 2017 and 18.5% in 2020, benefiting more than 1 million businesses, and the Chancellor has announced £1.4 billion-worth of support for business rates for the year 2015-16.

My noble friend Lord Cope asked whether the information shared by the VOA with local authorities would go beyond that already on the VOA website. The answer is yes. The information will include detailed information such as plans. I am seeing the VOA shortly and will explore some of the points raised in today’s debate.

I reassure the noble Lords, Lord Stoneham of Droxford and Lord O’Neill, and the noble Baroness Lady Donaghy, that the Government greatly value public sector workers and the important services that they deliver. We agree that it is essential that the public sector recruits, retains and motivates the highest-quality staff. The Government also recognise that exit payments are a valuable tool for employers, particularly when restructuring and modernising, as has been said. However, exit payments have cost around £2 billion a year in recent years and it is important these payments are fair and proportionate and provide value for money for the taxpayer. I assure the noble Lord, Lord O’Neill, that individuals will continue to receive their index-linked pension in full from their normal pension age. These reforms are not an attack on retirement benefits. They are a sensible curb on six-figure redundancy payments.

I also reassure my noble friend Lord Borwick that employers cannot get around the 28-day limit by staggering payments. The 28-day limit applies to the date that a person leaves public sector employment, no matter when they are paid.

The Industrial Development Act 1982 is over 30 years old and this Bill updates it to reflect current economic realities such as the need to be able to fund broadband infrastructure. I do not have time to go into the details that the noble Lord, Lord Stevenson, asked for, but I would like to reply to the question asked by the noble Lord, Lord Stoneham, on superfast broadband. Superfast broadband is available to over 83% of homes and businesses in the UK, up from 45% in 2010. Broadband deployment is progressing at pace, with the Government’s programme making available an additional 5,000 premises a day. We remain on track to provide 90% superfast coverage by early 2016 and we are aiming for 95% of UK premises to have access to superfast speeds by December 2017.

The noble Baroness, Lady Donaghy, raised the issue of cash retention in the construction industry. There are problems with the system, but this is a deeply embedded feature of the industry and we must act on the basis of evidence. This is why we will commission analysis on the costs and benefits of such practices to inform future action. I am sure that we will return to this subject.

On Sunday trading, the Government are currently considering the responses to the consultation and will publish our own response in due course. The consultation was signed by both the Secretary of State for Business, Innovation and Skills, and the Minister of State for Housing and Planning. The Government consulted on devolving powers to local areas—for example, to metro mayors through devolution deals, and devolving powers to local authorities more generally across England and Wales.

Finally, the noble Lord, Lord Stoneham, raised the important topic of SSI in Redcar. The Government are absolutely committed to helping the workforce and local economy. That is why we have announced a package of £80 million, which will include support for workers to retrain and help for local firms to grow and create jobs.

The Government are committed to supporting small businesses and have a much better track record than the noble Lord, Lord Mendelsohn, gives us credit for. There are 760,000 more businesses now than in 2010. Many measures exist to help small firms grow and innovate, such as the enterprise investment scheme, through which small businesses raised £1.46 billion in 2013-14. Micro-businesses and start-ups remain exempt from new regulations. The British Business Bank schemes currently support £2.4 billion of finance to more than 40,000 smaller businesses. Through the bank we aim to facilitate up to £10 billion of finance to business by 2019.

In the last 18 months alone, UK Export Finance products aimed at smaller exporters have helped to secure nearly £1.7 billion of export orders. That replies to the final point of the noble Lord, Lord Stevenson.

I thank noble Lords for their contributions today, and look forward to further debate and scrutiny when the Bill comes to Committee. The Enterprise Bill will support small firms. It will make life easier for businesses by furthering our deregulation agenda, and by investing in apprenticeships. We believe that it will help to cement the UK’s position as the best place in Europe to start and grow a business. I commend it to the House.