Draft Reporting on Payment Practices and Performance Regulations 2017 Draft Limited Liability Partnerships (reporting on Payment Practices and Performance) Regulations 2017

Margot James Excerpts

Thursday 9th March 2017 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I beg to move,

That the Committee has considered the draft Reporting on Payment Practices and Performance Regulations 2017.

[The Chair]

With this it will be convenient to consider the draft Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017.

[Margot James]

It is a pleasure to serve under your chairmanship, Mr Turner. Late payment is a significant issue for small businesses. It is estimated that small and medium-sized businesses are owed £26 billion in late payments. That can cause serious cash-flow issues for small businesses and, in the worst cases, cause them to go out of business. It can be difficult for small businesses to know who has a good reputation for payment and who has a poor reputation. They have no choice but to take it on faith that they will be paid in line with the agreed terms and conditions.

The Government are taking several steps to tackle the issue of late payments, one of which we are in Committee to discuss. Other measures include a Small Business Commissioner, whom we are recruiting at the moment, and the prompt payment code, which is an industry-led code of conduct setting out best practice. Today we are debating two statutory instruments that will introduce a requirement on large businesses to report on their payment practices and performance. The first instrument applies the requirement to large companies and the second to large limited liability partnerships. We are debating them together as the requirement is the same for companies and partnerships.

The reporting requirement will increase transparency, making it easier for suppliers to find information about large businesses’ payment practices and performance. The improved transparency should help suppliers to make better-informed business decisions based on reliable information. The public nature of the data will highlight large businesses that are leading by example and engaging in good payment practice, and will shine a light on poor practice that is potentially damaging to suppliers, in particular small businesses. Late payment will become a boardroom issue for many large companies.

Even a small reduction in overall late payment can benefit suppliers, smaller ones in particular. Last year I met suppliers who had been able to grow and innovate as a result of the reduction in late payment that we have already seen from the voluntary prompt payment code. Taken in the round, less late payment will boost our economy and help it to grow. We have already begun to see steps in the right direction, but there is much more to be done. The Government are committed to building on the prompt payment code by implementing the draft regulations.

The reporting requirement introduced by the draft regulations will mean that large companies must disclose information on a number of metrics about their payment practice and performance, including their standard payment terms, the average amount of days it took them to pay and the percentage of invoices that were not paid within the agreed terms. Businesses will need to report on those metrics, among others, for their first financial year starting once the regulations have come into force on 6 April 2017.

Each business in scope will be required to publish its individual and non-consolidated reports. That gives a greater level of transparency for suppliers looking to contract with reporting businesses. As part of the consultation process and in conversation with interested parties since, we have received a wide range of opinions about which metrics were most important. Throughout that process, we have sought to find a balance between the needs of small and large companies.

For example, the requirement is that businesses publish a report twice per financial year on the Government web service. We changed reporting from quarterly to twice a year in response to concerns that the reporting would be disproportionately burdensome on large companies. That maintains the balance between providing relevant information to suppliers with the need to minimise the burden on large business.

Smaller stakeholders have told us that up-to-date information is important. Stakeholders also told us it was important that information was easy to access. That is why information will be available on the Government web service as soon as a business publishes it, for suppliers to search and download. The web service is currently being developed with input from future users. That input has shaped the service, making it more user-friendly for both those who are required to report and those seeking the information. We will continue to seek input from users as we finalise the Government web service, which will be available from April this year.

In 2014, the Department for Business, Innovation and Skills published a consultation impact assessment that estimated the annual net cost to business of these regulations to be £3.2 million. Further research showed that the annual net cost to business is likely to be higher than that, estimated in our recently published impact assessment to be £17.7 million. However, that has to be considered against the savings to business that a reduction in late payments will bring. The impact assessment estimates that even a 0.25% reduction in the cost of chasing late payment could lead to a £22.9 million benefit for UK businesses.

The regulations have been welcomed by representative bodies, including the Federation of Small Businesses and the Chartered Institute of Credit Management, as a positive step towards a culture where businesses are paid on time for the goods and services they provide. Successful businesses create jobs and are essential to economic growth. To support small businesses and other suppliers, we need to take action to give them more information about the larger companies and limited liability partnerships they do business with and their records on payment. We need to tackle late payment, and the reporting requirement is an important part of the Government’s plan to do so.

Throughout the consultation process and the development of the policy, we have sought to strike a balance between the need for suppliers to have useful information and the need to minimise the burden on large companies. That has informed the development of the web service and the guidance that was recently published. We will continue to develop the web service in line with feedback from potential users. I commend the regulations to the Committee.

--- Later in debate ---

[Margot James]

I thank hon. Members for their pertinent comments, questions and observations—I have learned quite a bit in the process. I shall deal first with the shadow Minister’s speech and questions. He referenced the prompt payment code and some of the efforts that have been made to date to improve what I think we all agree is a serious problem facing small businesses. He said that not many companies abide by the prompt payment code or have signed up to it—it has limitations—and he gave some numbers. Almost 2,000 big companies have signed up to the code and, anecdotally, it is having an effect.

The good news is that we accept that the prompt payment code does not go far enough. That is why we are setting in stone the regulations under discussion today. As my right hon. Friend the Member for Wantage pointed out, approximately 15,000 of the large companies are likely to come within the scope of the regulations. That puts its likely impact on a much more secure footing.

The hon. Member for Sefton Central rightly pointed out that the measure is not a silver bullet and that it has to be seen as part of a package of measures, not the least of which is the appointment of the Small Business Commissioner. He asked when that measure was likely to be implemented. We anticipate having the Small Business Commissioner in post, with the resources needed to undertake inquiries and deal with complaints, by October this year.

The hon. Gentleman said that companies sometimes use late payment almost as a systematic policy, and I could not agree more. There is no doubt that some companies use small enterprises almost like a bank, which is immoral and unacceptable. The measures are of course designed to tighten the net, so that it will not be possible for the larger companies that fall within the regulations’ scope to continue with that approach.

The hon. Gentleman talked about the Late Payment of Commercial Debts (Interest) Act 1998, implemented by the Labour Government to make it a legal requirement for companies to abide by better payment terms. I agree that those were laudable aims. He implied that Conservative Governments are a bit too cautious, noting that we rely on culture change and shy away from statutory intervention. I agree about that, but we follow those instincts for a good reason: we want to arrive at a workable solution to the problem of late payment.

Unfortunately, the 1998 Act is not at all widely used, for the very reason the hon. Gentleman set out in his speech: smaller companies do not want to press home the situation they are in with their bigger customers because they fear losing the contract or the opportunity to bid for further work. That is the problem with using the 1998 Act, and it would be the problem with any overly legislative and punitive approach. Ultimately it would rely on small companies coming out into the open and challenging their big customers, which is very difficult.

The consultation phase on the corporate governance Green Paper is finished, and I agree with what the hon. Gentleman said about it being one way to get the suppliers’ voice heard more loudly in the boardroom. That is what we anticipate and I am glad he supports that element of the regulations.

The hon. Gentleman also mentioned companies going in and out of scope, as it were. In theory that could be an issue, but we have set three criteria, at least two of which should be met by companies if they are to be considered in scope. It is not just a question of the 250 employees; it is also a question of whether they have a turnover of £36 million or more, and whether the net asset value on their balance sheet is in excess of £18 million. Companies need to satisfy two of the three criteria to be in scope, to guard against the concern he raised.

I heartily agree that some companies tend to try to game the system—I hasten to add that most do not, but a good number do. That will be at the top of my mind when, in consultation with the Secretary of State, I appoint the Small Business Commissioner. He or she will need eyes in the back of their head to apprehend and anticipate the sorts of ruses that some large companies might get up to in trying to get around the reporting system.

That brings me neatly to the policing of the reporting, which the hon. Gentleman raised as a concern. Within five years there will have to be a formal review of the effectiveness of the regulations. I hope that answers to an extent the concerns raised by my right hon. Friend the Member for Wantage. In the meantime, the large companies that are in scope will have a legal obligation to report in the way I outlined. If they fail to report twice a year, or if they misreport on any occasion, they will have committed a criminal offence and, in the worst cases, my Department will resort to prosecution.

The hon. Gentleman asked about the web-based reporting system. We anticipate that it will be in place on the gov.uk site from April. We will keep that under constant review and consult stakeholders, particularly small businesses and their representative bodies, to ensure that the format is user-friendly and that they see value in having a simple way of identifying large companies’ payment practices. Come October, that will be backed up by the Small Business Commissioner himself or herself.

The hon. Gentleman asked about the effect of the regulations on early payment discounts. I will investigate that in the Department and get back to him if there is anything to say. He is right that companies sometimes offer that or suppliers negotiate it. It is another area that I am not yet sure will be covered by the regulations, but I will look into it and let him know.

There was some debate about interest charges. The hon. Gentleman answered his own question by reading the Government’s consultation response—I have read it and think it is correct. Our focus is on getting earlier payment. We are using transparency and the weight of the law to require that reporting in order to achieve prompter, earlier payments. Interest charges are not widely used, for the reasons he set out. We will keep it under review, but I think it is too dependent on SMEs coming out into the open and charging interest on their customers, which few are prepared to do. We want to change the balance of power in the relationship through the means proposed in the regulations. For the time being, we will look to enforce the regulations before looking at further regulations for imposing interest rate charges.

The hon. Member for Kilmarnock and Loudoun asked whether transparency will be enough. It is a good question, and one to which clearly I do not yet have an answer. We will probably only know once the regulations have been in place for two years. In answer to the question from my right hon. Friend the Member for Wantage, we believe that transparency will have the desired effect of ensuring that payment is made earlier and more promptly in the majority of cases.

However, will transparency alone be enough? I am also responsible for the national minimum wage, and I see that transparency there, through the naming and shaming of companies that do not comply, is starting to have an effect. I think the regulations will have an effect as well. They will not have that effect on large companies that go through quite serious trouble and have to take measures that even the best-governed companies would prefer not to take, so I can see that there will be examples when transparency alone will not be enough. However, I hope and believe that those will be a minority of cases, and that the vast majority will register a considerable improvement.

The hon. Member for Kilmarnock and Loudoun also mentioned cash retention in the construction industry. I am very concerned by that issue and am working on it at the moment with officials. We have commissioned independent research to better understand the costs and benefits of retentions and the alternatives. It has taken longer than we hoped, because this is a real issue that has been going on for far too long and needs to be tackled vigorously. We will look at ways of perhaps applying the regulations to that, but if it needs more than that, I hope that we will be able to deliver an effective means of preventing what is an unscrupulous exploitation of legitimate circumstances in which construction works have not gone right and it is the customer’s entitlement to hold some money back. I appreciate that it is too widely abused at the moment.

I thank my right hon. Friend the Member for Wantage for his kind remarks about my role in business. I agree with him that we are reluctant to regulate. We are trying to strike a balance between the legislative approach favoured by the previous Labour Government in 1997, which did not really work, and relying on just a nudge and setting an example. I think the regulations strike that balance. I think they will have an effect without having the unintended consequences that a more heavy-handed, legislative approach would have.

My right hon. Friend questioned the impact assessment. The cost currently stands at £15 million for large companies. There were further re-workings of the figures and further evidence supported an increase from the original estimate, which was an underestimate. He pointed out that that is not much per company. We cannot really look at it on a per company basis, because some companies are already behaving well and are already paying within a reasonable timeframe, so it will not cost them anything more.

Regrettably, a large number of companies do not pay on time, so I will not call them outliers. I do not think the actual cost of paying people on time is necessarily administratively a great deal more than the cost of keeping people waiting. That is why the cost per company in the impact assessment is quite small. My right hon. Friend asked whether I feel that is an underestimate. In fact, I feel the opposite: I think the impact assessment does not take any account of the savings that the myriad small companies will enjoy as a result of being paid on time. Those savings are real, as I outlined in my opening remarks. A small employer told me that they were able to divert a whole person from their accounts department to make more productive use of their time, which should assist our industrial strategy of making companies in this country more competitive and productive. The regulations will go some way towards achieving that happy state.

Finally, the vast majority of the Government’s strategic suppliers are now adhering to the prompt payment code, although there is another issue further down the supply chain. The prompt payment code deals only with tier 1 suppliers. I hope the regulations will improve what happens further down the supply chain. In conclusion, I am in favour of the regulations. I think they are important. I hope the Committee agrees.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Reporting on Payment Practices and Performance Regulations 2017.

DRAFT LIMITED LIABILITY PARTNERSHIPS (REPORTING ON PAYMENT PRACTICES AND PERFORMANCE) REGULATIONS 2017

Resolved,

That the Committee has considered the draft Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017.—(Margot James.)

CSC: Redundancies

Margot James Excerpts

Tuesday 28th February 2017 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate the hon. Member for Chesterfield (Toby Perkins) on securing the debate and on the detailed knowledge he has accumulated, despite the fact that the company does not seem to be in contact with him. Given the number of people it employs in his constituency, I must say that that is a surprise.

Business change is an inevitable consequence of modern competitive markets, and commercial and economic opportunities mean that companies will need to reorganise, merge, expand, and sometimes contract, in response. But what we have heard today is, indeed, a worrying picture, and I will do my best to respond to the key points about the security of the public sector contracts and the way in which the Government support people faced with redundancy. I will also try to address some of the corporate governance issues that have been raised.

Employers should want to implement changes as swiftly and efficiently as possible, to limit the impact on productivity and morale. Businesses need the flexibility to respond to the particular circumstances of their restructuring situation, but the number of rounds of redundancies that this company has engaged in causes one to ask in whose interest it is working. At the same time, employees will want to know how the changes are likely to affect them in this very fast-moving picture, and what their options are for the future. It is therefore vital that there is effective consultation with employees about the potential for collective redundancies.

I shall just remind right hon. and hon. Members what our legal obligations are. Collective redundancy legislation strikes a balance between the needs of the business and those of the employees. Collective redundancy occurs when 20 or more employees may be made redundant at one establishment within a 90-day period. In that situation, employers are under a statutory duty to consult employee representatives about the proposed redundancies. The length of a consultation period prior to the first dismissal depends on the total number of proposed redundancies. The consultation must be with the employees’ trade union representatives, or other elected employee representatives where there is no recognised trade union in place, and it must be completed before any dismissal notices can take effect. Importantly, it must be undertaken with a view to reaching agreement, even though sometimes agreement may not be possible. Therefore, any consultation should include consideration of ways of avoiding dismissals, reducing the numbers to be made redundant and mitigating the effect of the dismissals.

There are also a number of obligations on employers, including a requirement to notify the Secretary of State for Business, Energy and Industrial Strategy of the proposed collective redundancies before the start of statutory consultation. Employees who feel their rights have been denied may complain to an employment tribunal, which may make a protective award of up to 90 days’ pay to each of those affected. The ACAS helpline can provide advice to employees on their individual situation. ACAS has also produced a guide for employers on handling large-scale redundancies.

Government support is available for the many employees who have been made redundant or are likely to be faced with redundancy. Throughout the redundancy process, employers still have obligations to their employees and should be thinking about the help they can offer. First, employees with two years’ service under notice of redundancy have the right to reasonable time off to look for a new job or to arrange training. Employers in redundancy situations should contact Jobcentre Plus as soon as possible to discuss appropriate support that can be delivered locally. Jobcentre Plus has, indeed, made contact with CSC in this case to provide support, and that includes support for staff who work remotely, as may be the case with the constituent of the hon. Member for Newcastle upon Tyne North (Catherine McKinnell). The Jobcentre Plus rapid response service is delivered in partnership with a range of national and local partners, including Her Majesty’s Revenue and Customs. Where no partner support is available, dedicated funding may be used to fill gaps in provision.

All decisions about appropriate support are made locally. That is because a decision that is based on the specific redundancy situation, in particular on an individual’s own transferable skills and experience and the availability of jobs in the local area, is more likely to be the right decision and in the interests of the individual concerned.

[Mr Hendrick]

The Minister is giving an excellent exposition of the rights of employees and employers in the handling of the redundancy process, but will she try—and if she cannot, will she write to me later—to address the points I raised about ensuring that the services provided to Departments are maintained and are still deliverable? Her current contribution looks like she is talking about what employers and employees can or cannot do under legislation, rather than about how we address the problem of losing jobs that are of value to the Government.

[Margot James]

I thank the hon. Gentleman for his intervention. I will come on to talk about the effect on the public sector contracts that the company has contracted to provide. I mentioned that at the beginning. I first just wanted to cover the rights of the employees in these circumstances and the support that the Government are trying to offer through Jobcentre Plus. I will, indeed, come on to the important matter that the hon. Gentleman just raised.

To conclude on the employment support that we are able to provide, I am hopeful that the rapid response service will be able to assist those workers who have been made redundant in finding alternative employment. Officials at the Department for International Trade have also contacted CSC and are in close contact with Jobcentre Plus.

I will now move on to the potential impact on public services that various right hon. and hon. Members have mentioned. CSC has undertaken numerous contracts with vital services such as, as we have heard, Royal Mail, the police, civil nuclear and the NHS, and it is indeed of concern to us all that the skills and the contractual obligations given by CSC are honoured. Given the situation, I can well understand right hon. and hon. Members’ concerns about the future. The Cabinet Office has assumed responsibility in Government for dealing with CSC on these matters, and is in regular contact with the company about the viability of the contracts it has assumed. It has been given every assurance that the business will be ongoing and unaffected.

[Toby Perkins]

I am pleased with the tone of the Minister’s remarks. However, I wonder whether she shares my concern—I suspect she does from what she has said. We are being given assurances by an organisation that has had four different leaders in the past two years and has gone, as the Minister has rightly identified, through nine rounds of redundancies. The trade unions have reported that the workplace is in chaos and there is a catastrophe of employee confidence. In that kind of environment, where there is a huge financial incentive to deliver in the short term and a track record of failure, does the Minister agree that there is a real need for the Government to pursue the matter and ensure that the assurances are worth the paper they are written on?

[Margot James]

I have sympathy with the hon. Gentleman. I have the assurances from the Cabinet Office, which is in regular contact with CSC, and I am sure that my Cabinet Office colleagues are wary of the information they are being given in the climate that has been described this afternoon. I will undertake to have a direct conversation with my counterpart in the Cabinet Office to test out the assurances that he or she has been given. In the past, I have been exposed to corporations that have been going through this process of rapid change. That can be very worrying, especially where software and computer contracts are the main focus, because there could be a loss of the skills vital to the delivery of such contracts. In this country, we have had many concerns about public sector contracting for IT systems. It would be a reckless Minister who assumed that all was well, given the circumstances we have heard about this afternoon.

[Mr Hanson]

To be clear, my constituents have been made redundant, but the jobs are not redundant; the jobs have been offshored to other countries. Have the Government got a view in any way, shape or form on not only the company’s current performance but its future performance, which is equally important for my hon. Friend the Member for Chesterfield (Toby Perkins) and others?

[Margot James]

I thank the right hon. Gentleman, because I note that the hon. Member for Chesterfield said in his opening remarks that a lot of jobs had gone offshore to India. The Government have to be cautious in how we respond to that. Business change is an inevitable consequence, and it is not for the Government to direct companies as to how they fulfil their contracts. Unless contracts have certain stipulations within them from the outset, it is difficult for a Government to intervene. Once those contracts have been agreed, it is for the company to fulfil that contract and organise itself in the best way possible.

Having said that, I will say a couple of words about how the Government view public sector contracting. I am responsible for small business, and I am conscious that the Government have set a target that a third of all public sector contracts of a decent size should go to small and medium-sized enterprises. In committing ourselves to that goal, I do not think we meant SMEs in India; I think we meant SMEs in the United Kingdom. Members raise pertinent points. However, once a contract is agreed, if it does not have stipulations on the supply chain, how the company fulfils the contract using its own employees and where those employees are located, it is difficult to intervene part way through.

I reassure Members that suppliers are contractually obliged to meet their performance requirements. Those obligations remain in place regardless of any internal changes that a supplier implements. Through the Cabinet Office, the Crown representative for CSC regularly monitors the company’s performance across all its Government contracts. CSC currently delivers services for a variety of important public sector organisations. It has been formally requested to offer reassurance that the current redundancy programme will not impact on that service. CSC provided verbal assurance during a programme board at the beginning of February. NHS Digital and the Department of Health continue to seek full written assurances. The Cabinet Office are in regular contact.

I understand the concerns that have been expressed this afternoon, not only about redundancies but about their impact on public sector contracts. Every collective redundancy situation, large or small, involves individuals and needs to be managed carefully. It is a very difficult time for CSC employees and their families. It is therefore important that individual workers receive the information and support they need as and when they need it. I am clear that we cannot stand in the way of certain changes, but we have a reasonable hope that companies will act in the long-term interests of their communities and employees. As Members know, the Government recently issued a Green Paper on corporate governance. One thing we are looking at is extending the responsibilities of publicly quoted companies to large private companies. The facts that have emerged during the debate underline the importance of the Green Paper. I am sure that Members will want to debate the Government’s response to it in due course. I thank Members for all their contributions.

[Sir Edward Leigh (in the Chair)]

Mr Perkins, do you wish to say anything to sum up?

Draft Economic Growth (Regulatory Functions) Order 2017 Draft Growth Duty Statutory Guidance

Margot James Excerpts

Tuesday 28th February 2017 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I beg to move,

That the Committee has considered the draft Economic Growth (Regulatory Functions) Order 2017.

[The Chair]

With this it will be convenient to consider the draft Growth Duty Statutory Guidance.

[Margot James]

It is a pleasure to serve under your chairmanship, Mr Brady.

The order will support regulatory bodies in the UK in creating a healthier business environment by making regulation more proportionate, transparent and accountable. The Government are committed to ensuring that regulation supports growth and does all it can to unlock productivity in the UK. Better regulation is central to the Government’s desire to make the UK the best place in the world to start and grow a business, and a key part of our commitment to driving economic growth and boosting productivity. The Government delivered savings of £10 billion to business over the last Parliament, and we have committed to achieving a further £10 billion of deregulatory benefit for UK businesses in this Parliament through our business impact target.

In the Deregulation Act 2015, we introduced a duty for regulators to

“have regard to the desirability of promoting economic growth”—

the growth duty. Alongside the business impact target, that duty supports a positive shift in how regulation is delivered. It will help to reduce the regulatory burdens that hold businesses back and prevent them from getting on with doing business. The result will be another step forward in ensuring that regulation supports growth by freeing up businesses to innovate, creating greater prosperity and opportunity for all.

The 2015 Act establishes the economic growth duty as a legislative requirement for persons exercising a regulatory function. The draft order sets out the specific regulatory functions to which the duty applies, and the statutory guidance has been produced alongside it to assist regulators in fulfilling their new responsibilities at both strategic and operational levels.

Proportionate delivery of regulation plays an important role in supporting competitive markets and improving social and environmental outcomes. Regulatory enforcement that is not proportionate and risk-based imposes unnecessary costs on business, creates uncertainty and undermines investment. How regulation is enforced can have significant effects on businesses’ ability and willingness to invest and grow. In particular, there is evidence to suggest that some regulators fail to take sufficient account of the economic consequences of their actions and place unnecessary burdens on businesses in the exercise of their regulatory functions. To address that, in the 2012 autumn statement, the then Chancellor announced several measures designed to create a healthier business environment by making regulation more proportionate, transparent and accountable.

[Bill Esterson (Sefton Central) (Lab)]

The Minister refers to what the then Chancellor said and mentions that some regulators have not acted supportively for business and economic growth. Will she give an example of a regulator or a case in which that is supposed to have happened?

[The Chair]

Before the Minister resumes, let me say that because the Question has not been put yet, it is not technically possible for her to accept interventions. Of course, whatever the Minister says now is entirely up to her, but it is important that the Committee should be aware of the appropriate rules of order.

[Margot James]

I am extremely grateful, Mr Brady, as I am sure the shadow Minister is, for that point of learning, which was not enforced yesterday.

I will not comment on individual regulators, but I see from time to time examples where regulation is applied without sufficient concern for the ways of working in particular sectors. If those regulators were more sensitive to the ways of working, they would apply the regulations to no less effect and with less imposition on the companies concerned.

Although many regulators consider the impact of their actions on economic growth, some do not. Indeed, some regulators think they are unable to take account of growth because they do not have a statutory requirement to do so or their statutory objectives do not refer to growth. Requiring regulators to have regard to economic growth in this way will address the uncertainty of regulators that feel at the moment that they cannot have regard to economic growth and will put the obligation on a statutory footing, thereby complementing regulators’ other legal obligations.

The growth duty will help regulators to carry out their functions in a way that is conducive to economic growth, and will ensure that regulatory action is taken only when needed and that any action taken is proportionate. It will therefore encourage regulators to develop more mature and productive relationships with the sectors and businesses that they regulate, driving up the accountability of regulators to the business community. That will help to deliver our aspirations for greater productivity and growth in the economy.

Public consultations were carried out in 2014 and 2015, and there was a further consultation on the scope of the business impact target. Responses were received from a broad cross-section of stakeholders. The majority of respondents to the consultation on the growth duty agreed that regulators should have regard for economic growth and should be accountable for whether they have properly considered business growth in their decision making. One respondent said that

“businesses need to have proportional regulatory burdens that can be monitored and dealt with efficiently so they can focus on growth.”

Another stated that

“regulators should always have a dual responsibility to regulate and to promote economic growth…the two should not be mutually exclusive.”

There were a small number of objections to the inclusion in scope of particular regulators. Those were mainly based on arguments related to the amount of regulatory activity undertaken or the fact that the organisation did not have any regulatory functions.

Having considered those responses, the Government are satisfied that it is appropriate to bring the regulators listed in the instrument within scope of the duty. This measure is an important step towards creating a healthier business environment by making regulation more proportionate, transparent and accountable. I commend the regulations to the Committee.

[Bill Esterson]

rose—

--- Later in debate ---

[Margot James]

I thank hon. Members for their questions. Both the hon. Member for Glasgow North and the shadow Minister discussed the nature of regulation and I think there is some agreement—I would hope so anyway —that we are about better regulation, smarter regulation and regulation that is appropriate to the sector of society or the economy it is attempting to regulate.

I would like to put on record the fact that the notion that the Prime Minister was espousing some alternative for this country—its being, as the shadow Minister mentioned, a low-wage tax dodgers’ country on the edge of Europe—is the absolute antithesis of her aspirations. The notion of regulation is very important to the industrial strategy. We want to achieve a state where the regulators have a responsibility, as do all sectors of the economy and businesses operating within it, to support the economic growth that we all depend on. The shadow Minister said surely they were doing that already. Many do, and that is a good thing, but because they do not have a statutory obligation to ensure they have a duty to promote growth alongside their other responsibilities, some of them are not aware of it or, worse still, some think they do not have to do so. That is the purpose of the measure, and the response of the Federation of Small Businesses was that it would be a good thing if all regulators realised they had a responsibility to promote growth where appropriate. [Interruption.] Does the hon. Member for Sefton Central wish to intervene? I get a sense that he does. I am quite happy to give him the floor.

[Bill Esterson]

It is baffling, Mr Brady. The Minister has said twice that there is concern about regulators that are not promoting growth, but she is not giving us any examples. Without a proper evidence base, it is extremely troubling that the Government are doing something that does not stack up, that lacks the support to say that it is needed. Just one example, please—that is all we are asking for.

[Margot James]

I am not going to name individual regulators. The hon. Gentleman can read the consultation that lies behind the introduction of this regulation, from which I am sure he can get a feel for the sectors that are in need of this duty.

Talking in the abstract, we want to see regulators providing more proportionate decisions; we want to see a reduction in administrative burdens, inspection costs, duplication of information, and reliance just on external contractors. Businesses do not want to feel that regulators are faceless bureaucrats, but that they are approachable and supportive of their overall success. Some regulators are better at that than others. The purpose of the measure is to try to bring the rest up to the standards of the best. For more detail, I urge the hon. Gentleman to read the consultation.

Turning to other matters that the hon. Gentleman raised, he cited the Olympics as a regulatory success, and contrasted them with the financial crisis. He said there was not enough regulation to deal with that and the fact that, in his words, “all parties were on the side of less regulation.” I do not think that was the case. As my hon. Friends have pointed out, there were 6,000 pages to regulation at the time. The root cause of the problem was not the lack of regulation, it was the impossibility of enforcing those regulations, and the fact that there were too many regulators with a finger in the pie.

We want to see regulators balance their regulatory purpose with their duty to promote growth. The hon. Gentleman was concerned about legal challenges and the imbalance of power between large companies and relatively lightly resourced regulators. While, in principle, it is possible for a legal challenge to be brought, the statute and the regulations require that regulators have regard to the desirability of promoting economic growth. Providing a regulator does so, a legal challenge would fail, so there is no real prospect of a court being asked to consider the particular balance being struck by a regulator. That balance is up to the regulator and if they have good reason for their decision—if they have considered their duty to promote economic growth but concluded that, on that occasion, it is trumped by another of their other duties—they will merely have to demonstrate that reasoning. I hope that that reassures the hon. Gentleman.

The growth duty is a key element of our agenda to improve regulation in the UK, and these regulations will support a positive shift in the way in which regulation is delivered by reducing the unnecessary burdens that hold business back and prevent them from getting on and doing business. They will therefore help to ensure that regulation supports growth, and will create a healthier business environment by making regulation more proportionate, transparent and accountable.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Economic Growth (Regulatory Functions) Order 2017.

Draft Growth Duty Statutory Guidance

Resolved,

That the Committee has considered the draft Growth Duty Statutory Guidance.—(Margot James.)

ICL Boulby Potash Mine

Margot James Excerpts

Monday 27th February 2017 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I congratulate the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing this debate on such an important matter and on his work, which I read as part of my preparation for this debate, over several years to draw attention to some of the issues that he has raised tonight, notably the worrying health and safety record of the Boulby mine over recent years. I will return to health and safety later on.

The Government recognise the importance of the potash industry to the hon. Gentleman’s constituency and to the wider region. It is inextricably woven in the industrial fabric of the north-east but, as he said, the Boulby mine has faced difficult market conditions in recent years. Revenues and profits in the industry have been hit by low global potash prices, mostly as a result of greater competition in the global market, but some of that competition has not been what we would call free and fair. According to analysis by the market experts, IBISWorld, exports currently form more than a quarter of the industry’s revenue, so UK miners are exposed to global price volatility. The situation has been exacerbated by over-supply, which is unlikely to go away in the short term.

The job losses at the mine since 2014 have clearly come as a major blow to the employees concerned, their families and the communities in which they live. The rapid response service has delivered a number of redundancy briefing sessions to Boulby employees to help get workers back into employment as quickly as possible. In addition, the National Careers Service delivered support with CV writing, digital job searching, interviewing skills, and one-to-one appointments for rapid response funding applications.

However, with the production of polyhalite emerging as a key product of the UK industry, output from the UK is expected to expand in the next five years. I am pleased that ICL, which operates the Boulby mine, is now planning over the next five years and beyond to expand its output of polyhalite—a naturally occurring and highly sought after form of potash seen as a superior fertiliser. I understand that Boulby and the areas to the south have a near monopoly on this mineral resource, and I hope that that will be a great advantage for the area in the coming years. In fact, polyhalite is expected to overtake potash as the key product of the industry after 2018, and I hope ICL’s long-term commitment will result in a brighter long-term future for the mine and its employees.

[Tom Blenkinsop]

The Minister is correct that the industry is looking at polyhalite overtaking potash as the main product to sell to the market. Polyhalite is an incredibly hard material and is much more difficult than potash to mine. Extra help to market the product is therefore needed as the industry adapts to it. Has the Minister taken on board my comments about how polyhalite can be incorporated into the industrial strategy and marketed as an industrial product to the world’s agricultural producers?

[Margot James]

I certainly have taken that point on board. I appreciate that polyhalite is mined only from a layer of rock more than 1,000 metres below the North sea, below the potash seam at the Boulby mine, making it very much more difficult to access. I would welcome the industry’s contribution to discussions on how the industrial strategy that we are developing with the north-east in mind could benefit this emerging sector. It is a challenger sector and very much deserving of our attention as we roll out the industrial strategy.

I have quite a lot of information, so I will be selective. I was shocked by what I read about the health and safety concerns. I have spoken to the Health and Safety Executive, and we have a representative among the officials in the Box this evening who has travelled down from Bootle for this debate.

The Government take health and safety at work very seriously and fully support the HSE’s efforts to ensure that Great Britain remains one of the safest places to work in the world. There have been six significant incidents at the mine in the last two years—although, as the hon. Gentleman says, there is a longer record of safety concerns—resulting in the fatality he mentioned, three serious injuries and 14 workers being placed in potentially life-threatening situations. The HSE has found inadequate risk assessments, poor procedures and a failure to implement procedures designed to tackle the root causes of the problems.

I take this opportunity to express my heartfelt condolences to the family of Mr John Anderson, who was tragically killed while working at the mine on 17 June 2016, and to the other workers who have been injured or distressed as a result of accidents or incidents at the mine in recent years. All the incidents have been, and some are still being, thoroughly investigated by the HSE’s mines inspectors, whom I know the hon. Gentleman has met, and the HSE has called on additional specialist input, such as on human factors, where necessary. I assure the miners that the appropriate action either has been taken or will be taken. Should the HSE’s current investigations provide evidence of the management’s actions falling short of legally required standards, the HSE will not hesitate to prosecute ICL. Indeed, I believe that the HSE is preparing to launch prosecutions relating to the trapping incidents in April 2015—that is one example.

The HSE and the industry will continue to work together to improve safety performance. The hon. Gentleman mentioned the role of trade unions, which I understand have been very constructive and very dedicated to improving safety standards, and they will be a vital partner in that process.

[Tom Blenkinsop]

We cannot go into detail on the cases because they need to be taken through the official legal channels before we can speak about them in any way. My main concern is that, due to the pending legal action, the sick pay period ran out for the miners involved in these cases and they felt forced to go back to work in order to have an income. My worry is that some of those miners may have been in a state of post-traumatic stress, placing other workers in potential jeopardy, but had to go back to work because they are the breadwinner for their family. Will the Government review the legislation to ensure that, pending the legal action, workers in such workplaces can seek sick pay for an elongated period?

[Margot James]

The hon. Gentleman makes a reasonable request. I cannot give him a direct answer from the Dispatch Box, but I am certainly prepared to take that request back to the Department and ask officials to review the matter. I shall write to inform him of any progress I am able to make on that issue. He describes a bad situation being made worse, potentially putting others at risk; that seems to be something we ought to review.

The health and safety law that covers underground mining was brought up to date by the Mines Regulations 2014. All the previous relevant law, some of it 60 years old and drawing from even earlier requirements, was modernised and replaced without reducing any necessary protections. That was no small task, and would not have happened without the co-operation of the industry and, as I just mentioned, the unions representing Boulby’s workers. The law is now more straightforward and, together with the associated guidance, which was also modernised, duty holders should be aware of and understand what is expected of them when it comes to operating a safe mine.

The new law places clear duties on mine operators to ensure that sufficient and effective systems for the management and control of risks are in place and being followed. We now have a single set of regulations to cover the major hazards associated with underground mining, including ground control, shafts, winding equipment and operations, inrushes, and fire and explosion, as well as effective arrangements for escape and rescue if controls fail. Those hazards are far from new, and they are well understood by the underground mining industry. As such, it is unacceptable that some standards have not been applied consistently in the management of the Boulby mine. The Government and the HSE will work together to ensure that duty holders recognise the potential for those hazards causing major harm and that they control the associated risks.

The hon. Gentleman mentioned the underground fire. I understand that improvement notices were served on Cleveland Potash Ltd, after which improvements to underground safe havens and improved communications facilities and water availability have now been put in place.

The HSE has an intervention plan for every underground mine in Great Britain, and each reflects the specific inherent hazards and the mine’s previous health and safety performance. The Boulby plans for 2016-17 and 2017-18 reflect the outcomes of the investigations into the recent incidents. HSE inspectors will base their regulatory interventions and their oversight of the mine’s health and safety performance on those plans, which I know that the hon. Gentleman has discussed with the HSE.

I have probably said all that I can about the health and safety aspects of running this mine. As I have told the hon. Gentleman, I have talked to the HSE about the issues that he has raised, and also about my concerns when I read the individual case notes of some of the people who have had terrible injuries and who have been in fear of their lives. It was clear to me from reading those notes that several of the incidents could have been avoided, and certainly could have been reduced in their effect had proper and robust safety procedures been observed and implemented at all times.

I was encouraged by the response that I received from the HSE with regard to new management at the mine as it has a far more robust outlook and is well informed by the HSE, the trade unions and the hon. Gentleman himself. I think that we can be optimistic that the future of Boulby mine, both economically and, even more importantly, from a safety perspective, will be brighter. We must get everything right for the even more risky accessing of the new mineral source, which has so much to offer his constituents and the mining community that is so important to his part of the world.

Question put and agreed to.

Competitiveness Council: Post-Council Statement

Margot James Excerpts

Monday 27th February 2017 Written Statements

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

My noble friend, the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Lord Prior) has made the following written statement:

The Competitiveness Council met recently in Brussels. I represented the UK at the meeting.

Council began with the approval of the legislative and non-legislative ‘A’ items.

The Council then reached agreement on a general approach for the proposed text on enforcement in the consumer protection co-operation regulation. Alongside most other member states, the UK supported the text of the regulation.

The next item was an exchange of views as part of the regular competitiveness check-up on the EU economy. This focused on investment in intangible assets. The Commission presented evidence to show that the gap between the EU and US on investment in intangible assets is growing, and highlighted its own efforts to help small and medium-sized enterprises. In the following discussion, member states shared best practice and identified areas where they felt the EU could add value.

The Council next discussed actions to modernise public procurement in the context of the European semester. The Commission set out its views on the state of public procurement across the EU as published in its annual growth survey 2017. Member states emphasised their efforts to promote environmentally friendly and socially responsible procurement, as well as ensuring access for SMEs.

Over lunch Ministers were joined by two guest speakers Markus Beyrer (Business Europe) and Hariolf Kotmann (Clariant) to debate the competitiveness of European industries. Member states were asked to consider the appropriate balance between pan-European, national and regional initiatives. Issues of investment and innovation capacity were also discussed. I explained the approach we are taking to development of the UK’s new industrial strategy and that we are seeking to address the cross-cutting, geographical and horizontal issues which impact businesses, rather than focusing on a purely sectoral approach.

The afternoon session began with a presentation from the Commission on its start-up and scale-up initiative (published last autumn). The Commission emphasised that the key challenge is supporting SMEs to scale up to become larger, job-creating enterprises. In the discussion, measures promoting access to finance received the greatest praise from the Council which perceives this as a key barrier to scaling-up. Some member states requested a single EU-wide definition of a “start-up”. Others emphasised that there was a barrier to scaling-up beyond national borders as the single market is not, in fact, a reality.

Next the presidency gave a progress report on the negotiations of the revised regulations on type approval and market surveillance of motor vehicles. The European Parliament has recently agreed on a text. The presidency said it hopes that an agreement in Council will be possible at the next Competitiveness Council meeting in May. The Commission reiterated its message that swift progress on this file was imperative in order to respond to the Volkswagen scandal and fix the systematic failures of the type approval system. Most member states supported the Commission’s proposal, although some had reservations about some of the provisions in the text.

Next the Council took note of information from the Commission on the European defence action plan. In November the Commission adopted the European defence action plan, which is the industrial pillar of the EU defence package. The Commission highlighted the need for more competitive defence technology. It outlined that it does not seek to replace member state action in this area, but is looking for a dialogue on where support is needed. Several member states supported the Commission’s plan.

The next item was information from the presidency on the implementation and entry into operation of the Unitary Patent and the Unified Patent Court (UPC). The Commission echoed calls for signatory states to ratify the agreement without delay, pointing out the barrier to innovation caused by the currently fragmented patent system. I updated the Council on the domestic processes required for entry into force of the UPC in the UK and the progress we are making.

This was followed by information from the Commission on its recent services package. Several member states, including the UK, welcomed the Commission’s package and called for rapid and ambitious consideration of it by the Council. Other member states expressed concerns about aspects of the package.

Next the Council discussed a joint paper from nine member states on the competitiveness of the single market. The group was concerned about potentially burdensome new regulatory measures, particularly on minimum wages, introduced at national level by some member states. They feared these measures discriminate against workers and businesses in other member states, reducing their competitiveness. This could lead to single market fragmentation, with the road transport sector particularly affected. The Commission, after taking note of the discussion, stated it would publish its road package later in the year.

Council concluded with an update from the presidency on the regulation on cross-border portability of online content services. The presidency expressed delight at having reached a full political agreement on the regulation. This will see subscribers able to take their subscriptions to online content abroad with them when they travel around the EU. The presidency declared this as an important step towards modernising copyright for the digital single market, removing some of the existing licensing and commercial barriers. The presidency thanked member states for their hard work and co-operation.

[HCWS504]

Draft Business Impact Target (Relevant Regulators) Regulations 2017

Margot James Excerpts

Monday 27th February 2017 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I beg to move,

That the Committee has considered the draft Business Impact Target (Relevant Regulators) Regulations 2017.

It is a pleasure to serve under your chairmanship, Ms Ryan. The purpose of this statutory instrument is to support regulatory bodies in the UK to create a healthier business environment by making regulation more proportionate, transparent and accountable. The Government are committed to ensuring that regulation supports growth and does all that it can to unlock productivity in the UK. Better regulation is central to the Government’s desire to make the UK the best place in the world to start and to grow a business. It is a key part of their commitment to driving economic growth and boosting productivity.

During the last Parliament, the Government made significant progress through programmes such as one-in, two-out and the red tape challenge, which were instrumental in delivering savings of £10 billion to business over the lifetime of the last Parliament. Those programmes encouraged a cultural shift in Government Departments towards more proportionate and smarter regulation. That approach was formalised through the Small Business, Enterprise and Employment Act 2015, which provides a transparent framework for assessing, managing and reporting on new regulatory impacts to business—known as the business impact target.

Regulatory functions carried out by, or on behalf of, UK Ministers are already covered by the business impact target. Under the Enterprise Act 2016, we extended the target’s ambition through the power to include the activities of a range of other regulators that are legally separate entities to Ministers. The regulations, which list such regulators, will support us in achieving a further £10 billion of deregulatory benefit for UK businesses during this Parliament.

The extension of the business impact target will support a positive shift in how regulation is delivered. It will help to reduce the regulatory burdens that hold businesses back and that prevent them from getting on and doing the business. The result will be another significant step towards ensuring that regulation supports growth and that Britain is the best place in the world to start and to grow a business.

The regulations specify the individual regulators that will be brought within the scope of the business impact target. The regulators listed will be required to assess the economic impact on business of changes to their regulatory policies and practices that come into force or cease to have effect during the Parliament. The assessments must be verified by the Regulatory Policy Committee and the savings or burdens that are imposed on business incorporated into the Government’s annual report, outlining their performance against the target.

The rationale for that is clear: businesses consistently tell the Government that the actions of regulators are as important as the content of legislation in determining their experience of regulation. The cost to business of regulatory activities should therefore be actively assessed and transparently reported, and the regulations deliver that. When impacts on business are imposed by changes in regulatory activities, those should be transparent. In addition, businesses should have confidence in Government estimates of that impact.

The changes do not in any way undermine the core purpose of regulators, which provide vital protections and help to ensure that markets function effectively. Regulation has important economic, social and environmental goals. For those reasons, regulation should be proportionate and at the minimum cost to business necessary to achieve the outcome required. Including further regulators in the business impact target will help regulators to make the move to smarter regulation that delivers outcomes with the minimum overhead. That will be good for British business and will contribute to a more consistent regulatory process.

The Government consulted between 11 February and 17 March 2016 on the proposed list of regulators to be brought within the scope of the business impact target. We received responses from a range of stakeholders, including businesses, regulators, trade associations and other organisations. The majority of respondents were supportive of the proposal to bring the regulators specified in the consultation within the scope of the business impact target. One respondent stated that the business impact target would result in regulators

“having to design their services, policies and procedures in a way that suits the needs of business”.

Respondents did not suggest any further regulators be brought within the scope, while a handful of regulators questioned their own inclusion. We have reviewed those responses and are satisfied that it is appropriate to bring the regulators listed in the instrument within scope of the business impact target. We have also paid close attention to issues raised around proportionality, and the Government have been working collaboratively with a wide range of regulators to design a process for implementation that minimises burdens on regulators.

The business impact target plays a central role in the Government’s agenda to improve UK regulation. It supports a positive shift in the way regulation is delivered by reducing the regulatory burdens that hold businesses back and prevent them from getting on with business. The measures are an important step towards creating a healthier business environment by making regulation more proportionate, transparent and accountable. I commend the regulations to the Committee.

--- Later in debate ---

[Margot James]

I will start by clarifying the purpose of the regulations, in response to the questions asked by the hon. Member for Rutherglen and Hamilton West. The measures do not direct regulatory bodies to reduce regulation. They are about bringing them into the scope of the Enterprise Act such that the regulators listed will be required to assess the economic impact on business of their activities that qualify against the target. That assessment will be verified by the independent Regulatory Policy Committee, so there are safeguards in place. I hope that that reassures the hon. Lady.

On the questions asked by the shadow Minister, the hon. Member for Sefton Central, we agree that we are not after more regulation with these provisions. This sensitive approach to regulators brings them into scope such that they have to assess the economic impact of the regulations for which they are responsible. It is not a directive to the regulatory bodies to reduce regulation. Our concern in respect of regulators is that the regulations are designed to ensure that business benefits from reduced costs in complying with regulations. That does not mean they might receive less regulation, but we want them to be given every opportunity for reduced cost in compliance with regulations, so there is greater emphasis on reporting and transparency among the regulators that have been brought into scope through the regulations.

As the hon. Gentleman mentioned, tax is exempt from the target and therefore exempt from the regulations. I reassure him that HMRC is subject to a separate target of reduced regulation as regards the tax regime. Its target is that it should reduce the impact of tax regulations by £400 million by 2020. So it is subject to a reduced regulatory target, but that is not part of the business impact target—there is a separate target for which it will be held to account.

[Bill Esterson]

I am grateful for the Minister’s explanation, but it baffles me. At the start of my remarks, I mentioned quarterly reporting and the estimate by the Federation of Small Businesses of the average cost—£2,600 a year—to businesses. If HMRC is increasing costs to millions of businesses across the country in that way, it really is going to struggle to hit that target—unless she can tell me something I have completely missed.

[Margot James]

It is always difficult when one is talking about a measure that is currently under discussion. The requirement on businesses to report quarterly and digitally to the Revenue for their taxes will be introduced, but the exact mechanics of that proposition are still under discussion and review. The FSB, which I met to discuss the issue, accepts that this is not set in stone yet. It is, in fact, quite encouraged by the response it has received from the Treasury on the threshold below which businesses would not have to comply with the regime. I think it does accept that in the long run this new quarterly approach and the digitisation of tax returns will save business money, while it does not dispute that it will perhaps have a regulatory burden effect on some businesses in the short term. As I said, it is a bit premature to be bandying figures around when we do not know the exact shape of the new digitisation of tax and quarterly reporting requirement.

I will move on to the concerns that the hon. Gentleman rightly raised about regulators such as the Food Standards Agency and others in health and safety—Public Health England and so forth. I draw his attention to the exclusions; there is a list of exemptions from what we are debating this afternoon. The exemptions include any regulations relating to civil emergencies and relevant to the delivery of large infrastructure projects. He also mentioned the FCA, and there is an exemption to any provisions relating to systemic financial risk. There is a large number of exemptions and that is how we have tried to allay concerns such as those he expressed.

[Bill Esterson]

I am grateful for that explanation, but who will determine what is in and out of scope? Many people will be extremely concerned about all those points but, to take the FCA as an example, who will make the determination? How will we know in advance whether something will contribute to a future financial problem or indeed a crisis? Is there not a danger it will be too late? What is the mechanism for avoiding that happening?

[Margot James]

Each regulator has to provide an assessment of where it sees the impact of its regulatory activity being. That is then assessed by the Regulatory Policy Committee and, ultimately, Parliament can hold Ministers to account. The scope is designed to ensure that agencies ensure that the impact of their regulations is fully transparent. The environmental regulation impacts are included in that.

I am confident that savings are not going to lead to additional long-term costs. We are not necessarily reducing regulation. The measure is about minimising the cost to business to achieve the outcome that the regulations require.

I thank Members for their comments in Committee. The business impact target plays a central role in the Government’s agenda to improve the quality of regulation in the UK. Businesses tell us that the actions of regulators are as important as the content of legislation in determining their experience of regulation. The draft regulations will provide greater clarity and transparency for business about the impacts of the regulatory activities of Government and independent regulators. They will do so without undermining the core purpose of those regulators, and they will help to deliver smarter regulation, creating a healthier business environment, which will be good for British business.

Question put and agreed to.

Draft Claims in Respect of Loss or Damage arising from Competition infringements (Competition act 1998 and other enactments (amendment)) regulations 2017

Margot James Excerpts

Wednesday 22nd February 2017 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I beg to move,

That the Committee has considered the draft Claims in Respect of Loss or Damage Arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017.

It is a great pleasure to serve under your chairmanship, Ms Dorries. I will set out why I believe the draft regulations are an important tool in helping wronged businesses and consumers to access redress for breaches of competition law, and why the Government’s approach to implementation of the damages directive is in the best interests of UK businesses, consumers and competition authorities. I will then set out our approach to some of the key measures in the directive and explain how the draft regulations, supported by case law and court rules, will implement the directive and preserve important elements of existing UK law.

The damages directive aims to make it easier for consumers and businesses to bring private action claims for damages. It applies only where there has been a breach of European competition law, either on its own or alongside a breach of national competition law. The directive covers a range of issues affecting a claimant’s ability to access compensation, including a claimant’s access to information to support their claim, the time a claimant has to bring about a claim, and incentives for businesses to settle early. It also offers certain protections for small business defendants, cartel leniency applicants and commercially sensitive information held by defendants.

I am pleased to say that the UK has long been at the forefront in Europe when it comes to providing access to damages for breaches of competition law. Through the Consumer Rights Act 2015, we made it easier for consumers to get their money back from unscrupulous businesses by widening the jurisdiction of the Competition Appeal Tribunal, promoting collective proceedings—in particular by introducing opt-out collective actions and opt-out collective settlements—and providing the Competition and Markets Authority with the authority to approve voluntary redress schemes. I am also pleased to say that, thanks to careful negotiation, the directive recognises the strengths of the UK regime and is closely based on it. The regulations required careful drafting to ensure full implementation and reflect the strong message that we received from stakeholders that we should preserve UK case law and well-understood practices.

I will now set out the Government’s approach to implementation and explain why we think that our proposed route is the most effective in the long term. In our consultation with stakeholders, we proposed the normal “copy out” approach to implementing the directive and argued that that was the clearest way to ensure that the directive was implemented in full. However, consultation respondents highlighted the fact that the “copy out” approach risked undermining important, established UK case law and creating confusion where there is currently a good understanding of the regime. As a result of that feedback, we reconsidered our implementation approach. Given our well-established regime and rules, an approach to implementation that relied as much on case law and court rules as on regulations seemed more appropriate. We will therefore leave in place existing provisions in UK law that meet the requirements of the directive, including case law, and make changes to UK legislation only to implement outstanding provisions that are not currently covered in UK competition law and practice.

I turn briefly to the issue of gold-plating directives. As I explained, the damages directive is required to apply only to damages sought for breaches of European competition law or where a business has contravened both UK and European competition law. Owing to the close relationship between articles 101 and 102 of the treaty on the functioning of the European Union and chapters I and II of our own Competition Act 1998, the Government intend to apply the provisions to cases following breaches of UK law even when no parallel breach of European competition law exists. Although that is technically gold-plating, it will mean a simpler regime for businesses to comply with and will limit the amount of satellite litigation about which regime applies in a particular case. This approach was strongly endorsed by stakeholders during our consultation.

I will now discuss an issue that has driven considerable debate during the implementation process—the temporal application of the new requirements and how we handle the transition from one regime to the other. The directive states that its substantive provisions should not be applied with retrospective effect, whereas procedural provisions can be backdated. However, the directive does not specify which measures are substantive and which procedural, so to ensure clarity, the regulations distinguish substantive provisions from procedural. The Government have decided that substantive new rules will apply only to claims where both the infringement and the harm occurred after the coming into force of the implementing legislation. Procedural provisions will apply to proceedings that begin after the commencement of the implementing legislation, and may apply to cases in which the harm or infringement took place before the coming-into-force date. All provisions of the regulations are substantive, save for the provisions on disclosure and the use of evidence.

I am aware of concerns that this approach could mean that the substantive provisions of the directive do not have effect for some time. It has also been suggested that the approach could lead to claimants seeking to bring forward their claims in more favourable jurisdictions. I believe that taking the approach that I have set out achieves a balance between allowing consumers access to the reformed regime and not putting defendant businesses in an unfair position. I should also stress that, unlike some EU member states, we are certainly not starting from scratch. Our existing regime will ensure that consumers and businesses can have access to suitable redress, including damages, even if the new provisions do not have an immediate practical impact.

As I explained, the regulations contain only those elements that the Government believe must be included as they are not already provided for in UK law or practice. For example, it is a key tenet of the directive that a cartel causes harm. That principle is not currently codified in UK law so, through part 4 of the regulations, the Government are introducing a rebuttable presumption that where a cartel has been uncovered, it has caused harm to consumers or businesses.

The regulations will also introduce a ban on exemplary damages, ensuring that consumers recover only what they have lost. In other areas, we are implementing a combination of changes to primary legislation and changes to court rules. For example, there are strong rules already in place to govern the disclosure of documents in cases. The court rules will be amended to ensure that those are in line with the directive.

The regulations improve the protection from disclosure for cartel leniency statements and settlement submissions. I believe that that will help to protect the leniency and settlement processes, which are important for effective enforcement against cartels.

The regulations deal with two further issues that I will draw to the Committee’s attention. The directive puts in place protections for small and medium-sized enterprises that are part of a cartel. Although it is right that errant SMEs should pay their fair share back to consumers, we should do what we can to prevent SMEs from going out of business as a result of their involvement in a cartel. For that reason, the regulations contain measures to ensure that SMEs can be held liable only to their own direct or indirect purchasers when in a cartel. SMEs lose that protection if they are the cartel’s ringleader, have coerced other businesses to join or have previously been found to have infringed competition law.

As is the case under the Competition Act 1998, the regulations create a stand-alone regime for limitation or prescriptive periods for private claims. The time periods for making a claim remain at six years for claimants in England, Wales and Northern Ireland and five years for claimants in Scotland. The directive requires a change to the UK’s interpretation of the point at which the limitation period starts and the circumstances under which they are suspended. The limitation period starts when the competition infringement has ceased and a claimant knows or can reasonably be expected to know the identity of the infringer and that an infringement has occurred and harm has occurred arising from the infringement.

The regulations ensure that the limitation period is suspended in various circumstances—for example, where a competition authority in the UK or the EU is investigating the behaviour to which the complaint relates. The regulations contain provisions that I believe balance the right of consumers to have a reasonable time to bring their claim with the need for businesses to understand their contingent liabilities.

We have taken an approach to the implementation of this directive that ensures that victims of anti-competitive behaviour can access the right level of compensation. It balances the needs of consumers with the protection of important commercial information and the need to support our leniency and settlement regime. I believe that the regulations will enable businesses and consumers to benefit from the strengths of a regime that remains the envy of many across Europe.

--- Later in debate ---

[Margot James]

I thank hon. Members for their questions. I shall first answer the shadow Minister’s question on Brexit, together with that of the hon. Member for North Ayrshire and Arran. In line with other European directives, all European law will be transposed into UK law via the great repeal Bill, and this measure is no exception. It is not necessarily possible to give a view about what will happen next in all cases, but I can safely say that the Government will not only transpose the directive into UK law but will recommend that it remains UK law. We have always been against cartels, and we remain against cartels. We accept that there are advantages in the parts of the directive that we have introduced and which will strengthen UK competition law vis-à-vis cartels. As for the time it will take for the measure to take effect, it was initially a bit more difficult for me to understand that.

[Bill Esterson]

If this remains in UK law and European competition law changes over time, what would happen?

--- Later in debate ---

[Margot James]

I cannot comment on changes that may or may not take place in the European Union in years to come, but I can answer the question that the hon. Gentleman originally asked about what would happen to the regulations. They will be transposed into UK law, and there will not be any change to them thereafter. There may be improvements to UK competition law, but that will no longer be determined by the EU after we have left.

[Sir Oliver Letwin (West Dorset) (Con)]

Does my hon. Friend agree that the regulations are a matter of UK law anyway? They do not need to be transposed and they will persist. If one inspects the regulations, one finds a rather interesting example of a general phenomenon, as it is only in proposed new sections 3(1)(d) and 3(2) that any change in reference is required. One simply needs to eliminate reference to the EU competition authorities. The rest of the measure is built round the CMA and UK law, and presents a rather interesting example of the relative simplicity of the great repeal Bill manoeuvre in many cases, although not all. It is probably worth noting that and using it as an example in future.

[Margot James]

I thank my right hon. Friend for adding value to the debate and for his observations.

Turning to the question of why it may take some time to bring the regulations into effect, I should like to underline the fact that the bulk of protection against cartels is dealt with in case law and UK courts, and that will continue to give redress to SMEs and consumers. On the specific question of the parts of the directive that we have introduced in UK law, the timing will depend on the nature of the competition infringement, and it may take 10 or 15 years for a cartel to be uncovered and prosecuted. Until then, the current UK regime will, as I have said, provide effective protection.

The hon. Member for Sefton Central made the point that the additional protection that the new framework will give to SMEs is welcome. I remind hon. Members that SMEs are more often victims of cartels than participants. He asked about the Groceries Code Adjudicator and whether the regulations would have any effect on that office. They do not affect the operation of the GCA, because it deals with different aspects of protection for supply chains. Any supply chain that is affected by a cartel issue will have access to protection under the regime that we are discussing. Any other aspect of abuse in the grocery supply chain will go to the GCA, as happens at present.

Finally, the hon. Gentleman asked about the energy market and whether we expect more use of this regulatory framework in dealing with abuses, particularly price rises. The CMA report last summer provided a framework for strong objections to some of those price rises. Ofgem has pronounced that, in its view, the recent price rises to which he alluded are not justifiable.

I do not really see any connection with the idea of a cartel. The issues that the hon. Gentleman mentioned are real, and I share his concern at some of the price rises, as does Ofgem, but they are not the product of a cartel. If they were, we would see them across the board. Of course, the big six, to which he referred, account for just 81% of the market, whereas 13 years ago they accounted for 99%. There is a lot more competition in the energy market now, with up to 40 companies operating, and the share of the market held by other companies is increasing with speed, so I do not think the issues to which he alluded have anything to do with a cartel.

I am grateful to the Committee for its consideration of the regulations. I believe that I have set out an approach to the implementation of the damages directive that achieves full implementation in a way that works in the best long-term interests of UK consumers and businesses.

Question put and agreed to.

Construction Industry: Blacklisting

Margot James Excerpts

Wednesday 8th February 2017 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

It is a pleasure to serve under your chairmanship, Sir Alan. I congratulate the hon. Member for Streatham (Mr Umunna) on securing this debate and on speaking with such knowledge and passion about this terrible blight—this terrible indictment of companies in the construction sector, particularly during the 1990s.

I share the hon. Gentleman’s view that the blacklisting of trade union members and activists is an indefensible practice. What I have heard today really horrified me. However, I think we have an appropriate legislative framework for dealing with any further attempts at blacklisting, which is why we are not in favour of a public inquiry at the moment. Such an inquiry would perhaps have had an effect 20 years ago, and I regret very much that one was not held then.

The Information Commissioner intends to undertake a call for evidence later this year to develop her understanding of the underlying issues, building on her office’s observations from its extensive investigations into blacklisting complaints. In an area where there have been many allegations, that is an important step forward in establishing a true picture of the level of blacklisting that may or may not take place now.

Following the 2009 investigation of the Consulting Association—a case that Members are all too familiar with, thanks to the hon. Gentleman—the Government strengthened the legal protections in this area. The Employment Relations Act 1999 (Blacklists) Regulations 2010, which the hon. Gentleman referred to, make it unlawful for an individual or organisation to compile, sell, use or supply a blacklist of trade union members or those who have taken part in trade union activities. Individuals can enforce the rights contained in the regulations through employment tribunals or the county court, as the hon. Gentleman said.

I am not aware of any evidence that the blacklists regulations are not doing their job, but should any new information come to light to suggest otherwise, we will certainly consider it.

[Chris Stephens]

In July 2016, the Minister told me in a written answer that the Information Commissioner was investigating some allegations of blacklisting. She committed to consider any further action that might need to be taken as a result. Will she give me an update, please?

[Margot James]

There is no further update. The Information Commissioner’s Office is undertaking such inquiries and when it reports to me I will consider the contents of what has been found.

The Information Commissioner’s Office is an independent regulatory body that was set up to investigate breaches of the Data Protection Act 1998. It has the power to take enforcement action, including searching premises and issuing enforcement notices and fines. Since April 2010, it has also had the power to issue a civil monetary penalty of up to £500,000 for serious breaches of the Act. That is a significant deterrent and a vast improvement on the previous rules, which allowed a maximum penalty of only £5,000. Data protection law is undergoing reform as a result of the general data protection regulation, which is to take effect on 25 May 2018. The powers of the Information Commissioner’s Office to impose fines will substantially increase as a result.

In 2009, the Information Commissioner’s Office established a fast-track helpline for those who thought that they might have been affected by the Consulting Association case. I congratulate the trade unions mentioned by the hon. Member for Ashfield (Gloria De Piero), which campaigned for and won compensation, and the Blacklist Support Group, members of whom are in the Public Gallery today, on their work on this matter.

When the Information Commissioner’s Office considered that a person might appear on the Consulting Association list, they were asked to provide further documentation. It has continued to run that service and to respond to written requests for information. To date, the helpline has received and responded to about 5,700 calls and 3,000 written requests. The nature of blacklisting is that it is secretive and discriminatory, however, and it can be difficult for individuals to know whether they have been affected by the practice. If people suspect that they have been blacklisted, they can report their concerns to the Information Commissioner’s Office, which will provide advice on how an individual may choose to take the matter further. The Information Commissioner has also attempted proactively to contact individuals who might have been affected, although that is only possible where up-to-date contact details are available.

[Mr Umunna]

The Minister is coughing so I will intervene to allow her to take a swig of water. While she is doing so, I will ask three questions. First, on a public inquiry, I understand what she says about the history, but the fact that events happened in the past has not stopped other big public inquiries, such as those into Bloody Sunday and Hillsborough. Will she explain why that should stand in the way of a public inquiry into blacklisting? Secondly, does she accept that it is difficult for the self-employed to use the legislative framework?

Finally, will she answer this point that has been made to me by people in the sector: there is a feeling that the Leveson inquiry into media behaviour came about in part because powerful, important people were subject to an abuse of media power and that, because we are talking about construction workers, the Government and the establishment are not taking the blacklisting matter as seriously. What does she say to people with that view?

[Margot James]

I will come back to the hon. Gentleman’s third question in a minute. On the second question, the self-employed are covered by the legislation. I accept that it may be more difficult for them to exercise any powers, but they are covered by the Data Protection Act. A self-employed individual may make a complaint to the Information Commissioner’s Office.

On the more vexed question asked by the hon. Gentleman, there have been public inquiries in the past to do with people without power who have been affected by dreadful instances. That we are talking about a group of workers who are traditionally not very powerful and perhaps do not earn huge amounts of money has nothing to do with the matter. Personally, I think that such individuals are more entitled to protection and safeguarding than the wealthy and powerful.

The compensation on offer is, absolutely, for serious amounts of money. The Information Commissioner’s Office has taken action, and approximately £100 million has been extracted from the industry for a compensation scheme and to satisfy the results of court actions. The matters we are discussing are being taken very seriously.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

On the question of a public inquiry, is not the point that much of the information that has come into the public domain has done so in an utterly random way? That is why there is a need for a powerful and systematic examination of whatever evidence might be out there.

[Margot James]

We are now in a position where compensation and redress are available, and there is an absolute law against anything similar happening again. For the time being, we are not considering a public inquiry because action was taken back in 2010, as I mentioned. The Information Commissioner has also now announced a call for evidence. Pending the outcome of that, we will consider the framework and whether it is still appropriate. For now, no public inquiry is under consideration, but we will see what happens after the Information Commissioner’s call for evidence and its subsequent report.

I encourage anyone who thinks that they might have been blacklisted by the awful Consulting Association and who has not already done so to get in touch with the Information Commissioner’s Office through its helpline. Furthermore, the Trade Union and Labour Relations (Consolidation) Act 1992 prohibits an employer from refusing employment because someone is a union member, so that is illegal. Individuals who believe that they have been discriminated against can, as I said, bring a claim at an employment tribunal. Dismissal for such a reason would automatically be unfair.

I understand the desire for the blacklists regulations to be applied retrospectively, but in 2010 the Government decided that that was not appropriate. The compensation package is available, blacklisting is now against the law and the Government’s response to the consultation was clear about a new, specific criminal sanction not being proportionate. The Government will ensure that any allegations of blacklisting are investigated by the appropriate authorities.

[Chris Stephens]

Will the Minister say something about potential changes to procurement, as was asked for by the hon. Member for Streatham (Mr Umunna)? Are the Government minded to look at the procurement rules in that regard?

[Margot James]

We already have procurement rules that allow the Government not to enter into a contract with a company found guilty of a criminal offence or found wanting in ethical standards. It may well be that blacklisting can be shoehorned into that. Certainly, any company guilty of a criminal offence would not be considered for a public contract under the public contracting guidelines.

I think that I have answered the other points, so if there are no further interventions, I will sit down.

Question put and agreed to.

Draft Important Public Services (Health) Regulations 2017 Draft Important Public Services (Border Security) Regulations 2017 Draft Important Public Services (Fire) Regulations 2017

Margot James Excerpts

Wednesday 1st February 2017 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I beg to move,

That the Committee has considered the draft Important Public Services (Health) Regulations 2017.

[The Chair]

With this it will be convenient to consider the draft Important Public Services (Border Security) Regulations 2017 and the draft Important Public Services (Fire) Regulations 2017.

[Margot James]

It is a great pleasure to serve under your chairmanship, Mr Bailey.

The Trade Union Act 2016 modernises the UK’s industrial relations framework to better support an effective and collaborative approach to resolving industrial disputes. It ensures that strikes can happen only as a result of a clear positive decision by those entitled to vote. The Act received Royal Assent in May 2016. Today we are debating three statutory instruments that implement a 40% threshold for ballot mandate approval for important public services in the health, border security and fire sectors. As well as the requirement that 50% of union members who are eligible to vote do so, 40% of all eligible members will have to agree with the proposed mandate. That is a robust threshold.

We propose that the 40% threshold for the three sectors comes into force on 1 March. At the same time, we will bring into force a number of other provisions in the Trade Union Act, including a 50% turnout threshold for those who are eligible to vote, as I mentioned; additional information to be provided about the result of any ballot; two weeks’ notice of industrial action to be given to employers; new requirements to manage picketing; and new reporting requirements. That ensures that the key changes to the way official industrial action is decided on and implemented are prioritised and come into effect as a single package.

The purpose of the ballot thresholds is to rebalance the ability of union members to strike with the interests of the general public, non-striking workers and employers. The Trade Union Act takes proportionate action to redress the balance and ensure that unions in those sectors have a democratic mandate before they take strike action. Strike action in important public services in the health, border security and fire sectors can have a significant impact on the public. For example, during the NHS strike action that was taken by health unions in 2014, people with less serious conditions faced lengthy delays for an ambulance, yet that strike had the support of only 11% to 18% of union members.

[Neil Gray (Airdrie and Shotts) (SNP)]

Yesterday, when we discussed other areas covered by similar instruments, I asked the Minister what direct discussions her Government had had with Ministers in the Scottish Government and other devolved Administrations. Although she could not provide an answer then about direct contact, has she had a chance, 24 hours since, to check up on what consultation has taken place?

[Margot James]

I can confirm that Ministers in what was the Department for Business, Innovation and Skills did have discussions with their counterparts in the Scottish Government.

As I was saying, strike action in important public services in the health, border security and fire sectors can have a significant impact on the public. That is why we have introduced a 40% approval threshold, which is to apply to important public services such as health, border security and fire, in addition to the requirement for a 50% turnout threshold.

[Chris Stephens (Glasgow South West) (SNP)]

Have the Government considered that part of the role of public sector workers—because of their role profiles and job descriptions—may be covered under the regulations, whereas some aspects of their work may not be? If so, how do the Government seek to address that with the trade unions?

[Margot James]

This is not a blanket coverage of every worker and every job description in the public service categories that we are debating. The regulations pertain to listed job descriptions within those important sectors. They do not encompass every single worker; they encompass workers whose work has a direct impact on the public in those sectors. If the hon. Gentleman wants a more specific answer on exact job categories, I can provide that, but not at this juncture.

During the passage of the Trade Union Bill last year, the Government consulted on the services within the public service categories set out in the legislation that should be subject to the 40% threshold and on how the threshold should operate in practice. We analysed more than 200 responses, reviewed the available evidence on the impact of strike action across different public services and listened to stakeholders’ views. The Government response to the consultation was published in January last year, when we also published the draft regulations. The substance of those draft regulations was discussed in Parliament during the passage of the Trade Union Bill. The regulations limit the application of the threshold to those services in the health, border security and fire sectors where there is the most compelling evidence of the impact of strike action. The regulations will ensure that the scope of strike action is proportionate.

What does that mean for the sectors affected? The pressing social need that we are addressing in the health sector is the risk to life or injury to the public in the event of industrial action. We have therefore focused the impact of the threshold where reduced service levels can have the most immediate impact on the lives and safety of patients and the public. That is why the regulations cover emergency and urgent health services. That includes—this goes some way to responding to the hon. Member for Glasgow South West’s question— ambulance staff, accident and emergency medical staff in hospitals, services that are provided in high-dependency units and intensive care in hospitals, and psychiatric, obstetric and midwifery services provided in hospitals for conditions that require immediate attention to prevent serious injury, illness or loss of life.

In the fire sector, our aim again is to protect the public against the risk to life or injury. In the light of that, we have focused on firefighting services, including co-ordination of the emergency response, because those services are critical to ensuring that fires are dealt with promptly and effectively to protect the public.

[Neil Gray]

The Minister rightly talks about the protection that workers in these sectors provide for all of us. They risk their lives and dedicate their lives for us on a day-to-day basis in all the sectors we are discussing. Given the dedication, the risk and what they are putting on the line for us, can she explain how the restrictions to the capacity of their right to strike are proportionate?

[Margot James]

I think I have already explained that, but if the hon. Gentleman requires me to restate it, we are seeking to rebalance the rights of those workers to strike with the rights of the public, particularly in the case he mentioned. For patients facing critical illness or emergencies, those two rights have to be balanced, and that is what the legislation is all about.

In the Border Force, we are addressing the significant risks to public safety in the event of disruption to border controls. We have focused on services in respect of the entry and exit of people and goods, as those are central to the carrying out of checks and to preventing illicit commodities and other threats to our security from entering the country.

Members of the public will agree that strikes in those important public services should take place only when there is a strong level of support and a justifiable mandate. I hope I have reassured Members that the regulations are justified and proportionate to our objective.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

The Minister talks about balancing the rights of the public against the rights of people in employment to withhold their labour. Over the past decade, we have seen a decline in the number of days taken in industrial action. None of these powers has been necessary. Before she finishes, will she tell us what assessment the Government have made of whether there are alternative, more constructive ways of resolving their concerns, which do not restrict people’s right to withhold their labour when they feel under pressure?

[Margot James]

I will deal with the hon. Lady’s points in this way. Working days lost vary from year to year. For example, 170,000 working days were lost to industrial action during 177 stoppages in 2015. That number was less than some recent years and more than others, but I think most people would agree that that is a significant amount of time lost to strikes. The point is that this measure is not at all designed to attack a person’s right to strike. It is designed to ensure that, when the right to strike is exercised, it has a strong and democratic mandate from the people who vote for strike action.

[Michael Gove (Surrey Heath) (Con)]

I declare my interest as a former member of the National Union of Journalists. Following on from the intervention of the hon. Member for Walthamstow, is it not the case that the declining overall number of days lost to strikes over the past six years is a reflection of the faith that most working-class people have in the effective and competent stewardship of the economy by Conservative Chancellors of the Exchequer?

[Margot James]

I agree strongly with my right hon. Friend.

[Stephen Timms (East Ham) (Lab)]

Of course, it was a Labour Government who presided over the reduction that my hon. Friend the Member for Walthamstow drew attention to. Will the Minister tell us when was the last time that there was industrial action in the Border Force?

[Margot James]

I am afraid I cannot tell the right hon. Gentleman that, but I will certainly seek out that information.

[Stephen Timms]

The Minister certainly has not convinced me that these regulations are necessary. I am not aware of industrial action in the Border Force, and I wonder whether there is a real problem here or whether these regulations are unnecessary.

[Margot James]

I do not know whether that indicates that the right hon. Gentleman sees the need for the regulations for the health service and fire workers—perhaps he does, and to that extent I am encouraged. I will get the information about the Border Force for him, but the regulations were introduced in recognition of the very serious nature of any threat of industrial action in the border services and make provisions as a preventive measure, at the very least.

Surveys taken during the consultation indicate that the public agree with our proposals. There was, of course, a manifesto commitment.

[Stephen Timms]

Will the Minister give way?

[Margot James]

I will not give way for a third time. I will make some progress.

Before I conclude, I would like to address the Secondary Legislation Scrutiny Committee’s comments on the regulations. In relation to the three regulations on the 40% threshold, the Committee pointed out that the Government committed to issue guidance to clarify which workers will be captured by each of the important public services listed in order to assist unions and employers when they are assessing how a ballot should be conducted. Its view was that the need for such guidance raises a question about whether the regulations are sufficiently clear and understandable by those affected. Furthermore, it regretted the fact that the Government failed to publish that guidance in early December when we laid the draft regulations before Parliament.

I am grateful for the Committee’s scrutiny, and I can confirm that the Government have now published guidance to provide advice to unions on applying the 40% threshold in practice and on examples of workers who will be covered by each of the regulations. In drafting the guidance, we engaged with key stakeholders affected by the provisions to understand how the guidance can be most helpful. We listened carefully to their views and reflected them in the guidance. The Government believe that the regulations are proportionate, and I commend them to the Committee.

--- Later in debate ---

[Margot James]

I thank hon. Members for their contributions. Positive industrial relations are the backbone of a productive economy, and the Government believe that trade unions can play a constructive role in maintaining such relations. The Government are equally clear that modernising reforms were required to ensure that strikes only happen as a result of a clear, positive decision. The regulations implement the provisions of the Trade Union Act in relation to the 40% threshold alone. A number of specific points have been raised, which I will go through as quickly as I can. First, the shadow Minister mentioned e-balloting. That review, under the chairmanship of Sir Ken Knight, should be published by December this year. I trust that the hon. Lady, bearing in mind that these provisions will not be implemented until 1 March, will not think that that is too long. In answer to the right hon. Member for East Ham, the last strike to take place in Border Force was in October 2014.

The advice that the Government have is that the provisions are not inconsistent with our international obligations under the European convention on human rights and the International Labour Organisation. That is because they do not undermine the right to strike, but merely redress the balance of rights between people taking industrial action and the public who depend on those vital services.

The hon. Member for Glasgow South West raised the issue of a grey area in some sectors where jobs are covered by these provisions. The alternative would be to take a more blanket approach, automatically including all workers in each of these three sectors, irrespective of the impact of their work on the public, to which Opposition Members would probably object even more. The Government have consulted on the distinctions between different groups of workers in this context and have provided guidance, which I trust unions and employers will find useful.

I cited in my opening remarks a strike that would have been averted had this legislation been in place—the strike by health unions in 2014. If the right hon. Member for East Ham wants another example, I draw his attention to a strike by the NUT in 2014 that led to the closure of 3,000 schools. That strike cost children their education and disrupted the lives of many parents on a turnout of just 27%, with the support of just 22% of those eligible to vote. I have explained that the purpose of the 40% ballot threshold is to rebalance the ability of union members in the three sectors under discussion to strike with the interests of the general public, non-striking workers and employers.

The pressing social needs we want to address in these regulations are to ensure the maintenance of public safety and security and the protection of life. Strike action in important public services in the health, border security and fire sectors can have a significant impact on those social needs. The regulations support the Government’s commitment to delivering a modernised industrial relations framework, better to support an effective and collaborative approach to resolving industrial disputes. I believe they are fair and appropriate, and I commend them to the Committee.

[Chris Stephens]

rose—

--- Later in debate ---

[The Chair]

Minister, do you wish to reply?

[Margot James]

I think I have dealt adequately with the points made, particularly on discussions with the Scottish Government, so I will not respond further, Mr Bailey.

Question put.

Draft Important Public Services (Education) Regulations 2017 Draft Important Public Services (Transport) Regulations 2017

Margot James Excerpts

Tuesday 31st January 2017 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I beg to move,

That the Committee has considered the draft Important Public Services (Education) Regulations 2017.

[The Chair]

With this it will be convenient to discuss the draft Important Public Services (Transport) Regulations 2017.

[Margot James]

It is a great pleasure to serve under your chairmanship, Mr Evans.

The Trade Union Act 2016 modernises the UK’s industrial relations framework to better support an effective and collaborative approach to resolving industrial disputes. The Act restores a level of fairness to our industrial relations regime and gives effect to the Government’s manifesto commitments. It ensures that strikes can happen only as a result of a clear positive decision by those entitled to vote, balancing the interests of unions with the interests of the majority of people who rely on important public services.

[Neil Gray (Airdrie and Shotts) (SNP)]

The important public services that we are discussing today—education and transport—are devolved competences. What consultation has there been with the Scottish Government?

[Margot James]

I will come back to that point, if the hon. Gentleman permits.

The Act received Royal Assent in May 2016. Today we are debating two statutory instruments that implement a 40% threshold for ballot mandate approval for important public services in the education and transport sectors. As well as the requirement that 50% of union members who are eligible to vote do so, 40% of all eligible members will have to agree with the proposed mandate. We propose that the 40% threshold for the two sectors comes into force on 1 March.

[Chris Stephens (Glasgow South West) (SNP)]

The Minister will know that during the passage of the Trade Union Bill, there was some debate on other aspects of balloting, such as electronic balloting. What is the Government’s direction of travel on e-balloting and secure workplace balloting?

[Margot James]

I can certainly deal with the issue of e-balloting. The Government committed to undertake a review of the potential for e-balloting in advance of strike action. A review has been established under the chairmanship of Sir Ken Knight and it will report by the end of the year.

We propose that the 40% threshold comes into force on 1 March. At the same time we will bring into force a number of other provisions in the 2016 Act, including a 50% turnout threshold for those who are eligible to vote, as I mentioned; additional information to be provided about the result of any ballot; two weeks’ notice of industrial action to be given to employers; new requirements to manage picketing and new reporting requirements. That ensures that the key changes to the way official industrial action is decided on and implemented are prioritised and come into effect as a package.

The purpose of the ballot thresholds is to rebalance the ability of union members to strike with the interests of the general public, non-striking workers and employers. The 2016 Act takes proportionate action to redress the balance and ensure that unions in the education and transport sectors have a strong democratic mandate before they take strike action. The impact of strike action is most severe when it takes place in the important public services that people and businesses rely on every day, particularly when people are left with no real alternatives. That is particularly unfair when strike action goes ahead with no evidence of strong support from a unionised workforce. That is why we have introduced a 40% approval threshold to apply to important public services such as education and transport, in addition to the requirement for a 50% turnout overall.

[Alison McGovern (Wirral South) (Lab)]

For the sake of full disclosure, will the Minister say what her own approval threshold was and what percentage of her own electors voted for her?

[Margot James]

As I do not dwell on my own electoral circumstances, I cannot give an absolutely accurate answer to the hon. Lady’s question. However, I do not regard that as a parallel. That sort of question was raised when we debated the Bill last year. Everybody gets a say in the election of an individual MP to represent a constituency. It is not just a vote for one or another candidate; a range of candidates are on offer. Everyone who is going to be affected by the eventual outcome of such an election gets a say. In the cases we are describing, the non-striking workforce and—more important for this argument—the public, who require and depend upon these services, as they do in the hon. Lady’s own constituency, get no say whatsoever.

This is an attempt not to deny strike action or the validity of it, but to rebalance the interests involved. That is why we have introduced a 40% approval threshold to apply to these important public services, in addition to the requirement for a 50% turnout. It is in the interests of the public to know that where they face disruption in these crucial services as a result of strike action, it is because union members have secured a democratic mandate. That is also important for union members who did not support the strike action.

The Government believe that the measures being put in place strike the right balance. During the passage of the Trade Union Bill last year, the Government consulted on which services within the public service categories set out in the Bill should be subject to the 40% threshold and on how the threshold should operate in practice. We analysed more than 200 responses, reviewed the available evidence for the impact of strike action across different public services and listened to stakeholder views.

At this point, I will answer the question from the hon. Member for Airdrie and Shotts on what consultation took place with the Scottish Government. The Government held a public consultation on these measures during the passage of the Bill, published skeleton regulations as part of the Government response and invited comments from all stakeholders and members of the public, including in Scotland.

[Neil Gray]

A public consultation is very different from one-to-one correspondence with a Minister. Will the Minister elaborate on whether any direct contact was made with the Scottish Government on these matters?

[Margot James]

I imagine it was, but as I was not the Minister responsible at the time I cannot confirm that categorically.

As I said, the Government believe that the measures being put place strike the right balance. During the passage of the Trade Union Bill last year, the Government consulted on which services within the public service categories set out in the Bill should be subject to the additional 40% threshold and on how the threshold should operate in practice. The Government response to the consultation was published in January last year, when we also published draft regulations. The substance of those was discussed in Parliament during the passage of the Trade Union Bill. The regulations we are introducing today limit the application of the threshold to those services where there is the most compelling evidence of the impact of strike action and ensure that its scope is proportionate.

What does that mean for the education and transport sectors affected? The Government aim to ensure that all children have the right to an education, so we have focused on teachers who work with pupils of a compulsory school age in state-funded institutions. That reflects the importance of those years for children’s education and the disproportionate impact on learning that strike action can have. In the transport sector, our priority is to ensure that large numbers of people can rely on the services they need every day to make important journeys as far as possible. We have therefore focused on passenger services, because strike action is more likely to have an adverse and immediate impact on people’s ability to go to work, school, college and important appointments. That is why the regulations cover passenger railway services, including the maintenance of trains and the network, and the signalling and control of the operation of the train network. The regulations will also cover any London local bus services, civil air traffic control services and airport and port security services.

[Nigel Mills (Amber Valley) (Con)]

Will the Minister explain how the Government came to think that only London bus services counted as important public services? I assume that my constituents who travel on buses into Nottingham or Derby to work would find a strike on those routes inconvenient, too. Is there some reason why the regulations are restricted to London buses?

--- Later in debate ---

[Margot James]

My hon. Friend makes a very good point. I will reflect on that and get back to him.

Members of the public will agree that strikes in such important public services should only take place when there is a strong level of support for a justifiable mandate. I hope I have reassured Members that the regulations are justified and proportionate to our objective.

I am aware that concerns have been expressed in Parliament and elsewhere that the 40% threshold is not consistent with our international obligations. I will set out why we are satisfied that it is compliant. We recognise that the threshold introduces additional conditions that must be met before strike action can be taken. It therefore engages our obligations under article 11 of the European convention on human rights and the International Labour Organisation’s conventions. We analysed the provisions of the 2016 Act carefully against those requirements. It is clear that restrictions on article 11 of the ECHR are permitted when they are justified by a legitimate aim and are proportionate. The pressing social needs we want to address in the regulations are the safeguarding of children’s education and the ability of large numbers of people to go to work and carry on their daily lives. Strike action in the important education and transport sectors can have a significant impact on those social needs.

[Alison McGovern]

It was my great joy as a child to experience my dad, a railway worker, out on strike on many occasions. Too often, he was protecting health and safety for other railway workers—a cause that is extremely important to all of us who have family members working to keep our trains running. Will the Minister explain how she has weighed important social factors such as the safety of people working in the industry against the causes she mentions?

[Margot James]

The hon. Lady makes a very good point. The legislation does not purport to condemn all strike action as anathema. It is merely about a requirement to better balance the interests of the travelling public with the rights of people, including her father, to take strike action. There is no concerted effort by the Government to undermine a person’s or a union’s right to take strike action; we are merely requiring that right to be tempered by a strong democratic mandate.

Our aim is to rebalance the ability of union members to strike with the interests of the general public, non-striking workers and employers. In introducing thresholds, we have taken proportionate action that does not ban strikes, but simply redresses the balance by ensuring that unions have a democratic mandate before they take strike action. International bodies have persistently been asked to consider whether UK legislation is compliant, but the UK courts, the European Court of Human Rights and the governing body of the ILO have accepted that UK legislation strikes the right balance between the rights of union members and the legitimate interests of others affected by their actions. That is precisely what the Trade Union Act and the regulations continue to do.

We have taken account of the guidelines on essential services that some of the ILO’s supervisory committees have referred to in respect of services where it may be legitimate to limit or prohibit strike action, but our objective is not the same and that is why we have deliberately used a different term. As I have explained, we want to protect the public from the immediate and adverse consequences of strike action taken with the support of a minority of union members. We are not stopping strikes that have a reasonable democratic level of support, such as those the hon. Lady just mentioned.

[Chris Stephens]

Why are the Government seeking to rush ahead with these statutory instruments today, rather than wait until the outcome of the e-balloting review? I say that specifically because of the Government’s assurances to the House of Lords and hon. Members of this place during the passage of the Bill.

[Margot James]

The report of the e-balloting review is not far off and the matter is separate from the requirement to secure a proper democratic mandate for strikes in these important public services.

In relation to the regulations, the Secondary Legislation Scrutiny Committee pointed out that the Government had committed to issue guidance to clarify which workers will be captured by each of the important public services listed, in order to assist unions and employers when they are assessing how a ballot should be conducted. The Committee’s view was that the need for such guidance raises the question whether the regulations are sufficiently clear and understandable for those affected. Furthermore, the Committee expressed regret that the Government had failed to publish that guidance in early December when laying the draft regulations in Parliament.

I am grateful for the Committee’s scrutiny. I can confirm that the Government have now published guidance to provide advice for unions on applying the 40% threshold in practice, with examples of workers who will be covered by each of the regulations. In drafting the guidance, we engaged with key stakeholders affected by the provisions to understand how the guidance can be most helpful. We listened carefully to their views and have reflected those in the guidance.

In conclusion, the Government believe that the regulations are proportionate and strike the correct balance between the interests of unions and those of members of the public.

--- Later in debate ---

[Margot James]

I do not intend to respond to all of the points raised—they were given an adequate hearing during the passage of the 2016 Act—but I will respond to the particularly germane points.

First of all, I must respond to some of the points made by the hon. Member for Wirral South. She talked about the strikes in 2011 as if they were somehow justified as an attack on the former Chancellor’s rescue of the British economy. The coalition Government came in with a mandate from the 2010 general election to restore the public finances from the shambles the Opposition left them in.

--- Later in debate ---

[Alison McGovern]

Will the hon. Lady give way?

[Margot James]

I will not give way, because I am merely responding to the hon. Lady’s—

[Chris Stephens]

On a point of order, Mr Evans. For the record, I was on strike in 2011 to protect my occupational pension, which was being attacked by the Government.

[The Chair]

That was a point of information, not a point of order.

[Margot James]

I contend that the Government’s position on the legislation is not ideological at all. I agree with Opposition Members that trade unions are a force for good. Contrary to some of the remarks we have heard, we are seeking a rebalance in the interests of the public, most of whom are workers as well. In the egregious current example of the Southern rail strike, many of the passengers attempting to get to work or to important appointments are paid considerably less than the union members who are on strike. I ask Opposition Members to consider that. That is an important part of why we are trying to rebalance the interests of unions with those of the rest of the population, who require and indeed depend on public services. Nothing in the Act undermines the right to strike. It merely ensures that, when strikes occur in vital public services—I accept that they are usually the last resort—they have a strong democratic mandate. That is all that is being proposed.

The hon. Member for Sheffield, Brightside and Hillsborough talked about public opinion during the consultation. The consultation process was in depth. The response to a ComRes poll of 1,000 people held in 2015 found that 62% supported the ballot thresholds. This support was consistent across England, Scotland and Wales. The measure was, of course, a manifesto commitment made by the Government before they came into office.

The hon. Lady also talked about our international obligations and claimed that ECHR cases indicated that the thresholds we are proposing should only apply to police officers and workers in other sectors that involve life and death. That is not the case. The National Union of Rail, Maritime and Transport Workers case, which was heard by the European Court of Human Rights, specifically made it clear that Governments have a wide margin in deciding what proportionate measures are. We have taken great care to show that our proposals are consistent with our international obligations.

My hon. Friend the Member for Amber Valley made the very good point about bus services outside London. Buses in London are tightly regulated by Transport for London and the impact on the public of strikes in bus services in the past is well documented. More than 6.5 million journeys would be disrupted by 24-hour strike action across the London-wide bus network. In contrast, there is limited evidence of the impact of strike action in local bus services outside London on the sorts of users who rely on those services. If my hon. Friend has evidence to the contrary, I invite him to bring it to my attention and we will look at it.

Positive industrial relations are the backbone of a productive economy and the Government believe that trade unions can play a constructive role in maintaining such relations. We are equally clear that the reforms are required to ensure that strikes happen only as a result of a clear, positive decision by at least 50% of those union members entitled to vote. That is why we brought in the Trade Union Act, in order to fulfil one of our manifesto commitments. The regulations implement the Act’s provisions in relation to the 40% threshold for approval for strike action in important public services in the education and transport sectors. I have explained the purpose and we have debated it well this afternoon. We are taking proportionate action, which redresses the balance by ensuring unions in these sectors have a strong, clear and recent democratic mandate before they take strike action. I believe the proposals are fair and appropriate and I commend the regulations to the Committee.