Small Business, Enterprise and Employment Bill

Matt Hancock Excerpts

Tuesday 18th November 2014 Commons Chamber

[Toby Perkins]

That was a bizarre contribution in a number of ways. First, we have said we are going to support what the Government are doing so he was factually wrong in that regard. But saying that by giving a single example of how it might work I was suggesting that that example would always work in every single case is a complete straw man. That contribution did not take us anywhere, so let us move on.

In Committee we tabled amendments that would have required the Secretary of State to initiate an independent assessment of the functions on export finance and how to improve awareness of the body. Unfortunately the Government did not accept our amendments. But the next Labour Government will make it a central mission to boost exports. Within that, there is a role for examining the overall way in which UK Export Finance works, but I would be hesitant at this stage about saying that, on that basis, the amendment of the hon. Member for Brighton, Pavilion should be supported. She may be minded to explore the issue today and consider whether to push it to a future stage.

On amendment 92, we strongly agree with the principle that Ministers should be accountable to Parliament for their performance in supporting businesses, and I accept what the hon. Member for Brighton, Pavilion said about not wanting a series of meaningless measures with things being deregulated just for the sake of deregulation. I also think, however, that having a deregulatory target has some value in ensuring that Governments and their civil servants are constantly conscious of the impact of any proposed new regulations. We thus think the deregulatory target has some value, as I say, although I share some of the hon. Lady’s reservations about how it will work.

Public procurement is a hugely important function of government. Central Government spend about £45 billion a year on the purchase of goods and services, and ensuring that more of that money delivers for the UK economy is one of the most valuable things that any Government can do. We are absolutely behind ensuring that the power of UK Government procurement delivers for the real economy. That is the principle behind our amendment 1, which outlines three areas in which such value can be found for our constituents, constituencies and communities, ensuring that proper reports are made and kept in each of those areas.

There is much good practice around the country coming from various public authorities. The TUC has championed the “one in a million” campaign, which aims to ensure that as far as possible, every £1 million of public spend results in at least one apprenticeship opportunity provided to a young person. A Labour Government would deliver on such principles. We would, for example, require the HS2 project to create 33,000 apprenticeships for young people at no extra cost to the taxpayer. Likewise, Labour’s new immigration Bill would compel multinationals to create an apprenticeship place each time a skilled worker was hired from outside the EU. We should leave no stone unturned in fighting for apprenticeships.

We should ensure, too, that we fight for quality apprenticeships. They should be at or above NVQ level 3, so that every business that takes on someone who has had an apprenticeship will know that they have taken on someone who has had a really significant quality of training. We think there is a lot more to be done to support apprenticeships, and our amendment 1 would take significant steps forward in supporting those apprenticeships and the type of economy that we are looking to create.

On both apprenticeships and late payments, we think that the Government are taking small steps in the right direction, but they could have been far more ambitious and delivered far more for small businesses, apprenticeships and a skilled economy. We hope that the Government will support our amendments, which would enable us to do precisely that. If they do not, they can be sure that a future Labour Government will pursue these themes and make sure that we have the kind of economy in which we can have confidence and faith in the future.

[The Minister for Business and Enterprise (Matthew Hancock)]

We have had a good-natured and largely well-informed debate on these new clauses and amendments.

I shall deal first with late payments. We have heard passionate speeches from Members on both sides of the House on the importance of tackling late payment. I will start by addressing a comment made by the hon. Member for Sefton Central (Bill Esterson), who performed admirably on the Public Bill Committee and made many important interventions. He argued that the current situation in the country on late payment is not acceptable and is not working, and I think he is right. The question is what to do about it.

We consulted broadly on all the potential options surrounding late payments, including many of the options covered by the amendments, and we listened carefully to the responses to the consultations. There was a range of responses, including from those who would firmly regulate all private contracts and from those who did not want any change at all. It is important for us to take steps that will have a positive impact, and to think about the unintended consequences. If we introduce into English law a requirement for a contract to take a specific form, we will remove a freedom of contract that has served the country extremely well for a long time.

We have today heard passionate arguments about the importance of dealing with late payment, as we did on Second Reading and in Committee. We have heard them from my hon. Friend the Member for Ipswich (Ben Gummer) and from Opposition Members. I bow to none in my passion for sorting out the problem of late payment, because the family business in which I grew up nearly went under thanks to it, but let me point to the big picture. The hon. Member for Ochil and South Perthshire (Gordon Banks) argued that there was a moral case, and I agree with that. He also observed that the problem arose when there was a cascade of companies paying late—when, because some paid late, others had to do so, and then others had to as well. I have been at the receiving end of that, as I am sure he has. He is nodding now. The best way to tackle the problem of companies going bust and others paying late is first to establish a stable economy, and then to establish a culture of payment that is stronger and better.

[Bill Esterson]

Will the Minister give way?

[Matthew Hancock]

I will in a moment. Many Members have ignored the fact that the Bill already contains measures to improve transparency and increase prompt payment in the public sector. My Department pays within five days of receipt of 95% of undisputed invoices, and within 30 days of receipt of 99%. That excellent performance—which is what I would call it—must be rolled out much more widely in the public sector if the culture is to be changed, but we also need transparency.

[Bill Esterson]

I am glad that the Minister did not give way to me earlier, because he has made my point quite well. By improving its payment terms, the public sector is helping the economy. Rather than concentrating on putting the economy right in order to boost prompt payment, we should bear in mind that boosting prompt payment will help us to grow the economy, and if that is right in the public sector, it will be right in the private sector. We merely want to start the ball rolling. We in the Chamber do not have the perfect answers; it is for others to go away and design a system that works. If we assumed that all amendments must be perfect, we would never agree on anything here.

--- Later in debate ---

[Matthew Hancock]

All Government amendments are, of course, perfect, at least when I am at the Dispatch Box. However, I strongly agree with the thrust of what the hon. Gentleman has said. We must take the situation as we find it and then improve it, which is what I think the Bill does. However, I do not think we should go as far as the hon. Gentleman suggests. Let me begin by tackling the transparency provision, and explaining why I think it will make such a difference.

We propose that not only the average payment terms but the percentage of invoices met beyond agreed payment terms should be published. That is a different sort of late payment, but it is still a problem. However, we also propose that the proportion of payments made within 30, 60 and 120 days of receipt be published. The hon. Member for Chesterfield (Toby Perkins) has made a great deal of the fact that he received a parliamentary answer from my predecessor about naming and shaming. My predecessor was true to his word—he did publish a list of non-signatories to the prompt payment code in the FTSE 350, as he had committed himself to doing—but we have gone further. The fact that the Bill requires transparency means that all payment practices of all large companies will be published. It is not a question of having to ask a Minister to name and shame, or even the good idea of naming and shaming on the one side and celebrating on the other. The argument about naming and shaming will be driven by the measures taken in the Bill.

[Ian Swales (Redcar) (LD)]

The Minister is right to talk about unintended consequences. Getting companies to sign up to the prompt payment code made many of them extend their standard payment terms. What does he see happening to a company such as Procter & Gamble, which has now extended its payment term to 180 days? I regard naming it in this place as naming and shaming it. It is such a powerful organisation that it can be as transparent as it likes and simply ignore any consequences.

[Matthew Hancock]

First, the fact that everybody will now know, because they will read the Hansard, that that company pays in 180 days will have an impact, but the transparency measures in this Bill will take that information in Hansard and make it much more widely public. We have also made a change to the prompt payment code. Big companies could stay within that even if they made their payment practices worse, and we have seen a couple of examples of that recently, so we have convened a new prompt payment advisory board to strengthen the code. That code will only work if it has teeth, so people in the code who have poor prompt payment practices, or who make their prompt payment practices worse, need to be removed from the code, and that must be made to happen in a very public way to demonstrate that the code has teeth; otherwise, it does not have any teeth at all.

[Gordon Banks]

The Minister will recall that I mentioned that in Scotland there are 43 businesses on the prompt payment code register. What will he do to increase that number? If there are 43 businesses on the register, the system is not working.

[Matthew Hancock]

There are 1,700 businesses on the register from across the country as a whole. Of course, this is targeted at the biggest companies because they are typically the ones at the top of the supply chains, but I would be very happy to work with the hon. Gentleman to increase the number in Scotland.

[Toby Perkins]

rose—

[Matthew Hancock]

I want to turn to the campaign that the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) has run over many years, but first I will take an intervention from the shadow Minister.

[Toby Perkins]

Although many people will of course race off to Hansard to catch up on this debate, some, unbelievably, may not. Is it not entirely wrong that a business could have a term of 180 days, pay “on time”—that is, within those 180 days—and be seen as a signatory to the prompt payment code? All we are proposing in new clause 3 is that if they do not pay within 60 days, they should not be considered part of the prompt payment code.

[Matthew Hancock]

There is a lot in what the hon. Gentleman says, and that is why we are strengthening the code and will in future kick out companies that say that they have signed up to the code but then have unreasonably long payment terms, so I think we are basically in the same place on that point.

I wanted to address a couple of points made by the hon. Member for Oldham East and Saddleworth about modern slavery. She has run an admirable campaign on prompt payment over many years, and we have had exchanges across the Chamber before. She has brought a huge amount of pressure to bear on this issue, and has pushed this agenda. I strongly agree with the direction of the agenda, and I agree with her on modern slavery, too. We are determined to work with businesses to ensure that supply chains are not infiltrated by the abhorrent crime of modern slavery. There is a new disclosure requirement in the Modern Slavery Bill, requiring all large businesses to disclose what they have done to ensure that their supply chains are slavery-free. That is an important step forward and takes into account the point she made.

New clause 1 would introduce a power allowing a new reporting requirement on the retention of money, require a review, and provide a further power to act on that review, but we already have a new obligation to report on these practices in this Bill. The transparency measures are at the core of the prompt payment changes proposed in the Bill.

We will seek the views of business bodies during the consultation. We are also aware that retentions are particularly prevalent in the construction industry, as the hon. Member from Scotland said—[Laughter.] The hon. Member for Ochil and South Perthshire (Gordon Banks), as I should have said. We are working with industry to move to a position where retentions are no longer necessary, and I would be happy to work with Opposition Members to push that further.

New clause 3 deals with prompt payment. It would introduce a maximum payment term of 60 days, and also place an obligation on the Secretary of State to write annually to all non-signatory FTSE 350 companies asking them to sign up to the code. I am delighted to say that I commit wholeheartedly to writing to all non-signatory FTSE 350 companies asking them to join the strengthened prompt payment code, and we should continue the cross-party push aimed at getting more large companies to sign up. The new reporting requirement will provide sufficient transparency, which will lead to competitive pressure on companies to improve their payment practices.

[Ian Swales]

The Minister will be well aware that many large businesses in this country are not in the FTSE 350. For example, the company that I named earlier is American-owned. Is he going to do anything in addition to writing to FTSE 350 companies to try to address this issue?

[Matthew Hancock]

Absolutely, and I would be happy to work with my hon. Friend on that. There are large private companies that are not in the FTSE. Larger companies, however they are formulated, need to be considered.

New clause 4 also deals with prompt payment. It proposes a review of how the new reporting requirement can be used to ensure the automatic payment of compensation by large companies. This is the nub of the proposal, which we discussed in Committee, that interest be automatically allowed to accrue after 60 days. We consulted on something similar during the consultation, and some bodies were in favour and others were against. Some of the bodies representing small businesses, such as the Institute of Directors, were against the proposal because of the way in which it would change contract law. I therefore do not think that the new clause is necessary, but, like Opposition Members, I want to work to strengthen payment practices. We will resist this proposal today, because we do not think the case for it has been made and we do not believe that the unintended consequences have been thought through. However, we will report back publicly on the findings of further work before the end of this Parliament.

[Toby Perkins]

I am pleased to hear what the Minister has said about new clause 3 and the prompt payment code. Given those assurances, we will not press new clauses 3 and 4 to a vote. I hope that we can continue to work together constructively on late payments, because that is a key issue for small businesses.

[Matthew Hancock]

That is terrific. After our voting performance today, I am delighted to hear that.

Amendment 6 proposes that companies disclose details of the circumstances in which, and processes by which, payment terms are amended. I have already said that the Government believe that it is poor practice to subject suppliers to unilateral and ad hoc changes to payment terms. We talked about that in Committee. I agree that greater transparency could increase accountability for this practice, and we are launching a consultation on how that transparency could be achieved. I hope that that deals with the substance of amendment 6.

Amendment 7 seeks to ensure that contracting authorities know about the historical payment performance of potential suppliers before they enter into public contracts with them. It also seeks to ensure that the companies entering into those contracts pay their own suppliers promptly. The new procurement regulations that will be made early next year will place a duty on contracting authorities to pass 30-day payment terms all the way down the public sector supply chain, from the contracting authority to the tier 1 supplier. This has been discussed here today and in Committee. I hope that Members will therefore agree that this amendment is not required in addition to the regulations.

On amendment 1, having prompt payment in procurement is dealt with in the new procurement regulations. The requirement for training in procurement is something I agree with where it is cost-effective. We have delivered that in Crossrail and I very much hope that HS2, which has been mentioned, will also deliver it. That is exactly the sort of training, alongside contracting, that is common in the private sector, but of course we have to drive value for money in the public sector, too. The Government agree that transparency and reporting in public sector procurement is vital, and Departments are already required to report on procurement expenditure with smaller businesses. As hon. Members know, that expenditure has been rising rapidly as a proportion and we are on target to hit the goals we set.

Amendment 2, also on procurement, is designed to ensure that the Minister making regulations under clause 37 is able to specify the reasons why firms may be excluded from entering into contracts. Under the existing procurement regulations a contracting authority can already take account of certain types of past behaviour by an economic operator, such as grave professional misconduct, when deciding whether it is eligible to take part in a procurement process. So that is already allowed for.

Amendment 3 states that any regulations made under clause 37 are subject to the provisions of the Freedom of Information Act, and I reassure hon. Members that contracting authorities, as public authorities, are already required to respond to FOI requests. Amendment 4 is designed to increase the level of parliamentary scrutiny by removing the reference to the negative resolution procedure. I agreed to consider, following the debate in Committee, whether it would be appropriate to change the level of parliamentary scrutiny for these regulations. The Government think that the negative resolution procedure provides the right level, but I did go away and consider the matter. We think that an affirmative process would slow down potential changes when the Government want to remain nimble in responding to the needs of small businesses.

I thank the hon. Member for Brighton, Pavilion (Caroline Lucas) for tabling amendment 91 on UK Export Finance. In our response to the consultation on these issues, the Government rejected such a proposal and set out the rationale: a prohibited list, by its very nature, would not allow the Secretary of State to take an open-minded approach in coming to a decision on whether to support an export falling within an included class. The measures already enhance the support that UK Export Finance can offer, and creating an ability to prohibit support for certain exports which are otherwise perfectly legal goes directly against that goal.

Amendment 92, again tabled by the hon. Lady, relates to the business impact target. I am delighted to debate that with her, because I believe the need for the target proposals set out in the Bill is clear. Too many businesses, particularly smaller ones, find that complying with Government regulation is the single biggest challenge to running their business. We had strong support in Committee for the target. It is only by having a competitive business environment that we can have prosperity, growth and indeed the environmental protections that she is so passionate about. I strongly support, and urge her to support, the deregulation target.

[Caroline Lucas]

Why does the Minister present regulation as always being anti-business, given that so many businesses are saying that smart regulation is good for a competitive environment?

[Matthew Hancock]

Of course, if we can achieve the regulatory objectives with a lower burden on business, we can get the best of both worlds. Almost all the examples the hon. Lady gave were about the crash and the banks, but systemically important financial institutions are excluded from the one-in, two-out approach, precisely because we need to ensure that we have regulations so that we do not repeat the messes of the previous Administration.

Very briefly, let me speak to Government new clause 5, on the independent complaints commissioner duty, which I commend to the House, and Government amendments 27 and 28, on the business impact target. I made a commitment to look at what more parliamentary scrutiny of that target there should be. We are proposing that the report should be to the House. I look forward to building on the cross-party support for these measures and to explore whether a Select Committee can take a formal role in scrutinising the target. I therefore support those provisions.

[Debbie Abrahams]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.