Small Business, Enterprise and Employment Bill

Matt Hancock Excerpts

Tuesday 24th March 2015 Commons Chamber

[Toby Perkins]

That is an excellent question. The whole reason this issue is being placed in secondary legislation is that we recognise that there is a very difficult balance to strike. The formula needs to be dependent on the relationship of the investment to the value of the pub. For some pubs, a £30,000 investment might be substantial. For a town centre or city centre pub, a £200,000 investment might not be so substantial. There needs to be some sort of relationship between the rateable value of a pub, the amount that it turns over, and the amount of investment.

The hon. Gentleman is echoing my point, which is that this has been left very open. A great deal of work would need to be done. I assure the House that under a future Labour Government the principles laid out by Baroness Neville-Rolfe are exactly how we would see this. I anticipate that the same would be true of a Liberal Democrat-influenced Administration, although it would be good to hear the Minister clarify that. It would also be good to hear from the Conservative party whether its manifesto will follow the Bill’s principles, or whether it will take a different approach. The industry and campaigners have the right to expect that.

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

For the record, the Conservative party’s position on this issue is exactly the same as that of the Government.

[Toby Perkins]

Excellent. I am glad that that has been placed on the record. That will give people considerable confidence in the Bill, and many campaigners will be grateful to hear what the Minister has just said. In the unlikely event of a Conservative victory, we will hold him to it.

[Matthew Hancock]

Get ready.

[Toby Perkins]

We understand that Lynton Crosby has been telling the Conservatives to get ready for the past four or five months, but they never seem to reach the point he promises. We will no doubt debate that over the next six weeks.

The Government’s Lords amendment 39 replaces clause 42. We were proud to support the new clause tabled by the hon. Member for Leeds North West. We did not think that Report stage was the time to get into a detailed discussion of all the nuances of each individual line, and we know that a tremendous amount of work went into drafting a clause that would offer all the necessary protections. We felt, however, that ultimately it was too prescriptive and could have unintended consequences, and we are pleased to have worked with the Government on the drafting of the new provision.

Lords amendment 39 retains the triggers of renewal of tenancy, rent assessments and significant and unexpected price increases or other events beyond the tenant’s control that have a significant impact on their level of trade. The amendment omits the transfer of title and administration triggers that were in the original clause.

On balance, we support that omission, albeit not without reservation. We believe that the impact on the natural order of a competitive market that would have resulted from pub tenants having the right to opt out at the point of transfer of title would have caused a real disincentive to invest. Ironically, it would have meant that when a pub was sold from a major pub chain to a microbrewer, fledgling pub operator or family brewer, the MRO could have been triggered, acting as a disincentive to the sort of business transaction we want to support and encourage as part of the diversification of the pub market.

That means that campaigners and the next Government will need to be vigilant to prevent any attempts to use the amendment to game the legislation and exempt from the rights companies with any association with companies that we would expect the legislation to cover. The Minister in the other place has made specific the Government’s intentions and we have heard that there is consistency across the coalition.

On the subject of tenants of pub-owning companies that go into administration, we fear that, at a time when the whole future of a large number of pubs would be very uncertain, the original provision would have made the task of the administrator a great deal more difficult. When they would be attempting to bring order to a complicated situation, some of the stock they were trying to sell off to new providers would disappear and move into the free trade sector. We concluded that that would make it much more difficult for pubs to survive in the event of a major pub-owning company failure. For those reasons, we support those omissions from Lords amendment 39.

On Lords amendments 47 to 53, we are pleased that the Government have not sought to reintroduce to the code pub-owning companies with fewer than 500 pubs. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson) and I have enjoyed many a to and fro on the subject during the Bill’s various stages, but I remain of the view that, in voting the way we did, some egregious practices may not be covered by the protections. However, without that concession, we would have been less likely to win the support of the House for the MRO option. In the final analysis, that prize was worth the sacrifice. As a gesture of good will to the industry and as a matter of honour, this House should stick to what we have given it to believe we were legislating on, namely a code containing provisions for businesses owning more than 500 pubs. We are therefore pleased to support the Government’s commitment.

The Government have probably got the balance right in Lords amendment 47, which accepts our suggestion of extending code protections—apart from the MRO option—to tenants whose pubs are sold from a pub-owning company covered by the Bill’s provisions to a company outside the Bill’s scope.

Lords amendment 46 also performs a delicate balancing act by retaining the protection for pub-owning brewers to offer free of tie while also retaining their right to insist that their product is marketed. The question I asked the Minister is important, because some pub-owning brewers might think that retaining their stock and the right to market it is more important than their wholesale business. In that eventuality, if a brewer stops selling through their wholesale business, which they are perfectly entitled to do, a tenant who is in principle free of tie will still be forced, under the provision, to buy from that brewer as the only option available. We will need to look at that again.

--- Later in debate ---

[Jo Swinson]

With the leave of the House, I wish to respond briefly to the debate and thank hon. Members for their contributions. The hon. Member for Chesterfield (Toby Perkins) was kind. As others have said, this is an example of where the Government have listened, Parliament has spoken and we have worked genuinely with stakeholders and people from all parties to come to the right outcome.

Some outstanding concerns have been raised. The hon. Gentleman asked whether the investment waiver would end up being too broad for too little investment, and obviously it is important that we consult to get those details right. He also sought clarity as to whether the principles laid out would be upheld. The Minister for Business and Enterprise made the Conservative position clear in an intervention, and I am happy to confirm that the Liberal Democrats stand behind these principles. I hope that the consensus across the three main parties on those principles will give the industry and tenants some welcome confidence, certainty and reassurance.

My hon. Friend the Member for Burton (Andrew Griffiths) was concerned about potential unintended consequences, and my hon. Friend the Member for Leeds North West (Greg Mulholland) about some of the issues still to be discussed when we come to the secondary legislation. It is right that these matters be discussed properly during the secondary legislation phase and that we get them right. The long string of amendments to which my hon. Friend the Member for Leeds North West referred is testimony to the challenge of the detail we had to go into to get the issues right, and in that connection I would like to put on record my thanks to the officials who have worked tirelessly on this—not one of the more straightforward policy areas in the Department—over the last few months. I owe them a great deal of thanks for the wonderful job they have done.

There are issues still to be wrangled over come the secondary legislation stage, but I do not know whether I will be the Minister or if somebody else will have the great joy of steering that through the House. These are debates for another day. Today we should just be pleased with the proposed primary legislation before us.

Lords amendment 34 agreed to.

Lords amendments 35 to 62, 86, 132 and 136 to 141 agreed to.

Clause 3

Companies: duty to publish report on payment practices

[Matthew Hancock]

I beg to move, That this House agrees with Lords amendment 1.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to take Lords amendments 2 to 33, 63 to 85, 87 to 131, 133 to 135 and 142 to 193.

--- Later in debate ---

[Matthew Hancock]

With only a few days remaining in this Parliament, the Government continue to work tirelessly to make the UK the best place in the world to start and grow a business. We are proud of our record over this Parliament, including the 760,000 extra businesses, the 2.2 million extra jobs that business has created and the rising pay that has benefited millions. This has been possible only because of our unstinting and unambiguous support for businesses. Last week’s Budget built on this record with a fundamental review of business rates, and last week we set out our intentions for using the new prompt payment transparency powers. The Bill takes this commitment to support small business further. It is the first ever small business Bill and I hope will shortly become the first ever small business Act.

In the other place, the Bill was, as we would expect, subjected to careful and robust scrutiny, and I am grateful to Baroness Neville-Rolfe for ably steering it through the other place, where it was enhanced and improved. As part of that, several amendments were made, both substantive and technical. The Government supported all the successful amendments, and I hope that the House will agree them today. I shall go through each in turn, beginning with late payment. The Bill takes unprecedented steps to tackle late payment, so understandably the matter was debated in detail in this House and the other place. Late payment is a major issue for businesses large and small, and we are taking steps in the Bill and elsewhere to bring an end to the UK’s late payment culture once and for all.

Transparency has a pivotal role to play. Clause 3 introduces a tough new prompt payment reporting requirement for the UK’s largest companies. In the other place, this clause was further strengthened by amendments 1 to 3, which insert a reference to performance on the face of the Bill and make express reference to late payment interest as an example of the type of information that will be included in the report. Beyond the Bill, we have strengthened the prompt payment code with our announcement last month that 30-day payment terms will be the norm of acceptable behaviour, with 60 days as the maximum in all but exceptional circumstances.  The public sector will play its part, as 30-day terms are now legally required right down the public sector supply chain.

The transparency measures in the Bill will shine a light on poor payment practices and make a company’s payment terms a reputational boardroom issue. We will drive a culture change to redress the current economic imbalance of power between large companies and their suppliers. The amendments under consideration today will help to ensure suppliers are fairly compensated. We are determined to make 30-day terms the norm and 60 days the maximum acceptable payment terms. With this Bill, we will make unacceptable late payment a thing of the past.

[John Howell (Henley) (Con)]

I very much welcome what the Minister said and I welcome the clause. When I was running a small business of my own, late payments bedevilled the business, and it was always the larger companies that were responsible for it. I am very glad that this amendment is being made.

[Matthew Hancock]

I am grateful for that intervention. I, too, have personal experience of poor payment performance having a massive impact on the businesses I worked in. Frankly, the late payment culture is a problem with our contract law. Good contract law means good payment against a contract. I think these transparency measures will have a significant impact, changing prompt payment from being an issue for finance directors to being an issue for the board. Through these transparency measures, we will not allow it to be deemed reasonable to pay late. I think that 60 days as a maximum and 30 days as a norm is a perfectly reasonable place to settle.

[Toby Perkins]

I fear that the Minister is rather over-selling the measures he proposes, welcome though they are. When he says that 30 days will be the norm and 60 days the exception and nothing beyond it, will he make clear what happens when businesses do not pay within that time frame? What sanctions will they face under this new regime?

[Matthew Hancock]

There are already sanctions under EU law relating to interest payments, but the transparency measures will crucially mean that we can have league tables of payment performance. The transparency in this area, alongside the public sector payment practices, will change the culture. We considered and debated in detail going further in changing contract law, but a contract is signed up to by both sides, and no practical amendment was put down to make it more binding than the existing law, which already says that 60 days should be the maximum unless both sides agree to it. Any contract, of course, has to be agreed to by both sides. It is a matter of finding a way to make this practical in law.

Part 2 deals with regulatory reform, and the Bill brings forward significant measures to reduce the burden of regulation. The small business appeals champion will ensure that small businesses’ concerns about regulators are heard. There was extensive debate in the other place on whether the Equality and Human Rights Commission should be excluded from these measures.

We have always maintained that the EHRC should not be subject to the duty to appoint a champion and had originally considered that an exemption in secondary legislation would be sufficient. Concerns were expressed, however, that this might put at risk the EHRC’s “A” status as a national human rights institution. In the light of those concerns, we agreed to eliminate this potential risk by excluding the EHRC from scope of the duty on the face of the Bill.

On the business impact target, the other place questioned the definition of voluntary and community bodies in clause 27. The Government listened to this concern and amendment 28 simplifies the definition by removing the minimum membership threshold for certain smaller unincorporated associations. It also ensures that such bodies are not excluded from the proposed definitions of small and micro businesses later in the Bill by virtue of the size of their membership. Those are relatively technical changes. The principle of a business impact target to ensure that in future Governments are transparent—as this Government have been—about the impact of their overall regulatory approach on the burdens of business was well supported, and is made clear in the Bill.