Growth and Infrastructure Bill

Michael Fallon Excerpts

Monday 17th December 2012 Commons Chamber

[Mr McKenzie]

My hon. Friend makes a very good point; I could not agree more.

The Chancellor proclaimed that the proposal represented

“owners, workers and the taxman, all in it together,”

but the measure is divisive, goes against the spirit of one nation and risks creating a two-tier labour market across the country.

Offering employee owner contracts, where employees effectively sell their employment rights for shares, is unlikely, if ever, to deliver the highly motivated, engaged work force employers need. Ministers should be making it easier to hire employees, not easier to fire them.

Labour’s jobs plan includes tax breaks for small firms taking on extra employees. Labour supports employee ownership, but not coupling it with slashing employment rights. The US National Centre for Employee Ownership, one of the world’s leading groups promoting share ownership, has also criticised the scheme. The proposal smacks of fire at will. Although Ministers, including the Business Secretary, have claimed they are not going to take forward Mr Beecroft’s fire at will proposals, in practice they are introducing them by the back door. Ministers are trying to introduce the scheme without proper consultation or discussion, or indeed any real support.

The way the scheme will operate in practice and its ramifications are unclear. There are concerns about other ways in which the scheme could have an adverse impact on employees. Will jobs be advertised as being only employee owner and will employers be able to impose the scheme on individual employees or groups of employees? What safeguards will there be to ensure that the scheme is voluntary for existing employees, as Ministers claim?

The clause is a disaster for all, be they employees or employers, and it will not deliver growth in our economy. Businesses that utilise the scheme in recruiting will be recruiting from a smaller pool of talent, which will risk their not being able to take advantage if ever a real recovery comes about.

People giving up their hard-fought employment rights in return for a few shares beggars belief and takes this country back to the dark ages of employment practice. I ask that the clause be dropped.

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

We have had a good and reasonably balanced debate about the merits of the new employment status created by clause 25. I fully accept that there are concerns about it. Some of them are genuine and I hope to address them a little later. Some are based on a misunderstanding of the intent behind the new employment status and others take no account of the Government amendments that have already been tabled.

I will try to address all the points raised by hon. Members, but I first want to resist the casting of the hon. Member for Edinburgh South (Ian Murray), who suggests that I represent Scrooge in “A Christmas Carol.” Perhaps I could refer him to a better character, Scrooge’s older employer, Fezziwig, who was noted for the magnanimity he displayed towards apprentices and young workers and for the generosity of his Christmas party. Such generosity, I suggest to the House, is reflected in the new opportunities we are extending for share ownership and in the very generous tax relief that comes with it.

Clause 25 creates a new employment status—employee shareholder—in addition to the existing employment statuses of worker and employee. The United Kingdom already has differing types of employment status with different levels of rights and different obligations, to allow businesses and individuals to choose the right type of contract that suits their particular circumstances. It is important, therefore, before we come to consider the new status, that the House understands the differences between existing employment statuses, because each has different employment rights.

Employees, for example, have all employment rights, whereas workers do not have unfair dismissal rights, do not enjoy the right to statutory redundancy pay and do not have other statutory rights. Workers, however, do have the right to the national minimum wage and do have protection against unlawful deductions from their pay, paid annual leave, rest breaks and protection against discrimination, including on the ground that they work part-time. The statuses of worker and employee are distinguished by the level of control and obligation that the employer has over the individual. The employer has a higher level of control over an employee—he can dictate how, when and what an employee does, whereas an employer cannot dictate in the same terms how a worker carries out his work.

The new status that we are considering carries the same level of control as an employee, but links employment with shareholding in the company. Individuals in the new status will have similar rights to employees, but they will not have the right to statutory redundancy pay, the statutory right to request flexible working unless they have returned from parental leave, time off to train, or unfair dismissal rights except for automatically unfair reasons. The new status is designed to give companies more choice in the type of employment contracts they can use to structure their work force. But the flexibility that businesses have is not restricted to different types of employment status. Businesses may already choose to take on somebody as part-time, full-time, permanent or for a fixed period. The important principle underlying the Government’s approach is flexibility. We want to allow businesses a choice of which type of employment contract to use. This new status gives companies an additional option, should they wish to use it. They do not have to use it if it does not fit their business model.

We consulted in October and November on how we could best implement the new employment status. Our consultation lasted for three weeks and we received more than 200 responses. Those were very helpful, along with the discussions that we had on Second Reading and in Committee, and helped us address the areas of the policy that need improving with the set of Government amendments before us. Before I deal with those, let me consider the points raised on the other amendments.

The hon. Member for Hayes and Harlington (John McDonnell) tabled amendments 37 and 60, which would limit how companies can use the new employment status so that, in effect, they could offer it only to existing employees with at least two years’ service. The Government are creating a further employment status to provide additional flexibility and choice for companies in managing their work force. Allowing businesses greater flexibility in how they manage their work force encourages growth and confidence, and the difficulty that I have with the hon. Gentleman’s amendments is that they are restrictive and remove choice from employees and employers.

The employee shareholder status is a novel way for companies to arrange their work force. From its inception, it was principally intended—I think this was the point made by my hon. Friend the Member for Burnley (Gordon Birtwistle)—for fast-growing new companies. The amendment to limit the new status to existing employees would deter or even prevent many newer companies from making use of this innovative and flexible model. It would also prevent new or newly recruited employees from taking advantage of the status that existing employees might already enjoy. As I have just reminded the House, we decided to create a new employment status to give companies additional choice about the contract types they can use for those who work with them and for them.

Amendment 61 would cause inflexibility in the decision-making process for companies by giving their existing work force a veto over the type of employment status which the company may choose to use. The result of the inflexibility caused by amendment 61 would come at a time when companies need to be agile and innovative to respond to changing economic circumstances. Furthermore, we do not force companies to consult in this way if they decide to take on people as workers or as employees. I suggest to the hon. Gentleman that the new status should be no different. The decision on how to structure a work force is for companies to make. They are the ones best placed to determine how they go about employing staff, and the responsibility for deciding which employment status to offer should rest with them. Nor would the amendment be fair to employees in the work force who may wish to take up the option.

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[John McDonnell]

I tabled a further amendment, amendment 39, on the breaking of the link between employee share ownership and the exchange of employment rights. Is the Minister going to deal with it?

[Michael Fallon]

The hon. Gentleman is right to chide me, because I have missed out that amendment. If I discover it in time, I will try to return to it.

The Government amendments form a package of comprehensive measures that will strengthen the Bill’s provisions for companies and people. They respond to important points raised during the consultation, on Second Reading and in Committee. I hope that they fulfil the undertaking I gave the shadow Secretary of State to ensure that amendments, whether or not he agrees with them, were at least produced before the Bill leaves the House.

First, amendments 22 to 28 would amend the Bill to change the name of the new status to “employee shareholder.”—[Interruption.] Hon. Members cannot have it both ways; they cannot criticise the consultation and say that we did not listen to it when we did. When organisations asked us to change the name, we did exactly that. During the consultation we received comments on the name “employee owner”. I recognise that “employee owner” might be seen as confusing in relation to the wider employee ownership agenda. It is important that we do not confuse people. The name “employee shareholder” is far better at describing the new status, as it links the concept of employment and shareholding.

Secondly, amendment 29 ensures that employee shareholders who are parents can request flexible working once they return from parental leave. The parental leave directive requires that parents should be able to request flexible working after their return from a period of parental leave. The amendment ensures that the UK will be compliant with the directive. We have decided that employee shareholders should have to make a request for flexible working within two weeks of their return. The time limit gives companies employing employee shareholders certainty about the working patterns of their work force.

Let me turn to the issue of shares and what happens to them at the end of the employment relationship, on which we sought views during our consultation. We believe that employers and employee shareholders are likely to agree sensible terms for the disposal and buy-back of shares in order to ensure that the shares have the necessary value to meet the conditions for employee-shareholder status. The Bill is drafted on that basis.

It is not the Government’s intention that employee shareholders should be left with shares that they can sell back to the company only at prices that are unfair or where the buy-back arrangements would leave the employee at a financial disadvantage if there is no other way of disposing of the shares for value. We therefore believe that it is prudent to seek a power in the Bill to allow the Government to set a minimum value for the buy-back of shares if the company and employee shareholder enter into a buy-back agreement. Amendment 30 creates that power. Let me be clear for the House that the power will be used only if it is needed to safeguard employee shareholders in the unlikely event that employers behave unscrupulously.

[Bob Stewart]

I have a simple question. If an employee shareholder wants to keep his or her shares, am I right in assuming that he or she can do so and sell them on the open market later?

[Michael Fallon]

That will depend on the particular arrangement that the company has.

Amendment 31 will provide clarity and certainty to employers and individuals who are considering accepting a position as an employee shareholder, as it spells out how shares will be valued. It aids employers who want to be certain that the contract will not be void because too few shares in value have been given. It will therefore reassure individuals that they are getting at least £2,000-worth of shares in consideration for becoming an employee shareholder.

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

Can the Minister tell me what happens to a worker’s £2,000-worth of shares if the company goes bankrupt?

[Michael Fallon]

If the company goes bankrupt, the shares will clearly not have their original value.

I must respond to the hon. Member for Hayes and Harlington on amendment 39—I apologise for not doing so earlier. The amendment would remove the distinguishing feature of the new employment status and deprive companies of the flexible way of taking people on, because it would link directly back to employment rights.

I will now turn to the serious points raised by my right hon. Friend the Member for Hazel Grove (Andrew Stunell) and my hon. Friend the Member for Burnley, first in relation to amendment 41. The amendment seeks to ensure that individuals in receipt of benefits should not be disadvantaged if they turn down an employee-shareholder contract. I would like to reassure the House about what the Government have done to ensure that employee-shareholder status does not lead to jobseekers being deprived of benefits if they decide not to take a job they have been offered on the basis of the new status.

My right hon. Friend the Member for Hazel Grove proposed in Committee that the Government should issue guidance to ensure that an individual’s refusal to enter the status voluntarily is not used as grounds for withdrawing or reducing state benefit. He suggested that that should be made explicit in the Bill. The Government recognise that the status should not be regarded as suitable for all businesses or individuals and should therefore be entered into voluntarily and with a clear understanding of what it will mean for them. Although I made it clear in Committee that his proposed amendment would not work, I accepted that it is a serious matter and undertook to consider it carefully. I think that the matter was also raised on Second Reading by the shadow Secretary of State.

The Government have therefore considered what safeguards would be needed to ensure that the individuals receiving benefits are not deprived of them if they reject a job offer as an employee shareholder. I can confirm that the Employment Minister, my hon. Friend the Member for Fareham (Mr Hoban), has also looked at that carefully. The Government believe that jobseeker’s allowance claimants must actively seek and be available for work. That must include consideration of all suitable vacancies, and it is right that employee-shareholder jobs should be as much a part of that consideration as any other. If a claimant applies for an employee-shareholder job and is offered a position, they should normally accept the offer. If they do not, their benefit payments might be sanctioned if they do not have good reason for refusing the offer. Exactly the same rule applies now.

However, in considering whether the claimant does or does not have good reason, the decision maker will take into account the claimant’s individual circumstances and the specific terms and conditions on offer under the company’s employee-shareholder scheme. It is certainly possible to envisage situations where a job that is appropriate for one person may not be for another. For example, the right to request flexible working could well be crucial for a parent with young children and that may therefore be good reason for that parent to turn the job down if they cannot negotiate flexibility.

So that advisers are able to help claimants to make the right decision about employee-shareholder positions, we will provide guidance and information to them on what the status means and the factors that a claimant will need to take into account before making the decision. We will want to ensure that claimants make the right decision, which might be that they decide voluntarily to accept a job on employee-shareholder status. I confirm to my right hon. Friend the Member for Hazel Grove and to the House that we will provide guidance for decision makers to help them to reach consistent decisions in this area, and we will now seek views from key stakeholders to make sure that that guidance is fit for purpose.

The current guidance for decision makers, “Decision Makers’ Guide”, is on the Department for Work and Pensions website. We propose to amend chapter 34 of that guidance to ensure that it is available to decision makers in jobcentres. That safeguard can be put in place without the need for legislation, and the necessary changes will be made when employee-shareholder status is legally implemented.

[Andrew Stunell]

My right hon. Friend is being very helpful. I think I heard him say that there was to be a process of consultation with stakeholders. Will he say a little more about that? I am sure that Members around the House would want to convey to the Department for Work and Pensions that there is sometimes a gap between the intentions of Ministers and the advice that they give, and the actual practice at individual offices. I would like to hear a little more from the Minister about that link between good intentions and good outcomes.

[Michael Fallon]

I certainly accept that point. What comes between the intentions and the outcome is the guidance. There is currently guidance to all staff in jobcentres, and I have already undertaken for my right hon. Friend that we will amend it. However, we will not simply amend it to put my words of tonight into it; we will consult all the various stakeholders involved on how we can make sure that it properly reflects what both he and I want to do.

[Mr Umunna]

I am not very comforted by the Minister’s comments, because he seems to be suggesting that there would be circumstances in which it would be unreasonable for a prospective employee to turn down a job offer if it were conditional on employee-owner status. Will he, for the benefit of Jobcentre Plus employees, make it clear that if they have a jobseeker’s allowance claimant who refuses to take a job offer because they do not wish to have employee-owner status and lose their rights, no sanctions should be levied on that prospective employee in terms of the deduction of any benefit or any other adverse consequence? Will he make that clear for the record?

[Michael Fallon]

I am happy to make it as clear as I can. By the way, I think that it is somewhat unlikely that the jobcentre applicant in this case will be offered a significant number of shares and then still find himself unable to take up the position. Let us be clear about how the jobcentre system works: these decisions about sanctions are taken on an individual, case-by-case basis. What I am announcing tonight is that the guidance will make it very clear as to the reasons that the employee had to have before having his benefit sanctioned.

Let me turn to the second point raised by my right hon. Friend the Member for Hazel Grove, which is the only really serious issue about this new employment status. As he and my hon. Friend the Member for Burnley have said, it is a voluntary status. No one on the Government Benches wants employees to be pressurised, harassed or bullied into accepting it. We therefore want to ensure that no individual can be coerced into accepting an employee-shareholder contract. Throughout all the discussions since the policy was announced, there have been concerns that existing employees—not new employees, but existing employees—might be coerced into accepting these contracts. I have been very clear that the new status is entirely voluntary, but I wholly accept that it needs to be seen as such.

Amendment 40, tabled by my right hon. Friend the Member for Hazel Grove, seeks to ensure that existing employees are not coerced into the new employment status. The principle behind the amendment is right and the Government support that principle. Indeed, we think there is a stronger way of ensuring that no detriment will arise in the Bill than by relying on secondary regulation, and that is why we have tabled amendments 64 and 65.

Government amendment 64 creates a new right not to suffer detriment if an employee refuses to sign an employee-shareholder contract. This means that if an employee has been overlooked for promotion or has been disadvantaged in any other way because of that refusal, he may then be able to present a claim to an employment tribunal.

Government amendment 65 creates a new unfair dismissal right. This means that if an employee is sacked because he has refused to accept an employee-shareholder contract, this will be regarded as automatically unfair. Importantly, both these rights will apply from day one of an employee’s contract. That means that employees are protected from the first day of their service. I want to place that beyond doubt. Employees cannot be taken on and then, on day two, be forced to become employee shareholders.

[Sheila Gilmore]

Will the Minister give way?

[Michael Fallon]

I will not, because of the time.

Finally, let me turn to amendment 59, tabled by Opposition Front Benchers, and deal with their opposition to the clause. I have already outlined how the creation of the new employment status adds to the existing statuses of worker and employee. The new status gives companies a new way of taking on individuals, giving both companies and individuals greater choice and flexibility. Removing the clause in its entirety would remove the opportunity for new flexibility and choice for companies. Using the new employment status, just like using the existing status of worker and employee, is a choice for both companies and individuals. By increasing the range of employment statuses, companies limited by shares will have a greater choice about how to grow and adapt their work force. It will also create opportunities for an individual to take up an employment status that may allow them to share in the rewards of a company.

It is for the company to decide what type of contract will be most suitable for it to offer, depending on its requirements and circumstances. The clause does not prevent employers from offering more rights to their staff, such as a contractual right to request flexible work or contractual redundancy pay, just as they can now do with all other existing employment contracts.

This is not about taking away employment rights; it is about creating a new employment status with a different set of rights, just as there are different rights associated with being an employee or a worker. This Government want companies and people to share in the risks and rewards that share-ownership offers, and this is a new way to do so. The clause should remain part of the Bill, to give people and companies a new way of working together, and I urge the House to reject Opposition amendment 59.

[Ian Murray]

The Minister said that he was not Ebenezer Scrooge, but Fezziwig. Wikipedia explains that Fezziwig is

“a happy, foppish man with a large Welsh wig.”

Let us see whether that description fits the right hon. Gentleman.

The employee-shareholder schemes will not be voluntary and will have absolutely no value. How can the Minister tell the House that he knows better than the 204 respondents to the consultation who said that this policy was, as Dizzee Rascal would say, to give a more contemporary reference, “Bonkers”?

I finish by echoing the Business Secretary, who said that this provision would not be compensated no-fault dismissal by the back door. I could not agree with him more: this proposal is no-fault dismissal without any compensation. Anybody who cares about business and employees in this country will join us in the Lobby.

Question put, That the amendment be made.

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[Roberta Blackman-Woods]

I am afraid that the Open Spaces Society simply does not agree with the right hon. Gentleman. It made it clear in its briefing to Members on Report:

“The government claims that people would know of the threats through the neighbourhood planning process, but this process is in its infancy and is not widespread. Those who use and enjoy their local open spaces are usually doing just that and are not necessarily clued up about, or involved in, the planning process, and they cannot be expected to know or realise that there is a potential threat to their rights. Moreover those who may be aware of the neighbourhood planning process may not be the same people enjoying the use of a particular piece of land and thus would not be in a position to know that such land is being used as of right.”

It seems odd to give communities the right to register village greens under the Localism Act and the neighbourhood planning process—rights that have not yet been firmly embedded in all communities—while in the Bill taking away rights to register village greens. We ask the Minister to think again.

[Michael Fallon]

The amendments are identical to those that were moved in Committee, and I explained then that they would weaken the Bill by bringing in trigger points far later in the planning process. The Government do not understand why that is needed and we think it undermines the ability of local authorities and neighbourhoods to contribute to their own plans. The amendments were misguided when they were moved in Committee and they are equally misguided this evening. If the hon. Member for City of Durham (Roberta Blackman-Woods) suggests pushing the amendment to a vote, I urge my hon. Friends to reject it—

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[Michael Fallon]

I beg to move, That the Bill be now read the Third time.

The Bill is about the coalition’s priority: promoting economic growth. It contains a range of practical measures to boost infrastructure, increase housing supply and simplify planning rules, and all those things will make a difference now. I am grateful to the House for acting so swiftly in considering the Bill and I thank all colleagues who have contributed today, in Committee and on Second Reading. I particularly wish to thank the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Grantham and Stamford (Nick Boles), who shouldered most of the burden, and the Opposition for ensuring that, although we did not come to agreement on all the main issues, they were at least properly ventilated and discussed.

As amended, the Bill will provide for commencement on Royal Assent for clauses that support stalled sites being unblocked, broadband being rolled out, the removal of legislative blocks on the gas innovation network competition, and broadening the major infrastructure regime—key reforms to promote growth, on which the Government are acting decisively. It is regrettable that the Labour party stands alone in failing to appreciate the urgency of the Bill and in continuing to oppose it.

[Sir Bob Russell (Colchester) (LD)]

Does the Minister agree that where the landowner blocking a development happens to be a Government Department—that is the case with the national health service and the missing link of road infrastructure in north Colchester—other Departments must bring pressure to bear and have joined-up governance so that the land can be released, rather than other less-desirable land going instead?

[Michael Fallon]

I understand that and it is such a skilful piece of constituency pleading that I fear I may have to address it in greater detail in writing. I will do that in the next few days if the hon. Gentleman will allow me.

Local councils and communities are at the heart of the planning process and we have no intention of changing that. We reject the flawed approach of top-down Whitehall housing targets and it is for local councils to determine where development should go and how best to meet housing need. That is why our policy is to revoke Labour’s regional strategies as soon as possible. Indeed, we have laid an order in Parliament to revoke the east of England regional strategy, which will come into force on 3 January.

Our reforms have given significant additional power to councils and communities but with that comes the responsibility to exercise planning functions properly. The measures in the Bill for tackling poor performance are aimed squarely at councils that are failing to deliver an effective service. Applicants can reasonably expect timely and good quality decisions—justice delayed is justice denied. Most councils deal with planning applications efficiently, but a small minority need to raise their game if we are to ensure that their local areas do not lose out in the recovery that is now under way. The Bill is therefore not about removing local people’s involvement in planning decisions. Where a decision is made by the Planning Inspectorate, local people will still have their say in the same way as they would if the decision were made by their local planning authority, but slow decisions are bad for local communities as well as for the wider economy.

The Bill also seeks to broaden the scope of the nationally significant infrastructure planning regime to promote investment, so that developers of large-scale business and commercial schemes will have the option to request to use the infrastructure regime. Given that the speed with which large-scale major applications are determined is falling, it is right to offer developers an alternative.

The need for affordable housing remains high, and the coalition is committed to unlocking stalled sites where affordable housing obligations make them unviable because they are economically unrealistic or were negotiated during Labour’s housing bubble. Let me repeat: affordable housing that is stalled is not affordable housing; it is non-existent housing. The Bill will enable developers to challenge the affordable housing elements if they make the site unviable.

As well as making those reforms to the planning system, the Bill will facilitate infrastructure investment, which is crucial for jobs and growth. Our ambition is for the UK to have the best superfast broadband of any major European country by 2015. It is vital that the deployment of broadband is fast-tracked to support the UK’s long-term economic future, but roll-out is being delayed or blocked because of planning requirements. As a result of this Bill alone, we estimate that 4.4 million more people will have access to superfast broadband. Without that measure, many hard-to-reach areas would be left unserved.

The Bill also amends the Electricity Act 1989 so that developers of power generating stations that want to apply to change their projects will in most cases need to undertake only a three-month consultation, rather than going through the whole process of applying for consent again. That could unlock investment decisions across a range of technologies, bringing thousands of new jobs and millions of pounds of investment to the UK economy.

As well as making the reforms I have mentioned, the Bill cuts red tape to speed up processes. In particular, it carries forward recommendations from the Penfold review of non-planning consents, most significantly the reforms to the town and village green registration system, which we discussed albeit briefly just before Third Reading.

As well as making the reforms to the planning system and unlocking infrastructure investment, the Bill contains two important economic measures. First, it postpones revaluation 2015 in England to avoid local firms and shops facing unexpected hikes in their business rate bills over the next five years. As business rates are linked to inflation, there will be no real-terms increase in rates over the period. That reform will provide certainty for business to plan and invest, supporting local growth. Secondly, as we have discussed at some length, the Bill creates a new employee-shareholder status to increase the range of employment contracts that businesses and employees can use. The measure is about increasing choice and flexibility in the employment relationship. The Bill makes it absolutely clear that it will be for the employer to choose to offer the new status, and for an individual to choose whether to accept it.

In conclusion, the House this evening has the chance to vote for practical measures to boost growth. The Bill will unblock delays in the planning system, encourage faster roll-out of superfast broadband, bring forward investment in energy projects, and give employers and employees more choice and flexibility. The Opposition repeatedly attack the Government for failing to do enough on growth, as if some magic wand could repair at a single stroke the terrible damage they inflicted on our economy. In the Leader of the Opposition’s speech to the CBI last month, he said:

“Enterprise and job creation are fundamental to the good economy and good society, and I will lead a party that understands that at its core”,

but businesses that back the Bill will see that, when his party has the chance to live up to those words and support reforms to promote growth, it votes against them. Government Members instinctively understand enterprise and will back the risk-takers and those willing to invest in creating jobs and growth. We want to help to modernise our economy, our infrastructure and our planning system. Only one part of this country resists modernisation—the Labour party. Better planning, more affordable housing, faster broadband, bigger investment in infrastructure and a boost for share ownership are the core of the Bill, and I commend it to the House.

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[Roberta Blackman-Woods]

My hon. Friend makes an interesting point that I will address later. At the last count, the number of consultations underpinning this Bill had risen to four—or perhaps five—and we have had at least six sets of guidance. As far as I am aware, however, the final guidance has not yet been produced. We will wait to hear what the Minister has to say on that.

[Michael Fallon]

I have said that we will provide fresh guidance to decision makers to help them make consistent decisions. The current guidance is referred to as the decision makers guide. We will consult all the key stakeholders involved to make sure the new guidance properly reflects the position I have outlined and the reassurances I have given.