Worker Exploitation: Leicester Textile Industry

Paul Scully Excerpts

Wednesday 18th November 2020 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Hollobone. I would like to thank the hon. Member for Leicester West (Liz Kendall) for securing today’s important debate. I was pleased to have the opportunity to meet with her and Councillor Clarke from Leicester City Council to discuss the issue, share our thoughts and plan together. I know it is not going to be the first or last time that we meet to do so. I welcome the opportunity to hear about the work on the ground in Leicester, and their insights as well—it is so important that we learn from the experiences there.

[Claudia Webbe]

I did have permission, Mr Hollobone. I congratulate the hon. Member for Leicester West (Liz Kendall) on securing this important debate. The Minister says that we need to learn, but while the pandemic has thrown the crisis into sharper light, exploitation in Leicester’s textile industry is not a new phenomenon. The reality is that it has been widely reported and studied for at least a decade and there has been a shameful failure to act, despite widespread, long-standing evidence of employer misconduct. There has been a failure to address institutional exploitation in Leicester’s garment industry, which has been brought to official attention over many years and has posed an obvious injustice and health risk to workers.

[Paul Scully]

I thank the hon. Lady. We did have an exchange yesterday in a wider debate about workers’ rights and I was pleased that she was able to raise the important ongoing issues in Leicester. I shall cover some of the historic enforcement issues and what we have done, involving a variety of bodies, as well as some of the problems with getting the evidence to a point sufficient to get people to speak out and make it possible to mount prosecutions.

We are committed to ensuring that workers receive their employment rights, and that employers act responsibly. It is important to realise that some workers are particularly vulnerable. That is where our enforcement bodies have a role. The Government already spend more than £35 million a year enforcing the national minimum and living wages, protecting agency workers, administering a licensing scheme for labour suppliers in the fresh food supply chain, and protecting workers from the worst cases of labour exploitation. In 2017 the Government created the office of director of labour market enforcement, to ensure greater joint working and set the strategic direction across the three labour market enforcement bodies—HMRC national minimum wage enforcement, the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority.

The labour market enforcement bodies play a crucial role in protecting vulnerable workers. In 2019-20 alone, HMRC recovered more than £20.8 million for more than 260,000 workers and issued 1,000 penalties to non-compliant businesses with respect to national minimum wage. The Employment Agency Standards Inspectorate recovered more than £61,000 for agency workers, dealing with almost 1,700 complaints, and led more than 300 inspections. The Gangmasters and Labour Abuse Authority recovered more than £166,000 for workers and was involved in more than 260 criminal investigations, which resulted in 29 arrests for suspected labour market offences.

Those figures show only a fraction of what state enforcement bodies achieve on a daily basis to protect vulnerable workers, but there are challenges with so many different bodies playing a role in this space. That is why we have committed to the creation of a new single labour market enforcement body that will bring together what is currently a fragmented landscape, as we have heard, making it easier for workers and employers to know where to get help. It will do even more, enforcing holiday pay for vulnerable workers and also with respect to umbrella companies. By bringing together the existing bodies we can also develop a more comprehensive picture of non-compliance, making better-targeted, proactive activity possible.

We consulted on proposals for the new body last year, as the hon. Member for Leicester West said. We planned to take them forward in the forthcoming employment Bill. Progress on that has been slower than I would have liked, because of covid-19, but the delay gives us the opportunity to learn a huge amount from the situation in Leicester, as well as from the covid-19 pandemic situation. That will strengthen the plans for the new body.

[Claudia Webbe]

Will the Minister give way?

[Paul Scully]

I have only a little time to cover the points raised, I am afraid.

The allegations of abuse in textiles manufacturing in Leicester that are the subject of today’s debate are not new, as the hon. Member for Leicester East (Claudia Webbe) said. On the recommendation of the previous director of labour market enforcement, Sir David Metcalf, the main enforcement bodies undertook a pilot project with Leicester City Council in 2018 to address the issues. In response to the most recent allegations, as we have heard, a multi-agency taskforce led by the Gangmasters and Labour Abuse Authority has been set up in Leicester. It works closely with Leicester City Council. Partners include HMRC, the Employment Agency Standards Inspectorate, Leicestershire police, the National Crime Agency, Leicestershire City Council and the Department for Work and Pensions.

The work plan includes targeting enforcement activity, strengthening intelligence gathering and improving community engagement. The taskforce has identified more than 200 premises of interest for investigation and has so far conducted more than 140 visits. In those visits, it has identified issues with non-payment of national minimum wage, unsafe working conditions and small amounts of potential illegal working, but so far it has seen no indication of modern slavery offences. The enforcement bodies will fully investigate all concerns and bring appropriate enforcement action against non-compliant employers.

Historically, HMRC has recovered more than £215,000 in wage arrears for 411 textile workers and issued more than £325,000 in corresponding penalties to employers, including in Leicester. Since 2015, HMRC has facilitated 19 director disqualifications relating to the textile sector. Early evidence suggests that the visibility of enforcement activity is having a positive effect on employer behaviour, with some factories making changes to become more compliant. That is an encouraging development, but the enforcement bodies clearly are not complacent.

One of the major challenges is a lack of reporting from workers, many of whom may be worried about speaking to law enforcement because of a perceived fear of reprisals. Leicester City Council has been leading work to improve community engagement and encourage people to come forward, and has launched a campaign with Crimestoppers to raise awareness and promote workers’ rights. In recent weeks, the taskforce has seen a small increase in reporting from workers, although we remain conscious that there is still work to be done.

This is a key issue that we need to look at as we develop plans for a single enforcement body; it must be seen as being approachable to workers and employers. We need to build stronger links—as we have seen in Leicester—with local authorities, workers and community groups, who can share valuable insights and information. There is much that we can learn from Leicester City Council here. I am also grateful to the director of labour market enforcement, Matthew Taylor, who is chairing a series of workshops to gather views on how we can make the body approachable to different groups and build links for effective ongoing engagement. Getting that right will be key to the body’s success. Through those workshops, Mr Taylor will also consider what sort of sectoral engagement and approach might be needed.

Alongside enforcement action, however, retailers of course have an important responsibility to promote compliance in their supply chains. The findings, as we have heard, of the review by Alison Levitt, QC into Boohoo’s Leicester supply chain are very concerning. I welcome Boohoo’s commitment to implementing the recommendations in that report, but, as the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) said, there is much more that we need to do. We must not be complacent, but work to see that that is carried through.

Since the publication of the report, the engagement with Boohoo has been encouraging, but there is more to do. Boohoo and other retailers, including Missguided and New Look, have raised issues with the taskforce as they have become aware of them, which has been instrumental in building the intelligence picture. The apparel and general merchandise public and private protocol is the main form of engagement between the taskforce and the sector, and is aimed at tackling all forms of labour exploitation in the garment trade. That group is undertaking a programme of work looking at improving worker engagement, business accountability, intervention mechanisms and the regulatory framework; I very much support its work and look forward to seeing the results.

The Leicester and Leicestershire Enterprise Partnership is also playing an important role, working with the city council to support businesses and improve working practices. It is keen to set up a textiles hub in the city, supporting local businesses and employees through the sharing of best practice, skills provision and business training. The Government have provided £1.4 million to the enterprise partnership since 2015; I welcome these initiatives and I encourage local partners to join in and deliver those plans.

It is in shareholders’ long-term interests to promote responsible behaviour from the companies they own. The share price often suffers if companies are found wanting. As reflected in the revised stewardship code, which took effect from the start of the year, I expect asset managers to take more account of environmental, social and governance factors in their investment activities.

The Government have acted to drive stronger business transparency so that companies are more accountable to shareholders on corporate responsibility. For example, in 2018, our corporate governance reforms introduced new company reporting requirements on executive pay, including pay ratio reporting and new reporting on how directors are having regard to employee, environmental and other interests in pursuing the success of their company within the meaning of section 172 of the Companies Act 2006. The hon. Lady talked about consumers, as well as shareholders, having a responsibility beyond the value of the company. It is important that consumers get that right and are very aware about supply chains, albeit that some supply chains are incredibly complicated.

The behaviour of brand names is not only affecting Leicester. I engage regularly with retailers and manufacturers from across the country on the issue and I stress the importance of preventing abuse in supply chains. I know the Business, Energy and Industrial Strategy Committee is doing some important work on that as well. My officials are engaging with the British Retail Consortium on options to improve compliance in UK textile manufacturing, including proposals for a licensing scheme.

We are also committed to strengthening our approach to transparency in supply chains overall, under section 54—

Motion lapsed (Standing Order No. (10(6)).