Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021
Paul Scully Excerpts(3 years, 1 month ago)
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The Chair
Before we begin, I encourage Members to wear masks when they are not speaking, in line with current Government guidance and that of the House of Commons Commission—apart from me, who may have to speak at any moment. Please also give each other and members of staff space when seated, and when entering and leaving the room. I also ask Members to please send their speaking notes via email to our colleagues at Hansard. The address is hansardnotes@parliament.uk. Similarly, officials in the Gallery should communicate electronically with Ministers—the days of passing notes are gone.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
It is a pleasure to serve under your chairmanship, Mrs Huq. I beg to move that the Committee approves the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021 (S.I. 2021, No. 1091).
These regulations were laid before the House on 28 September 2021. We are here again discussing another snappily titled statutory instrument after the Corporate Insolvency and Governance Act 2020 introduced a suite of permanent and temporary measures to help companies weather the effects of the pandemic. Most of those temporary measures, including the relaxation of wrongful trading, expired at the end of June this year. However, the restrictions on company winding-up protections were extended for a further three months until the end of September. Since their introduction, those restrictions—despite also being a severe restriction on creditors’ right to enforce recovery of their debts—have helped to protect from unnecessary insolvency the many businesses that were unable to trade due to the national lockdown periods.
Now that we are back to full trading, following the successful completion of the Government’s four-step road map out of lockdown on 19 July, the signs are indicative of a strong economic bounce back. However, many businesses—particularly those in the hospitality, retail and travel sectors that were most affected by the lockdown restrictions for over a year—have been acutely affected, and their solvency will be threatened by accrued debts and low cash reserves before they have been given a chance to trade their way back to financial health. They therefore need a further period of protections to allow them to do so, but as businesses are now trading normally and have been able to do so since the middle of June this year, it is right that any further period of protection given should recognise that fact and bring back some creditor rights.
As such, these regulations introduce a new form of restriction on winding up companies that is tapered from the version that has been in place since last year. To put it another way, we are still protecting those businesses that most need it; we are also promoting a gradual return to the normal functioning of the insolvency framework.
This instrument replaces the previous high bar for winding-up petitions on the ground of inability to pay debts introduced by the Corporate Insolvency and Governance Act—which required that petitioners should satisfy a court that those debts were not covid-19 related—with new targeted criteria for creditors that seek to encourage dialogue with their debtors prior to pursuing a winding up. The new and temporary criteria for petitioning creditors that came into force on 1 October 2021 for a period of six months are threefold: a requirement for creditors to demonstrate that they have sought to negotiate repayment of a debt before seeking to wind a company up; that the debt owed must be at least £10,000; and that a company winding-up petition cannot be brought in respect of a commercial rent, as described by the provisions in the Coronavirus Act 2020.
Starting with the first of the criteria, the new requirement for creditors to demonstrate that they have sought to negotiate the repayment of a debt, before presenting a winding-up petition, the creditor must send a notice to the company giving it 21 days to respond with proposals for paying the debt. Creditors will then be required to confirm to the court that they have sent the notice and whether they have received any proposals from the company, and if so, state why those proposals are not satisfactory. A creditor is not obliged to agree to the proposals put forward by the company. However, the court will be able to draw on its existing discretion to refuse to make a winding-up order where it appears that a creditor is attempting to abuse the winding-up process. The measure will reinforce the message that creditors and debtors should collaborate to find solutions to address arrears accrued as a result of the pandemic.
Chris Bryant (Rhondda) (Lab)
Will the Minister tell us how many companies have taken advantage of this situation thus far, how many companies he expects to fall within this provision over the next few months, and how he has determined that this is the right process for us to adopt at this stage?
Paul Scully
It is difficult to assess that at the moment. We believe that it has helped companies to get through this process, but we are not able at the moment to ascertain an accurate figure.
The second of the temporary criteria is that, in order to present a company winding-up petition, the debt owed must be at least £10,000. For the most part, there is not normally a minimum amount that must be owed before a winding-up petition can be brought, although based on the statutory demand the debt must be at least £750. Analysis suggests that a temporary minimum debt level of £10,000 could prevent in the region of 15% of petitions that would otherwise be presented. They would largely be petitions against small and medium-sized enterprises, which are likely to have smaller debts and lower cash reserves and, as such, are most in need of additional support.
That £10,000 limit also aligns with the existing £10,000 limit for bringing a case to the small claims court, making it easily recognisable as a rule, to prevent winding-up petitions being presented for small businesses and small debts in the aftermath of the pandemic.
Mark Pawsey (Rugby) (Con)
Will the Minister say whether those are debts that occurred before covid that are subject to the measures, or debts that have occurred since the commencement of the covid period?
Paul Scully
These are an extension of the existing provisions, which are specifically for covid-related debts.
The third and final criterion is that a company winding-up petition cannot be presented in respect of commercial rent until the end of March 2022. I should say that the point of the petition is not to stop companies that have accrued debt being wound up; it should be to allow the creditor the full rights to be able to do so. We are trying to give temporary relief to businesses that are otherwise hard-pressed, specifically because of the pandemic.
The Committee will be aware that the Department for Levelling Up, Housing and Communities has announced an extension of the moratorium on the forfeiture of commercial tenancies until 25 March 2022. That is to allow time for the implementation through primary legislation of a rent arbitration scheme to help industry deal with the significant amount of commercial rental debts that have accrued during the national restrictions period.
The restrictions in the commercial rent arrears recovery scheme have been similarly extended. That measure serves not to undermine the proposed rent arbitration scheme before it is implemented, so commercial landlords will continue to operate under the previous restrictions for petitioning to wind up a company in respect of debts until the end of March 2022. We recognise that that measure might mean a further period of uncertainty for commercial landlords, who themselves might be struggling as a result of the pandemic. However, the rent arbitration scheme will deliver certainty to both the landlord and the tenant, where an agreement to pay down lockdown rent arrears has been unachievable.
Sarah Champion (Rotherham) (Lab)
I am looking for clarity. I think the Minister said that this does not cover rent. Is that right? Could he give an example of the sort of debt that would be specific to this new extended legislation? Are we talking about a supplier not paying for goods that they have taken—that sort of thing? How is it proved that it is a covid-related debt under this legislation?
Paul Scully
I do not want to pre-empt deliberations on this, but if a business has been closed and is unable to trade, that would be more likely to be eligible. However, the commercial debt that was within the period that we have packaged and kept aside—effectively, from the beginning to the end of lockdown—has been bundled up and will be dealt with in the next set of legislation on mandatory arbitration, which we hope we will not need.
We hope that between now and completion of that legislation a lot of companies will be able to have those conversations between tenants and landlords, knowing that otherwise they will be forced into mandatory arbitration. We want people to be able to settle their own debts and have their own discussions. The rent debts that were accrued during lockdown are ring-fenced for the purpose of that arbitration scheme, but all commercial rents that are owed after 19 July 2021 should be paid in full, as and when they fall due.
In conclusion, these new targeted criteria demonstrate that the Government have listened to the concerns raised about the potential for a cliff edge for insolvencies, once the Government’s regulatory and fiscal support has ended. The new targeted criteria represent a balance between the rights of creditors and the further protections needed by the businesses most affected by the trading restrictions placed on them. The new criteria reinforce the Government’s clear message that discussion is absolutely crucial between creditors and the debtors, who should continue to negotiate where possible. If successful, those negotiations can result in both creditors and debtors achieving the same long-term goals of continued trading, repayment of debts and a return to profits, in turn bringing benefits to themselves, their employees and the wider economy. I commend the regulations to the Committee.
Question proposed,
That the Committee has considered the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021 (S.I. 2021, No. 1091).—(Paul Scully.)
Paul Scully
I thank hon. Members for their interesting and valuable contributions to the debate. Forgive me, Dr Huq, for not using your correct nomenclature earlier.
We have been helping companies throughout all of this, and we continue to do so. I am not sure whether I said at any time that it was the end of covid. As I have been saying for many months, this is not like a zombie film where the baddie is killed—end of covid and roll the credits. That is not the case. We will be living with it for some time, hence why the hon. Member for Rhondda is wearing a mask and why we are extending the measures before the Committee. We must ensure that, whatever happens in the next few months, we can keep businesses trading as best we can.
I did ask the Committee to approve the regulations because, yes, it will have considered them, but I want it to approve them. That is why I am begging the Committee—
Paul Scully
The hon. Gentleman says that we are not, and that is fine, but I want to be able to go back to businesses and say that we are four-square behind them in helping them through the crisis.
On what we have done for businesses, which was mentioned in a couple of contributions, we have been in close dialogue with businesses, professional groups and other organisations such as the Insolvency Service right the way through the process of these regulations about their likely impact. Indeed, on insolvencies, I am not sure of the exact figures now, but throughout the majority of the emergency they were at a 40-year low. We were clearly supporting businesses. However, that will have an impact down the line when business that would probably have been insolvent in normal times but have been held up by the suite of Government’s emergency measures start to fall by the wayside. That is the normal business cycle and landscape. None the less, there are clear signs from our feedback from businesses, business representative groups and the Insolvency Service that this measure has been useful and helpful.
The hon. Member for Feltham and Heston asked about what happened within the two-day window. When we spotted the drafting error, we laid the new SI. There were no winding-up petitions within those two days. On what happens if a repayment proposal is rejected, a court cannot force a company to accept a repayment proposal, but it will be able to refuse to issue a winding-up order where a creditor may be attempting to abuse the winding-up process, for example.
We continue to work with businesses on a number of measures. The hon. Lady asked what other support we are giving to small businesses, especially as we go through the winter. We are continuing to flex with, and listen to, businesses. Indeed, once I leave this sitting I will speak to really hard-pressed businesses from the hospitality sector, to listen to them and see how they are getting on. We regularly check in to see what businesses conditions are like. Clearly, the Budget is coming up shortly; we will see what their feedback is afterwards, and how it will affect them. We continue to ensure that we can flex our support, help and measures within that sphere, having had that feedback.
Importantly, what we are doing is extending these measures. We picked a six-month extension. To date, we have been going in three-month chunks, so that creditors in particular do not feel that we are only looking after debtors, and not looking after their interests as well. As I said, it is really important that we get a balanced, proportionate view between the two sides.
Seema Malhotra
May I remind the Minister about the question on court fees? It would be helpful if he could come back to me on that. Also, no statutory review clause was introduced as part of the instrument. The explanatory memorandum says that
“the Government will continue to monitor the need for these measures”
and that
“the provisions in this instrument will automatically expire”,
I think on 25 March. Would it not be helpful to have a statutory review clause? Otherwise, it feels like we get bounced at the end, and sometimes after the event. It would be helpful to have some time to consider the changes made in advance.
Paul Scully
As I say, it is ongoing. We will not set a particular arbitrary date for a statutory review because things can change very quickly. We have seen that right the way through the past 18 months. We do not want to be bounced, as clearly happened at points last year when we were chasing the virus, which affected the decisions made. We have learned a lot of lessons from that, but putting in an arbitrary review date is not particularly helpful when we are ensuring that we continue to speak to businesses on a day-to-day basis. On court fees, this is a modification of the usual court process for winding up, so no new fees are involved.
The hon. Member for Rhondda asked about Northern Ireland. It has laid its own regulations extending the same temporary consultancy measures as the rest of the United Kingdom.
Chris Bryant
This starts on 31 October. Today is 27 October. How is that providing sensible provisions for businesses, when there are only four days before it comes into operation?
Paul Scully
We laid the SI before then, and there is a clear direction from the Insolvency Service and other business groups on the intention of what is happening. The courts are obviously aware of the landscape. Yes, the measures are coming to us for discussion only today, but they were laid before the House and are known to business groups, with which, as I say, we continue the conversation so that they can see the constant direction. Clearly, when the measures end on 31 March 2022 it is envisaged that the insolvency regime will return to its normal operation; however, as I have been stressing, as the effects of the pandemic continue to be felt the Government will keep the requirement for the measures, as we do for all measures, under review.
Seema Malhotra
May I just clarify the dates? I think some things have been 25 March, but this says 31 March. Are today’s measures retrospective, so from 1 October, and will they expire on 31 March?
Paul Scully
We have re-laid the SI so that there is no gap in provision. That is the key thing. It goes to 31 March 2022. I should say to the hon. Member for Rotherham, who spoke about debts—
Paul Scully
No, this was about the debts over and above rent. Utilities, tax and supplies are the three obvious ones that I probably should have mentioned. I think I have gone through most of the issues that were raised.
Sarah Champion
I do not know about these sorts of courts. I know about all the other courts, which have a massive backlog at the moment. Has the Minister estimated how long it would actually take to take this to court, and therefore how realistic the timeframe of the instrument is?
Paul Scully
Not in terms of the court cases themselves, but it is about the issuing of winding up. If someone starts issuing demands and then winding-up petitions, that blows a hole in the confidence of other suppliers and customers for businesses. It is the process of the petition itself, which can be done with paperwork, rather than the court hearing, which may come some way down the line, that is really key in the protection here. That is why we need to get it operative very quickly. We have all highlighted the importance of tapering the effects of the instrument, and ensuring that businesses can trade with confidence, and the certainty that we are living with covid.
Mark Pawsey
It is important to get it on the record that when we talk to businesses in our constituencies they are incredibly supportive of the measures that the Government have introduced to tide them over during the most difficult trading period for any business in a generation. Today’s measures are a proportionate step in getting us back to normality.
Paul Scully
I thank my hon. Friend for that. He is right, and he brings his own business experience to bear here. With these balanced and proportionate measures we are reiterating and emphasising that we want creditors and debtors to come together to solve their issues in a way that suits both of them, so that they have a trading relationship in the future and we protect as many businesses, consumers, jobs and opportunities as possible, so that we can continue our strong recovery. I commend the regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021 (S.I. 2021, No. 1091).
Subsidy Control Bill (First sitting)
Paul Scully Excerpts(3 years, 1 month ago)
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The Chair
I am going to request that Members are brief, because many of you wish to ask questions.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
Q
Professor Fothergill: The assisted area maps allow a higher rate of financial support for certain sorts of activities—subsidies, state aid or whatever you wish to call it—than is allowed outside the assisted area maps, so you can provide more intensive support. If you really want to attract inward investors to that locality, you can put more money on the table within an assisted area than you can outside an assisted area. One of the advantages of having a map in advance is that it is a clear signal to everyone concerned. Businesses know that those are areas where financial support can be made available, and local players know that in those areas it is possible to put money on the table if necessary to deliver an investment.
If everywhere is treated the same, everybody will be competing against one another on a level playing field, in terms of powers to give financial support or subsidy. If we are seriously interested in levelling up, we have to back that up with something beyond rhetoric. We have to back it up with some action.
Paul Scully
Q
Professor Fothergill: I disagree that it has not worked. There is plenty of evidence, as I was trying to say earlier, that support for businesses through the various programmes of regional investment aid over the years has delivered substantial numbers of new jobs in the less prosperous areas of the country. Often it has meant that we have been swimming against the tide in many of those places, with old industries disappearing at the same time as we have been doing our best to create new jobs. We have not solved the problem, but plenty of evidence shows that the use of what was state aid—we used to call it regional development grants, or regional selective assistance in England, many years ago—has positive benefits and delivers jobs in the places on the assisted area map.
Paul Scully
Q
Professor Fothergill: I am not an expert on some of the international systems, I have to say. I would hesitate to look across the Atlantic, from what I understand of the system there, because I do not think they have a simple system—a map—that applies in the United States, and therefore you get the horrible situation developing of a subsidy race between individual states. In many respects, that is what we want to avoid in the United Kingdom. We want a system where Guildford is not bidding against Grimsby. We want a system where places that really need the investment have the powers to deliver the investment. It is not just the places—the local place—of course; it is the Department for Business itself having the powers to mobilise its resources to give financial assistance in the Grimsbys rather than in the Guildfords.
Paul Scully
Q
Dr Pazos-Vidal: Yes. I could also say, if I quote some data from pre-pandemic, that in the regional selective assistance scheme in Scotland—I just checked that quickly when you raised that question—there were 69 awards worth in total £24 million, and the jobs created or safeguarded were around 2,500. That is evidence about where these schemes have worked, and we can look at that and evaluate that in terms of the development of the new system.
When it comes to international comparisons, I completely agree with Professor Fothergill. Clearly, the reason why this system exists across the Union—the state aid regime or the procurement framework legislation—is to provide the kind of chaotic system we have in the so-called competitive federalism model, such as in the US. Definitely, the UK would be much smaller and I would say more homogeneous in many ways. We should not actually have a system that is imitating that, because I think even the Americans sometimes would love to have a system that is more consistent than what we had in the EU and probably that we will have in the UK, so definitely no. A system that incentivises subsidy races and competitive federalism such as in the US will not perhaps be helpful.
In any case, it is a matter of choice. On this issue, I have been working with my Finnish and Norwegian colleagues, and one is from part of the EU and the other is not from part of the EU. One—Norway—uses special targeting so that certain remote areas will actually get additional subsidies, whereas Finland does the minimum in what it sets. In that more domestic context—a more European context, I mean, or closer to the UK—there is a variety of models, so it is just a question of finding the model that suits the UK, given the geographies, the mobility and the economy of the UK, specific area diversities that we have in the UK, and also the very specific asymmetric system that we have in the UK.
The Chair
Thank you. I am going to call Kirsty Blackman first, then Steve Kinnock, Kevin Hollinrake, Alexander Stafford and Mr Millar. As already indicated, and looking at the time, could we stick to brief questions and brief answers to carry on up to the allocated time?
Subsidy Control Bill (Second sitting)
Paul Scully Excerpts(3 years, 1 month ago)
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The Chair
I will bring the Minister in now—I ask him to be conscious that Kirsty Blackman also wants to come in.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I am happy to let Ms Blackman go first.
Kirsty Blackman (Aberdeen North) (SNP)
Q
Dr Barker: That is what I said, yes.
Kirsty Blackman
Q
Dr Barker: This is why I was arguing for transparency. Transparency is an important part of that. A lot will depend on how quickly and effectively the system operates and how much trust there is in the system. If you are potentially a competitor and you can see that there is a clear justification, based on widely understood principles, for a subsidy—it is something that is not being covered up and that is openly stated—and if you have trust in the decision-making process, the system is going to work well, and there is probably going to be less legal challenge from competitors. But as soon as that trust is lost—because things are taking too long, because there is a lack of transparency, because decisions are being made on a very unsafe basis, or because officials do not understand how to apply the principles—that is going to build mistrust and that will then lead to more legal challenge and more problems from the system. It is very important that all the components of the system have the right resources and the right clarity in terms of guidance, and that there is transparency.
Paul Scully
Q
Dr Barker: Yes. For us, it is very much about finding the balance. We absolutely do not want a highly prescriptive, bureaucratic regime. We really do see the benefits to our members of nimbleness. It is finding that balance between being nimble and not too nimble, such that decisions are made that then subsequently fall through. It is finding that sweet spot that we need to search for.
Paul Scully
Q
Dr Barker: Yes, we do. I realise that various options were considered, but we agree with that option.
The Chair
That brings us to the end of this panel. I thank Dr Barker for his evidence this afternoon.
Examination of Witness
George Peretz QC gave evidence.
Paul Scully
Q
George Peretz: No, not a company boss. I think a company, a competitor, would.
Paul Scully
Q
George Peretz: That is a live question. It seems to me that any court, when reading clause 70(7)(a), is likely to go back and have a look at the trade and co-operation agreement because the concept of “interested party” is a concept of that agreement, as it contains a definition of “interested party”. I do not have the provision before me and cannot remember the exact words off the top of my head—
Paul Scully
Q
George Peretz: The Secretary of State is automatically an interested party because of clause 70(7)(b). The Secretary of State does not have to demonstrate a role; all he has to do is say, “I am the Secretary of State”—he has an interest.
Paul Scully
Q
George Peretz: That may or may not be right. That seems to be an issue. Other local authorities, or other sub-governmental bodies, are not listed in the relevant provision of the TCA—
The Chair
Order. I am sorry, but that brings us to the end of the time allotted for the Committee. I thank the witness very much for his evidence.
Examination of Witnesses
Jonathan Branton, Alexander Rose and Richard Warren gave evidence.
Stephen Flynn
Q
Ivan McKee: The proof of the pudding will be if an amendment comes forward in that regard and is accepted. We have not had confirmation that such an amendment would be accepted, so we will see where that goes. In answer to your question, we have not had confirmation from the UK Government that they would accept the exclusion of agriculture from the Bill at this point in time.
Paul Scully
Q
Ivan McKee: Clearly the Bill sets out where we go in the future. Agriculture is devolved, so we would be concerned if a scheme or support that we put in place was deemed to be within scope, and could not be put in place as a consequence of the Bill. That would be a concern, obviously.
Paul Scully
Q
Ivan McKee: I am very happy to engage, Paul, as you know, and to have those conversations at ministerial and official level. The issue is not so much the engagement; it is where the engagement leads. Our concerns have been clearly articulated, and if we do not see movement on them, clearly the engagement and discussion has not led to a solution that we find satisfactory. The challenge on the devolution settlement and the scope of powers is extremely concerning. We are glad that we continue to talk on this, but the real nub is the outcome. If the Bill continues to ignore the devolution settlement, clearly that is of significant concern to us.
On specifics, one thing that could help as part of that engagement process would be early sight of draft guidance and draft regulations; a lot of that has still to be nailed down. As we go forward with these discussions at ministerial and official level, any early sight of those things would facilitate discussions.
Simon Baynes
Q
Ivan McKee: As I say, our main concern is the assault on the devolution settlement; it takes control away from Scotland in devolved areas. That is a significant concern. It is not acceptable for the UK Government to behave like that. Powers in devolved areas should lie with Scotland, and that is our main concern.
Employment and Trade Union Rights (Dismissal and Re-engagement) Bill
Paul Scully Excerpts(3 years, 1 month ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I congratulate the hon. Member for Brent North (Barry Gardiner) on securing the Second Reading of his private Member’s Bill and on the way in which he has engaged with both sides of the House, as well as with unions, workers and employers. I met him twice over the summer, and indeed, again this week, to discuss his ambitions for the Bill. In a slightly surreal surprise moment, he leaped out of a bar in Manchester at our party conference to lobby me as I moved from event to event. I know that he wants to be associated with the party of workers, but that was an extreme way of doing it. However, I welcome his approach and I jest, because I know that he has engaged on this issue and is committed to finding a workable solution to address the issue of fire and rehire, which is clearly important for Members of the House. I have stood here many times before to address the House on this issue.
Let me answer the charge from the hon. Member for Birmingham, Erdington (Jack Dromey) about sending out an unambiguous message. We do send the message out and we have been really clear. We do not have to do it through this particular Bill. I was really attracted to the approach of my hon. Friend the Member for Newbury (Laura Farris), when she talked about not having primary legislation to address this, but looking at other ways—including the code of practice that she proposes—for the reasons that she talked about relating to not having unintended consequences.
Alexander Stafford
Can we make it fully clear that Government Members, regardless of what is going on, are against the abuse of fire and rehire? I stand against it for the residents of Rother Valley and I am sure that the Minister does. Will he clarify that once and for all and make it clear for everyone listening at home?
Paul Scully
My hon. Friend is absolutely right. The unambiguous message is that using fire and rehire as a bully-boy negotiating tactic is absolutely inappropriate. However, and I will develop this point later, I do not believe that the Bill as it stands—even if it is amended, because we do not believe that we need primary legislation to achieve these ends—will have the intended effect, because it will not ban fire and rehire, as the hon. Member for Brent North said. I think he needs a bigger badge to explain what it actually does do, in his opinion. However, we want to get rid of using fire and rehire as a negotiating tactic, as a bully-boy tactic, and that is what the other measures that we are proposing seek to achieve.
Gavin Newlands
The Minister says that we are sending an unambiguous message, yet he refuses to legislate. I am not sure how that is unambiguous, but let me ask him this question: does he intend to talk out the Bill today?
Paul Scully
The hon. Member talks about being unambiguous and says that we are refusing to legislate. As we heard from my hon. Friend the Member for North East Bedfordshire (Richard Fuller), legislation that comes from the fact that we are coming to the end of a pandemic is not the right way to reflect the concerns about the long-term issue of workers’ rights. We need to make sure that we can address the situation. We will legislate if we need to, but as a last resort, not a first resort. A fundamental difference between Government and Opposition Members is that Opposition Members immediately look for primary legislation rather than other ways of incentivising employers to do the right thing, with the carrot of incentivisation and the stick of making sure that there are financial penalties and clear downsides for businesses that do the wrong thing.
Chris Stephens
The Minister says that the Government’s position is that they will legislate when they need to. We waited four years for the Taylor report, and there is still no legislation. When do the Government intend to introduce any kind of employment Bill to deal with unfair practices in the workplace?
Paul Scully
We published the “Good work plan”, in which we accepted many of Matthew Taylor’s reviews, but we did not have to wait for an employment Bill to begin progress on this. We have closed the loophole which saw agency workers employed on cheaper rates than permanent workers, we have quadrupled the maximum fine for employers who treat their workers badly, and we have given all workers the right to receive a statement of their rights from day one. We do not have to always reach for primary legislation first when we can be doing other things to make sure that we can stand up for workers across the UK.
Andy McDonald
The Minister says that he does not have to reach for primary legislation, but when is he going to do anything at all? He has stood at that Dispatch Box for years, wrung his hands over the pernicious practice of fire and rehire, and done diddly squat. If we are going to have to wait for some other document from a new Member of Parliament, where is it and when are we going to get it? The only message that is going out from this place is that this Government will do nothing about fire and rehire, and bad bosses can carry on as before, continue these practices and cut people’s wages—it is either that or they will lose their jobs. That is the message that leaves this place today.
Paul Scully
I am sorry if the hon. Member feels that I have been here for years. I think I have been here for only 18 or 19 months, but it does seem like years, so perhaps I am boring for Britain in talking about workers’ rights and standing up for those rights. None the less, we are acting on this, and I will develop my speech to show exactly how we are doing so.
Bob Stewart (Beckenham) (Con)
I take another message away from this debate. I take away the message that the Government understand that there is a real problem, and are going to get it fixed as soon as possible.
Paul Scully
My hon. Friend is absolutely right. We have heard about reaching for primary legislation. We have had a very reasonable debate which, as I have said, was opened in a very reasonable way by the hon. Member for Brent North. We heard a forensic response from my hon. Friend the Member for Newbury, who brought her expertise to the debate with such élan and showed how we can keep the flexibility of employers to be able to restructure and reconsider their future, while making sure that we can cover the most egregious cases of bully-boy tactics from rogue employers.
Shaun Bailey
First, I am sure the Minister will agree that the hon. Member for Newbury (Laura Farris) is not just some “new Member”, but an experienced employment barrister who has practised in this field for some time. Secondly, let me return to a point that has been articulated by my hon. Friend for Newbury in particular. If we are going to make law, it has to work on the ground, because otherwise the only people whose pockets we are putting money in are the lawyers. It is as simple as that, is it not?
Paul Scully
My hon. Friend has hit the nail on the head. What we have on this side of the House is the expertise that we are bringing to bear to try and solve the problem, rather than just throwing things around. Earlier, someone accused the hon. Member for Newbury of over-egging the cake; in one of the other Front-Bench speeches, we heard, basically, no cake but a lot of egg. We cannot take a Poundland Arthur Scargill approach to this; we have to get it right. I hope that Pepco, the owner of Poundland, will forgive me, as the retail Minister, for dragging down its reputation.
Dr Kieran Mullan (Crewe and Nantwich) (Con)
Reference has been made to messages going out from the House. It is important to make one thing clear to those who have been potentially misled by some of the remarks made by Opposition Members. There are already steps that people can take if they are dismissed unfairly. We should not lead people to believe that they have no legal protection if an employer dismisses them claiming a business need that was not really there.
Paul Scully
My hon. Friend is right. We heard another accusation, in relation to whether or not those on this side of the House are uncaring when it comes to workers’ rights. What it boils down to is this: would an employee facing a rogue employer using a bully-boy tactic rather have a solution that protects their rights, or would they rather have a jabbing-finger Opposition politician who relies on an unstable future for such workers for his or her political future?
Apsana Begum (Poplar and Limehouse) (Lab)
Ethnic minority workers have faced hire and rehire tactics at a disproportionate rate—nearly twice the rate of white workers. They have also disproportionately borne the brunt of the pandemic. Does the Minister not believe that the message he is giving today does not show the urgency needed to address the fact that they are literally dying in the pandemic without adequate protections?
Paul Scully
The hon. Lady raises very important points about the situation facing ethnic minority employees, but that is why we are acting. It is why we sought quantitative evidence from ACAS. It is why we charged ACAS to come up with guidance in the first instance. There are plenty of other things we can look at, but as well as giving employers certainty in knowing how they should approach the situation, the guidance allows employment tribunal judges to make sure they are consistent with their judgments, too.
We receive lots of correspondence—I get a lot, not least from Members of this House sharing their constituents’ concerns—and I can see how deeply distressing it is for those who face changes to their pay, working hours, sick pay or other benefits. That may happen after years of service to their employer or to those new to the world of work. Losing one’s job through redundancy and dismissal is clearly something everybody wants to avoid. I speak to businesses every day and I know the vast majority of employers want to do the right thing by their employees. For most employers, decisions to change terms and conditions are not taken lightly, nor is the choice to let members of their workforce go. Good employers know that investing in their workforce and not treating them badly is the best way to increase productivity.
Jerome Mayhew (Broadland) (Con)
We have heard in the debate, from right across the House, that the Bill is aimed at bad employers and at removing this as a negotiation tactic. The problem with the Bill, however, is that it would actually damage the ability of every single company—every good company—to survive when faced with an emergency. It would lead to higher unemployment, as this has where it has been tried, both in Ireland and in Spain. Does the Minister agree that the high youth unemployment in Ireland of 31.7%—[Hon. Members: “Speech!”]
Madam Deputy Speaker (Dame Eleanor Laing)
Order. The hon. Ladies who are heckling me from the Labour Benches are quite right. The hon. Gentleman should not be making a speech. He is making an intervention. He can make two or three interventions, but he cannot make one long speech.
Paul Scully
Thank you very much for that clarification, Madam Deputy Speaker. My hon. Friend makes a really interesting point about unemployment.
Steve McCabe (Birmingham, Selly Oak) (Lab)
On a point of order, Madam Deputy Speaker. It appears to me that there are considerably fewer Members in the Chamber now than voted against the closure motion you granted earlier. That would tend to give credence to the idea that the Government Whips have deliberately organised their Back Benchers to wreck the Bill by voting against the closure motion and then sent them home. Is it in your gift to grant a second closure motion, so that we can now test the will of those here in Parliament?
Madam Deputy Speaker
I thank the hon. Gentleman for his point of order, which is a perfectly reasonable one and one that had crossed my mind. However, I have come to the conclusion that, with everyone in the Chamber having been sitting here since 9.30 am, the Tea Room is probably full to overflowing at present. I am therefore not inclined to consider a second closure motion, having taken the will of the House less than an hour ago. That does not create a precedent for not doing so, but I am giving the hon. Gentleman a straight answer to his straight question.
Paul Scully
Thank you for that clarification, Madam Deputy Speaker. Indeed, I think Members from both sides of the House are taking advantage of the Tea Room, because both sides are lighter in numbers at the moment, but I always bow to your perspicacity. I would have thought that, in the last 20 minutes or so of the debate, Members pushing the Bill would want to hear the Government’s response to the merits or otherwise of the Bill, and what we are trying to do about the issue.
Peter Dowd (Bootle) (Lab)
The House of Commons Library has produced an excellent report on this subject, which says:
“Professor Alan Bogg, a Professor of Law at the University of Bristol, argued that under the current law the balance of power lies too much with the employer”.
Does the Minister agree?
Paul Scully
I think it depends on which employer. We are trying to make sure that we can root out bad employers who fail to understand that investing in their workforce and respecting their workforce is good for business as well as good for the workers. As Business Minister, I speak to businesses every day and I know that the vast majority of employers want to do the right thing. When it comes to fire and rehire, I have always been very clear that we expect all employers to treat employees fairly and to consider dismissal only as a last resort when all other options have been exhausted. It is completely unacceptable to use threats of fire and rehire as a negotiating tactic.
Paul Scully
I will not for a minute, because I want to make some progress.
It is right and proper, however, that we consider the evidence before we act, rather than just jabbing our finger, so that we avoid any course of action that runs the risk of doing more harm than good. I assure the House that the Government are taking the issue seriously, considering the evidence available from different perspectives and then taking appropriate and proportionate action.
It has been an extraordinary and difficult 19 months for all of us. The impact of the covid-19 pandemic on the whole country has been profound. Millions of people were on the precipice of losing their jobs, livelihoods and homes, but the forecast was wrong and the unemployment rate in the UK is at less than 5% and falling. That is 2 million lower than some of the forecasts and it is lower than France, the United States of America, Canada, Italy and Spain. As we heard from my hon. Friend the Member for Broadland (Jerome Mayhew), the high levels of youth unemployment in Spain and Ireland compared with the UK show that we are getting things right here.
We are making sure that bouncing back better means growing our economy, creating opportunities and creating jobs. I know how hard it has been in the past couple of years, despite the fact that we are now on our way to recovery, especially for the many businesses that have had to shut their doors and take a significant economic hit to protect the public’s health.
Mrs Natalie Elphicke (Dover) (Con)
During the pandemic, I worked closely with the National Union of Rail, Maritime and Transport Workers, which was excellent in the negotiations with P&O Ferries in my constituency of Dover and Deal. Will the Minister consider that kind of positive and collaborative working, which is clearly possible within the current framework, as a good example when looking at the balance of rights and interests of employers and employees in his work?
Paul Scully
My hon. Friend is right that good work should be done collaboratively by employers and employees, with Members of Parliament leaning into that as well. That is what happened in the case that was cited earlier of JDE and the Kenco factory in Banbury. Although the hon. Member for Brent North launched his campaign there, the situation was resolved through talks and negotiations within the current structure and without this legislation.
Sir George Howarth (Knowsley) (Lab)
If the Minister considers the history of employment reform, the abolition of child labour, health and safety at work and equal pay for women all required primary legislation. What is his alternative to primary legislation for this issue?
Paul Scully
I will cover that as I continue with my remarks. I am not sure that we should equate child labour with fire and rehire, but I will develop that argument.
Barry Gardiner
The Minister referred to JDE at Banbury and the fact that, ultimately, an accommodation was reached about the least disagreeable way forward. He must know, however, if he has spoken to any of the 291 workers involved in that dispute, about the huge stress that was placed on their families and the complete disregard that they felt they were shown by that company for all the loyal service that they had given it for years. To hold it up as an example of a resolution of a dispute is beneath him.
Paul Scully
I raised it as an interesting point. I do not underestimate the stress, and I will cover that later when I talk about the solution we have come up with. It was a resolution, but none the less we want to get rid of the bully-boy tactics—the use of fire and rehire as a tactic of negotiation—because that should never be able to happen. As we have said, it has been exacerbated by the pandemic, but we want to make sure that we get our resolution and our approach correct so that it does what it says on the tin rather than have some of the unintended consequences that we have heard about today.
I was talking about the recovery. We have one of the fastest recoveries of any major economy in the world, thanks to this Government’s will to act and plan to deliver. My right hon. Friend the Prime Minister said at our conference that we were embarking on a change of direction for the UK economy, away from the broken model of low wages, low growth, low skills and low productivity; away from a broken model underpinned by reliance on uncontrolled immigration to keep wages low. We want to build back better in a new direction towards a high-wage, high-skill, high-productivity economy, which the people of this country—workers and employers—need and deserve.
A key part of the building of that economy will be to continue to champion a flexible and dynamic labour market, creating the conditions for new jobs, protecting existing ones and maintaining the UK’s excellent record on workers’ rights—one of the best records in the world.
Aaron Bell (Newcastle-under-Lyme) (Con)
Is it not the case that now, with unemployment lower than before the pandemic, the bully-boy employers that mistreated their workers will find that those workers—this is the genius of capitalism—will go and look for jobs with better employers?
Paul Scully
My hon. Friend is absolutely right. We are taking proportionate and appropriate action on the issue of fire and rehire, but that must avoid any course of action that runs the risk of doing more harm than good, increasing the risk of collapsing businesses and subsequent increasingly redundancies and unemployment. I have real concerns about the approach in this Bill, as it would significantly increase administrative burdens and costs to employers, when they are already facing challenging circumstances.
I want to assure the House that the Government take reported misuse of fire and rehire really seriously, and we are continuing to assess the evidence available from different perspectives. I will set out today what I believe to be a proportionate response to the available evidence on the practice of fire and rehire. It is an approach that encourages best practice by employers, protects workers from unscrupulous employers and, above all, protects jobs and livelihoods by not forcing employers into a situation where they need to make redundancies or close entirely. That is an approach which, in line with the Government’s actions over the past two years, has supported businesses, livelihoods and jobs through the profound impact of the covid-19 pandemic on the whole country.
Brendan Clarke-Smith (Bassetlaw) (Con)
I thank the Minister for being generous with his time today. He mentioned burdens. We have spoken about ACAS today and there is also the employment tribunal system, which currently has a burden to get through. Does my hon. Friend share my concern that one of the unintended consequences of the Bill is that it could add to that burden and lead to more workers not being able to resolve their problems?
Paul Scully
My hon. Friend, typically, is absolutely right. One of the unintended consequences of the Bill is that it adds extra layers within the process. It risks adding pressure on the employment tribunal service.
Let me set out what we know about the practice of fire and rehire. During the coronavirus pandemic, the issue started gaining attention through high-profile cases, many of which we have heard about today. I was deeply concerned by reports over the last year that some employers might be turning too soon to firing and rehiring employees and were using this as a tactic in negotiations to put undue pressure on workers to rush into accepting new, and often worse, terms and conditions, or face losing their jobs. That is why we asked ACAS to conduct an evidence gathering exercise to learn more about the use of fire and rehire. We wanted ACAS to do this because of both its expertise and its impartiality. Businesses, employee representatives and other bodies were all included in that report. I want to take this opportunity to set out the key findings of the ACAS report, which was published on 8 June.
Much of the attention given to this issue was driven by high-profile cases with large employers and unionised workforces. Those cases include instances in which fire and rehire had been threatened, in some cases leading to dismissals; in other cases agreements had been reached. However, ACAS found that fire and rehire is neither a new phenomenon nor concentrated in a particular sector or type of employer. It seems to have been used by employers in the years before covid-19 as well as during the pandemic. Fire and rehire is used in a range of circumstances, including in redundancy scenarios, both to minimise redundancies by cutting payroll costs and to enable the maximum reduction in headcount, for example by changing the working hours of remaining staff, as we have heard.
ACAS suggested that there was a sense that employers’ ability to fire and rehire was being used earlier in contractual negotiations than before, but it was unable to establish whether that was linked to business challenges due to covid, or whether the timescale available to reach agreed solutions was shorter than at other times.
The parties that ACAS involved in the evidence gathering agreed that the use of fire and rehire should be limited. Views on less acceptable use focused on three areas. The first was whether negotiation was conducted fairly and in good faith, with concerns focusing on fire and rehire being used as a threat, as I have said. Secondly, while some employers may have a genuine business need to vary terms and conditions, there are concerns that some are exploiting the circumstances of the covid-19 pandemic to drive through disproportionate or longer-term changes.
Paul Scully
I have 15 minutes; I will give way in a second.
The third area was whether fire and rehire is being used deliberately to break continuity of service, to restrict access to employment rights and protections among employees and workers. We share those concerns, and I will set out in a second—as long as I have time—the existing protections, as well as further steps that the Government have taken to prevent the misuse of fire and rehire.
Grahame Morris
A number of Conservative Members have referred to the ACAS code, and in particular section 1, and the fact that there is an alternative means of redress for workers who have been unfairly dismissed. During the debate, someone sent me a very long list of companies, including British Airways, where tens of thousands of workers were affected. I wonder how many people in the cases the Minister referred to have been able to achieve redress through the existing arrangements and how many would benefit from a Bill to end fire and rehire.
Paul Scully
I would be interested to see that list. As I said, we want to make sure that we can tackle that early basis, which I outlined earlier.
As I said, we are considering fire and rehire from all angles, and we have continued to gather and review evidence beyond the ACAS report. It is difficult to find robust evidence on the practice, because what is seen by workers as a threat or tactic can be seen by employers as necessary behaviour to move negotiations forward and out of deadlock. What is a reduction of terms and conditions for workers can sometimes be necessary organisational change for employers.
We heard a bit about the various surveys that have been going on. The hon. Member for Brent North referenced an earlier CIPD survey. We now have further survey data based on a sample of more than 2,000 senior HR professionals and decision makers in the UK. Fieldwork for that CIPD employment outlook survey was undertaken during the summer, and it found that 3% of employers with two or more employees used fire and rehire to reduce employment terms of some or all of their staff, and a further 19% of employers said they had changed terms and conditions through consultation, negotiation and voluntary agreement. Around half of those who said they had made changes to pay, location or enhanced entitlements said that they had improved those terms.
The Office for National Statistics business impact of covid-19 survey found that around 3.1% of businesses had reduced terms and conditions since 2020. While the evidence does suggest some use of fire and rehire, it does not allow us to fully understand the circumstances of the employer and the rationale or proportionality of the use of fire and rehire. It is important to consider those business circumstances as we look to draw up solutions.
I would like to draw the House’s attention to the voice of employers, about which we heard much from my hon. Friends the Members for Thirsk and Malton (Kevin Hollinrake), for North East Bedfordshire and for Rugby (Mark Pawsey). The CIPD has shed light on how the
“impact of COVID-19 has had a huge effect on employers, causing operational disruption, increased supply costs, loss of revenue, reduced productivity. They have had to react, adapt and effect change to their processes.”
The context of heightened disruption and business challenges has also meant that some employers have been forced to consider firing and rehiring their employees where an agreement cannot be reached to vary the employment contract. We have said that that should be considered as an absolute last resort if changes to employment contracts cannot be found through negotiation.
The evidence I have just set out shows there is some use of firing and rehiring, or the threat of doing so, by at least 3% and potentially up to 9% of employers to reduce the terms and conditions of some or all staff. Although the evidence does not provide a full understanding of the employers’ circumstances, this House should be left in no doubt that the Government will always continue to stand behind workers and to stamp out unscrupulous practices where they occur.
Existing legislation already provides employers with the right baseline for setting terms and conditions for their workforce, including on the minimum wage, annual leave, statutory sick pay, parental leave, pay entitlements and pension contributions. Above that statutory baseline, employers are rightly free to offer the terms and conditions of employment that best suit their business needs. In doing so, they must always act fairly and not discriminate unlawfully on the basis of a protected characteristic such as race, sex or disability. The valid variation of contractually binding terms and conditions usually depends on mutual agreement between the employer and workers as two parties to the contract.
The employment contract itself may contain a clause expressly allowing variation. Such clauses are usually limited to specific circumstances, and they tend to be interpreted narrowly by courts and tribunals. Should an employer seek to enforce contractual variation without agreement, there are a number of legal obligations and protections with which they may need to comply, depending on the circumstances.
A dismissal may be wrongful if the employer fails to provide the relevant statutory or contractual notice period to terminate the contract. There may be a breach of contract or constructive dismissal if changes are imposed unilaterally by the employer. As we have heard, there are also collective redundancy consultation requirements that apply where there are proposals to dismiss 20 or more employees at one establishment within a 90-day period for reasons not related to the individuals concerned.
These all require an employer to provide certain statutory information and to engage in discussions with a view to reaching agreement either with trade union representatives, where there is a recognised trade union, or with other elected representatives. In workplaces where there is a recognised trade union, employers are prohibited from making offers to workers with the sole or main purpose that any terms of employment will not or will no longer be determined by collective agreement with the union.
It is not all about what the law requires. It is in businesses’ own interest to have committed, motivated staff who are properly engaged in decisions about the future. We have seen in the press and the media the considerable reputational and practical risks, many of which have been cited today, to companies that look to pursue this route. The CIPD wrote:
“Employers must recognise that this approach creates a high risk of legal claims, reputational damage and an adverse effect on employee relations. It should only be undertaken after extensive consultation and consideration of all other alternatives.”
As we have heard, in the vast majority of cases, businesses want to do the right thing by their employees. I am determined to help them do this and to make sure that we find the best approach for both employers and employees. Although I do not believe we should legislate to stop the practice of fire and rehire, and certainly not in the heavy-handed way proposed by the Bill, the Government are taking action.
Earlier this year, we asked ACAS to produce more comprehensive, clearer guidance to help all employers to explore other options before considering fire and rehire. ACAS is well placed to provide that guidance, being an independent Crown non-departmental public body that plays a vital role in promoting and maintaining good industrial relations between employees and employers. We are all well aware of the potential pressures on business as we continue to undergo the impacts of covid-19, but that ACAS guidance will help to set out best practice to employers who are considering how to solve problems that might require contractual changes.
The Government are also taking action in one of the areas where ACAS found that fire and rehire was being used, which is to interrupt the continuity of service. Certain employment rights in the UK require a period of continuous employment, so it is right that we find the right balance between worker protection and flexibility in the labour market. Continuous service is where an employee has worked for one employer without a break, and we will be introducing a measure to extend the permissible break in service from one week to one month as soon as parliamentary time allows. That measure will make it easier for those with intermittent or flexible working patterns to access employment rights, and it will deter businesses from engineering breaks in employment to deny individuals their important employment rights.
To address the Bill specifically, it seeks to amend the law relating to workplace information and consultation, employment protection and trade union rights. [Interruption.] I am glad that the right hon. Member for Islington South and Finsbury (Emily Thornberry) wants to hear my thoughts, as she has turned up for the last 20 minutes of the debate. She did not feel the need to hear the debate itself.
I have met Members of the House and trade unions to discuss the issue, and the discussions have made plain to me the anxiety and distress that has been caused. As the Bill covers a lot of ground, I make it clear, for those Opposition Members who are wearing the badges, that it will have the effect of banning fire and rehire, if enacted. It will leave us in a space where employers may be forced to make redundancies. It will also significantly increase the pressure on the employment tribunal system, as we have heard, when the right priority is to reduce the backlog.
Proposed new section 187A would introduce new consultation requirements for establishments and undertakings where there is a real threat to continued employment. The Government are perfectly clear that, should employers seek to change terms and conditions, they must seek agreement. The threat of fire and rehire should never be used as a negotiation tactic.
In addition, collective redundancy law already provides that, should an employer propose to make 20 or more people redundant in a single establishment within a 90-day period, it must consult with employee representatives. However, this legislation would introduce onerous new requirements on employers in situations where they need to make business-critical decisions. Those requirements would be additional to the collective consultation requirements already in place.
The legislation includes situations where decisions may have to be taken to terminate the contracts of 15 or more employees for reasons other than conduct or capability, or where anticipatory measures are envisaged that are likely to lead to substantial changes in work organisation or contractual relations affecting 15 or more employees.
Proposed new section 187B would place a higher duty on employers to disclose information to allow employee representatives to engage in consultation. The Government already have clear guidance that, if an employer needs to change a contract, the first step is to talk with employees or employee representatives, such as a trade union. The guidance that ACAS is producing will help to set out the best practice for employers considering how to solve problems. In addition, the ACAS code of practice on the disclosure of information to trade unions for collective bargaining purposes sets out the respective responsibilities of employers and employee representatives in matters related to collective bargaining.
Proposed new section 187C would introduce a right for employee representatives to complain to the Central Arbitration Committee about an employer’s failure to consult or disclose information. The CAC is an independent body with statutory powers, but under the Bill, should the CAC find that an employer had been remiss, it could refer it to ACAS for conciliation. If ACAS was of the opinion that further attempts at conciliation were unlikely to result in a settlement, it could then refer it back to the CAC. For complaints referred and returned through ACAS, and where settlement had not happened, the CAC could hold a hearing and determine the complaint. It could then make a declaration stating whether it found the complaint well-founded, wholly or in part, and the reasons for its findings. While the CAC could choose not to recommend a course of action, such as referring to ACAS for early conciliation, it could set out steps to rectify the error and the timeframe in which that should be done.
The House can see that the Bill would add extra layers, which would affect the flexibility of the situation for employers seeking to make business-critical decisions. It is an incredibly complex situation, and we would be adding bureaucracy and extra process when they need to make a decision quickly to protect the jobs and livelihoods of those people who have been mentioned throughout the entirety of this debate. I have real concerns about the approach in the Bill, as it would significantly increase administrative burdens and costs for employers in a situation where they are already facing challenging circumstances.
Proposed new section 104H would disallow an employee not agreeing to reduced terms and conditions as a substantial reason for dismissal and remove the qualifying period of two years to bring forward an ordinary unfair dismissal claim. That would remove the legal ground on which employers may be able to dismiss and re-engage an employee who has not agreed to changing their terms and conditions.
While these measures could result in a decline in the use of firing and rehiring, they would present a significant change to the current framework and could have unintended consequences for businesses and employment tribunals. The hon. Member for Brent North has couched this Bill as proportionate to the issue, but it would have the effect of banning fire and rehire and the unintended consequences of such actions could be severe. For instance, setting that higher threshold for dismissal and for consultations with trade unions on changes to terms and conditions may mean that the cost for employers is so high that they choose an easier route, such as redundancy; in effect, if you get rid of fire and rehire, you end up with fire, which is no good to employees up and down this country.
In the last six seconds available to me, may I just say that we are looking at this Bill, we will act and we do not need primary legislation to do so?
Draft National Security and Investment Act 2021 (Monetary Penalties) (Turnover of a Business) Regulations 2021
Draft National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021
Paul Scully Excerpts(3 years, 2 months ago)
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The Chair
Before we begin, I encourage Members to wear masks when not speaking; this is in line with current Government guidance and that of the House of Commons Commission. Please also give each other and members of staff space when seated and when entering and leaving the room. Members should send their speaking notes by email to hansardnotes@parliament.uk. Similarly, officials in the Public Gallery should communicate electronically with Ministers.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I beg to move,
That the Committee has considered the draft National Security and Investment Act 2021 (Monetary Penalties) (Turnover of a Business) Regulations 2021.
The Chair
With this it will be convenient to consider the draft National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021.
Paul Scully
The commencement date for both statutory instruments is 4 January, which is the same date as the full commencement of the National Security and Investment Act 2021. If Members will indulge me for a couple of minutes, I will first remind the Committee of the purpose of the 2021 Act and why it is vital for the UK’s national security. The UK economy thrives as a result of foreign direct investment. Over the last 10 years, more than 665,000 new jobs have been created as a result of over 18,000 foreign direct investment projects. I am sure the Committee agrees—indeed, the House has demonstrated its assent by passing the legislation—that an open approach to investment must include appropriate safeguards to protect our national security and the safety of our citizens.
The 2021 Act provides the Government with updated powers to scrutinise and intervene in acquisitions to protect national security, as well as to provide businesses and investors with the certainty and transparency they need to do business with the UK. The Act establishes a call-in power for the Secretary of State to scrutinise qualifying acquisitions and a voluntary notification option for firms that wish to gain clarity on whether the Secretary of State will call in their acquisition, and, subject to these regulations, creates mandatory notification requirements in 17 sensitive sectors where it is considered that national security risks are more likely to arise.
The draft National Security and Investment Act 2021 (Monetary Penalties) (Turnover of a Business) Regulations set out how the Secretary of State will calculate a business’s turnover when calculating monetary penalties resulting from non-compliance. We generally expect compliance with the 2021 Act to be high and the need for the Secretary of State to issue monetary penalties to be rare. It is important that the Act comes with sufficient deterrents to non-compliance. This SI is laid under the delegated power in section 41 of the Act. Sections 32 and 33 create offences of completing a notifiable acquisition without approval and failing to comply with an interim or final order. Both these offences can result in the imposition of a monetary penalty.
The maximum fixed penalty that can be imposed on a business for an offence under section 32 or 33 is the higher of 5% of the total value of the turnover of the business and £10 million. The maximum amount per day for a daily rate penalty that can be imposed on a business for an offence under section 33 is the higher of 0.1% of the total turnover of the business and £200,000. With these regulations, we have ensured that global turnover is taken into account when calculating the total turnover. No efforts to get around the penalties will be successful, for example through changing accounts approaches. These are important and well-balanced regulations, necessary for the effective functioning of the 2021 Act.
I now turn to the draft National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021—in likelihood, the SI of much greater interest to the House and noted by the Secondary Legislation Scrutiny Committee as an instrument of interest.
Richard Fuller (North East Bedfordshire) (Con)
On a point of clarification about the definition of “turnover”, certain foreign investments will be acquiring businesses with debt in possession or that have very little revenue but a significant amount of intellectual property value. When it comes to appropriate penalties, what is the consideration given to those two particular circumstances?
Paul Scully
We have spoken to businesses to get the balance right. There are clearly complexities in these issues, and those will be determined in terms of the enforcement powers. We have decided that the figure and the impact we have calculated around that is the right balance to strike.
The notifiable acquisition regulations specify descriptions and activities of qualifying entities, the acquisition of which must be notified to the Secretary of State as a notifiable acquisition. Acquisitions in the scope of mandatory notifications that are completed without the Secretary of State’s approval will be void and therefore have no effect in law.
Shailesh Vara (North West Cambridgeshire) (Con)
My understanding is that section 6(2) of the National Security and Investment Act provides that
“A notifiable acquisition takes place when a person gains control…of a qualifying entity”.
What precautions, if any, are in place to ensure that people are forewarned that a gain might cause difficulties? Otherwise, is it simply that matters kick in after the acquisition rather than having a forewarning system before the acquisition?
Paul Scully
As I said, there is a voluntary notification process, and the investment security unit in the Department will be able to offer advice and give forewarning. With this measure, while protecting security and our citizens, we want to give certainty to business. We certainly do not want to be deterring investment in this country; it has been a success story for the UK for so many years. Again, I think we have got that balance right.
These are really important changes to the UK’s investment screening system. Sectoral expertise has been vital for ensuring that the mandatory notification is proportionate and targeted, and we have taken great care and time to get that right.
Alongside the introduction of the NSI Bill in November 2020, the Government launched and ran an eight-week public consultation on the proposed descriptions in the 17 areas of the economy referred to in the draft regulations. After that, we published revised definitions in March. We undertook further targeted engagement with stakeholders in key sectors such as communications, synthetic biology and suppliers to the emergency services to develop further the proposed descriptions to provide businesses and investors with further clarity. I place on the record my thanks for the extensive input we have had from cross-sector organisations in getting the definitions right.
The regulations strike a careful and appropriate balance between ensuring that our national security is safeguarded and keeping the number of businesses caught by the mandatory notification requirement to a necessary and proportionate level. Furthermore, to monitor the impacts on business investors, and particularly small and medium-sized enterprises, the Government have chosen to include a shorter three-year post-implementation review in the regulations instead of the more standard five-year period.
The Government intend to publish extensive guidance across all 17 areas of the economy specified in the regulations to assist parties further in understanding the requirements. In response to the point made by my hon. Friend the Member for North West Cambridgeshire, that will help give that certainty to businesses pre-acquisition. My Department will continue to engage daily with businesses to help them understand the Act’s requirements.
These are detailed and technical statutory instruments that give effect to the purpose of the NSI Act. They have been carefully developed and tested to ensure that they give maximum clarity to businesses while allowing us to protect the UK’s national security. I commend them to the Committee.
2.39 pm
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
It is a great pleasure to serve under your chairship, Sir George, to consider these two pieces of legislation.
As the Minister said, these regulations are made under the National Security and Investment Act 2021. I thank the Minister for setting out some of the background to that Act. During the passage of that legislation through Parliament, I was clear, as were colleagues, that the Government need new powers to deal with evolving national security threats in corporate transactions. Labour supported the legislation because it was legislation demanded by Labour, and we support these SIs too, as they are critical to the effective functioning of the new investment-screening regime.
I will say something about each of these SIs in turn, starting with the turnover of a business regulations. As the Minister has set out, this relates to the civil monetary penalties that the Secretary of State can impose under the new regime. Section 41 of the Act sets out the maximum fixed penalty and, where applicable, the maximum daily rate penalty that may be imposed. Where a business commits an offence, the maximum fine is the higher of 5% of global turnover or £10 million. I do not recall intellectual property or other assets being referenced in the Act.
Section 41 also enables the Secretary of State to make regulations specifying how the maximum penalties applicable to business should be calculated and to amend the maximum penalty amounts or percentage rates. The SI is made under section 41(8) and 41(9) of the Act and does three things: it clarifies that, for the purposes of penalties, businesses include sole traders; provides a statutory definition of where one business controls another; and establishes the test for determining the turnover of a business for the purpose of calculating maximum penalties.
We support the principle that the new regime should be underpinned by robust enforcement mechanisms, and it is important that the Secretary of State has the relevant powers to punish and deter non-compliance with the regime. However, such penalties make the need for clarity and certainty even more important.
During the Committee stage of the Act, I asked whether the monies received by the Department for Business, Energy and Industrial Strategy from the payment of penalties could be put towards a specific purpose, rather than going into the general Consolidated Fund. I urge the Government to think about that again. Would it not be fantastic if this money was, for example, spent on supporting our great innovators and start-ups to further build on our domestic resilience in these sectors?
I turn to the specification of qualifying entities regulations, which establish descriptions of qualifying entities for the purposes of section 6 in the Act. In other words, this SI defines the sectors that will fall under the scope of the mandatory regime. A notifiable acquisition takes place when a person gains control of a qualifying entity of a specified description. As Members will know, a buyer must give notice to the Secretary of State before making a notifiable acquisition in one of the 17 sectors, so the responsibility falls on the buyer to understand whether the acquisition it is contemplating is notifiable.
As the Minister set out, the definitions contained in the 17 schedules have been refined in response to stakeholder feedback following earlier consultations on the scope and definitions of the 17 sectors from November 2020 to January 2021. This led to important changes in all 17 sectors. For example, the scope of the mandatory regime within the artificial intelligence sector has been significantly narrowed to focus on only three higher-risk applications: the identification of objects, people and events, advanced robotics, and cyber security.
We welcome the fact that the Government have continued their consultation with business and wider stakeholders to refine the mandatory sector, but there is a lack of transparency in who has been involved and what the impact has been. I think it would benefit the Committee if the Minister described how the key changes made by this statutory instrument differ from the draft definitions published in March 2021, and why those changes have been made. For example, the reference to “Critical Suppliers to the Emergency Services” sector in the March proposals has become “Suppliers to the emergency services”, and the definitions of goods and services used by the emergency services have also been amended. Can he set out why those changes have been made? We see that changes have been made, but we do not know who has been consulted. It would be helpful to understand what changes have been made and why.
The Minister will know that there remain concerns about the definitions. The BioIndustry Association, which focuses on synthetic biology, has said most recently, so after the consultation, that:
“Synthetic Biology is defined too broadly in the legislation, meaning companies developing medicines and technologies with no national security implications will be captured. This risks imposing a long, unnecessary process for biotech to receive funding and could deter investment in the sector, and subsequently the development of medicines for patients.”
The Minister spoke about the level of consultation without giving specifics on how many businesses had been consulted. The BIA goes on to say:
“It is important that the new regime works well and is effective. Even once the regime commences, the BIA encourages the Government to listen to industry about how it is being perceived.”
I would be grateful if the Minister gave some indication of how he intends to continue engagement with industry and business on these issues.
There is a lack of transparency on the consultations that have led to these amendments, so can the Minister confirm what engagement he has had specifically with small businesses and organisations that represent small and medium-sized enterprises? As he will know, the Act’s impact assessment notes that 80% of transactions within the scope of the mandatory regime will involve SMEs. SMEs are the lifeblood of our economy, and it is from the growth of SMEs that we hope to build back not only better but more sustainably and fairly. That is why Labour has consistently called for SMEs to be consulted by the Government, listened to and provided with comprehensive guidance on how to navigate this new regime.
Staying with the question of guidance, I note that to date the Department for Business, Energy and Industrial Strategy has published only one piece of sector-specific guidance, for the higher education and research-intensive sector. In the Bill Committee, I and my hon. Friends repeatedly highlighted the importance of prompt and accessible guidance so that firms operating in the relevant sectors understand whether their businesses are affected.
I say to the Minister directly that, based on conversations I have had with stakeholders—including university research departments and university start-ups, but also investment and equity finance organisations, and indeed law firms—there remains significant confusion as to who may be impacted by these regulations, and indeed by the Act. That is seen as having a chilling impact on foreign direct investment in this country and—something we raised in the Bill Committee—as a job creation scheme for lawyers. Many legal firms are already setting up workstreams to address that but, as we all know, small and medium-sized enterprises do not have the benefits of large legal firms, so not to provide the kind of guidance that we have asked for is putting such enterprises at a huge disadvantage.
Will the Minister therefore confirm what wider sector-specific guidance will be published, and according to what timetable, in advance of the regime coming fully into effect on 4 January? If the regime is to operate effectively, it is critical that businesses understand how to interpret whether their activity falls within the scope of the regulations. I suggest to the Minister that he needs to do more on this over the next 12 weeks, if we are to ensure—as I emphasise yet again—that small and medium-sized enterprises are not unduly and negatively impacted by the regulations.
Before concluding, I want to say something about the important context of the draft SIs. Owing to a weak pound and lower equity prices on the FTSE when compared with other international markets, private equity firms are acquiring UK companies at the fastest rate since 2008. Unprecedented levels of dry powder mean that that is only set to continue.
The Act gives the Secretary of State the power to call in transactions across the economy, not just in the 17 mandatory sectors where that decision has given or may give rise to a national security risk. Clearly, however, the success of the new regime in protecting our national security interests, such as in the supply chain, is dependent on the Secretary of State’s willingness to use his new powers. The indications are not good.
To take Morrisons, for example, it is a much loved British company, which has been rooted in communities up and down the country for more than 100 years. It is the second-largest fresh-food manufacturer in the UK, supporting thousands of farmers across the country. That is why my right hon. Friend the Member for Doncaster North (Edward Miliband) and others have been clear for months that Morrisons is also of strategic importance to the country’s food security. Labour is clear that food security is an essential part of national security, and yet there is no indication that the Secretary of State has considered the impact of that transaction on the country’s food security.
Labour supports the two draft SIs, which will play an important role in shaping the scope of the new regime and the consequences when the rules are not followed. Labour is calling for greater transparency and greater guidance to support our small and medium-sized enterprises. We are aware that the public will be watching closely how the Government use their powers under the Act to protect our vital national interests.
Paul Scully
I thank hon. Members from both sides of the room for their valuable contributions. First, let me have another go at responding to my hon. Friend the Member for North East Bedfordshire: turnover does not include stock and assets, but it does include any income that derives from their use. The hon. Member for Newcastle upon Tyne Central raised with my right hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi), now Education Secretary, when he was covering this subject in Committee, the question of where the fines go. As she knows, the fines are going to the Consolidated Fund, but none the less, she makes her case powerfully.
In terms of what changes have been made to the definitions since the consultation, the scope of a number of descriptions—communications, critical suppliers to Government, data infrastructure, energy, suppliers to the emergency services, and synthetic biology—was narrowed following the publication of the consultation response, and a few descriptions were amended. For example, in the area of communications, qualifying entities carrying on activities in the UK that related to public communications supply chains were removed from the definition, substantially narrowing the activity of the qualifying entities captured. For critical suppliers to Government, two of the five limbs of the definition set out in the Government response to the consultation were removed, again to narrow the scope of the definition. Those two limbs were the provision of services to facilitate the security of network and information systems, and the guarding of premises to insure against unauthorised access or occupation and against outbreaks of disorder or damage.
In the area of data infrastructure, as was mentioned by the hon. Member for Glenrothes, the Government response to the consultation provided a definition of a public sector authority using the meaning of “contracting authority” in the Public Contracts Regulations 2015. The final regulations revised the definition of a public sector authority to a much narrower list of authorities, set out in a table within the regulations. I understand the hon. Gentleman’s point: I would say that first of all, the purpose of that table is to make sure that the notifications to the Secretary of State are proportionate and balanced. None the less, we will review this SI within three years, rather than the normal five years, to ensure that we lean into this and get it right, to give certainty to businesses and to ensure that we capture the whole gamut of the areas that he raised.
In terms of energy, changes were made to clarify the infrastructure activities carried on in the UK and captured within this description. Suppliers to the emergency services, as the hon. Lady mentioned, and several meanings in the definition, published in the Government response to the consultation, have since been amended and narrowed to provide an objective list of activities, captured for the purposes that require self-identification. The applicability of each activity to each type of emergency service listed has been narrowed to ensure that the activities of qualifying entities, captured by mandatory notification, are as targeted and proportionate as possible.
Finally, on synthetic biology, new paragraph 6 was added to the definition to create exceptions relating to human or veterinary medicines, or immunomodulatory approaches, which is not easy to say.
The hon. Lady also asked who was consulted on this and what was said. We are proactively and extensively engaging across all the relevant sectors. For example, our policy colleagues at the Department for Business, Energy and Industrial Strategy have attended meetings with techUK members, the AI Council, an aerospace, defence, security and space group webinar, and an electricity industry forum. We conducted targeted and extensive engagement with organisations most likely to be affected by the NSI Act, including companies that invest in or acquire entities in the 17 mandatory areas of the economy, and those providing legal or financial advice in UK acquisitions.
We have met and spoken to more than 200 cross-economy organisations through workshops, teaching and presentations, including the Law Society, the Institute of Chartered Accountants in England and Wales, techUK, international investors and UK universities. Tailored communications have been sent out to more than 100 industry bodies in those mandatory areas of the economy, including 70 major law and financial services firms, 36 international investors and 550,000 businesses via Companies House.
Additional care has been taken to ensure that we can reach small and medium-sized enterprises, because the hon. Lady is absolutely right that they need to have the capacity to be ready and will be affected by the regulations. We have used associations, such as the Federation of Small Businesses, the British Chambers of Commerce and the Confederation of British Industry, so together there is a network of 580,000 businesses. We will continue to ensure that we work with SMEs in particular, to give them guidance ahead of time, because we need to keep on engaging directly with businesses around this Act, ahead of the full commencement.
The first tranche of detailed guidance has already been published to assist businesses, investors and advisers in understanding the Act and how to comply with its requirements. We have established a BEIS expert panel, which includes business representative organisations, higher education bodies, investment associations, law societies and others, that has provided detailed feedback on the draft guidance, ensuring that the guidance is fit for purpose, rather than rushing it.
Our second tranche of guidance will be published ahead of regime commencement, to continue to aid the interaction of parties with the new investment security unit and to ensure compliance, including how to submit a notification form and guidance around notifiable acquisitions. A communications campaign will focus on delivering teaching and guidance to that cross-section of businesses in the UK and internationally.
The hon. Member for Glenrothes asked about turnover and whether we were confident about getting this right; absolutely, we are. If the Secretary of State and a business disagree on the business’s turnover, the Secretary of State can overrule the business. Clearly, the Secretary of State has to act reasonably under public law duty, so it does not give him a free pass, but it is a fallback option if there is a disagreement on business turnover for the reasons mentioned.
Peter Grant
I am grateful for that answer. When assessing a business’s turnover, can the Minister confirm whether sufficient attention will be paid to previous years? If a business has a big turnover for several years and it suddenly drops, looking at a single year will not necessarily flag that up. However, if that is noticed, it may well raise suspicions that turnover is being artificially depressed. Will that kind of examination be standard practice whenever a business’s turnover is being examined?
Paul Scully
As is set out in the statutory instrument, annual turnover is calculated by taking the turnover for the available period and scaling it up to a full year—if there is not even information for one year. None the less, the Secretary of State will have to take a view, albeit under his public law duties, to ensure that turnover is a realistic. There must be an effective deterrent against a breach of the rules, which is why in some cases the Secretary of State may even deal with a subsidiary business with a small turnover that is funded and controlled by a large, wealthy parent business. Indeed, the subsidiary may have been established specifically to carry out the acquisition in question and may not even have a turnover, full stop, at the point when the Secretary of State is calculating a penalty. That is why there is scope for the Secretary of State to overrule and take the wider view that he is asking for.
I hope that I have covered most of the areas that were raised and provided sufficient clarifications and assurances to hon. Members on today’s statutory instruments. Both SIs are essential for the effective operation and running of the NSI Act and the provision of a safeguard for the UK, and I commend them to the Committee.
The Chair
Before I put the question, I want to say that an awful lot has been said and written since the tragic murder of Sir David Amess last week about how we conduct ourselves. I think this afternoon’s proceedings have been a model for how parliamentarians should conduct themselves. The debate was respectful and constructive, and the Minister’s responses reflected that. It is worth putting it on the record that sometimes we do get it right, and this afternoon is one such occasion.
Question put and agreed to.
Resolved,
That the Committee has considered the draft National Security and Investment Act 2021 (Monetary Penalties) (Turnover of a Business) Regulations 2021.
Draft National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021
Resolved,
That the Committee has considered the draft National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021—(Paul Scully.)
Post Office Closures
Paul Scully Excerpts(3 years, 2 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows) on having secured today’s debate, and on all the work that she and other Members do in the APPG on post offices. It is a very vibrant and diverse APPG, and I always enjoy speaking with its members and sharing thoughts with them.
I thank you, Mr Betts, and others for the tributes that have been paid to our friend and colleague Sir David Amess. In giving my tribute, I want to respond to the hon. Member for Strangford (Jim Shannon), who talked about the Government’s social vision for the Post Office, because two of the three things in our vision really chime with what Sir David did and what he stood for. The main building blocks are to deliver a convenient and trusted local service offer that meets customers’ needs—working closely with postmasters, who play a hugely important role in their communities—and to ensure that the Post Office’s services continue to be easily accessible to all consumers, particularly the vulnerable groups that need them most. The third, which perhaps does not relate directly to Sir David but is so important for the Post Office, is to support the Government’s access to cash and financial inclusion agenda by ensuring that basic cash and banking services are available throughout the network to meet the needs of individual customers and small and medium enterprises. We have heard about the importance of those services throughout the debate.
The post office network is unique. With more than 11,500 branches, the Post Office is the biggest retail network in the UK: there are more post offices than bank branches and building societies combined. Thanks to Government funding, we have ensured that we have the most stable post office network in a generation, with 99% of the population living within three miles of their nearest branch. As I go through my speech, I will try to cover some of the issues that have been raised about the network, but over the past decade, while the country’s high streets have undergone a significant period of change, the number of post office branches has remained broadly stable. As we have been discussing, that business has continued, and must continue, to evolve to meet customer need. What has not changed, though, is how undeniably important post offices are to communities. Our local post offices have never been more important or more valued than in the past 19 months, as the country has faced the unprecedented challenges of responding to the pandemic.
Jamie Stone
Does the Minister accept that his point about 99% of the population living within three miles of their nearest branch does not apply to my constituency?
Paul Scully
I think the hon. Gentleman has a fair point. As I will try to develop a little, we need to do more to diversify and change the network to make sure it evolves, not only to use those mileage figures, but to make sure it meets demand and what is required by communities.
We wasted no time in March 2020 in announcing that post offices were an essential business and postmasters were key workers, so that post offices could stay open and provide the lifeline for businesses and customers everywhere that we have already heard about, and to enable loved ones to keep in touch at such a difficult time. Post offices have changed, because there is no Post Office without postmasters. While high streets grew quiet through the pandemic, postmasters across the UK went the extra mile to support their communities.
I was delighted to see Sara Barlow, the postmaster for Rainhill branch, and Luke Francis, postmaster for Bude branch, recognised in the recent Queen’s birthday honours for their services to local communities. Thanks to the tireless efforts of postmasters and their staff, those vital post office services continue to be available to communities across the country—an incredible 90% of the network remained open. I think there are many Saras and Lukes across the country who deserve our recognition.
However, the network was not immune to the challenges of the pandemic and branch numbers were clearly impacted. Some postmasters had to close their branches for health reasons, but other post offices were closed because of their location—for example, if they were in a university, community centre or library. The Post Office worked hard on a case by case basis to resolve any practical issues to keep as many post offices open as possible, but obviously it was not always possible.
I discussed the issues affecting the network on a regular basis with the Post Office’s chief executive, Nick Read, throughout the difficult time. His priority and that of the Post Office was, rightly, to protect vulnerable customers. The Post Office acted quickly to designate 1,000 branches as priority branches based on socio-economic criteria. These were branches that the Post Office considered would have the most detrimental impact on vulnerable customers should they close. That ensured that the Post Office’s efforts through the pandemic could be targeted. When any of those branches were forced to closed, the Post Office could implement a range of mitigations, including deploying mobile vans, the “post office in a box” kit and even redeploying trained staff from Post Office HQ itself. The Post Office also worked closely with Government to set up two cash delivery services, designed for self-isolating or shielding customers.
We have been monitoring the network situation very closely and working with the Post Office to understand further the impacts on postmasters and how we can support them throughout that period. Post offices were eligible to be awarded financial support through many of the Government’s measures to support business and were able to access other business support schemes, such as the VAT deferrals.
We also stepped in to put in place a temporary waiver for the requirement for the Post Office to provide those 11,500 branches. It was clear that despite postmasters and the Post Office doing everything they can to ensure services were available through the pandemic, it still was not possible to provide full network coverage. However, I am pleased to report that the waiver expired in June this year and that the post office network is above 11,500 again and with increased stability.
The pandemic helped to demonstrate what an incredible contribution post offices make to our communities. This confirmed, as we have heard, what we all know to be true. Many of us see first hand the impact that post offices have on our communities and how much constituents value their post office. That is widely backed by research, not just our own eyes and ears. The Association of Convenience Stores consistently finds that post offices are valued by customers and have a positive impact on the local area.
I fully appreciate and recognise the impact a post office closure can have on a community. I know it can be disruptive, particularly for those rural communities that do not have nearby alternatives, as we have heard. I can reassure hon. Members that we are confident that the post office network is stable and that the Government continue to be as fully committed as ever to ensure the long-term sustainability of the network.
However, it is inevitable that, with a network the size of the post office network, there will be variations, as we have heard, in the number of branches open at any one time. The post office network can and does fluctuate and change over that time, as postmasters move on, branches close, and new ones open. The Government’s access criteria ensure that however the network changes, services remain within local reach of all citizens. Churn in the network is part of the modern, dynamic, franchising business that the Post Office is.
A postmaster can resign for a number of reasons. They might be retiring, and the new business owner does not want to take on that post office. The postmaster might want to turn their shop back into a home. With partners who operate multiple post offices, businesses might make a commercial decision to resign from operating a post office. The reasons behind the post office closing might be varied, but I assure hon. Members that the Post Office’s response is tried and tested and it works. It requires operators to provide six months’ notice of a branch closure to allow it time to identify alternative ways to provide services.
We have talked about specific examples. That requirement applies to all franchising partners, whether it is a multiple retailer or an individual postmaster. Where notice is given, Post Office works hard with communities to make sure that the service is maintained. When it is not possible to open a full-time branch due to lack of retail premises in the local area, maintaining the service can include innovative solutions, such as mobile or outreach services. It is important that we make sure that those are temporary and that we look to more permanent, long-term solutions.
Andy Slaughter
I am listening very carefully to what the Minister says, but how does he explain the circumstances that I set out? I have just totted up in my head—I have half the number of branches open that the Post Office thinks should be open. I have six open, five temporarily closed and one that was due to open two years ago that never has. That is a system that is not working. I am sure I cannot be the only MP in this situation. How does he address the problem of temporary closures?
Paul Scully
Temporary closures do not feature in the network figures. The 11,500 does not include temporary closures—trading has to have taken place within that month to be included in those figures. I understand the hon. Gentleman’s position. This is part of the churn that I am talking about. He and I both represent city seats, where branches tend to be closer together and can be more easily lost compared with rural communities, where there is a massive, immediate hit that everybody notices. Whether it is in Hammersmith or Sutton, there is probably more fluidity and churn, but the services are no less important for the most vulnerable in our society and we need to work through that.
We are not blind to future challenge. The hon. Member for Motherwell and Wishaw and others have talked about the Horizon scandal. It is a scandal. The vast majority of comments today have been about the future of the network. We cannot fully address the future of the network without addressing the past. I am really pleased to be back in my place after the recent reshuffle because it gives me the opportunity to continue the work to make sure that everybody affected by the Horizon scandal gets justice and gets fully compensated, and that we can work towards that. It will take time. It will not happen as quickly as those who are badly affected will want, but I will make sure I redouble my efforts on this issue, through the statutory inquiry and our considerations around it.
Turning back to the future, the retail sector has clearly gone through a significant period of change, which covid has accelerated. Post Office is continuing to explore new business opportunities to ensure a thriving national network for the benefit of communities, businesses and postmasters up and down the country. As the e-commerce market continues to grow, accelerated by covid-19, it is expanding its pick-up and drop-off offering. In the last few months, it has signed click-and-collect deals with DPD and Amazon. A new partnership has been forged with Yoti, a global leader in digital identity services—that is a clear demonstration of the Post Office embracing new technologies. Alongside those new partners, it is strengthening existing relationships. A landmark deal with Royal Mail was agreed at the end of last year to solidify what has been a long and successful relationship.
Finally, Post Office continues to work to secure the third iteration of the banking framework agreement, a vital partnership with all of the main UK banks and building societies to provide free-to-use cash services for those that need them right across the UK. The hon. Member for Newcastle upon Tyne Central (Chi Onwurah) talked about the record amount of cash withdrawn from post offices in August. That is an opportunity for the Post Office, as it has more branches than banks and building societies put together. No bank wants to be the last bank in town—they want to be the second-last bank in town—because the pressure and the spotlight are put on them. Only too often, the post office is there to work through. The Post Office is continuing to innovate through its bank hub trials, which are shared retail spaces where high-street banks can hold appointments with their customers on specific days of the week, in addition to the usual post office banking services available either at the counter or in the new self-service machines.
The hon. Member for Motherwell and Wishaw talked about Government contracts and about POca. It is for the Department for Work and Pensions specifically to work out who the contract is with. I speak to my colleagues there on a regular basis and I am due to speak to them and, indeed, to the chief executive about that. Yes, we look at what we can do for the Post Office, but clearly, we need to make sure that contracts are tendered on a commercial basis and deliver value for money, alongside that social purpose, through whoever provides the service.
A number of Members raised CJ Lang’s commercial decision to resign from operating 31 post offices. As with all post office closures, we regret the commercial decision and recognise the disruption that will cause to affected communities. I speak with the Post Office regularly about that because I know how concerning it is for our Scottish colleagues across the House and the communities they represent. The Post Office continues to make significant progress in finding the solutions to mitigate that customer impact and I understand that it is in discussions with both independent postmasters and various retail groups. The Government will continue to monitor the situation closely to ensure the access criteria continue to be met in the affected areas.
Similarly, my hon. Friend the Member for Keighley (Robbie Moore) talked about Haworth, and I will certainly take that away. I know that the petition he has raised has been heard. I assure those Members who are wondering whether the Post Office is listening that I will have a message for it about the debate when I get back. It is listening and will respond, but I will take that away and make sure my hon. Friend’s work standing up for his constituents is heard.
I thank hon. Members for their contributions to the debate. I cannot do justice to all the things they have raised, or I will be here way beyond time. To make one last point about postmasters’ remuneration, again, that is an operational matter for the Post Office, but we have to recognise the importance of supporting postmasters to give them the future we talked about. I was pleased to see that it listened carefully to the feedback it received on the proposed changes, and I welcome the recent improvements it announced last month. We will continue to monitor and work with the all-party parliamentary group and the Post Office to make sure postmasters feel they have that vibrant future. I thank hon. Members once again for their contributions. It is encouraging to see everybody come together to ensure that a vital national asset continues to serve our constituencies for many years to come.
Supporting Small Business
Paul Scully Excerpts(3 years, 2 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I thank all hon. Members for their contributions. First, can we celebrate and commend the small businesses up and down the country that have been so hard-pressed during the pandemic, especially in the areas that we have heard about today—hospitality, retail, leisure, tourism and indeed travel?
Businesses have shown incredible resilience throughout the pandemic and it is right that we support them, as the Government have done with £352 billion-worth of immediate financial support through loans, grants, the furlough scheme and various reliefs. That leaves us, as free market Conservatives who do not believe in big interventions but who are the Government with probably the biggest intervention since the war, with 352 billion reasons to get the recovery right and build resilience into our economy.
All I have heard from Opposition Members for nearly three hours is re-diagnosis of the problems. We can all agree that business rates need reform: that is why the Chancellor launched the fundamental business rates review. It is not starting now; we are concluding it now. It is looking at the entire scope of the business rates system, from the multiplier and reliefs for plant and machinery to billing, the administration of the system and alternative taxes. All those matters are being looked at and the report will be coming in the autumn.
I have heard nothing from the Opposition as an actual response. One can say that everything is funded and costed, but saying that does not mean that it is actually there. We have heard pledges from the Opposition to scrap business rates; that is £26 billion, and we have heard nothing about how it will be paid for. We have heard about freezing business rates until the end of the financial year; that is another £6 billion. What are they going to do to pay for it?
We heard from my hon. Friend the Member for Bexhill and Battle (Huw Merriman), who talked about changing high streets, and from my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who proposed changes to VAT. He made a cogent argument, albeit a controversial one—at least he came up with a solution that he had costed and threw it into the mix. That is the difference between Government Members and the Opposition: we come up with solutions that businesses can understand and that we can debate and work through.
My hon. Friend the Member for Ipswich (Tom Hunt) was accused of talking down his area. Actually, he was talking about the issues that he is tackling and that he is bringing together and convening people to tackle, such as antisocial behaviour. He is doing things like that through the town deal that he is championing. He raised the future high streets fund, which is already bringing empty properties back into use—there is a lot of infrastructure going on and it is already delivering upgrades. He also talked about shopping parades. It is really important that we talk about retail parks and shopping parades as well as high streets: they are part of the ecosystem of our local economy.
Kevin Hollinrake
The shadow Chancellor did present a short-term solution: a sixfold increase in the digital services tax. Does my hon. Friend agree that when we implemented the digital services tax, Amazon added that 2% straight on to the prices of the merchants on its site? Does he accept that if there were an increase, it would be passed directly to consumers?
Paul Scully
My hon. Friend raises a really important point. We also heard about business rates being scrapped and replaced with a property tax—on a property that would presumably be owned by a business, and I guess we could use our rating system to work it out. Essentially, that is just semantics, not a systematic and effective way of replacing business rates. That is why the fundamental review is so important.
My hon. Friend the Member for Wantage (David Johnston) made a comparison to Chris Hemsworth and talked about the Great British Mead Company, which reminds me of the importance of the hospitality sector as part of the ecosystem of our local and night-time economy and indeed the high street. My hon. Friend the Member for Devizes (Danny Kruger) talked about opportunity and connectivity, which are at the heart of what we are doing to allow high streets to bounce back further.
All I have heard is negativity from the Opposition with no answer, but we are making sure that the 352 billion reasons to allow the economy to bounce back are as effective as possible. Our plan is working. Our unemployment rate is at less than 5% and falling, which is lower than France, America, Canada, Italy and Spain. We have one of the fastest recoveries of any major economy in the world, and GDP is growing. That shows that the Government’s approach is a success and that we have fostered the right environment for the economy to grow.
The Labour party will never admit this, but the UK is a great place to do business. We have the lowest corporate tax rates in the G20, and the kind of lean regulation that puts us in the global top ten for ease of doing business. Next year, my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy will publish an enterprise strategy which will explain how we want to revive Britain’s spirit of enterprise and help more people to start and scale up a business.
It is easy to see why the UK is consistently home to one of the largest and most resilient economies in the world. All this underlies the reason why it has long been a great place to do business, and why we are seeing so much excitement in the rest of the world about investing in the UK. People are queuing up to spend at the global investment summit that is being held today. In the last 10 months, we have already seen a flurry of spending in the UK: there is to be a gigafactory in Sunderland, Ford and Stellantis are churning out electric vehicles in the north-west, and GE Renewable Energy and others are creating an offshore wind hub in Teesside. Those projects constitute a huge vote of confidence in the UK as a place to do business as we recover from the pandemic.
We have been there for small businesses since the start of the pandemic, we are there for them now, and we will be there for them for as long as they need us. I want to ensure that as we move forward into this area of recovery, we build resilience into our economy as well. We will do that through the fundamental review of business rates and through our enterprise strategy, and by making sure that we stand behind our businesses.
Question put:
Flexible Working and Carer's Leave
Paul Scully Excerpts(3 years, 2 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
The Government have today published a consultation on flexible working and the response to our consultation on a new right to time away from work for unpaid carers. These deliver on commitments in our manifesto and are an important part of our drive to build back better after the pandemic, deliver for working families by helping people to access and stay in work, and improve business productivity.
Flexible working consultation
This consultation considers measures to increase the availability and uptake of the full range of flexible working options—whether that is a part-time or job-sharing working arrangement, flexing working hours or working remotely—freeing employers and employees alike from the default nine-to-five model.
The consultation proposes that every employee in Great Britain is given the right to request flexible working, regardless of time served, under our plans to modernise the way we work and improve business productivity.
Under the proposals—which would see around 2.2 million more people given the right to request flexible working—employees would also be able to make more than one request for flexible working each year, and the current three-month period an employer has to consider each request would be shortened.
If an employer is unable to accommodate a request, our consultation proposes that they would need to consider what alternatives they could offer. For example, if they couldn’t change their employee’s hours on all working days, they could consider making the change for certain days instead.
There is no “one size fits all” approach to working arrangements. While certain ways of working may suit some employers and employees, they will not suit everyone. Therefore it is important that Government do not prescribe specific arrangements in legislation. Instead, these proposals would provide a strengthened legislative framework that encourages conversations around flexible working to be more two-sided. They are designed to balance the needs of employee and employer, and encourage all parties to focus on what may be possible, rather than what is not.
Empowering workers to have more say over where and when they work makes for more productive businesses, and happier employees. Flexible working allows employees to balance their work and home life: including helping people manage childcare commitments or other caring responsibilities. It can also be key to ensuring that people who are under-represented in the workforce, such as new parents or disabled people, have access to more employment opportunities.
Alongside clear benefits to workers, there is a compelling business case for flexible working. Benefits include:
Attracting top talent—Research conducted by Timewise, a flexible working consultancy, has shown that 87% of people want to work flexibly, rising to 92% for young people.
A highly motivated, productive workforce—Research published by HSBC shows that nine in 10 employees consider flexible working to be a key motivator to their productivity at work—ranking it as more important than financial incentives. Employers have reported seeing improvements in staff motivation and employee relations.
A better business environment—the CBI employment trends survey found that 99% of all businesses surveyed believed that a flexible workforce is vital or important to competitiveness and the prospects for business investment and job creation.
For both these individual and business reasons, the Conservative party’s 2019 manifesto committed to a consultation on measures to help make flexible working the default unless employers have good reasons not to. Today's publication delivers on that commitment. It also contains our response to measures in the July 2019 “Good Work Plan: proposals to support families” consultation on publishing flexible working and family-related leave and pay policies; and stating whether jobs may be open to flexible working in the advert.
While the consultation focuses on contractual flexible working arrangements, the Government recognise that people do not always need something so formal to help them balance their home and work life. The consultation therefore also sets out our future plans for a call for evidence on how to support more “ad hoc” and informal forms of flexibility, for example to attend a one-off appointment.
The territorial extent of the proposals included in this consultation extends to England, Wales, and Scotland (employment law is devolved to Northern Ireland).
The consultation runs for 10 weeks until 1 December 2021. I will place copies of the flexible working consultation in the Libraries of both Houses.
Government response to the carer’s leave consultation
The Government have also today published their response to the consultation on carer’s leave.
Around five million people across the UK are providing unpaid care by looking after or helping a family member, relative or friend. Nearly half do this while also working full-time or part-time. Juggling caring responsibilities and work can be challenging and can limit the participation of unpaid carers in the labour market. Women, who are often still the primary carers within families, tend to be disproportionately impacted.
The 2019 manifesto committed to introduce an entitlement to one week of leave for unpaid carers. This was followed, last year, by a consultation on carer’s leave, which recognised that unpaid carers face particular challenges in balancing work and caring responsibilities that may warrant a specific new employment right to time off from work.
The response, published today, sets out key aspects of the leave entitlement, including:
Employees with caring responsibilities for a dependant with long-term care needs will be entitled to one working week of unpaid carer’s leave (per employee, per year).
This new right will be available from the first day of employment.
Eligibility for the new right, both in terms of who the employee is caring for and how the leave can be used, will be broadly defined.
The leave can be taken flexibly (i.e. from several half day blocks to a single block of whole week).
The entitlement has been designed to balance the needs of employers and employees, ensuring that employers are able to plan and manage the absence created by carer’s leave. These include a minimum notice period and enabling employers to postpone (but not deny) the request for carer’s leave where the employer considers the operation of their business would be unduly disrupted.
The territorial extent of the proposals included in this Government response to the consultation on carer’s leave extends to England, Wales, and Scotland (employment law is devolved to Northern Ireland).
I will place copies of the carer’s leave consultation response in the Libraries of both Houses.
[HCWS303]
Subsidy Control Bill
Paul Scully ExcerptsWednesday 22nd September 2021
(3 years, 2 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
It is a pleasure to respond to the hon. Member for Feltham and Heston (Seema Malhotra) and to follow the hon. Member for Newcastle upon Tyne Central (Chi Onwurah). I thank all hon. Members who have spoken in this important debate. I aim to respond to as many of their points as possible in the time available—I know that we have further business—but I would like to begin by quickly reminding the House of what the Bill signifies and what it will achieve.
The Bill is the very first subsidy control framework designed by the UK for the UK. It will be flexible and agile, allowing all public authorities to design subsidies that deliver strong benefits across the whole UK. For the first time, in all instances, public authorities will decide whether to grant a subsidy. The Bill will provide certainty and confidence to businesses investing in the UK. It will enable public authorities to deliver strategic interventions that will support our economic recovery and deliver on the priorities of the British people, such as levelling up.
We have talked a little about scrutiny; the hon. Member for Newcastle upon Tyne Central spoke about scrutiny of secondary legislation and guidance. I am glad that my hon. Friend the Member for Clwyd South (Simon Baynes) raised the issue of the lack of scrutiny in this debate. It is nice that the Opposition have found a couple of Back Benchers to come and join the debate, but it is outrageous that we have had so little input from Opposition Members.
This Bill will strengthen our Union by protecting our internal market through a single coherent framework that fully complies with our international obligations. On that note, I thank the hon. Members for Feltham and Heston, for Aberdeen South (Stephen Flynn) and for Aberdeen North (Kirsty Blackman) for their points. To ensure that the new regime works for all parts of the UK, we look forward to continuing to work closely with the devolved Administrations, as we have throughout its development, as the Bill passes through Parliament. We hope that the devolved Administrations can understand and support the approach that we have taken, and will give their legislative consent. I can say to the SNP Members who spoke earlier that to date we have had 30 meetings with the devolved Administrations on an official-to-official basis to discuss the Bill, and 10 at ministerial level.
We also heard a bit about the devolved Administrations’ input into guidance. Obviously an agreed framework is needed before there is something to give guidance for, and we have made that clear in discussions with our devolved Administration colleagues. We will continue to work with them as we work through that guidance.
Deidre Brock (Edinburgh North and Leith) (SNP)
The Minister will have noted the concern of the Welsh Government about the fact that the agriculture and fisheries subsidies will be within the scope of the UK subsidy regime as a result of the Bill. We have already heard today a member of the Minister’s party express concern about his local farmers being undercut by devolved Governments’ support for their farmers. Can the Minister assure us that this Bill and the United Kingdom Internal Market Act 2020 will not be used to interfere with decisions by the devolved Governments on devolved matters such as agriculture?
Paul Scully
We have consulted on agriculture, fisheries, and sanitary and phytosanitary measures. There was no particular agreement among the devolved Administrations, but some people raised those issues.
The Bill introduces a permissive framework. It is totally different from the EU state aid regime, which is the only regime of its kind in the world. No other country, no other trading bloc, has such a restrictive regime, whereby authorities must ask permission and then wait for months to receive it. The Bill flips that on its head. A public authority can give support where it feels the need for it, and only the most distortive levels of support will then be challenged and go through the courts.
Let me turn to some of the issues raised by the hon. Members for Feltham and Heston and for Aberdeen North, and by the right hon. Member for East Antrim (Sammy Wilson) in relation to how this interacts with the Northern Ireland protocol. I reiterate that the UK will continue to be a responsible trade partner that respects our international obligations. However, as the Secretary of State for Business, Energy and Industrial Strategy said in his opening speech, the robust subsidy regime that the Government propose makes it clear that there is no need for EU state aid rules to continue to apply in Northern Ireland, and that all subsidies will be within the scope of the domestic regime. This framework has to work with whatever is involved in our international obligations. However, as the right hon. Member for East Antrim will know, the Command Paper gives the details of that, and I should love nothing more than to hear of rejoicing in his constituency.
Sammy Wilson
The Minister argues that the robust regime should mean that there is no need for EU state aid to apply because there is already sufficient scrutiny of any subsidy regime. Does he not accept that the fact remains, as far as the EU is concerned and as far as the law states at present, that the EU state aid rules still have to apply in Northern Ireland?
Paul Scully
I refer the right hon. Gentleman to the Command Paper, and assure him that those negotiations will continue.
The hon. Members for Feltham and Heston and for Aberdeen South raised the important question of how the Bill helps deliver on our priorities to level up opportunity in this country, ensuring that every region and nation benefits from growth. I can reassure Members throughout the House that our new regime will give authorities the flexibility to deliver subsidies where and when they are needed to support economic growth, without facing excessive bureaucracy or the same lengthy pre-approval processes that they faced while we were members of the EU. In response to points raised by the hon. Members for Feltham and Heston and for Aberdeen South, I would highlight that assisted area maps are not the only way of addressing inequalities. A map can be a blunt instrument, making it difficult to address inequality and disadvantage within regions.
I also want to respond to concerns raised by my hon. Friend the Member for Weston-super-Mare (John Penrose) on whether the domestic regime would allow Ministers to resist the siren call of ever greater intervention in the market, and whether it would be sufficiently rigorous compared with the EU’s prescriptive and prohibitive rules. I want to reassure the House that the regime in this Bill is indeed robust. It operates alongside the UK’s existing spending controls—the Treasury controls—which are subject to significant parliamentary control. The Government have no intention of propping up unsustainable or failing businesses, nor will future Governments be able to do so.
The hon. Member for Feltham and Heston was right to say that it is vital that there is independent oversight of the UK’s domestic subsidy control regime. The subsidy advice unit will provide advice that is genuinely useful to public authorities in designing their subsidies and assessing them against the regime’s requirements.
My hon. Friend the Member for Amber Valley (Nigel Mills) talked about advance approval. As I say, this is a permissive regime, so this is not about advance approval; it is about advice that public authorities will be able to take. On the Secretary of State’s referral powers in relation to the subsidy advice unit, he will not be able to overturn decisions unless they relate to security issues or international obligations. The regulation of harmful and distortive subsidies is reserved to the UK Parliament. The Secretary of State therefore has a responsibility to ensure that the new regime is enforced consistently across the UK.
The hon. Member for Feltham and Heston and my hon. Friends the Members for Weston-super-Mare and for Thirsk and Malton (Kevin Hollinrake) raised points on the importance of transparency in the regime. Our regime strikes a proportionate balance between minimising the administrative burden for public authorities and gathering more data. I think this is more about an issue with the interoperability of databases themselves, rather than about legislation. The guidance that we will work on will help public authorities and recipients to understand the practical application of the regime and what they will need to do to comply with it.
To conclude, I want to thank right hon. and hon. Members for their contributions to an excellent and informative debate today. I strongly believe that the new UK subsidy control regime that the Bill sets out will help us to deliver key Government objectives, protect jobs and make the UK the best possible place to start and grow a business. I look forward to discussing the Bill further in Committee, but for now I commend it to the House.
Question put, That the Bill be now read a Second time.
Post Office Horizon IT Inquiry
Paul Scully Excerpts(3 years, 2 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I welcome that Sir Wyn Williams, chair of the Post Office Horizon IT inquiry, has today published a progress update which outlines the work already undertaken by the inquiry and the planned next steps. The Government look forward to receiving Sir Wyn’s final report by the end of 2022.
[HCWS298]