Small Business, Enterprise and Employment Bill

Richard Fuller Excerpts

Wednesday 16th July 2014 Commons Chamber

[Vince Cable]

If the hon. Gentleman reflects on this matter, he will see that it is not about penalties. If the exclusivity ban is made effective—as we are determined it will be—the simple remedy for somebody who is affected is to go somewhere else. The issue of penalties is not relevant; we want to ensure that the ban is effective, which is why we are consulting on the best mechanism for making that happen.

[Richard Fuller (Bedford) (Con)]

One of the most significant issues in employment is the massive amount of corporate welfare in the form of tax credits for people on low incomes. A move to promote the living wage across a wide range of industries would have a positive impact on employment. Will my right hon. Friend tell the House what thoughts he had in this Bill for promoting the living wage, and say why he did not include those in the provisions under debate?

[Vince Cable]

Anything that raises wages takes people out of the tax credit net. There are, of course, other ways of dealing with this problem, one of which is taking people out of tax, and that is what the Government have been doing through their tax threshold. This Bill builds on the minimum wage system—I will say a few words about that in a moment—and does not relate to the living wage. The living wage presents all kinds of practical problems, not merely that it is way in excess of the current minimum wage and therefore presents problems for employment levels. There is a perverse feature that the recommended level of the London living wage, which would introduce a regional differential, is highest in London, which is an area with the highest levels of unemployment. If we are concerned with maximising employment, pursuing the living wage may not be the best of way of doing that. None the less, I have given guidance to the Low Pay Commission on how we increase real wages, and that is a major policy objective. I think we are better doing that by strengthening the minimum wage regime.

I assure the House that the Government are taking a series of steps to ensure proper penalties for employers who fail to comply with the minimum wage. In 2013-14, 650 employers received penalties totalling £815,000 for failure to comply with minimum wage law, and we have increased the penalty percentage from 50% to 100% of underpayment. A naming and shaming regime has come in since the new year, and we have increased the maximum penalty from £5,000 to £20,000, which came into effect in March. The Bill goes one step further. The maximum penalty will now apply on a per worker basis, rather than per notice. As a result, in future overall penalties will be substantially higher for employers that owe high arrears to multiple workers.

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[Vince Cable]

I will explain in a moment our proposal in relation to rents. The hon. Gentleman will know that a considerable variety of views emerged from the consultation. I know there are strong views that we should perhaps have done more—there will be plenty of opportunity to air them—but we have taken a big step forward. Let me briefly describe what it is.

The Bill will introduce a statutory code of practice, which I think has been the House’s basic demand over the years, to govern the relationship between companies and tied tenants. It will establish an independent adjudicator to enforce the code that will build on the experience of the groceries code adjudicator, which is building a track record in addressing similar problems. That should result—this is our objective—in getting transparency, fair treatment and the right to request a rent review for all tied tenants if they have not had one for five years, and the right to take a dispute to an independent adjudicator under the enhanced code.

[Richard Fuller]

Why did my right hon. Friend not exempt small pub companies, given that the problem is with large pub companies?

[Vince Cable]

As the hon. Gentleman will now have realised, we envisage a two-tier code system. There will be an enhanced code, with more demands on the bigger pubcos. Of course, other people are concerned that the provisions are not extensive enough. We have tried to identify the problems presented by the large pubcos, where we fully accept the major problems lie.

Let me give an example of a case that was drawn to our attention recently that in many ways exemplifies the issues. After seven years with a large pub company and a personal investment of £50,000, a tied tenant was renewing his agreement. His pub company presented him with a rent increase and reduced discounts on the price of beer. That means that, in effect, he will be paying £60,000 to his pub company for a year. Under our measures he would expect a detailed justification for the rent and, if he thinks it unfair, he will be able to go to the adjudicator for independent arbitration.

From the submissions that I have received, I am already aware that there are many concerns about the details, including of how the code will be formulated once the Bill goes through Parliament, as we hope it will. I am certainly very happy to receive any representations that Members want to make about those crucial details.

Another provision affecting small business is the public sector procurement market, which is worth £230 billion. Many small businesses have found it very hard going in the past, with bureaucratic and time-consuming processes. Under this Government, we have attempted to make the burdens less onerous—for example, by lifting the need for pre-qualification questionnaires—and, as a result, we managed to increase the direct spend in central Government procurement from about 6.5% to 10.5% between 2009-10 and 2012-13. It is our firm intention to lift that figure to 25% of central Government procurement next year.

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[Mr Umunna]

I thank my hon. Friend for that intervention; I shall quickly be coming on to zero-hours contracts.

In the context of the national minimum wage having become disconnected from levels of growth and productivity, there is a wider problem, because it has led to a squeeze on wages and a fall in the real value of the minimum wage. That is why we would set a long-term ambitious target for the Low Pay Commission to increase the minimum wage to a more stretching proportion of median earnings over the next Parliament. It is a shame that the Secretary of State has set his face against that. We also want to promote—I think the hon. Member for Bedford (Richard Fuller) mentioned it—the payment of a living wage through “Make Work Pay” contracts, but there are no provisions at all that touch on the living wage, which is disappointing once again.

Let me turn to zero-hours contracts, which my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) mentioned. There are 1.4 million such contracts in use in the UK at present.

[Richard Fuller]

Before the hon. Gentleman moves on from the living wage and in the context of the important issue of Government contracting, will the Labour party table amendments to ensure that, when local authorities contract, there is the potential for companies to pay the living wage?

[Mr Umunna]

I may have the figures wrong, but I think that at least 29 Labour-run local authorities have become living wage employers, and I think we should absolutely do all we can to encourage them to pay the living wage. That may take time because current contracts are left to run, but the more who sign up to become living wage employers, the better.

On zero-hours contracts, it is worth reminding Members what we are talking about. Let me quickly tell the story of a lady I met last year who was on such a contract—I have, of course, met many others, including my own constituents, since. She worked in the care sector and had to be available to visit clients in their homes on at least six days a week, including evenings. Her rota could change in a flash. If visits were cancelled at short notice, she would often not be paid. If visits were added at the last minute, she would have to manage her child care commitments as best she could. That was because she had a zero-hours contract which did not oblige her employer to offer guaranteed hours of work.

Thankfully, that lady has managed to find a permanent job, but she has left behind several hundreds of thousands of other care workers who are still on zero-hours contracts in England. She featured in an excellent report produced by my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), my right hon. Friend the Member for Knowsley (Mr Howarth), and my hon. Friend the Member for Wirral South (Alison McGovern). Her experience illustrates the reality of life on zero-hours contracts for many people. Such contracts put a strain on families who cannot plan and do not know when the next pay cheque is coming. They create a huge obstacle for people who aspire, for example, to obtain mortgages so that they can own their homes and do things that many others take for granted. And what is the Government’s answer to all that, in the Bill? To ban exclusivity clauses.

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[Richard Fuller (Bedford) (Con)]

People who start or run their own small businesses are heroes. Every day, they take the risks, they work the extra hours, they manage the anxieties, and they go the extra mile to create employment and wealth in constituencies across the country. They are people like Amy Taylor and Zak Resinato. Amy Taylor started her beauty business very early in her teenage years and is now at the stage of putting it on a solid and sound foundation for future growth. Zak Resinato is a person I see every week who is not only inspiring in running his own business but inspiring others who work with him to have the vision that they too can start their own business. Beth and Mahmood, through their dedication and hard work, have created a café that is working in a location where it never worked before—an environment that local people want to spend time in. Maria has battled a council that does not understand the role of business rates in suppressing entrepreneurship. Year after year, she carries on in business because that is the core of her passion.

We live in the age of the entrepreneurs, and those people in my constituency are some of the leaders in that age. They look to this Bill and this Government for inspiration. There is indeed much in the Bill that can inspire them, but, alas, too much in the way of intervention and regulation. It is as if the Secretary of State sees himself as a real-world version of Saruman, the character who came down to Middle-earth with the best of intentions but unfortunately took the power to himself and believed that he alone was benign enough and so all-seeing that he could create a wonderful environment in which all would be good. Alas, the Secretary of State has not read his Hayek. He does not understand that it is a far better solution for our country’s economy to leave these decisions and powers in the hands of the entrepreneurs—the people who make these decisions and take these risks every day. The shadow Secretary of State noted that the Secretary of State had Conservative minders. It is important that he has Conservative minders, and I am delighted that the Minister for Business and Enterprise will be a strong, solid Conservative voice in getting this Bill through Parliament.

Part 4 is where some aspects of intervention and regulation fall down. It was never the intention that family-owned breweries would be impacted by the regulations, yet the Bill has measures that will do so. That should not happen in a Bill that is supposed to support small businesses. It also provides for an adjudicator whose role is flawed, and for a publican code that, as many hon. Members have already said, lacks some of the necessary details to be able to support small businesses. The Government’s own impact assessment states that there are additional costs on a brewing and pub industry that is already reeling from the cost competition provided by supermarkets and other places where people can buy alcoholic beverages. Those things should be looked at by the Minister and given a Conservative slant, to make sure that we support not only our publicans who want a fair deal, but our family brewers who also deserve a fair deal.

Let us hope that, through this Bill, people such as Zak, Amy, Beth, Mahmood and Maria can say that the Conservative Government stand, in the age of the entrepreneurs, on the side of our small business leaders.