Oral Answers to Questions

Toby Perkins Excerpts

Thursday 26th March 2015 Commons Chamber

[Matthew Hancock]

I pay tribute to the hon. Lady’s long-standing and effective campaign on late payment. The amendments did not work technically, but I am prepared to consider anything to tackle the culture of late payment. We will make 30 days the normal payment term and 60 days the maximum. That is the culture change we need, and I look forward to working with her to make it happen.

[Toby Perkins (Chesterfield) (Lab)]

The Minister seems to be entering the realms of fantasy when he claims that the limited steps the Government have taken will put an

“end to the UK’s late payment culture once and for all.”—[Official Report, 24 March 2015; Vol. 594, c. 1357.]

According to the latest BACS figures, there were more than £46 billion of late payments last year—the highest figure on record—and that figure has continued to grow over the course of this Government. How much and by when would late payments need to fall for him to consider his steps successful in eradicating this culture once and for all?

[Matthew Hancock]

We do need to eradicate that culture, and I have already set out the steps we are taking. However, may I also take this opportunity to pay tribute to the work of the Business Secretary on this issue and many others over the past five years? We have had an incredibly business-like relationship working hard in the Business Department, and I pay tribute especially to his work on getting an industrial strategy that all parties in the House are now signed up to; to his work on women on boards; and on late payment. It has been a great pleasure, and I look forward to working with him in the future, too.

Small Business, Enterprise and Employment Bill

Toby Perkins Excerpts

Tuesday 24th March 2015 Commons Chamber

[Jo Swinson]

The adjudicator will be able to make recommendations so that problems can be put right, and ultimately it will have the power to levy fines. The specific details will be set out in secondary legislation, but we have a model in the Groceries Code Adjudicator. That adjudicator is already working, and we are learning from it how such a system can work smoothly in terms of staffing, for example.

Amendments 43, 44, 45, 55, 132 and 139 are consequential technical amendments to the MRO amendments. They relate to the enforcement of the code, the adjudicator’s annual report, the list of defined terms in clause 69 and to commencement.

The original market rent only clause allowed brewers that own tied pubs to require their MRO tenants to continue to sell the brewery’s products, as long as the tenant may buy them from any source. Amendment 46 implements that intention by amending clause 65 so that such a stocking requirement in a tenancy agreement would not of itself make the pub a tied pub. In stakeholder discussions, brewers requested greater clarity on what they were permitted to do under a stocking requirement; others were concerned that the stocking requirement might lead to undue restrictions on tenants who have chosen MRO.

Amendment 46 clarifies that brewers may also protect their route to market by allowing some restrictions on the sales of competitors’ products in their MRO pubs. However they will not be able to require that these pubs sell only their products and they will need to satisfy themselves that the requirements they are imposing are compliant with competition law. The restrictions may be placed only on beer and cider products and, crucially, tenants must be able to buy the brewer’s products from any source.

[Toby Perkins (Chesterfield) (Lab)]

In the event of marketing arrangements which meant that the only place that beers could be purchased was direct from the brewer, do the provisions take account of the fact that the tenant’s right to do so might be difficult to put into practice?

[Jo Swinson]

The adjudicator could look into whether practices were all fair and whether the code had been properly complied with. Depending on the circumstances, competition law may also be relevant. The companies would have to assure themselves that any restrictions that they were placing were compliant with competition law. Through the new code and the adjudicator we will make sure that there is somebody who can look into the circumstances and arbitrate on whether what is being offered is fair and compliant with the statutory code.

For completeness, I shall touch on three other important areas of debate both here and in the other place where the Government have made important commitments to use existing powers in the Bill. On Report in this House, I committed to consider calls to exempt genuinely short-term agreements from the pubs code. My noble Friend Baroness Neville-Rolfe confirmed that the Government would use the power in clause 68 to exclude from the code tied pubs that are operated on short-term tenancy at will and temporary agreements that do not extend beyond a certain limited period. We intend to consult on the length of the period for exemption.

Hon. Members will remember that pub franchise agreements are in scope of our measures. They are, after all, tied pub agreements and share many of the characteristics of traditional tied pubs. Nevertheless, consistent calls have been made in both Houses to exempt certain franchise agreements from the code, or at least from MRO, if they do not charge rent and the price of products does not affect the tenant’s share of income. After much consideration, my noble Friend the Minister announced in the other place that the Government will use the power in clause 68 to exempt genuine franchises from the MRO provisions. The remaining code protections—for example, in respect of transparency—will still apply.

Given the differences between traditional tied pubs and genuine franchise agreements, we consider this a reasonable exemption. We will consult on the precise definition of “genuine franchise”, but we expect it to include criteria such as where a turnover fee rather than a rent is paid by the tenant and the share of the profit is unaffected by the price paid for tied products. This is important as these criteria can mean that the tenant’s interests are arguably more aligned with those of the pub company because both rely on a fixed proportion of turnover. The tenant in such circumstances does not face the combination of the wet and dry rent, as tenants do in traditional agreements.

There are other agreements in the industry which may be marketed as a pub franchise that display elements common to franchises in other sectors, such as common branding. But if they charge tenants a tied rent in the traditional way, they are not inherently fairer than a tied pub agreement. The consultation will allow us to set out the criteria for a genuine franchise.

In addition, I should clarify that where a franchise pub falls within the definition of a tied pub in clause 65, it will count towards the number of tied pubs that a company owns for the purposes of the 500 tied pub threshold. This will ensure that we do not create a loophole in the legislation. Furthermore, the Government would be able to amend the regulations should there be attempts to use this exemption as a means of avoiding the legislation.

Next, I come to the matter of investment. Hon. Members will recall that Government committed to avoiding unintended consequences in introducing this legislation. In the other place, and in discussions with stakeholders, concerns were raised as to whether investment in tied pubs could be discouraged because of uncertainty as to whether a tied tenant might trigger MRO. Views vary as to the extent of this risk to investment, but the Government consider that we should act to minimise any risk. We want to ensure that investment in pubs can take place and that pubs thrive. I am sure that sentiment is shared across the House.

The Bill as drafted does not prevent pub companies from issuing a tenant with a new lease alongside an offer of investment, and no amendment to the Bill is necessary to enable companies to do so. This would, in effect, provide a waiver from the rent review and renewal MRO triggers for five years. However, the Government recognise that significant investments may warrant a longer period of return on investment. My noble Friend the Minister therefore announced in the other place that the Government will use existing powers in clause 41 to set out in the code different rent assessment periods for different amounts of substantial capital investment offered. This will have the effect of deferring the rent assessment trigger for MRO for a longer period. It is important to note, though, that the other MRO triggers—that of a significant price increase and an economic event that impacts on a tenant’s trade—will remain throughout the deferral period.

Alongside setting out the deferral periods for different levels of investment, the secondary legislation will set out important safeguards for tenants—for example, to ensure that they accept an investment offer only after taking proper advice and that they cannot be pressurised. This is an area where both sides of the debate recognise that the need to enable investment and the need to protect tenants must go hand in hand. It is important that we can consult fully on the details so that we get it right.

These commitments regarding exemptions for certain tenancy at will, temporary and franchise agreements, and for a deferral of MRO in return for substantial investment, are not on the face of the Bill. They will be set out in secondary legislation after full public consultation.

I shall touch briefly on a number of technical amendments in this group before turning to the second issue in the group. Amendments 34 to 37 are technical clarifications to the “no worse off” and “fair and lawful dealing” principles. The key change is to make it clear that tied pub tenants should not be worse off than they would be if they were not subject to any product or service tie. Amendments 35, 36, 38, 42 and 48 to 54 are consequential on the changes made to clause 66 in this House to exclude family brewers from the provisions. This change means the legislation will apply only to a pub-owning business with 500 or more tied pubs. There are further minor technical amendments, on which I refer honourable Members to the explanatory notes for a fuller explanation.

Finally, amendments 136, 137, 138, 140 and 141 relate to adjudicator staffing and the point that I made earlier in response to the hon. Gentleman. They amend schedule 1 to enable the adjudicator to second staff from any source, in addition to the existing power in the Bill for the adjudicator to second from the public sector. The aim is to provide the necessary flexibility for the adjudicator to find suitable staff from a wider pool.

I am sure the House will agree that throughout our debates in both Houses all the pubs measures have been thoroughly scrutinised. Incorporating the market rent only option into the Bill in the limited time available to us and ensuring that it will work in practice has not been easy, but I believe that we have produced legislation that promises to be effective as well as targeted and proportionate. Crucially, these measures mark an historic moment for tied tenants of pub-owning companies. They will have the protections of a statutory code with a powerful and independent adjudicator to enforce that code. That the measures have the support of my hon. Friend the Member for Leeds North West, CAMRA, Fair Pint and others is testament to that, so I hope the House will agree to the amendments.

[Jo Swinson]

Clearly, the intention is to make sure that the adjudicator is able to recruit staff with the requisite expertise and experience, not only from the public sector pool. That is an important change and we have learned from the legislation that we have in place for the Groceries Code Adjudicator. Understandable concerns were raised in Committee about whether staff would come with vested interests. It is important that protections are in place to ensure that everybody can have confidence in the staff who are seconded, and to ensure that up-to-date experience of industry does not entail a conflict of interest.

On amendment 86 and the important matter of pay transparency, I am delighted to reiterate the Government’s support for this amendment to the employment part of the Bill that was introduced in the other place. We have already legislated in this Parliament to ensure that companies which directly discriminate against women in pay matters can be required by a tribunal to complete a gender pay audit, as well as to pay compensation. The new provision requires the next Government to make regulations under section 78 of the Equality Act 2010 within 12 months of the Bill receiving Royal Assent. Section 78 requires mandatory reporting of gender pay information by larger companies.

It is 45 years since the Equal Pay Act, and although the gender pay gap is at its lowest ever level and has been virtually eliminated for full-time workers under the age of 40, it is simply not acceptable that in 2015 we still have a gender pay gap at all. We are determined to eliminate it entirely.

[Toby Perkins]

I endorse what the Minister says about the need to deal with this matter urgently. Given that urgency, will she explain why the provision she is now bringing forward under the Equality Act 2010 has been sitting on the statute book for five years? Why is it that only at the fag end of this Parliament are we seeing some action, which the Opposition have been calling for throughout those years?

[Jo Swinson]

The hon. Gentleman says that the Opposition have been calling for this throughout this Parliament, but unfortunately that was not the case when they were in government. I refer him to the Hansard report of proceedings on the Equality Bill on 24 June 2009, when the then Labour Minister said that

“having mandatory arrangements in force by 2011 would run the risk of riding roughshod over the legitimate voice of both sides of the business community. Progress can better be made by bringing employers with us—by including, encouraging and cajoling, rather than compelling.”

My right hon. Friend the Member for Hornsey and Wood Green (Lynne Featherstone) responded:

“We cannot wait another four years…It is clear that we must take action now”.––[Official Report, Equality Bill Public Bill Committee, 23 June 2009; c. 410-432.]

We have got agreement in the Government to take that forward, but I have to say that the context of the commitments made from this Dispatch Box by the previous Labour Government during the passage of the Equality Act—they committed to a voluntary approach before implementing the legislation—certainly did not make that easier. None the less, I am delighted that we are now where we are.

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The amendment before us requires that consultation must take place before implementation. By consulting with business, we will find the best and most effective way of implementing section 78 while meeting the objective of achieving genuine transparency on pay and tackling the gender pay gap now. I look forward to the House’s support for the amendment.

[Toby Perkins]

It is a great pleasure to speak on the amendments proposed by the noble Lords.

On 16 July, we debated the Second Reading of this Bill. It was interesting, in preparing for this debate, to re-read the contributions that were made then and those that have been made by Labour Members in both Houses during its subsequent stages. Though modesty would usually prevent me from quoting extensively from the contribution that I made, it would be strange not to reflect on how widely our critique of the Bill has been adopted by the Government. We said that it had the potential to make a real difference to small businesses but that the steps that it originally proposed were a collection of faint nods in the right direction of key issues that had emerged under this Government. We said that far more robust action would be needed if this Bill was to deliver on the steps small businesses required and to take action on things like abuses of the labour market and their impact on workers in every constituency in the land. On the subject of pubs, we said that a successful small business Bill—a Labour small business Bill—would have introduced a code with a market rent only option, which the Bill now indeed contains. It would be churlish not to recognise that the Government have ultimately acted in good faith on pub company legislation.

I should place it on the record that this is the last piece of legislation that the Minister will be bringing through in this Parliament. As we fast approach the general election, who knows when will be the next time a Liberal Democrat Minister will have the opportunity to bring through a piece of legislation? She has done a good job in reflecting the wishes of the House and has acted in good faith on pub company regulation.

Their lordships’ amendments broadly achieve the objective of striking the devilishly difficult balance between proper protection for pub tenants while not imposing an overly rigid straitjacket on the industry with the potential to discourage future investment. They are positive steps forward that have faithfully built on the spirit of the historic clause 42 proposed by the hon. Member for Leeds North West (Greg Mulholland). We recognise that some aspects of the proposals will sensibly need to be included in the pubs code through secondary legislation.

There remains the thorny issue of the right of the tenant to offer a substantial investment in their public house in exchange for giving up the right to use the next rent review period as a trigger to request an MRO assessment. The letter dated 16 March from the Minister, Baroness Neville-Rolfe, to the noble Lords Mendelsohn and Stevenson details the Government’s intentions with regard to new clause 43 and specifies that it must not be used to abuse the waiver. However, this will still leave those who fought this cause for many years with considerable unease that this creates the potential for too broad an exemption for too small an investment.

We entirely agree with the Government that encouraging future investment in the stock of public houses is a crucial element in the future success of the industry, but, over four months since the original victory for clause 42, that still leaves a huge unanswered question about the scale of investment that constitutes “substantial”. I think that my party’s record on this issue means that campaigners will have confidence that the statutory code that addresses it under a future Labour Government will be consistent with the approach—

[Andrew Griffiths (Burton) (Con)]

The hon. Gentleman mentioned his party’s position on investment. What scale of investment does he believe would constitute “substantial”?

[Toby Perkins]

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

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

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

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

[Toby Perkins]

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

[Matthew Hancock]

Get ready.

[Toby Perkins]

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

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

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

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

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

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

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

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

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

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[Matthew Hancock]

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

[Toby Perkins]

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

[Matthew Hancock]

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

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

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

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

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In all, these amendments strengthen the Bill, the Bill will strengthen business, and strong business will strengthen Britain. The amendments before us have the full support of Government and I hope will have the support of the House.

[Toby Perkins]

The Minister questioned whether the amendments will have the support of the Opposition. They will do, of course; we proposed a good deal of them, so it would be rather foolish for us not to be supporting them at this stage. He is right to say the Bill arrives back in this House in stronger order than it left it. It looks far more like the kind of small business Bill I was talking about back in July 2014 when I said the Government ought to be taking far greater steps, and I agree with the Minister that the Bill is improved.

We said steps needed to be taken to strengthen enforcement of the compensatory award in employment tribunal cases. We are pleased that the Government have today announced a naming and shaming programme that will ensure exposure of businesses that do not pay compensatory awards identified by a tribunal. We said that insolvency creditors meetings were an important part of our world-class regime and we are glad the Government accepted our amendment on that. We are glad, too, that the Government decided to exempt the Equality and Human Rights Commission from the work of the small business appeals champion—although not from the growth duty section of the Deregulation Bill, as we called for at the time. On late payment as well, we have been saying for a long time that stronger action was needed. I am therefore bound to say that the fact that these are issues Her Majesty’s Opposition have been raising, from abuse of zero-hours contracts to late payments to small firms, and from non-payment of the national minimum wage to supplier pay and stay deals—an area of pub company legislation we have already discussed—shows that it is the Opposition who have been leading the way, and the Government have been following us reluctantly.

It rather undermines the charge that Labour is anti-business when the Government keep taking action in so many of the ways we have called for. I know the Government have form in this regard; they used to suggest UKIP was mad before they adopted its No. 1 policy. However, we support the principle that the Government should be willing to listen and take action where they have got things wrong, and we think the Bill before us today is a good deal stronger as a result of that.

I want to take up the Minister’s challenge on late payments. As I said in my intervention, he is overplaying his hand when he suggests that the measures brought forward, welcome though they are, signal the end of egregious late payment practices. The steps the Minister has taken on the public sector are welcome. Particularly at the time of the bank-induced global economic crisis, the previous Labour Government took significant steps to ensure that the public sector paid on time and this is putting that on to a more permanent footing, which is a positive step. However, the Minister suggested that the transparency he is introducing will create a reputational risk that means businesses and boardrooms around the country will think carefully before paying late. While the way this is going to be marketed will be different, many of the transparency measures proposed here are currently available if people choose to look. There has been no reputational risk for many of the companies that have operated in that way.

In response to what the Minister said a few minutes ago, the truth is that no new sanctions have been proposed. He said that businesses could avail themselves of the sanctions in the EU late payment directive, but they have been able to do that for several years. If a major business chooses to say, “We’ll supply you, but our terms are 90 days”, a small business will have the choice of whether to deal with it on those terms or not at all. That means that nothing has changed, and we are still in exactly the same position.

The steps that the Government are proposing on late payment are fine, as far as they go, but this is a missed opportunity. I am willing to predict that, in the next Parliament, we will not consider this issue to have been dealt with and that, at some point in the next four or five years, we will all be back here discussing late payment again and saying that something must be done, that we must change the culture, that we need to get across to businesses that late payments are unacceptable, and that we need greater transparency so that small businesses know what they are letting themselves in for. My right hon. Friend the Member for Doncaster North (Edward Miliband) stated powerfully at the Federation of Small Businesses conference last week that late payments are one of the great scandals in our economy. Small businesses are disadvantaged by the practice, and more should have been done.

Clause 3 initially created a duty for companies to publish only their payment policies. We have consistently argued that publishing policies is not enough and that small businesses also need concrete information on the performance in practice, and not just what is written in a policy book. We tabled amendments in Committee in the Commons and on Report in the Lords that would have created a compulsory reporting regime to ensure that large companies’ reporting records would be open to quarterly scrutiny with automatic interest paid for late payment. The Government voted down our proposals on both occasions. The Minister said a few minutes ago that no practicable proposals had been tabled in this regard, but that is not true. We tabled specific proposals that would have put the late payment directive on a statutory footing. He might have decided that he did not want to support our proposals, but it is not true to say that they did not exist.

However, we are pleased that the Government have made some concessions and accepted our fundamental argument that information on performance, as well as policies, must be published. This will allow large companies to be judged by their deeds, not just by their words. However, we believe that there should be a financial backstop, such as an automatic interest payment or a fines regime, as outlined in our proposals. So it remains to be seen how effective the Bill will be. It is stronger as a result of the interventions by the Labour Opposition but more could have been done and, regrettably, we will have to return to this issue in the next Parliament.

The Bill establishes small business appeals champions, whose role will be to watch non-economic Government regulators and encourage them to improve the impact on business of their policies, their processes and their approach on appeals and complaints. In broad terms we welcome this idea, but many bodies have questioned how the champions will work in practice and what relationship they will have with the general growth duty in the Deregulation Bill. We welcome the fact that the Government have taken up our argument that the guidance to the small business appeals champions in relation to the exercise of their functions should be laid before Parliament for full scrutiny and debate.

On Lords amendment 25, we are pleased that the Government have acceded to our demand that the Equality and Human Rights Commission be excluded from any of the regulatory provisions in the Bill. This will relate specifically to the work of the small business appeals champions.

On the subject of creditor meetings, I should like to draw to the attention of the House the donation made to my office of employment support from R3, the insolvency regulator. The intention of the original Bill was to end once and for all the practice of insolvency practitioners holding physical creditor meetings in all types of insolvency procedures. We felt that that was a mistake and that it could disengage creditors and weaken the strength of the world-leading insolvency regime that we have here in the UK. We very much welcome the fact that the Government have listened to some of the specific proposals we made on ensuring that the threshold for a creditors meeting should be changed to

“(a) 10% in value of the creditors;

(b) 10% in number of the creditors;

(c) 10 creditors.”

We think that is a much stronger amendment, providing the support that that industry needs to ensure that it continues to provide a service that gets record amounts of money back to creditors and is also successful in saving jobs and businesses.

Oral Answers to Questions

Toby Perkins Excerpts

Thursday 12th February 2015 Commons Chamber

[Matthew Hancock]

We constantly review the scheme to ensure that we get the best possible deal. The majority of the enterprise finance guarantee goes through other banks, which, as far as we know, are performing impeccably. On the RBS aspect, we have met RBS to discuss that. It is reviewing the matter, and we will make sure that it works in the future. The big picture is that the scheme is working well and helping small firms to access finance.

[Toby Perkins (Chesterfield) (Lab)]

Following a year of my right hon. Friend the Member for Delyn (Mr Hanson) raising this issue, RBS has admitted that there has been mis-selling of the EFG scheme.

Rebuilding confidence in our banking sector will be one of the key tasks facing the next Labour Government. From interest rate swaps to tax evasion and now mis-selling of EFG loans, the Government have been slow to act and slow to investigate whether there are problems. Does the Minister now accept that only through investigating and repairing mis-selling in Britain’s high street banks will confidence in the sector return?

[Matthew Hancock]

The hon. Gentleman has a bit of a cheek, because the investigation required, and the sorting out of confidence in banks, was an enormous issue that we had to take on in 2010. We have regulated and passed legislation throughout this Parliament to ensure that there is more confidence in the banking industry. Of course, there is more to do, but considering how far we have come over the last five years, the hon. Gentleman ought to be saying we have done a good job and be helping us to do that.

Oral Answers to Questions

Toby Perkins Excerpts

Thursday 8th January 2015 Commons Chamber

[Matthew Hancock]

The timing of the announcement was clearly very difficult, but we are doing all we can to support those affected by the decision. Both the Secretary of State, who was constantly in touch with the company and the unions over Christmas, and I are working hard to support those affected.

[Toby Perkins (Chesterfield) (Lab)]

One of the things that the Government could do to support small businesses is to support Labour’s plans to outlaw pay to stay agreements. We very much welcome the fact that, on the back of pressure from the Opposition, Premier Foods has ceased its pay to stay arrangements. The Government say that such arrangements are unacceptable, but at the same time they refuse to outlaw them. Does the Minister consider some forms of pay to stay acceptable, or are the Government so hostile to any form of regulation that they are willing to stand by while unacceptable business practices evolve and to leave small firms at the mercy of their big business customers?

[Matthew Hancock]

I know that the hon. Gentleman likes to chip in to this debate, but recent events have clearly demonstrated the power of transparency in relation to late payment to small business. As he knows, we are radically improving the position through the small business Bill. When the contracts came to light, the company was held to account and did a U-turn. [Interruption.] They were brought to light by the Federation of Small Businesses, to which I pay tribute for its work in highlighting the issue.

Business Investment (Outer-City Estates)

Toby Perkins Excerpts

Thursday 18th December 2014 Westminster Hall

[Toby Perkins (Chesterfield) (Lab)]

It is traditional at this point in a contribution to say what a pleasure it is to serve under your chairmanship, Mr Davies. It is always a pleasure to see you on the Back Benches as well. You are always keen to make contributions, some of which have been among my favourites and will no doubt find their way into my leaflets in April.

I congratulate my hon. Friend the Member for Nottingham North (Mr Allen) on not only the contribution he just made, but the wider work for which he is recognised and admired across the House. His description of the specific work being done on rebalancing outer estates was informative and thought-provoking. He described it as long-winded, but the time positively flew by for me. It was also a pretty strong sales pitch for cross-departmental work and the impact that that can have on areas such as his constituency. He was typically pragmatic and non-partisan, which may be something for me to aspire to in future years, but we cannot escape the political dimension of many of the challenges that his community faces. However, I understand why he would choose not to introduce that into this debate and into his promotion of his cause. He made some thought-provoking points about the challenges and the positive steps that his project can take to make a difference. He spoke at length about the importance of partnership working and bringing on board the private, voluntary and public sectors, local enterprise partnerships and various other networks.

My hon. Friend highlighted that a project such as this will face a lack of core capacity, so where will that capacity come from? In the main Chamber today, we had a statement on local government funding. In many areas, local government would have been the glue that pulled together the fantastic work that he described. We have already seen unprecedented local government cuts over the past four and a half years, and if the events of the past few weeks have taught us anything, it is that if we continue down the path the country has taken over the past few years, local government will experience even greater ravages. In somewhere like Nottingham, which has an excellent local authority, that will inevitably have an impact on capacity.

[Mr Allen]

Since we have a little time to spare, I am prompted by my hon. Friend to mention two things. First, in terms of all-party working or working “across the aisle”, it will often be the case that the serious things that we need to do will stretch across more than one Government and more than one political complexion. When talking about intergenerational change, it is important that we attempt to find some common ground across all parties, but there will always be differences.

Secondly, further to my hon. Friend’s point about today’s statement, local government funding is relevant to today’s debate, because I am a strong advocate of proper devolution to local government. Even in the direst circumstances, those in the localities will spend money, limited and diminishing though it is, much more wisely. I pay tribute to the men and women in Whitehall, but local people will spend money more wisely than those in the centre. I hope that my hon. Friend, in his exalted position on the Front Bench, will continue to push that point with his colleagues in Her Majesty’s Opposition.

[Toby Perkins]

I do not think that it needs a great deal of pushing. My hon. Friend will be aware of the report produced by Lord Adonis, and the Labour party is enthusiastically pursuing many of its ideas, which would represent significant steps towards devolution. We recognise that whatever Government follow the next election will still be working in straitened economic times and tough decisions will still need to be made, but we disagree about the sustainability of the scale of the proposed cuts. Projects such as my hon. Friend’s must be able to survive from one Government to the next as Governments change colour. The local authority devolution agenda, involving combined authorities working with local enterprise partnerships and bringing in the best of the public, private and voluntary sectors, is a vision that we share.

My hon. Friend also mentioned the impact of austerity on his constituents, which cannot be overstated. We are all conscious of the link between poverty and educational underachievement, but for too long the focus has been on spending more on education to deal with educational underachievement, rather than dealing with poverty, which is an approach that this Government could have taken. In communities that have faced challenges over many years, people will often have to deal with welfare cuts, may have a greater reliance on food banks and may have to deal with other social ills, which will inevitably have an impact on the educational attainment of the area and on other things that my hon. Friend is attempting to address. Placing that on the record is important.

I entirely agree with my hon. Friend about the importance of careers guidance, and I hope that that aspect of his plan is taken up and supported. Careers advice and getting careers advisers in schools in his constituency is a key goal of his project. In fact, one of my most loyal party members in Chesterfield was previously a careers adviser in a school in my hon. Friend’s constituency.

I know how important such work is in raising the aspirations and expectations of people from more deprived communities. My hon. Friend should be reassured that, more broadly, the Labour party has publicly identified previous attempts by successive Governments to boost social mobility as having too often focused on getting more young people from disadvantaged backgrounds into the traditional professions. In many cases, we need to see those young people’s aspirations and expectations opened more broadly, in particular with support for them to set up and run their own small businesses, which is a key part of his focus.

My hon. Friend will also be pleased, I hope, to know that a future Labour Government intend to get a representative of the business community on to every board of governors in every secondary school in the country. Schools do excellent work to ensure that young people pass exams, but alongside that there is real potential in ensuring a focus on the links between schools and the business community, which can have a positive impact on the educational aspirations of young people. He is very much pushing at an open door on the broader approach with what he is looking to introduce in his constituency through that project. I am supportive of his specific initiatives as well as of what needs to be done more generally.

My hon. Friend spoke about personal employability being one of the key criteria that his project wants to support. He is absolutely right to acknowledge the wide recognition of the need for an education system that supports people in their personal employability at the school level and through further education. He was entirely right to say that, although some streamlining of qualifications was necessary, there is a real worry about the focus moving away from vocational education and about the great narrowing of the further education opportunities available to people.

When people leave school, we need to get them on to courses that will not only give them rewards for studying, but get them turned on to study, or there is a real possibility of all of the prevalent problems that come from the absence of that. My hon. Friend was absolutely right about personal employability, but he was also right about the importance of the vocational further education landscape.

I want to touch on and take up the business support challenge set by my hon. Friend. He is absolutely right that if we want to see more people from deprived communities setting up businesses, we need them to have the support. I ran three businesses, at least one of which was successful, so I know how important business support is for people when they first set out on that path. It gives them the huge array of knowledge necessary.

When people become a new business owner, they instantly become the salesperson, the marketing person, the buyer, the legal person and the accountant—they are supposed to have all those skills and knowledge bases. Having someone able to support people and understand the kind of environment that they come from and the kind of challenges that they will face, ensuring that they are given correct guidance on the process, is incredibly important business support.

In recent years, in particular in the absence of Business Link, we have seen that business support tends to collect where most businesses are, so the areas already doing well and growing well are pretty well provided for with business support networks, but in areas such as my hon. Friend’s on the exterior of cities, or even more so in small towns and rural areas, business support networks are much more spread out and patchy. As a result, we tend to find most businesses being set up in exactly the areas that are already performing best, and the fewest businesses being set up in the very areas that need them the most. I support what my hon. Friend is attempting to do with the project that he has set up. I make the wider point that his project is perhaps providing a road map for some of the ills that face our country more broadly. That is a challenge that the Labour party will be enthusiastic to take up.

I congratulate my hon. Friend again on his excellent contribution and on the work that he is doing. I support his approach and, even more than that, the need for broader devolution in tough times. He provides a road map that gives us all food for thought about some of the challenges that face a future Government. The principles that he has set out for how Nottingham North can be developed would be listened to by a sensible Government in a much broader context.

--- Later in debate ---

[Toby Perkins]

Just before the Minister moves on, I welcome what he said a moment ago. Does it reflect a slight softening of the Government’s approach to careers guidance that suggests that they now recognise its value on the ground and face to face? Is he saying that they recognise that that sort of careers guidance should happen, particularly in areas of greater deprivation and, if so, are we likely to see that change of approach more generally across the board?

[Nick Boles]

I thank the hon. Gentleman for asking that question because it allows me to remind him and other hon. Members of the Government’s announcement just last week of a new careers company. That company is specifically charged with identifying those areas of the country—sadly, too many—where, frankly, the headline duty on schools to ensure the provision of independent advice and guidance for young people, to inform their choices both of qualifications and for further progression in the education system and into the world of work, is not being properly met.

Schools need to provide that guidance—it is extremely explicit that they should—although we have tried not to be too prescriptive about how they should do so. When any of us visits a good school, of whatever kind, in whatever community, we find that it provides that guidance. It is not, therefore, something mysterious to those running schools, but unfortunately not all schools do it. There are different ways of doing it; it is not necessarily the case that every school will want to employ its own full-time careers advisers or work-life coaches—it may be that schools will want to work with some of the many social enterprises and charities that do such work. But it is clear that, for schools and communities facing the very particular, deep and deeply entrenched challenges that schools in the constituency of the hon. Member for Nottingham North face, it is right to look to try to support that kind of very specific project to employ work-life coaches; of course, that particular project will have to prove itself and have benchmarks and a data review to see whether it has had an effect. If other schools choose to use their direct schools grant, which we have been able to protect despite the cuts elsewhere in public expenditure, they will not hear any criticism from me.

I turn back now to the disadvantaged learners pilot. I am looking vaguely at the officials in the box to see whether that is something over which I have more influence, as I do not know, but I suspect my influence is still none—one of the great discoveries on becoming a Minister is how little power one has, not how much. However, again, I say that I cannot think of a better place for that money. To be honest, the figures that the hon. Gentleman has shared with us make it quite clear that it is hard to think of a place where learners are more disadvantaged than in Nottingham North. So again, if the project proposed and being worked on by the local economic partnership and Rebalancing the Outer Estates is able to meet the criteria, I will be a strong enthusiast for it.

I want to respond to one final specific point. The hon. Gentleman said that he felt that the reform of qualifications—he himself acknowledged that that was much needed—with its winnowing out of soft and unproductive qualifications, had caught up some courses and qualifications, particularly those related to employability skills, that he thought had value. If he, or indeed anyone else—it is a general invitation—writes to me with specific details about a qualification that they think was valuable, and can provide evidence of how, I am always happy to have another look. The qualifications he is thinking of were probably removed for a reason, but that does not mean that every such decision is always right or was made when all of the evidence was available. Certainly no decision is ever for ever.

Finally—in this season of good will, I do not wish to test anyone’s patience, Mr Davies—I will reflect on the general points that the hon. Gentleman made about the nature of engagement in areas such as his. He referred to his own long-standing support for localism. That was the first thing that brought us together, before I was elected to this place, and I share his support for it. I know that he welcomes the progress the Government have made with local growth deals, city deals, local economic partnerships and, most interestingly of all, the recently announced agreement with Greater Manchester that will see a substantial devolution of powers and budgets to the new combined authority, not least in the areas of skills and employability. I hope that that is just the first of those moves. I know that my colleagues will be looking forward to receiving proposals from other areas of the country and I will certainly be happy to lend my support to any proposal for Nottingham, led by the hon. Gentleman, to be a candidate for receiving further powers of that sort.

Oral Answers to Questions

Toby Perkins Excerpts

Thursday 20th November 2014 Commons Chamber

[Matthew Hancock]

The hon. Gentleman is absolutely right. The 22,000 firms that have received start-up loans have been supported, but the new British Business Bank, something that we have not had before, has supported £2.3 billion of financing, a lot of it to the scale-up firms that he is talking about. Ultimately, we need a strong banking system. After the chaos the banking system was left in, we have been turning that around with stronger regulation. Banking balance sheets are starting to improve and move in the right direction, but it has taken an awfully long time to turn the mess around.

[Toby Perkins (Chesterfield) (Lab)]

As we head towards small business Saturday, which enjoys the support of the entire House, one group of small businesses that will be feeling better supported and be looking forward with more optimism are the nation’s tied pub tenants. The run-up to Tuesday’s vote saw the Government mired in confusion, as last-minute changes and amendments were proposed and dropped with alarming speed. Will the Minister tell the House what steps he will be taking to ensure that this important change is delivered in a way that works for everyone who cares about Britain’s great pubs?

[Matthew Hancock]

We are considering and reflecting on the will of the House as it was expressed this week, but be in no doubt that it is this Government who support pubs and publicans more than possibly any Government before: the first cut in beer duty in decades, two cuts in beer duty, and support through ensuring there is community support for pubs. We will not rest in our support for British pubs.

Small Business, Enterprise and Employment Bill

Toby Perkins Excerpts

Wednesday 19th November 2014 Commons Chamber

[Matthew Hancock]

The hon. Gentleman is dead right about that and he anticipates my next paragraph. We have also strengthened measures to support prompt payment, acting both to increase transparency, so that when companies do not pay on time that is made clear, and to strengthen public sector prompt payment so that the sector can lead by example. I am grateful for that intervention.

We have also included a new clause on home businesses to remove the incentive, dating from a very old Act of Parliament, for landlords to prohibit tenants from operating a business from home. Home businesses are the hotbed of enterprise; 70% of new businesses are started at home, and we want to make it easier for that to happen. We have also strengthened support for the early-years pupil premium to help three and four-year-olds from less well-off backgrounds by amending the Bill to enable Departments to disclose to local authorities information on eligibility, while ensuring that unlawful disclosure of such data continues to be an offence.

Questions were raised in Committee about the scrutiny of complaints handling procedures in the financial services sector, so we have introduced a measure to require the independent complaints commissioners to produce an annual assessment of complaints handling. That will ensure that processes are fair and accessible to all complainants, including small business.

Finally, on pubs, the Government have listened and responded to the concerns about the burdens the measures would place on family brewers and removed these smaller companies from the scope of the code during the passage of the Bill. Yesterday, we saw the House express its will, and we will reflect on that vote during the Bill’s further passage.

[Toby Perkins (Chesterfield) (Lab)]

Is the Minister not being a little disingenuous to suggest that the Government have listened to what the Committee said, because they voted against the Committee on the family brewers issue and indeed yesterday they tabled another amendment to try to defeat the will of the House on that matter? Is not the truth that the Government have realised this is a battle they cannot win and they have given in?

[Matthew Hancock]

No. As the hon. Gentleman knows, no amendments were moved yesterday on family brewers. We will reflect on the vote on the larger pubcos and the mandatory free-of-tie option as the Bill continues its passage in the other place.

--- Later in debate ---

[Toby Perkins]

I echo the Minister’s thanks to everyone who has contributed to the surprising and interesting passage of this Bill. I thank my shadow ministerial colleagues, my hon. Friends the Members for Edinburgh South (Ian Murray) and for Hartlepool (Mr Wright), and all the other members on our team who have contributed to the valuable scrutiny of some very important measures. The Bill posed a number of questions and challenges for the Government, and I look forward to investigating and exploring the extent to which they have been delivered.

I also thank the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), for her work—the Minister did not get the opportunity to thank her in his contribution—and all the other Members who contributed to an interesting Committee stage.

When we first saw this Bill, it was our strong belief that it was jammed full of missed opportunities. It confronted many of the big questions that people in our constituencies raise. I am talking here about late payments, zero-hours contracts, the minimum wage, insolvency and how our insolvency regimes works, and how we can provide more support to parents in the form of child care. It also addressed this key question of the relationship between pub companies and their tenants, and the Government’s role in all that.

On Second Reading, I said that this House had the chance to pass a small business Bill that did not miss out on many of those key opportunities, and I must say now that we did rather better than I expected, especially on the subject of pub companies. We can be satisfied that, as a Committee, we made progress in some of those areas. What we need is not soundbites on a long-term economic plan, but a Government who deliver on that plan and support a skills-based economy in which people go to work knowing that they can afford to pay their bills at the end of the working week. We want real investment in high-quality apprenticeships and good relationships between businesses in which we can all have confidence. I am talking there about the thorny subject of late payments and the relationship between pub companies and their tenants. This Bill leaves this House having missed out on a whole score of opportunities, but it is none the less stronger than it was at the outset, so the Committee and indeed the whole House must take great credit for that.

Labour has demonstrated real leadership in supporting small businesses through the course of this Bill. The fact that the Government agreed with the spirit behind many of our amendments, but not the specific wording, suggests that we were indeed on the right lines. I am glad that we managed to secure some concessions from the Government in a few of those areas, and the Bill is much the stronger for it.

[Mr Jim Cunningham]

I am sure my hon. Friend will agree that the test of this Bill will be in its implementation. We want to see what happens with things such as low pay and zero-hours contracts. We hear fine words in the House, but it is what happens out there that is important, because there is a great deal of insecurity at the moment.

[Toby Perkins]

My hon. Friend makes an excellent point. He is absolutely right. Let me take this opportunity to say that he is a fine MP, and I know that because he is my father’s MP. My father speaks very warmly about his contribution. The last point my hon. Friend made was typical of him. He is speaking up for a city, with a varied post-industrial economy and a proud manufacturing history. Its university is one of the most important in the country, and a massive employer in his constituency.

[Mr Cunningham]

I thank my hon. Friend for paying such a compliment to Coventry. In the last recession, during the Thatcher years, we lost thousands of jobs in the motor car trade. We learned a lesson from that, because we diversified. More importantly though, we still have the development centre for Jaguar Land Rover and the university technical college, which is due to take off any day now.

[Toby Perkins]

My hon. Friend is absolutely right to trumpet the manufacturing excellence of his city and Jaguar Land Rover. We are delighted that Mike Wright from JLR is producing a review for the Labour party, as he is a much-respected figure. For our economy to work in the long term, it is incredibly important that we have a real skill base. I am glad that my hon. Friend raised that point. I am also pleased that he talked about the lessons that we learned from the industrial vandalism of the 1970s which that had appalling consequences for his city. None of us will forget the song “Ghost Town” that was written by the Coventry band The Specials. It reflected precisely that sense of desolation when industries disappeared. He is right to say that the city has learned lessons from that. To repay the debt, we must ensure that we never make the same mistakes again, which is why Labour is coming forward with an economic strategy that is based on skill and on competing with high-wage and successful world economies. We are not even attempting to be part of this race to the bottom or to scrap with the developing world on who can be the cheapest employer. What we are saying is that we need to look again at the way that our economy works.

[Mr Cunningham]

Interestingly, when Coventry city council joined with the university of Warwick to set up a business park, we were heavily criticised by the then Conservative Government. Two years down the road, it is clear that it was the greatest thing since sliced bread. Creating business parks was the way to go, and we did it in Coventry.

[Toby Perkins]

I could not agree more. That is an example of how Government and industry can work together to build the high-skill, high-wage economy that we want, which is in stark contrast to the kind of economy that has developed under this Government. My parents worked at Warwick university, and if we compare the size of that university in the ’70s, when I first came to the area, with its size today, we see the real difference that investment can make.

[Gordon Birtwistle]

Surely the hon. Gentleman agrees that the advances in apprenticeships and high-tech skills that the coalition Government are delivering represent progress from the previous 15 or 20 years. The number of apprentices is approaching 2 million, and many companies in the aerospace, automotive and oil sectors have jumped on the fact that we need such skills to be delivered. Does the hon. Gentleman accept that progress has been made, or is he still thinking back to the days of Thatcher 30 years ago?

[Toby Perkins]

I accept that some progress has been made. There was a real rebirth in apprenticeships over the second half of the previous Government’s time in office and the current Government have said a lot about apprenticeships. However, I was disappointed that they did not support our amendments on apprenticeships, and people will feel short-changed because the Bill represented a real opportunity for the Government to take substantive steps on apprenticeships.

The hon. Gentleman is right to point out that many employers recognise the importance and value of apprenticeships. However, the number of under-19 apprenticeships is falling, and there has been a big increase in the rebadging of programmes that were previously known as back-to-work schemes as apprenticeships. I hope that the hon. Gentleman does not mind me saying that he was the oldest new Member of the 2010 generation. Older workers are incredibly important, as is demonstrated by the vigour with which he performs his tasks, and no one would describe him as an apprentice, but many older workers with a huge amount to offer our economy are being classified as though they are apprentices.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The hon. Gentleman talked about the need to tackle the problem of low-wage jobs. Today’s report by the Office for National Statistics indicates that workers in Wales earn an average of £473.40 a week, whereas the UK average is £518 and the London average is £660.50. How would a future Labour Government tackle that wage inequality?

[Toby Perkins]

The hon. Gentleman makes an important point. I am glad that Members can cite important statistics by the ONS in the Chamber, given the importance of our having statistical accuracy which we have heard about.

On the hon. Gentleman’s specific question, we have a commitment on the living wage for businesses involved in major Government contracts, as well as to increasing the minimum wage to £8 by 2020. We also have a broader commitment to a skills-based economy in which we can create jobs that deliver wages that people can live on, as ultimately that is what will make the biggest difference to increasing wages, rather than the use of Government regulation as a silver bullet.

The small business community took pleasure from the arrival of a small business Bill. We give the Government credit for bringing forward a Bill with the words “Small Business” in its title, as such businesses have been overlooked in recent years. However, sadly, the opportunity to include in the Bill many of the measures that we proposed to benefit small business has passed us by. Provision on late payments is a classic example, as the Government had a real opportunity to support a late payment plan that would ensure that the onus to pursue payment—eventually through the courts, but initially through invoicing—was removed from small businesses that are owed money. Despite the sensible evidence that the Committee heard from the hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile), among others, about why small businesses do not pursue their big business customers, the Government did not support our measure, which was backed by the Forum of Private Business and the Federation of Small Businesses, and would have been a significant step forward. However, on a more positive note, the Government talked yesterday about how they could strengthen the prompt payment code and ensure that businesses with payment terms of longer than 60 days would not be considered to be prompt payers.

--- Later in debate ---

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before the hon. Member for Chesterfield (Toby Perkins) considers giving way, I must point out to him that this is an extremely short debate, that he has had plenty of time to speak over the past two days, that many Members in the Chamber have not spoken on the Bill at all in those two days, and that he has spoken for longer than the Minister. However, I leave it up to the hon. Gentleman; he has the floor.

[Toby Perkins]

Of course I take your guidance, Madam Deputy Speaker, and I shall attempt to crack on but, as we said yesterday, the programme order gives us a pathetically short period of time to debate the Bill.

[Matthew Hancock]

rose—

[Toby Perkins]

I shall give way in a moment.

Indeed, the hon. Member for Huntingdon (Mr Djanogly) tabled amendments, but he did not even have the opportunity—

[Matthew Hancock]

rose—

[Toby Perkins]

I can see you, but I am saying something at the moment. The hon. Member for Huntingdon wished to move an amendment—

[Madam Deputy Speaker]

Order. This is not the moment for discussing the programme order. We have very little time left in which to consider this important Bill, and the hon. Gentleman must stick to his Third Reading points—briefly.

[Toby Perkins]

I think that that rather makes my point, Madam Deputy Speaker.

At the start of the Bill’s passage, our objectives were clear—[Interruption.] The Minister for Business and Enterprise is getting angry now. I appreciate that he has had a pretty difficult couple of days, but he should have been apologising last night not to the Prime Minister, but to all the publicans he was trying to get in the way of and all the people he has let down. He turned up late to the start of the Bill’s proceedings in Committee and its passage has been a shambles. If this is his Churchillian way of taking measures through Parliament, he should have spent a little more time at the knee of the Chancellor of the Exchequer, as he might have learned a little more.

[Matthew Hancock]

You are an embarrassment.

[Toby Perkins]

Frankly, the right hon. Gentleman is the one who ought to be a bit embarrassed.

Let me continue by talking about pub companies. The right hon. Gentleman was not in the Chamber for much of yesterday’s debate, but had he been, he would have realised why we were able to convince people that the Government’s proposals on pub companies did not go nearly far enough and that real change was needed. It is a matter of tremendous pride that we were able to convince hon. Members on both sides of the House to express their will in support of the market rent only option. The Minister’s attitude and the approach that he is taking demonstrate how the Government have lost all the arguments on that. I am glad to see that they are not going to try to bring the family brewers back into the scope of the measure, even though he is wrong to say that no amendment was withdrawn yesterday. A series of amendments were withdrawn yesterday that would have attempted to bring the family brewers back in. I hope he reflects carefully before attempting to change in another place something that was the will of this House.

[Tom Blenkinsop]

On a slightly different note, I wanted to raise one factor that was highlighted to me. There has not been one speech or one single contribution from a Scottish nationalist during the entire—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. That is not a point for Third Reading. I asked the hon. Member for Chesterfield (Toby Perkins) to be brief because there are people who have had no chance to speak in this debate. I trust that what the Chair says will be listened to.

[Toby Perkins]

My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) was making an important point, but I accept your guidance, Madam Deputy Speaker.

We have come to the end of the Bill. We look forward to it coming back here. It has been strengthened in respect of prompt payment and includes the market rent only option and a pubs code that the industry has demanded for many years, but we have not seen serious action on zero hours. We have seen a Government at the fag-end of their time in power doing the least they could on the question of zero hours, which shows their lack of commitment to dealing with the issue. None the less, the Bill leaves Report stronger than it arrived, and the House should be very proud of that.

Small Business, Enterprise and Employment Bill

Toby Perkins Excerpts

Tuesday 18th November 2014 Commons Chamber

[Jo Swinson]

The hon. Gentleman could recognise and welcome the fact that the Government have responded to the concerns he raised and have moved on the issue, but he has chosen not to, given his comments about colleagues in the Department, with which I wholeheartedly disagree. We must ensure that we consider those concerns, but they were raised not only by his colleagues, but by my hon. Friend the Member for St Austell and Newquay (Stephen Gilbert), who was a member of the Committee, and by Opposition Members concerned about the issue.

[Toby Perkins (Chesterfield) (Lab)]

That is a fundamental part of this. The Government lost the vote in Committee, and now they say that the Bill will go right through to Third Reading as it is, but that they have some vague idea of doing something about the matter in another place. As we have been through Committee and are now on Report, that does not give this House much opportunity to debate whether we are happy with these eventual changes.

[Jo Swinson]

We have between now and 4 o’clock to have that discussion. What I have clearly set out is in line with what the hon. Gentleman wanted in Committee, which was for smaller companies to be excluded. As I have said, he made the very reasonable and rational point that there were some companies—this deals with the intervention from my hon. Friend the Member for Bedford (Richard Fuller)—that had in excess of 400 tied pubs, for example, and it might seem strange to people that such companies would not be covered. We listened in Committee and now propose that the threshold should be 350 tied pubs, rather than 500. I think that it is a positive thing that the Government have listened to the views of hon. Members and responded accordingly.

[Toby Perkins]

For the benefit of the House, can the Minister clarify how many businesses she believes will now be brought into scope that would not have been previously?

[Jo Swinson]

Three further businesses would fall into that category. It is obviously a fluid issue, because companies buy and sell pubs all the time, so that might change in future.

--- Later in debate ---

[Jo Swinson]

The point of a consultation is to explore the issues and, if necessary, to make changes to the Government’s proposals in response. That is exactly what we have done. The parallel rent assessment responds to some of the concerns expressed in the consultation about the initial ideas that we had outlined. It is right that the Government should be flexible enough to respond to a consultation. If the Government go into a consultation with a set of plans and come out of the consultation with exactly the same set of plans, that means either that the plans were perfect—sometimes that may be the case—or that the Government refuse to listen. That was the point of the consultation on this issue.

My hon. Friend makes the point that there was great support in the consultation for a market rent only option. He is right. The Government recognise that. Although I appreciate that he will be disappointed that that will not culminate in the Government accepting his new clause 2, it gives a great fillip to campaigners who have worked on this issue and shows that the Government are serious. We think that the parallel rent assessment approach that we have outlined will deliver the “no worse off” principle, which we should all be able to agree is what we want for tenants. We will make sure that with the further power, the market rent only option is still on the table if, for any reason, the parallel rent assessment proposal does not deliver the intended outcome.

[Toby Perkins]

I will not dwell on the fact that the Minister is suggesting that a consultation is a success if the Government change their view and conclude that something that no one was asking for is the right answer. The industry is desperate for certainty. If we come out of the process proposing another review in two years which might change the whole landscape yet again, does the Minister agree that we will have failed to give the industry the certainty it requires?

[Jo Swinson]

We recognise that a significant number of companies appreciate the beer tie. For many tenants and companies it is a model that works well, as Members on all sides would agree. Therefore, we do not want to undermine it. There is a danger that that could happen under the market rent only option. Equally, I understand that many people advocate that as a market-based solution to deal with the issue. We are trying to forge a way forward that will have the confidence of the industry and will allow the market rent only option to be introduced two years after commencement of the Bill if a review finds that the parallel rent assessment is not working. It is clear that the “no worse off” principle is paramount and needs to be delivered. We believe that the parallel rent assessment will deliver that, but if it does not, we do not want to have to introduce another piece of primary legislation. We want the Government to be able to act swiftly.

--- Later in debate ---

[Jo Swinson]

I would like to correct the hon. Gentlemen’s characterisation of what is happening. He is saying that this is the market rent only option but with a two-year wait. To be absolutely accurate, it is a power for the Secretary of State to introduce the market rent only option after a period of two years if a review finds that that is necessary. That is not exactly the same thing. It is important to put that on the record.

Throughout this process, the Government have been engaging with companies and with individuals. The market rent only option was extensively covered and discussed within the consultation process. I have had very many such discussions with companies over the course of the past 18 months. As was put to us forcefully on various occasions, some large pub companies will not welcome this and are very opposed to it. At the same time, we recognise the issues that have been raised in successive BIS Committee reports about the tenants who are suffering and the need to do something about it. We think that our parallel rent assessment is a proportionate and sensible way forward that will deliver for tenants, but we are keen to make sure that if that does not happen we do not end up at this stage again; we need the ability to act swiftly to introduce a market rent only option.

[Toby Perkins]

Let me try to clarify this. In the last few moments we have discovered that there is to be a two-year review before fundamental change to the industry, leading to two years of uncertainty. Is the Minister saying that she has discussed a whole series of things over 18 months but has not spoken to anyone within the industry about the new development that she is presenting to us today?

[Jo Swinson]

I am saying that we have had plenty of negotiations and discussions about all the different options, but specific round tables have not been reconvened with the industry since the Committee stage. We know where the industry stands on this. My officials are in regular contact with the industry and with campaign groups, who have been making their cases fervently. Many Members represent tenants and also have pub companies and family brewers in their constituencies. Ministers have had many discussions with those hon. Members on behalf of their constituents who have raised these issues over the past couple of weeks since the Committee stage. Indeed, we also had such extensive debates in Committee. There has been plenty of consultation.

--- Later in debate ---

[Jo Swinson]

The review was always built into the process, because we wanted to look at how the measure was working. What is new is the introduction of the power to introduce a market rent only option, and when that proposal goes before the other place, supporting documentation, such as impact assessments, will also be submitted. Clearly, different quarters have opposing views on what it will mean: some say it will be excellent for business, while others say it will result in concerns for business. People will not necessarily concur and agree about what the exact impact will be, but the Government will produce the documentation to go alongside that amendment when it is tabled in the other place.

The Government’s technical amendments—amendments 34, 35 and 55—deal with the particular issue of franchises. Clause 40 already makes it clear that tied pub agreements are in the scope of the pubs code where tenants pay some sort of fee, such as a turnover fee, rather than rent. Such agreements are often called franchise agreements and it is right that they are covered. The same potential for the abuse of a tie exists, and if franchises were not in scope there would be a sizeable loophole by which companies could evade the code.

Amendments 34 and 35 therefore ensure that franchises are covered by clause 42, which refers to rent assessment and rent review arrangements, which the Secretary of State may rule as void or unenforceable. Amendment 55 provides the Secretary of State with a power to define parallel rent assessments in regulations so that we can ensure there is appropriate flexibility in the approach to cater for franchise pubs. That will allow the final design of parallel rent assessments to take account of further engagement with the industry and public consultation, and through that we will ensure that those assessments are available to all tied tenants of large pub-owning companies.

Amendments 40 and 56 ensure that agreements where the tenant is tied for some or all alcoholic drinks are still covered, even when the tenant does not purchase those drinks from the pub-owning company. We are aware of some franchise agreements where the tenant does not technically purchase drinks from the pub-owning company. The tenant is still contractually obliged to sell those drinks on behalf of the pub-owning company and cannot source them elsewhere, so the amendments are important to avoid a loophole in the legislation.

The Opposition’s amendment 5 seeks to clarify that franchise agreements are in scope of the legislation. I absolutely agree with that view and hope the hon. Member for Chesterfield will be reassured by the Government amendments, which make that crystal clear and address the point by ensuring that no loopholes are being created.

Amendments 38, 39 and 47 to 53 seek to ensure that tied agreements are covered by the protections of the pubs code, whether the tenant occupies the pub under a tenancy or under a licence to occupy. This is another measure to ensure that all tied tenants are protected. Amendments 36, 37, 42, 46 and 54 are technical clarifications to ensure that the provisions of the Bill apply to pub-owning companies and any subsidiary companies they may own.

Finally, amendment 57 provides that all regulations under part 4, other than regulations under clause 61(1)(c), are subject to the affirmative resolution procedure, which, given the sensitivity surrounding the issues and the interest in them, is absolutely appropriate. I hope the Government amendments will be supported and that hon. Members on both sides of the House will be reassured by our commitment to make further changes in the other place in order to address any concerns.

[Toby Perkins]

It is always a singular pleasure for this House to gather to discuss what we can do to support our great British pubs, which are crucial institutions, bedrocks of our community and vital economic and social hubs, as well as really important employers, particularly of women and young people—two groups who are underrepresented in the workplace. Pubs and brewers also make an incredibly important contribution to the economy as taxpayers and employers, and our communities take tremendous pride in these institutions. The industry is watching this debate with tremendous interest and concern, in the hope that we in this place will do justice by everyone involved in it.

The Government are creating a spectacle by changing the Bill as we speak. These are incredibly important issues, but the Government’s attempts at debating this part of the Bill are rather like attempting to mount a moving bus: the moment we think we know what we are going to discuss, the debate suddenly focuses on something completely different. It is a complete and utter shambles.

[Duncan Hames (Chippenham) (LD)]

I am conjuring the image of the hon. Gentleman mounting a moving bus. On the new clauses and amendments under discussion, however, is it not the case that he himself intends to move the bus? Is that not the very purpose of our having a debate in this place?

[Toby Perkins]

If the hon. Gentleman is talking about the amendment we tabled and that the Government voted against and that they then adopted only to drop again, his description is rather uncharitable. He is right to say that the Government should listen to consultations and follow the right process for a Bill, but on Friday the Government tabled new amendments to undo amendments that were voted on in Committee and now, without any discussion or notice, they have come to the debate and said, “Actually, we’re going to drop the amendments we tabled on Friday to the things that were voted out of the Bill a couple of weeks ago. The Lords can talk about them, but Members of Parliament will not have the opportunity to vote on them.” I do not think that is any way to run a whelk stall, much less a really important industry about which we feel so passionately.

It is to Parliament’s credit that it has debated and researched the issue of pub companies with incredible diligence. The issue and the industry are incredibly complicated and this Parliament has attempted to strike a fine balance that best meets the needs of the industry with minimum disruption. However, at a time when Parliament should be reflecting with some pride on its contribution to this debate, I think that the way in which the Government are operating leaves everyone unsatisfied. There are Government Members on both sides of the argument—some think the plans go too far while others think they do not go far enough—but I do not think that the way in which the Government are operating the process of the Bill gives anyone any confidence that they know what they are doing.

The Minister for Business and Enterprise made a fleeting visit to our debate on the programme motion a few moments ago: he popped in to tell us that everything was going swimmingly and that there was plenty of time for debate, and then he dashed out again. We are told that he raced around last night attempting to convince Conservative Members not to vote with the hon. Member for Leeds North West (Greg Mulholland) and the other 90 Members who are supporting new clause 2.

--- Later in debate ---

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Surely at the very kernel of any amendment is the fact that we are losing pubs every week right now. As a consequence, the Government clearly need to focus much more on that aspect of the problem, so that it does not continue to recur, as it very regularly does in all our constituencies.

[Toby Perkins]

I am grateful to my hon. Friend for making that point and precisely expressing the passion which so many of us feel for the pubs in our communities. It is precisely because so many of us are concerned about the changing face of the pub trade in our communities that the issue of the contribution of pub companies to pub closures has been so fiercely debated. It is because so many of us believe that the model under which pub companies operate is the cause of many of the pub closures that the Opposition have brought this matter to the House on many occasions, and many other Members have made that case. My hon. Friend is absolutely right that this debate is all about the strength of the industry, but it is also about having a sense of what exactly is being done to support it, and the question of pub companies is a key part of that debate.

I suspect that much of this debate will be about what divides Members, but there is real value in reflecting on what we are all agreed about, including the fact that this Government Bill contains provisions for a pubs code. The very fact that we are debating an issue that for so long seemed destined to elude this Parliament is a tribute to the dogged work not just of the Business, Innovation and Skills Committee, but of Parliament itself. Today still has potential to be a great day for this Parliament.

In reflecting on the contribution that Parliament has made on this question, notwithstanding my reservations about how the Government are handling this incredibly important debate, I want to pay tribute to the many hon. Members whose work has brought us to this point. In no particular order, those who deserve great credit include the hon. Member for Mid Worcestershire (Sir Peter Luff) and my hon. Friend the Member for West Bromwich West (Mr Bailey). They have both chaired the Business, Innovation and Skills Committee, which produced diligent research on this issue in 2004, 2009, 2010 and 2011.

In 2011, the Select Committee finally came to the conclusion that the industry had had enough time to get its house in order and that the time had arrived for a statutory code with an independent adjudicator, open market rent assessments and a free-of-tie option. It is disappointing that it has taken more than three years to get from the Select Committee’s conclusion to the Bill before the House. It will be an even greater disappointment if we have to move away from the Bill and are told that there will be a further review in two years’ time to debate the whole thing again and decide whether we then need the free-of-tie option. What is more important than anything else is that Members do not let the opportunity to take real action through the Bill pass us by.

I want to acknowledge other Members. My right hon. Friend the Member for Wentworth and Dearne (John Healey) was the pubs Minister who empowered the Select Committee to be the arbiter of when the time for action had arrived. The hon. Members for Leeds North West and for Northampton South (Mr Binley) and my hon. Friend the Member for Easington (Grahame M. Morris) led a cross-party campaign to ensure not only that we had a pubs code, but that it would make a real difference for tenants and create competitive pressure on pub-owning companies to ensure that they offered their tenants a fair deal.

I also want to recognise the Minister’s contribution. Notwithstanding what I said about how the Government have handled this Bill and how she has been badly let down on a Bill that appears to be changing in front of our eyes for what appear to be political considerations, the fact is that she did at least end the prevarication—at least, that is what I wrote down in my speech—that we endured under her predecessors. If this was Prime Minister’s questions, I would be told off for writing my script in advance, but that helps when we are going to be on our feet for a while.

To be charitable for a moment, at least we are here to debate the pubs code. The fact that the Minister’s predecessors constantly pushed for review after review and did not take action, while she came forward to say that there would be something in statute, is a source of tremendous credit. It is a shame that she has unfortunately been forced to come to the Dispatch Box to propose a review in two years’ time, with all the uncertainty that that will create. However, she has at least made an effort to get something on the statute book.

There are many other such hon. Members, but the strength of this campaign has been due to the fact that the push inside the House very much reflects the broad coalition in favour of the measures outside it. The case that we and other hon. Members are making today has been supported by a tremendous range of organisations, almost all of whom come under the Fair Deal for Your Local banner.

Just listen, Mr Deputy Speaker—not that you would ever not listen while in the Chair, but perhaps you will do so with particular attention—to the breadth of organisations that support this case. Such breadth makes the case more powerfully than anything else. The organisations include the Federation of Small Businesses, which does not usually demand regulations or that the business relationship between two parties should be put on a statutory footing; the all-party save the pub group, which is so ably chaired by the hon. Member for Leeds North West; the Campaign for Real Ale and the Fair Pint campaign; the trade unions Unite and the GMB; and the Guild of Master Victuallers and the Forum of Private Business.

There are also two support groups, Justice for Licensees and Licensees Supporting Licensees, which were set up to support licensees affected by what had happened in their relationship with the pub company. Such licensees have often been bankrupted or are facing bankruptcy as a result of having chosen to pursue their dream of running a pub. Who would have thought that a support group needed to be set up for people who have chosen to pursue a particular profession or work in a particular industry?

In some ways most significantly of all, the Punch Tenant Network, made up of tenants who run pubs owned by Punch Taverns, has come out in support of new clause 2. Those tenants’ business success hinges to a large degree on the strength—or weakness, depending on how they see it—of their relationship with their pub company, and they are saying that the hon. Member for Leeds North West and 90 other Members are right that the code should be put on a free-of-tie basis. If the network believed the scare stories that the industry is putting about—that the proposed changes will lead to an increase in pub closures, less choice for punters or increased unfairness in the industry—it would hardly be calling on hon. Members to support the new clause.

The House has heard in recent years from literally dozens of Members who are desperately trying to support pubs in their communities that are under threat—all victims of the great pubco scandal.

[Richard Fuller]

The shadow Minister has listed many people who have been involved in the debate on one side or the other. Now, at the moment when the Government are reversing the policy that they had in Committee, does he think it odd from the point of view of protocol that the Secretary of State for Business, Innovation and Skills is not here to explain that change in Government policy?

[Toby Perkins]

The hon. Gentleman has a valid point. We have all received a huge number of representations from members of CAMRA; from pub licensees; from many different organisations, some of which I have just listed; from the pub-owning companies themselves; and from the British Beer and Pubs Association. They have all been lobbying us in support of, or in opposition to, what they thought would be in the Bill. The Minister, whether by her own choice or because of the hand she has been dealt today, has had to say to the House, “Forget all the speeches that you have prepared and all the letters and considerations you have received on this complicated issue, because we are ripping up a lot of the amendments you thought you would be voting on. We’ll discuss some of them later; and on another one, we thought we might lose, so as a bit of a sop we’ll come back to it in two years if there’s still a problem.” It is a shambolic way to present a Bill.

I wish to be conciliatory and work constructively on the issue, but it reflects no credit on the Government or the House when people come to watch our debate, or watch it on television, and suddenly discover that the issues they have been lobbying their Member of Parliament on have been totally changed. It is an absolute shambles. I have some sympathy with the view that the Secretary of State should have been here to explain why the changes have been made. The Minister was unable to tell us whether he has been involved in the discussions—maybe she will want to clarify that now.

However, this is the point that we have arrived at, and I think we all recognise that when the Government are under pressure they will sometimes take the opportunity to discuss with Members in the run-up to a debate what form amendments will take. Let us make no mistake, though—this debate was scheduled for next week, so the Government could have had another week to consider what should be debated. For reasons best known to them, they decided to bring the debate forward and table last-minute amendments. Now, on the day of the debate, they stand up and say, “Forget all those amendments, we’re not doing any of that”. The hon. Member for Bedford (Richard Fuller) may well be right to apportion some responsibility to the Secretary of State, but either way, something that should be a source of pride to the House is now a source of embarrassment. I deeply regret that, because this is an important issue on which there is considerable agreement.

[Bill Esterson (Sefton Central) (Lab)]

Does my hon. Friend agree that all the ins and outs, ups and downs and unknowns of what the Government will end up bringing forward, either here or in the House of Lords, show why it is important that we support new clause 2, which 91 of us, including me, have signed?

[Toby Perkins]

I do. You will be glad to know, Mr Deputy Speaker, that I will come on to new clause 2 in more detail in a moment, but I basically agree with my hon. Friend’s point. His constituents in Sefton, who feel strongly about their local pub industry, will be glad to know that he took part in debates in the Public Bill Committee and has signed new clause 2.

That brings me nicely on to the contributions that a variety of Members from throughout the House have made on the subject in recent years. The hon. Member for Salisbury (John Glen) told the House about the landlords of the White Horse in Quidhampton, alleging that Enterprise Inns had

“signed them up to a lease on a false prospectus and…made their business completely uneconomic and unsustainable”.—[Official Report, 13 June 2013; Vol. 564, c. 476.]

The hon. Member for Meon Valley (George Hollingbery) has confirmed that the closure of the White Hart in South Harting was caused by

“unsustainable rent demands...from Enterprise Inns”.—[Official Report, 13 June 2013; Vol. 564, c. 476.]

The hon. Member for Romsey and Southampton North (Caroline Nokes) wrote to Enterprise Inns to inform it that the Abbotts Mitre public house in Chilbolton was

“under threat largely due to unrealistic rents and changes in terms and conditions”.

The hon. Member for Bristol North West (Charlotte Leslie) wrote to Enterprise Inns asking it not to close the Lamplighters in Shirehampton, and the hon. Member for Cheltenham (Martin Horwood) has bemoaned Enterprise’s decision not to save the Little Owl. As a Sheffield United fan I am not generally in favour of saving the Owls, but in this case it would have been important. He said that

“a big company has failed to recognise a pub’s value to the community.”

The hon. Member for Pudsey (Stuart Andrew) was also concerned with saving the Owl, this time the one in Rodley, whose threatened closure he blamed on

“the mounting costs imposed by the building owners, Enterprise Inns”.

The hon. Member for Bromley and Chislehurst (Robert Neill) said of the sale of the Porcupine in Mottingham that the public were

“incensed that their right to bid for the pub has been bypassed deliberately by Enterprise Inns and LiDL”.

[Richard Graham (Gloucester) (Con)]

The hon. Gentleman is giving a terrific roll-call of his party’s MPs who are apparently now standing up for pubs, but he completely forgets what happened to pubs over the 13 years of the Labour Government. Thousands of them closed all over the country under their regime. This is an extraordinary moment of amnesia, is it not?

[Toby Perkins]

I think the moment of amnesia is the hon. Gentleman’s, because all the Members I have listed so far are Conservative Members—in fact, many of them are sat behind him. I was not seeking to make a party political point. Sadly I do not have in my speech—as it is currently drafted, although we know these things are subject to change almost on the spur of the moment—a reference to a contribution that he has made to saving a pub, but he might well want to tell us either now or sometime in the future about what he has done to support pubs in his local area.

[Richard Graham]

The hon. Gentleman will be interested to know that I launched a strong campaign some months ago to save the Ridge and Furrow in Abbey. It is an ongoing process, and I am confident that we will win in due course. I am grateful to him for giving me the opportunity to make that point, so that the residents of Abbey ward in Gloucester can hear it loud and clear.

[Toby Perkins]

I am glad I was able to facilitate that magic moment.

I have not finished listing members yet. The right hon. Member for East Devon (Mr Swire) told a packed crowd that he would be joining the campaign to save the Red Lion in Sidbury, which Punch Taverns was planning to sell.

The list of pub-saving parliamentarians is long. My right hon. Friend the Member for Tooting (Sadiq Khan) joined the campaign that successfully saved the Wheatsheaf, and my hon. Friend the Member for Westminster North (Ms Buck) was busy trying to save The Clifton and The Star. My right hon. Friend the Member for Southampton, Itchen (Mr Denham) campaigned to save the Bittern, and my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) joined the Legh Arms campaign for community pubs—the list goes on. Eventually, however, comes the time to put up or shut up, and many people outside this House will be looking to see what we do.

[Mark Pritchard (The Wrekin) (Con)]

Does the hon. Gentleman agree that one way we can all support local pubs, whether in urban or rural areas, is by supporting the Government’s planning reforms, and allowing pubs—whether tied or not—to expand restaurants or develop bed and breakfasts? We should back those pubs to grow their businesses on brownfield sites wherever they can.

[Toby Perkins]

The hon. Gentleman mentions planning and whether pubs can expand, and it is important that pubs have that opportunity. However, the biggest planning issue currently facing pubs is the fact that big supermarkets can come in and change a pub into a supermarket without any reference to planning law. In my constituency we have a significant campaign to try to save The Crispin—I was not going to mention it, but the opportunity now arises. A pub that currently operates perfectly successfully under Enterprise Inns will be closed because the lease has been signed to Tesco. Indeed, Labour’s planning proposals would increase restrictions on pubs that are turning into supermarkets, and deal with many of the concerns that I have already raised. Hon. Members gave many examples of pubs that are being closed to become supermarkets.

[Andrew Griffiths]

The hon. Gentleman has treated us to a tour of the country and listed some 30 or 40 MPs who have done something to save pubs. It has all been very interesting, but we have not heard what he will do to save pubs. Rather than packing his speech with such examples and filling time, will he get on with telling us what he is going to do?

[Toby Perkins]

Many contributions that hon. Members have made are important to their constituents and they will consider it pretty disrespectful for the hon. Gentleman to say that I am filling time. I do not think I am—this is a significant issue. We can all get the press release out or attend packed public meetings, and we can all rail against unfairness and talk about how a pub company sold a false prospectus and failed to consider the needs of the community, but today is the day for talking to finish and for us finally to act. People will reflect on whether, when given the opportunity to act, Members of Parliament stood up in the Chamber to complain about the situation or actually took action.

[Mark Pritchard]

The hon. Gentleman is being generous with his time, but earlier he did not address my question. I was not asking about pubs that have not succeeded and therefore a change in use to retail has been suggested to the local authority; I was asking about successful pubs that want to expand further, to build bed and breakfasts, hotels or an extra restaurant. The question is about successful pubs and whether the hon. Gentleman and Labour Members support the Government’s planning reforms on permitted development rights and change of use, for example, to make those successful pubs flourish even more.

[Toby Perkins]

I take issue with the idea that the only pubs that are being closed and turned into supermarkets are unsuccessful ones. The Crispin in Chesterfield is a successful pub that makes good profits, but it does not offer Enterprise Inns the 25-year lease that Tesco is willing to offer, and that is why it is being shut down. Pubs that are turning into supermarkets should not necessarily be described as unsuccessful.

I thought that I had responded to the hon. Gentleman’s point, but I will do so again. Of course we are supportive of steps to support larger pubs, and we think that is important. The specifics of the Government’s proposal and whether it has implications on the right of a community to have its voice heard on such issues is a matter that my hon. Friends in the communities and local government team will consider at greater length. Of course we support pubs that are successful and want to expand, but we also want to defend pubs that have a future in the community but often fall victim to the vagaries of pub companies’ operations, particularly when pub companies close pubs that are successful.

In response to the hon. Member for Burton (Andrew Griffiths) let me turn to the specifics of new clause 2. When debating pub tenants we are talking about a group of people who often work as many hours as anyone, but who earn less than they could legally be paid by an employer on the minimum wage.

[Bill Esterson]

The hon. Member for Burton (Andrew Griffiths) asked my hon. Friend what he is doing to help, and he was just starting to explain. My hon. Friend supports the market rent only option in new clause 2, so that is exactly how he, and the 91 hon. Members who have put their name to the new clause, are supporting pubs in our communities. When mentioning those Members who have referred to pubs in their constituencies, I hope my hon. Friend also expects them to support new clause 2, as do I.

[Toby Perkins]

I certainly do. The hon. Member for Burton had the unrivalled pleasure of listening to a day and a half of debates to which I made a fairly significant contribution—I appreciate that he cannot get enough of my contributions on pubs, but he has had a significant opportunity to hear my thoughts on the matter.

Pub tenants are those who clean their pub and get it ready for the next day’s trade. They are working at the bar, handling supplier relationships, generally keeping a cheerful presence, wearing the mask, and closing up long after most people have finished work, and all the while they know that the unfairness of their relationship means that the whole day’s work has been for nothing financially. Latest figures show that more than half of tied licensees work for less than £10,000 a year. Indeed, during the recent mini-recess I spoke to three pub tenants in my constituency who run pubs owned by the big pub companies, and none of them was taking a wage out of the business. By voting for new clause 2 and amendment 5 we can take a significant step towards preserving pubs for the next generation, and hardwire fairness into that longstanding business relationship.

Amendment 5 is simple but important and should reassure people who have concerns about these complicated issues. The Minister attempted to say that she believes the Government have found a different way to achieve broadly the same thing, but the specific wording of our amendment leaves a lot less potential for businesses to get out of saying that they are covered. To my mind, there are two ways in which the pubs code could fail to deliver what we want—first if the code is too weak and allows pub companies to comply with it while continuing unfairly to disadvantage their tenants; and secondly if we end up with a code that strikes the right balance for our expectations about the behaviour of pub companies, but is drafted in a way that allows pub companies to exempt themselves, or creates confusion as to who is covered.

Already the big pub companies have attempted to create confusion over definitions. The Government were right to acknowledge that they dropped a clanger with the phrase “tied pubs”, which in their definition is supposed to mean those on a tenanted or leased model in England, Scotland and Wales, although the code would need to be enacted separately in Scotland. The phrase “tenanted, leased” is the type of tenure clearly defined and easily established. We remain of the view that amendment 5 will provide the greatest clarification on exactly who should be covered by the Bill.

--- Later in debate ---

[Richard Fuller]

rose—

[Toby Perkins]

I did not want to take many more interventions because many other Members wish to speak. However, if the hon. Gentleman feels that it would add a huge amount to the debate I will give way.

[Richard Fuller]

The shadow Minister is making an absolutely crucial point. I think he will have heard, as I did, the Minister say that three companies will be captured by the reduction from 500 to 350. Is the shadow Minister aware of what those three companies have done to incur the wrath of the Secretary of State to be included in the regulation?

[Toby Perkins]

I am not sure that I would necessarily accept that we are suggesting those companies are wrath-deserving. We are attempting to create a regulatory framework that is reliable, so that businesses know where they stand. The limit of 500 is arbitrary, as is the 350 limit. I suspect this is more about attempting to save political face than save the actual companies. Suddenly bringing smaller pub companies into the heart of the Bill is seen as an act of bad faith by the industry. Having lost the vote in Committee, and having then voted against almost exactly the amendment that they then attempted to bring back, which, for the avoidance of doubt was the one that is now not being brought forward, is a pretty shabby way to treat an important industry.

Members and the many thousands of CAMRA members who have written to us all in such impressive numbers in the very short period of time during which there has been an awareness of new clause 2 will be aware that the Opposition supported a free-of-tie option for pubco tenants. [Interruption.] Goodness me, this is a magical moment for the House! I can now say I was there when the Minister for Business and Enterprise, the right hon. Member for West Suffolk (Matthew Hancock) actually attended proceedings on his own Bill. I can tell my grandchildren, “I was there!” He is here, Mr Deputy Speaker. Goodness me.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

And I can tell the hon. Gentleman that he is running out of time.

[Toby Perkins]

I have just been waiting for the right hon. Gentleman to arrive, Mr Deputy Speaker. The debate barely seemed worth getting on with until he was here.

The people who have written to us in such numbers will be aware that we have supported the introduction of a free-of-tie option for pubco pub tenants at the date of renewal ever since the Business, Innovation and Skills Committee concluded that the industry had had its last chance and that the time was right. That was back in September 2011, and in debates in January 2012, 2013 and 2014 the Opposition sought the support of the House for that viewpoint. It will therefore come as no surprise to Members that it remains the view of Opposition Members that the time for the mandatory rent-only option is now.

I am delighted that a cross-party group of Members has tabled new clause 2. In a time of great cynicism with politics, the fact that Members of four different political parties have added their names to it shows that there are things more important than naked party political advantage. It shows that this House can work in the finest traditions of democracy in a collective voice in support of our pubs, not because there is necessarily party political gain but because it is the right thing to do. I pay tribute to all those who added their names and to everyone from any party who votes for it today.

I look forward to the contribution of the hon. Member for Leeds North West (Greg Mulholland). I hope he considers that yet another review is not the right step for the industry. It appears to be a political solution to a political problem at a time when a serious industry needs a serious response from this place, and needs to be able to conduct its matters with real certainty knowing what it will face in the future. I think that anyone bought off by the review and the suggestion that the issue will be looked at in two years’ time if today’s measures are not considered to have worked was never really serious about supporting it in the first place. The House should vote in support of new clause 2 and repeat the unanimous support it gave to the motion in the January 2012 Backbench Business debate.

In conclusion, I said on Second Reading that the Government had introduced a Bill that expected too much of family brewers and not enough of pub companies. I also said that I hoped the Bill would leave the Committee and Report stages in a stronger shape than it arrived in. Already, thanks to the hard-won amendment brought by the hon. Members for South East Cornwall (Sheryll Murray) and for Burton (Andrew Griffiths) and others, it could do that. Supporting the two other substantive amendments before us today would mean that we were finally on the way to repaying the debt the House owes to Britain’s publicans.

By supporting our amendment 5 and ensuring that large pub-owning businesses with tenanted, leased and franchised models are exempted, by continuing to reject any amendments that bring family brewers under the scope of the Bill and by backing new clause 2 to ensure a free market solution in this most important of industries, with an industry regulator, the House can unite in support of Britain’s pubs and ensure that the pub sector enters a new, better and more optimistic period free from the restrictive practices that have been allowed to dominate, with faith in the market to choose who is offering a fair deal. That will allow our pubs to offer one of the greatest of all Britain’s great inventions, the simple pint of ale, for many hundreds of years to come. I commend our amendment to the House.

[Greg Mulholland]

I am delighted to speak at this important stage of this important Bill. I commend my hon. Friend the Minister and her colleagues for their work in bringing measures forward not only on pubs, which is an area of particular interest, but other positive measures.

I will concentrate my comments on new clause 2, which I am delighted to introduce on behalf of myself, as the chair of the all-party save the pub group and co-ordinator of the Fair Deal for Your Local campaign, the hon. Member for West Bromwich West (Mr Bailey) who is the Chair of the Business, Innovations and Skills Committee, and my hon. Friend the Member for Northampton South (Mr Binley), the president of the save the pub group and a member of the BIS Committee. Unfortunately, he cannot be here today because he is becoming a freeman of Northampton. I am sure we all congratulate him on that. I am also speaking on new clause 2 on behalf of the 91 colleagues who put their names to it and the many others who have said they will support it.

Over the past few days, in the limited time between Committee and Report, more than 8,000 e-mails were sent by CAMRA members up and down the country and several thousand by members of the Federation of Small Businesses, licensees, organisations and trade unions, urging the Government to take the sensible, obvious, market-based action to resolve the issues that have been a problem in the leased and tenanted pub sector for too long.

So that Members are clear, new clause 2 is the cross-party solution from the Business, Innovation and Skills Committee introduced first by the hon. Member for Mid Worcestershire (Sir Peter Luff), then ably continued by the hon. Member for West Bromwich West (Mr Bailey), and supported by all colleagues on the Select Committee at all stages in this and the last Parliament. It is also backed by the FSB, the Forum of Private Business, the Pubs Advisory Service, Justice for Licensees, Licensees Supporting Licensees, CAMRA, Licensees Unite the union, the Fair Pint campaign, the Guild of Master Victuallers, the GMB and now the Punch Tenant Network, which represents Punch tenants and is giving an honest and a very different picture of the Punch model from that which Punch Taverns has been trying to communicate to MPs.

To remind the House, the problem is a simple one, despite the complexity of the sector: the large companies went on a reckless acquisition spree, buying up pubs using borrowed money, and got themselves into grotesque amounts of debt—more than £4 billion in the case of Punch Taverns and more than £3 billion in the case of Enterprise Inns—and with nothing to stop them charging unlimited prices for beer and unlimited rents, both of which have gone up and up and up. The beer tie, which was always operated responsibly, has been abused. It used to offer lower rent in exchange for higher beer prices and genuine support for small breweries, but the pub company model does not do that.

What, then, is wrong with the proposals as they stand? I commend my right hon. Friend the Secretary of State and his colleagues in both coalition parties for having the courage to bring forward the statutory code of practice that the Select Committee first recommended so powerfully and clearly in 2009. As drafted, however, the proposed statutory code will not deliver the Government’s two key principles: fairness and the principle that a tied licensee should be no worse off than a free-of-tie licensee. The problem is that there is no direct mechanism to stop the double overcharging that I have mentioned.

As I have already said, not a single respondent to BIS’s extensive consultation thought that the Government’s proposed parallel rent assessment was the right solution, whereas two thirds said that the Select Committee was right. The assessment would need considerable participation from the adjudicator—in fact, the proposal confuses the adjudicator with the rent assessor, as the adjudicator is there to adjudicate disputes, not to survey and set rents. Without the direct mechanism, the basis on which the adjudicator is set up is currently weak.

Furthermore, the Government made the fundamental mistake that the shadow Minister has pointed to already. The Fair Deal for Your Local campaign and the Select Committee are clear that this measure must not apply to smaller companies—those with fewer than 500 pubs—because that is not where the majority of the problems are. A “large pub company” must be defined as any company with 500 or more pubs of any type, with the measure applying to its leased and tenanted pubs only, not to tied pubs.

The issue of tied pubs is a legal minefield, as the Government have realised, with the absurdity that Harry Ramsden’s, a fish and chip shop restaurant, could have been categorised as a “tied pub”. There are different forms of the tie in the UK—some free houses opt to be tied to a brewer in return for soft loans and business support—and how would we categorise “part tied” and “fully tied”? It is a nonsensical way to categorise. We need to define a “large company” simply as a company with 500 or more pubs, some of which are tenanted and leased pubs, and then apply the measure to the tenanted and leased pubs only. In that way, there would be no question of the large managed companies, such as Wetherspoon’s and Mitchells and Butlers, being caught any more than there would be of a restaurant chain being caught.

At the moment, the Bill and code do not deliver what the Government have set out, courageously, to deliver. Do not take my word for it; take the word of one of the two companies lobbying particularly vociferously against the code. In its own prospectus for potential investors, dated 6 October 2014, Punch Taverns said it did not believe that the reforms proposed would materially adversely affect the Punch group. In other words, it would be business as usual, and it would continue to charge excessive beer prices—often 70% more than hon. Members could get from the brewery—and set entirely unregulated rents.

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[Greg Mulholland]

I will put on record strongly that there are many small pub companies and breweries that run their pubs exceptionally well and, interestingly, are doing very well and are expanding rather than contracting, but here is the rub: I speak directly to my Conservative coalition colleagues. The question I put to them is this: “Do you believe in competition? You all say you do. If you do, you should not be afraid of allowing brewers of all sizes to compete.” The reality is that small microbrewers do not have adequate, fair and direct access. They cannot turn up at thousands of pubs and say, “We would like to sell our beer to you because we believe it is good.” They are prevented from doing that.

Let me tackle the issue directly; this will be controversial. SIBA, the Society of Independent Brewers, has a direct delivery scheme that used to be part of the solution to the pubco closed shop. It is now part of the problem; many small independent brewers have contacted the save the pub group to say that. Incidentally, there was a U-turn in SIBA’s position. SIBA was a member of the Independent Pub Confederation, which supported the market rent only option. Seemingly without consulting its members directly, SIBA suddenly decided that it was against it; that is what SIBA members have told me. It no longer represents the majority of microbrewers on this key issue.

[Toby Perkins]

I wish to reinforce the hon. Gentleman’s point that new clause 2 is precisely about a free market option, and that to defend the status quo is to defend a restrictive practice, which should be absolutely anathema to any Conservative MP; if they vote against the new clause, they will be voting for a closed shop and against an open market.

[Greg Mulholland]

I share the shadow Minister’s bafflement about that, and I am delighted that we have a strong group of Conservative colleagues who, having heard the reality of the situation from their local branch of the Campaign for Real Ale, their local pubco publicans and their local Federation of Small Businesses branches, are fully supportive.

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[Greg Mulholland]

I am afraid that the hon. Gentleman is simply wrong. I can send him the e-mails I have received from microbreweries—cider as well as beer producers. They are desperate to get more direct access, so that they can knock on the door of the pub 2 miles down the road and say, “We believe our beer is great and that your customers would like to drink it. We would like to sell it to you at our brewery price, rather than you having to go through the SIBA-directed delivery scheme, which has a considerable mark-up, or get on a pubco list,” as the pubco outrageously demands an incredibly low price that many microbrewers simply cannot afford to brew at, and then marks up prices by 60% to 70% to sell the product to their own so-called business partners. Is that seriously a model that Conservative MPs can support? I remain baffled by that.

Let me remind you, Mr Deputy Speaker, of the reality of the pub company model. As I look round, I see hon. Members who have family and smaller brewers in their constituency and want to support them; I respect their position, and I am at one with them on that, which is why the Fair Deal for Your Local campaign has always said that the provision should apply only to companies with over 500 pubs.

Let us look at the reality of what the big pubcos have done to skew the traditional tied tenancy model. Punch Taverns, a pub company that does not brew a single pint of beer, made a profit over 10 years—these are its figures from its own annual report—of £2.271 billion, all from on-selling beer to its own so-called business partners. Frankly, in any other country, that would be called a protection racket. It is extraordinary and unjustified, which is why it is right for us to try to deal with it.

If Members do not believe that this is an anti-competitive model—I know that some colleagues behind me do not, for their own reasons—they should listen to former Punch licensee Alison Smith, a Conservative activist who has e-mailed all colleagues today to tell of the reality of the pubco business model, and how it stifled her and her partner, preventing them from being able to create a successful pub. Even though they were doing well and improving their business, the draconian terms of the pubco lease meant that that was simply not possible.

What do hon. Members think these large pub companies are? They are not pub companies at all; unlike the traditional brewers, these are people who do not really care about our pubs or our brewers. There was a huge rush in the City when people saw this “get rich quick” scam, a way to inflate the value of companies artificially by basing it on what they could overcharge their own tenants by—their tenants for 25 years on these outrageous, new, long-term, fully repairing and insuring leases.

Let me give the example of what happened to the excellent Sir John Barleycorn in Hitchin. The community, I am delighted to say, applied to use powers introduced by this coalition Government to apply for community value status; they applied for the pub to be an asset of community value. There were objections. The most vociferous one said:

“the current use of the premises as a public house…does not itself further the social wellbeing or social interests of the local community and therefore is not land of community value.”

Who said that? Was it someone living down the street who was anti-pub? No, that objection was from the so-called pub company Punch Taverns, which was seeking to get rid of this pub and sell it off after forcing out the licensees. That is what is going on.

If there is any doubt that this model is closing pubs, let me read out the stark evidence of the figures. These figures, collated by CGA Strategy for the British Beer & Pub Association and CAMRA, showed that there was a much greater drop in the number of leased and tenanted pubs than in the number of free houses between December 2005 and March 2013. The number of non-managed—that is, tenanted and leased, mostly tied—pubs fell by 5,117, whereas there was a fall of only 2,131 free-trade pubs. All pubs have issues—there has been a difficult recession—but the difference is clear and stark.

We could also look at the pubco trade association’s own figures—figures that it has frankly been keeping very quiet about. Its own figures show that over 10 years, the number of non-managed—in other words, tied, tenanted and leased—pubs decreased by 8,000, while the free-trade sector expanded by 1,600 pubs. I repeat: that is its own figures. Between 2008 and 2012—just four years—the two giant pubcos, Enterprise Inns and Punch Taverns, collectively disposed of over 5,000 pubs—a third of all their pubs in just four years. Can any Member seriously stand up and say that this is a business model that is working for pubs?

[Toby Perkins]

The hon. Gentleman is hitting on a really important point. These big pub companies are often heralded for employing so many people, but they, of course, inherited these pubs and employees, and what they are doing over a long period is laying people off and shutting pubs, not the opposite.

[Greg Mulholland]

Absolutely. The debt level is still in the billions, and the hon. Gentleman will be aware of the extraordinary restructuring that has left Punch shareholders owning only 15% of the company. Meanwhile, the Punch tenant network expressed its serious concern about the effects on them of the company’s instability.

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[Jo Swinson]

We have had a lively debate on the various amendments before us. The hon. Member for Chesterfield (Toby Perkins) made the point that today has the potential to be a great day for Parliament. Given all the detailed discussions we have had—that is what we do on Report—getting into the specifics on thresholds, family brewers and new clause 2, I think it is easy to lose sight of quite how far we have come and what a real change this Bill will mean for tenants who have been arguing for such a long time for action to be taken to improve their situation.

We have heard hon. Members make contributions of various lengths—significant, in some cases—and we have heard more make interventions, on both sides of the argument, about new clause 2, and we have heard speeches from those who powerfully oppose it. I want to respond to some of the specific points made by the hon. Member for Bedford (Richard Fuller) about family brewers and the Government’s proposed threshold of 350. He was right that earlier I confirmed that three companies would be included. An important fact to put on the record is that none of those three is a family brewer. Those who have been arguing for the exclusion of family brewers can rest assured that, with the reduction in the threshold from 500 to 350, that exemption will remain, as I think was the will of the Committee, which the Government have listened to and recognised should be reflected in the Bill.

I take issue with the suggestion that those companies are all small businesses. Of the three that will be included by changing the threshold from 500 to 350, one has a turnover of £758 million a year and some 16,000 members of staff. I do not think that it is accurate to say that we are necessarily talking about small companies in that sense. The hon. Member for Heywood and Middleton (Liz McInnes), who is new to the House, asked about the brewery JW Lees in her constituency. I am happy to confirm that with fewer than 350 tied pubs, it will not be affected by the measures.

In his comments about family brewers and the changes we have introduced, my hon. Friend the Member for Bedford indicated a certain lack of confidence that the commitments made here by the Government will be implemented. We have set those out in clear words, which will appear in black and white in Hansard if he chooses to read it tomorrow. The amendments will be made in the other place but this House will have the opportunity to vote on them as well. The situation is not necessarily good versus evil, as he outlined it. I began to worry that he was being a bit uncharitable towards me at one point, until he compared my right hon. Friend the Business Secretary to Saruman, who was a pretty evil and nasty piece of work. I do not think that comparison is warranted, but perhaps I should just be pleased that my hon. Friend did not reach for Sauron instead.

New clause 2, which was introduced by my hon. Friend the Member for Leeds North West (Greg Mulholland), seeks to introduce a market rent only option requiring pub-owning companies with more than 500 pubs of any description and one or more of those being a tied pub to offer their tied tenants the right to go free of tie. It is widely accepted in the industry that tied tenants should be no worse off than free-of-tie tenants. It is one of the key principles underpinning the Government’s proposals and goes to the very heart of the measures we have set out in this Bill. There was an attempt in Committee to take that principle out—a probing attempt, apparently, but none the less an attempt—by some of the Back Bench who have spoken today. It is a vital principle that underpins the impact that we are trying to have.

[Toby Perkins]

The hon. Lady to some extent predicted what I am going to say. People who listened to the hon. Member for Burton (Andrew Griffiths) might want to reflect on the fact that he attempted to introduce an amendment in Committee that would have removed the principle that tied tenants should be no worse off than tenants free of tie. It may be valuable for hon. Members to consider in that light everything else they have heard from him.

[Jo Swinson]

Indeed. I am glad that that amendment did not ultimately form part of the Bill, as that principle, which we have set out from the beginning, is crucial. We looked at various means of achieving it. One of the things we consulted on was whether the market rent only option should be included in the pubs code. We looked carefully at whether to introduce that. It might seem a straightforward way of strengthening the negotiating position of tenants, because if they are faced with a compulsory free-of-tie option alongside market rent only, pub-owning companies will arguably work much harder to offer a tied deal which represents a fair share of risk and reward.

The freedom to choose the supplier and the likely lower costs of supply could mean that free-of-tie agreements offer greater potential profits for tenants wanting to maximise the benefit of those terms. Those would be the most experienced and entrepreneurial tenants. It would not necessarily help others, whereas the parallel rent assessment will do that. It was interesting from the consultation, and almost unique in such a polarised policy area, that concerns were expressed by people on all sides of the debate about the impact of introducing that provision and the consequences it could have on the tied model as a whole. There would be some uncertainty and unpredictability, especially in relation to pub-owning companies and how they would respond.

The parallel rent assessments that we are introducing provide a way of making sure that the prime principle that a tied tenant should not be worse off than a free-of-tie tenant can be enacted and made real. That is why we are proceeding with the arrangement.

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[Jo Swinson]

I can give an assurance that the review will be rigorous and that, in response to it, there will not only be this power for the Secretary of State, but, if he finds that there is insufficient protection for tenants as a result of the parallel rent assessments and the system is not working as it should, a requirement for him to bring forward the market rent only option.

[Toby Perkins]

The Minister is attempting to straddle a very difficult line. She claims that we should believe that the measures proposed by the Government today are likely to work, but if not there is an alternative process that is her party’s policy for which she will argue going into a general election. Why do we not just do away with all that nonsense, give the industry some certainty, and support new clause 2?

[Jo Swinson]

The hon. Gentleman is right to say that it would be Liberal Democrat policy. Clearly, we are in a coalition Government rather than a Liberal Democrat Government, and people will make their decisions when it comes to the general election in which we will all be campaigning and voting in a few months’ time.

We have before us a Bill that will improve the lives of tenants and makes real the principle that a tied tenant should be no worse off than a free-of-tie tenant. The hon. Member for Bedford suggested an analogy with “The Lord of the Rings”. Perhaps I can posit an alternative scenario. I think that what we have had on this issue over the past few years is a rather intrepid fellowship—a group including MPs from all parties in all parts of the House, tenants, Select Committees, business groups, and campaigners. I will leave hon. Members to make up their own minds about who among them would be deemed to be hobbits, elves, dwarves or men—[Interruption]—and, indeed, who has been Gandalf at their head. The members of this intrepid fellowship have campaigned hard. In some ways, they probably feel that they have been on an epic journey, battling against the unfairness that has been repeatedly highlighted in Select Committee reports.

We need to recognise that the result of that campaign by all those individuals has been to achieve a great success. What we have is proposed legislation with a statutory code and a pubs adjudicator who can make that code a reality and ensure that if it is not abided by there can be arbitration, investigations, and ultimately, if necessary, penalties with real teeth. We also have the parallel rent assessments to make sure that the system bites. Now, going even further, we have the power to introduce the market rent only option if all that is ultimately unable to work. That is a huge success for campaigners who have worked on this issue for many years. I think that people should welcome what has happened.

I hope that my hon. Friend the Member for Leeds North West will recognise that success, see how far he has come, and think twice about putting his new clause to the vote. In the Bill before us, we have a solution to the issue identified in the Select Committee reports and a way to make sure that if that does not work we have the ability swiftly to implement a market rent only option. I commend this part of the Bill to the House.

Question put and agreed to.

New clause 6 accordingly read a Second time, and added to the Bill.

New Clause 2

Pubs code: market rent only option for large pub-owning businesses

(1) The Pubs Code shall include a Market Rent Only Option to be provided by large pub-owning businesses in respect of their tenants and leaseholders.

(2) A Market Rent Only Option means the right of the tenant, or leaseholder, of a pub owned by a large pub-owning business, to be offered such tenancy or lease in exchange for an independently assessed market rent paid to the pub-owning business and, for the avoidance of doubt, not thereafter being bound by “a tie”, meaning an agreement meeting, in whole or in part, Condition D as defined in section 63(5) of this Act (obligation to buy from the landlord, or from a person nominated by the landlord, some or all of the alcohol to be sold at the premises).

(3) For the purposes of this section, the definition of Condition D in subsection (2) is to be interpreted to include an obligation to buy or contract for goods and services other than alcohol.

(4) For the purposes of this section, the definition of a “large pub-owning business” is a business which, for a period of at least six months in the previous financial year, was the landlord of—

(a) 500 or more pubs (of any description); and

(b) one or more tenanted or leased pub.

(5) The Pubs Code may include provisions to permit a brewery which qualifies as a large pub-owning business to continue to require that specified brands produced by that brewery (required products) are sold within its tenanted or leased pubs—provided that such tenants and leaseholders are free to purchase such required products from any supplier.

(6) The Pubs Code shall contain provisions requiring that the offer of a Market Rent Only Option to a tenant—

(a) at the point of lease, tenancy contract or other agreement renewal, or at rent review or five years from the date of the previous rent review;

(b) when the large pub-owning business gives notice of, or imposes, (whichever is the earlier) a significant increase in the price at which it supplies products, goods or services (falling under subsections (2) or (3)) to the tenant;

(c) when a large pub-owning business implements, or gives notice of, a transfer of title;

(d) when a large pub-owning business goes into administration; or

(e) upon an event outside of the tenant’s control, and unpredicted at the time of the previous rent review, that impacts significantly on the tenant’s ability to trade.

(7) The terms of an offer under subsection (5) shall include provision for a 21 day period of negotiation, commencing from the tenant giving notice of an intention to pursue a Market Rent Only Option, in which the large pub-owning business and the tenant may seek to negotiate a mutually agreeable Market Rent Only settlement.

(8) Following the negotiation period under subsection (7) there shall follow a 90 day period of assessment. In this period—

(a) an independent assessor shall be appointed with the agreement of both parties by joint private instruction and on the basis of an equal apportionment of costs; and

(b) under arrangements and criteria that the Adjudicator shall establish, such an assessor shall be—

(i) independent of both parties; and

(ii) competent by virtue of qualification and/or experience.

(c) if the business and tenant cannot agree on an appointee then a person shall be appointed, on the application of either party, under arrangements established by the Adjudicator;

(d) the appointed assessor shall then assess the market rent for the property operating as a pub with no “tie” as defined in subsection (2) and submit to both parties the resulting sum for such a rent; and

(e) at the time of the three month assessment period, the tenant shall have the right to pay no more than the sum determined under paragraph (d) to the pub-owning business and, if previously one party to a “tie” as defined in subsection (2), shall no longer be bound by it.

(9) The Pubs Code shall contain such measures as ensure that—

(a) the Market Rent Only Option is conducted in accordance with timing provisions and procedures, in accordance with RICS guidance, as specified in the Pubs Code; and

(b) large pub-owning businesses are prohibited from acting or discriminating against any of their tenants who choose the Market Rent Only Option.

(10) The Secretary of State shall confer on the Adjudicator functions and powers in relation to the Market Rent Only Option, that include—

(a) determining what constitutes a significant increase in price, as mentioned in subsection (6)(b) in the event of a dispute between tenant and business;

(b) adjudicating in disputes concerning the process or outcome of the market rent assessment; including the power to set the market rent if the Adjudicator deems the process or decision to have been flawed; and

(c) receiving, investigating and adjudicating in relation to complaints made under subsection (9)(b).

(11) The Secretary of State shall make provisions for the implementation of the following measures in this section by regulations amending the Pubs Code. Such regulations shall be made under negative resolution procedure. The Secretary of State may make provisions changing the types of agreement that fall under subsection (2) by regulations. Such regulations shall be made under negative resolution procedure.”—(Greg Mulholland.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

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[Debbie Abrahams]

My hon. Friend speaks from experience. That is certainly the experience of many contractors, and we need to address it.

There is evidence that cash retentions have been used to shore up the working capital of local authorities and tier 1 suppliers. There is a key concern that if tier 1 suppliers become insolvent, the small businesses in the supply chain are at risk of losing their retentions.

I recognise that the Department for Business, Innovation and Skills has said in its construction supply chain payment charter that it wishes to abolish retentions by 2025. My new clause, however, is a stepping-stone towards that by requiring the publication of companies’ policies, practices and performance on retention moneys, reviewing this and subsequently making recommendations about further action to help secure and protect retention of moneys for small businesses—in trusts, for example.

The new clause is timely, with New Zealand considering the requirement for cash retentions to be taken in trusts, and New South Wales in Australia is currently reviewing regulations to that effect. The new clause would enable the Secretary of State to review published information and then issue regulations to ensure that these owed moneys are protected for small businesses.

Moving on to amendment 6, a key issue for small businesses has been the changes made to contract payment terms without negotiation or notice. My amendment recognises that and would require companies to include details of the “circumstances and process” by which payment terms may be amended in the company’s published payment practices and policies. This will prevent ad hoc and unilateral changes from being made to the payment terms, which have again affected the financial viability of so many small businesses.

Amendment 7 looks at the issues around public procurement practices. One major issue identified in my late payments inquiry was that late payment is a cultural issue. Large companies pay small companies late because they can, as I mentioned—they have the power and the small companies do not. We need to change these attitudes, and we need to view late payment as being as unethical as tax evasion. Changing public procurement practices, as identified in amendment 7, provides an opportunity to do so, first, by requiring public bodies to determine the “past payment performance” of potential contractors before any contract is entered into; and secondly, by making the contracts of tier 1 suppliers commit them to pay their suppliers promptly. All the way down the supply chain, there should be a commitment that payments will be made on time.

Although my next topic does not relate to my amendments, it relates to public procurement practices. A report came out today from the Walk Free Foundation on the subject of modern slavery. Although the UK is supported for what it is doing to combat modern slavery, it finds that we are not doing as much as Brazil and the US, for example, in addressing Government procurement practices to stop this happening. I know this is highly irregular, Madam Deputy Speaker, but I hope the Minister is listening so that he can respond and make clear how we will deal with this problem in future Government practices.

[Toby Perkins]

rose—

[Debbie Abrahams]

I have come to the end on that really important point, but I happily give way to my hon. Friend.

[Toby Perkins]

My hon. Friend may be approaching the end, but if I am any judge, I know she is nowhere near the end of campaigning on this issue. She has been a robust and resilient campaigner on late payments, and I know that she was granted an award for her work yesterday by the Federation of Small Businesses. I want to take this opportunity to congratulate her, not only on that thoroughly deserved award, but on the fantastic campaigning work she has done on late payments.

[Debbie Abrahams]

That was very kind of my hon. Friend, and I am grateful to him. I will continue to campaign, because, as I have said, I do not think that the Government’s measures are strong enough. They have been dragged here kicking and screaming; I hope that they will now listen, and will address what are still weaknesses in the Bill.

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[Gordon Banks]

Yes, I am aware of that research, and late payment is a major problem. It is not just a transient major problem, but a constant one, week to week. I have lain in bed at night worrying whether the cheque was going to come in so that I could pay the wages of my staff. That is not a position that any business should be put in, and certainly not because of late payments.

A small business, perhaps a new one trying to establish itself, often finds a degree of comfort in dealing with a larger, perhaps household, name in its business sphere. The saying in my sector is, “You know your money is safe with so and so.” It may be safe but it may also be in their bank all the time and not yours.

We also need to consider the credibility that comes from working with such a customer and the possible opportunities, arising from volume increases, for small business suppliers to be able to renegotiate rates from their suppliers. In my experience, those will more often than not be larger companies. So the small business can find itself sandwiched between a large business customer and a large business supplier, perhaps a multinational company, and being strung out at one end and wrung out at the other. These multinational companies, understandably, have strict credit limits and they will be very quick to stop supply if they are not being paid within 30 days. Within a limited period of time they will remove the small business’s credit facilities, so damaging its credit rating, and reducing its access to key products and, in effect, its ability to pay the bill for which the multinational is awaiting payment.

As we know, the reason for late payment in these cases is often that a large customer fails to keep its side of the deal. I wish to draw the House’s attention to an experience I have encountered a number of times, where large multinationals have been pressing for payment within 30 days for a commodity sold by them to my business and yet that commodity has been sold to another division of the same company and it has no intention of paying within 30 days. Even within the same organisation we may have the supplier pressing for payment within 30 days, the product having been sold to another division in the same company as the supplier and yet it not upholding its part of the bargain and being prepared to pay in 30 days—it just strings you out. So the company wants its money in but does not want to pay the money out. That is just not good enough. The current system of being able to charge interest, at the supplier’s instigation, or being able to apply a debt recovery cost is not adequate and we have to improve these experiences.

[Toby Perkins]

My hon. Friend is making an excellent speech on this important subject. He will probably be aware that in Committee we tabled a worked-through amendment that would have moved the onus from small businesses having to pressure their large business customers for repayment on to the large businesses. Does he agree that the fundamental change we need is for small businesses not always to have the onus on them to pursue their large business customers?

[Gordon Banks]

I absolutely agree with my hon. Friend. It is not morally or structurally fair for a small business to be trying to squeeze a few hundred or a few thousand pounds—perhaps even tens of thousands of pounds—out of a large multinational company. That onus must be shifted away from the small company. After all, the company is only endeavouring to get what it is owed. If the larger customer is made to pay its bills on time, it will take the onus away from the small supplier.

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[Gordon Banks]

I take the right hon. Gentleman’s point. I have asked the Minister to give the issue some thought before he sums up, and I have also said that I do not necessarily think that there will be a simple solution, but I am convinced that there is a way in which this can be developed so that small businesses—in fact, all businesses—can rest assured that 30, 35 or 40 days after they have submitted their invoice, that invoice will not be challenged. Is not 40 days long enough?

[Toby Perkins]

In Committee, we proposed an amendment similar to my hon. Friend’s new clauses. We suggested that there be a period of up to 30 days for someone to register a complaint; after that point, they would be deemed to have accepted the invoice, so that there could not be this constant adding to the payment period.

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[Gordon Banks]

Of course they do. Every £1,000 not received has an impact on whether a business can prove to a possible financial investor, whether that is a bank or anything else, that it is a responsible company with the processes and the people in place to take the business forward. It may well have the people and processes in place, but it may be being stymied by the Tuesday and Friday phone calls to try to get the money that is long overdue.

New clauses 3 and 4 are a step along the way to moving the responsibility to where it should lie, ensuring greater financial impact on those who make late payments, and naming and shaming those who are not signed up to prompt payment practices. I was looking at the prompt payment code website last night. I represent a Scottish constituency, so I did a search on Scotland and I found that 43 businesses there have signed up to the prompt payment code. That level of commitment is extremely questionable. There are hundreds of thousands of businesses in Scotland.

[Toby Perkins]

I agree with my hon. Friend entirely on that. Does he agree that if a prompt payment code allows a business to pay on 90-day terms and if, so long as it meets those terms and conditions, it is deemed compliant with the code, that calls into question the use of the word “prompt”?

[Gordon Banks]

It most definitely does. Prompt payment in my business experience is 30 days. That is fair and prompt payment. In my book, 90 days is not and should not be considered prompt payment. It is a massively overdue payment allowing one business to make its way in the world at another’s expense.

I fear that we have a long way to go, unless the Government listen tonight. I do not think that the Bill really gets us to where we need to be. It does not, in its current form, lift the onerous responsibility from the shoulders of small businesses; it actually empowers the larger businesses in their relationships with small businesses. However, it could be improved if the Government listen and support new clauses 3 and 4.

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[Toby Perkins]

The hon. Gentleman may well think that the proposal would make things worse, but his opinion is not shared by the Federation of Small Businesses or the Forum of Private Business, both of which support our approach. Why does he presume to think that he knows better than those well-respected bodies, whose members tell them that they support our approach?

[Ben Gummer]

I can only speak from personal experience, which is what I have tried to do, to explain why I think it makes sense to go down the Minister’s route and why we would end up with perverse consequences were we to go down the route of mandation. Many small businesses are not members of the Federation of Small Businesses, and the Federation of Small Businesses is not absolutely right in everything it suggests. All I would say is that, in this instance, my own experience is that mandation would have a perverse consequence that would be inimical to the well-being of all small businesses. As a good first step, transparency, as the Government suggest, will create a new environment for businesses, which will change things for the better for people trying to build wealth and prosperity in our nation today.

The shadow Minister intervened on me to suggest that something better could be done. All I will say to him is that, when in government, his party did absolutely zero. They were, if I may coin a phrase, a zero-zero Administration when it came to small businesses. In 13 years, they did nothing apart from put up taxes on small businesses. They did nothing to cut red tape. Labour Members oppose the Minister’s efforts to tackle bureaucracy and claim that they can do better, but that sits a little ill in their mouths. I know that most business people—this is true of almost everyone I speak to in my constituency—think that it sounds a little false, and there is a reason for that: it comes neither from the heart nor from a real desire to do anything right. The difference is that the Minister understands what needs to be done and he is doing it.

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[Bill Esterson]

I do not know how many businesses there are in Scotland, but there are 5 million in the UK as a whole, and it is not too hard, by scaling that up, to calculate that the number signing up to the prompt payment code overall is not very big.

There is support for new clause 4 from across the business community. Phil Orford from the Forum of Private Business has said that it would be

“a welcome addition to the proposals outlined in the Small Business, Enterprise and Employment Bill and would go a long way to reducing the time and cost small firms spend on chasing late payments and allow them to concentrate on growing their businesses and creating jobs.”

Government Members must accept that it is supported across the business community. As my hon. Friends have said, the only way to support small businesses is to make the proposal mandatory to ensure that big businesses pay on time. New clause 4 does just that, and I hope that the House will support it.

[Toby Perkins]

I am in the rather unusual position of speaking to my new clauses and in effect winding up the debate at the same time, but it is a challenge I relish.

There have been some very valuable contributions to the debate. I reiterate my admiration of the campaign on late payments led my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams). She has been a really doughty fighter on the issue, and there is no doubt that late payment is a key factor in holding back small business growth. Suppliers frequently report that it is one of the key hurdles that they face, alongside access to finance, because small businesses do not have the cash flow buffers of their large competitors.

The hon. Member for Ipswich (Ben Gummer) has been forced to leave his place—he arrived in rather a rush and left in rather a rush. Let us hope he is properly dressed when he returns. He said, rather ungenerously, that I was in a lonely position as a Labour Member in having run a small business. However, we all know that my hon. Friend the Member for Edinburgh South (Ian Murray) was a small business owner, as were my hon. Friends the Members for Ochil and South Perthshire (Gordon Banks) and for Sefton Central (Bill Esterson) and many of my other colleagues. And so are several of Labour’s parliamentary candidates, who we hope will be joining us here in just a few months. Conservative Members often try to create the impression that they are the only ones who have ever been in business and that all Labour Members were previously engaged in social work, school teaching or whatever they think is not worthy.

[The Minister of State, Ministry of Defence (Anna Soubry)]

Nothing wrong with that.

[Toby Perkins]

Absolutely right, there is nothing wrong with that. However, the suggestion that none of my colleagues has been involved in the business world does not stand up to scrutiny

The hon. Member for Ipswich described the Bill as a thing of “magnitude”, which was an incredibly generous description. It contains a number of measures, none of which has anything particularly wrong with it, but it is not in any sense a thing of magnitude. It contains small steps in the right direction on transparency, with some positive commitments from the Government— [Interruption.] Oh, he’s back. I’ve just been talking about you. For the benefit of anyone watching on television, the hon. Member for Ipswich has returned. There are positive steps in the Bill on the role that central Government will play by paying people on time, but it is certainly not a thing of magnitude. The steps are relatively minor, and the steps that the Opposition proposed in Committee and have alluded to today on Report would have been far more significant, which was why they enjoyed such broad support.

The hon. Gentleman attempted to say, “The Federation of Small Businesses—what do they know? They might be wrong.” I believe that having more transparency would be a significant step, so he was wrong to say that. Many owners of the 2,500 businesses a year that go bust as a result of not being paid on time will think so, too. It is important to get on record the full scale of the problem that we are highlighting, and to reiterate some of the statistics that my hon. Friend the Member for Oldham East and Saddleworth gave. Figures published by Bacs reveal that Britain’s small businesses now carry a burden of £39.4 billion in overdue payment.

[Ben Gummer]

I apologise for missing the first part of the hon. Gentleman’s speech. He has just characterised what I said in terms that were completely different from what I actually said. He quoted me as saying with reference to the FSB, “What do they know?” That was not actually what I said. Maybe if he reflects on precisely what I said, which was that I thought the proposal could have perverse consequences, he might give a different response.

[Toby Perkins]

Members will be able to check Hansard for the exact phraseology, but I was attempting to paraphrase the hon. Gentleman rather than to quote him. He said, if I remember rightly and can quote him more directly, that the FSB was not always right, or that it was wrong on this issue. He said that he believed he was right and the FSB was wrong on the issue—is that close enough? Anyway, anyone who wants the word-by-word definition can check it in Hansard.

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[Gordon Banks]

Does my hon. Friend share my ambition that new clause 4 does not have to be onerous or deliver any financial problem to the debtor? All the debtor has to do is pay on time, and there is no penalty. It is simple; it puts money back into the economy and oils its wheels. It ensures that small businesses do not totter on a knife edge of survival at the behest of a larger company. There need be no financial detriment to the large company in the new clause.

[Toby Perkins]

My hon. Friend is right. The proposals brought forward in Committee were detailed, and new clause 4 is investigating those ideas. Small businesses have the right to expect to be paid on time, and we should be taking serious steps to support that.

Current provisions in the law are not adequate to deal with the extent of the problem, and the Late Payment of Commercial Debts (Interest) Act 1998 was an important step. The EU late payment directive that the Government introduced in 2012 was broadly built on the same principles. They are valuable as far as they go—the prompt payment code is valuable as far as it goes—but they are clearly not adequate. The idea that more transparency, welcome though it may be, will be a silver bullet or even a significant step towards a resolution, is entirely wrong.

The Bill includes some provisions on interest charging. For reasons that other Members have highlighted, many small businesses feel that they are not able to charge interest because of the impact it would have on their relationship. This was a real opportunity for the Government to take hold of the issue and tackle the problem once and for all. Our amendments in Committee should have won the support of the Committee and the Government, because they had potential and I look forward to promoting them as part of a Labour party business manifesto in 2015. Small businesses will recognise that the measures we proposed were a step forward and that the measures in the Bill are a much smaller step.

The Government have dragged their feet on this issue over the past four years: the EU late payment directive was introduced at the last possible moment and the steps proposed at this juncture are small. We were disappointed after the very successful Back-Bench debate on late payments secured by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) and the hon. Member for South Basildon and East Thurrock (Stephen Metcalfe). In the run-up to that debate the previous Minister, the right hon. Member for Sevenoaks (Michael Fallon)—he was great; he used to attend debates and everything—said that he would write to the FTSE 350 and warn businesses that they would be named and shamed if they did not sign up to the prompt payment code. Unfortunately, because that had not happened by May 2014—almost two years on—I tabled a series of written parliamentary questions to find out if companies were due to be named and shamed. We were told that it was no longer Government policy. It ceased to be the policy of the Government before it had ever actually become the policy of the Government. The Government’s record on this is not strong and to describe it in the terms that the Minister did was generous in the extreme.

New clause 3 would take this issue out of any Minister’s hands by ensuring that the very biggest businesses would know that they would all be named and shamed publicly if they did not comply. It would also provide an opportunity for Ministers to name and praise businesses that paid on time and complied. That carrot-and-stick approach is valuable as it would ensure that businesses that played by the rules and ensured that their customers were paid on time would not be tarnished with the same brush as those that gamed the system. It would ensure that the Government had a focus on signing up businesses to the prompt payment code. There was some talk previously about the number of people signed up to the prompt payment code. In the last two years of the Labour Government 978 businesses signed up to the code, whereas in the first two years of this Government just 204 did—a real difference in the number signing up. Our proposed changes will ensure that companies comply with the spirit of prompt payment, not just the letter of the code. I hope Members will give the new clause the support it deserves.

New clause 4 was tabled because the Government’s draft legislation fails to grasp the central problem behind the late payment crisis. Ultimately, despite the extent of the crisis, small businesses are often reluctant to report late payment as they rely on the custom of businesses for their very existence. Just 10% of businesses have considered using late payment legislation, despite 22% of businesses ending a relationship with a customer because they could not be paid on time.

Previous policy initiatives have focused on increasing prompt payment from public sector bodies to contractors. In the March 2010 Budget, the last Government took significant steps to tighten the rules on late payment by the public sector, and this Government are looking to take further steps in that direction, which we welcome. However, the FSB is clear that late payment by private sector businesses is the major problem, and although it is right that government should put their own house in order first, the challenge for policy makers is to shift the burden away from small businesses going out on a limb to ask for interest payments to their being paid as a matter of routine. Ministers are wrong to say that transparency, welcome as it is, will solve the problem. Yes, businesses might know they are dealing with a company that often pays late, but none the less, because of how their businesses are constituted, they might be utterly dependent on that relationship and be unable to do anything about it.

We are clear about the changes we think should be made to alter the balance of power in the late-payment relationship, and our proposed review would be an opportunity to investigate the matter in more detail, away from the cut and thrust of a Committee stage, where Governments, for whatever reason, are often reluctant to take forward ideas simply because they come from the Opposition. Our review would be an opportunity to explore an idea that we think has real merit. Our proposed quarterly statement would list all payments made late to suppliers without a formal query having to be made. It would also confirm whether interest has been paid to compensate the supplier and set out a payment plan to ensure it is paid promptly where it has not. As a package, those measures would be a significant step forward, with greater potential than any other to change the relationship between small businesses and their suppliers in the context of late payments.

My hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) spoke to her new clause and amendment. Amendment 6 would require companies to include details of the circumstances and process by which payment times can be amended and details of whose permission is required, which would prevent individual directors from making rash, unilateral or ad hoc changes to companies’ payment policies. Her new clause 1 addresses the issue of retention money in the construction industry, where it is common for firms to withhold payments to protect against problems with work and/or materials. We think that these proposals are worthy of consideration, and we look forward to hearing what the Government have to say. Many jurisdictions abroad have legislation in place for protecting retention money. It has worked well elsewhere and certainly deserves significant scrutiny.

The hon. Member for Brighton, Pavilion (Caroline Lucas) proposed a couple of amendments, including one on exports. Like the rest of us, she will know that the Government have failed spectacularly to secure the export-led growth they promised us back in 2010. We have the largest 2014 trade gap of any major industrial country, which is a significant issue, particularly in relation to goods, and we believe that the Government should pull their weight in supporting our exporters and that a case can be made for examining the overall role of UK Export Finance.

[Damian Collins (Folkestone and Hythe) (Con)]

I have been following the hon. Gentleman’s remarks very carefully. To touch on what my hon. Friend the Member for Ipswich (Ben Gummer) said, the charging of an 8% levy for late payment might not be a catch-all, because there might be people not paying because they have a legitimate complaint about the quality of the work done who might fear being charged the 8% levy for late payment if they raise a legitimate concern but are not successful. That would be unfair and might discourage people from making reasonable complaints.

[Toby Perkins]

The hon. Gentleman makes a valid point. The Bill, as originally drafted, would have meant that a business that had raised a legitimate concern within 30 days would have been exempt from punishment for late payment. That is a valid concern.

--- Later in debate ---

[Toby Perkins]

I almost wish the hon. Gentleman had been on the Committee. We debated many of these issues and he raises thoughtful questions on it. His would have been a valuable contribution to the Committee. We are referring to something that we are not debating today but, in terms of his question, the invoice would usually become due for payment at the moment the work is completed. If we were talking about a six-week construction project, the moment at which the invoice would start would be once the work was completed. There would then be a period from that point. A late payment penalty would be due 30 days after the invoice was due. In practical terms, on a traditional contract of 30 days’ net monthly, the business would provide the work and present the invoice. There would be 30 days when the payment was due. There would then be another 30 days before any late payment interest was due. There are a number of safeguards in place to try to deal with that.

[Ben Gummer]

Will the hon. Gentleman give way?

[Toby Perkins]

I will give way because the hon. Gentleman made a speech. But if we are going to get into a great deal of detail about something that is not actually in the new clause, I would caution whether that is the best use of our time.

[Ben Gummer]

I understand that, but the hon. Gentleman has just made a point that reveals his misunderstanding of how an industry works. Herein lies the problem; his answer suggests that he fails to understand the way in which payment terms work in the construction industry. Often, invoices are not issued when work is complete. They are done on a staged basis when applications are made and certified by an architect or a quantity surveyor. Often the work is not complete; it is part of a process. It might well be that the work may not have been completed to the satisfaction of the customer, but they will be afraid of raising a complaint because it is not worth the 8% premium, or whatever it might be under the proposal. Herein lies the issue; he proposes legislation the impact of which he does not quite understand. It would have perverse consequences, and he has come back with another clause just to satisfy a particular interest group rather than actually trying to support what the Government are doing.

[Toby Perkins]

That was a bizarre contribution in a number of ways. First, we have said we are going to support what the Government are doing so he was factually wrong in that regard. But saying that by giving a single example of how it might work I was suggesting that that example would always work in every single case is a complete straw man. That contribution did not take us anywhere, so let us move on.

In Committee we tabled amendments that would have required the Secretary of State to initiate an independent assessment of the functions on export finance and how to improve awareness of the body. Unfortunately the Government did not accept our amendments. But the next Labour Government will make it a central mission to boost exports. Within that, there is a role for examining the overall way in which UK Export Finance works, but I would be hesitant at this stage about saying that, on that basis, the amendment of the hon. Member for Brighton, Pavilion should be supported. She may be minded to explore the issue today and consider whether to push it to a future stage.

On amendment 92, we strongly agree with the principle that Ministers should be accountable to Parliament for their performance in supporting businesses, and I accept what the hon. Member for Brighton, Pavilion said about not wanting a series of meaningless measures with things being deregulated just for the sake of deregulation. I also think, however, that having a deregulatory target has some value in ensuring that Governments and their civil servants are constantly conscious of the impact of any proposed new regulations. We thus think the deregulatory target has some value, as I say, although I share some of the hon. Lady’s reservations about how it will work.

Public procurement is a hugely important function of government. Central Government spend about £45 billion a year on the purchase of goods and services, and ensuring that more of that money delivers for the UK economy is one of the most valuable things that any Government can do. We are absolutely behind ensuring that the power of UK Government procurement delivers for the real economy. That is the principle behind our amendment 1, which outlines three areas in which such value can be found for our constituents, constituencies and communities, ensuring that proper reports are made and kept in each of those areas.

There is much good practice around the country coming from various public authorities. The TUC has championed the “one in a million” campaign, which aims to ensure that as far as possible, every £1 million of public spend results in at least one apprenticeship opportunity provided to a young person. A Labour Government would deliver on such principles. We would, for example, require the HS2 project to create 33,000 apprenticeships for young people at no extra cost to the taxpayer. Likewise, Labour’s new immigration Bill would compel multinationals to create an apprenticeship place each time a skilled worker was hired from outside the EU. We should leave no stone unturned in fighting for apprenticeships.

We should ensure, too, that we fight for quality apprenticeships. They should be at or above NVQ level 3, so that every business that takes on someone who has had an apprenticeship will know that they have taken on someone who has had a really significant quality of training. We think there is a lot more to be done to support apprenticeships, and our amendment 1 would take significant steps forward in supporting those apprenticeships and the type of economy that we are looking to create.

On both apprenticeships and late payments, we think that the Government are taking small steps in the right direction, but they could have been far more ambitious and delivered far more for small businesses, apprenticeships and a skilled economy. We hope that the Government will support our amendments, which would enable us to do precisely that. If they do not, they can be sure that a future Labour Government will pursue these themes and make sure that we have the kind of economy in which we can have confidence and faith in the future.

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

We have had a good-natured and largely well-informed debate on these new clauses and amendments.

I shall deal first with late payments. We have heard passionate speeches from Members on both sides of the House on the importance of tackling late payment. I will start by addressing a comment made by the hon. Member for Sefton Central (Bill Esterson), who performed admirably on the Public Bill Committee and made many important interventions. He argued that the current situation in the country on late payment is not acceptable and is not working, and I think he is right. The question is what to do about it.

We consulted broadly on all the potential options surrounding late payments, including many of the options covered by the amendments, and we listened carefully to the responses to the consultations. There was a range of responses, including from those who would firmly regulate all private contracts and from those who did not want any change at all. It is important for us to take steps that will have a positive impact, and to think about the unintended consequences. If we introduce into English law a requirement for a contract to take a specific form, we will remove a freedom of contract that has served the country extremely well for a long time.

We have today heard passionate arguments about the importance of dealing with late payment, as we did on Second Reading and in Committee. We have heard them from my hon. Friend the Member for Ipswich (Ben Gummer) and from Opposition Members. I bow to none in my passion for sorting out the problem of late payment, because the family business in which I grew up nearly went under thanks to it, but let me point to the big picture. The hon. Member for Ochil and South Perthshire (Gordon Banks) argued that there was a moral case, and I agree with that. He also observed that the problem arose when there was a cascade of companies paying late—when, because some paid late, others had to do so, and then others had to as well. I have been at the receiving end of that, as I am sure he has. He is nodding now. The best way to tackle the problem of companies going bust and others paying late is first to establish a stable economy, and then to establish a culture of payment that is stronger and better.

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[Matthew Hancock]

There are 1,700 businesses on the register from across the country as a whole. Of course, this is targeted at the biggest companies because they are typically the ones at the top of the supply chains, but I would be very happy to work with the hon. Gentleman to increase the number in Scotland.

[Toby Perkins]

rose—

[Matthew Hancock]

I want to turn to the campaign that the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) has run over many years, but first I will take an intervention from the shadow Minister.

[Toby Perkins]

Although many people will of course race off to Hansard to catch up on this debate, some, unbelievably, may not. Is it not entirely wrong that a business could have a term of 180 days, pay “on time”—that is, within those 180 days—and be seen as a signatory to the prompt payment code? All we are proposing in new clause 3 is that if they do not pay within 60 days, they should not be considered part of the prompt payment code.

[Matthew Hancock]

There is a lot in what the hon. Gentleman says, and that is why we are strengthening the code and will in future kick out companies that say that they have signed up to the code but then have unreasonably long payment terms, so I think we are basically in the same place on that point.

I wanted to address a couple of points made by the hon. Member for Oldham East and Saddleworth about modern slavery. She has run an admirable campaign on prompt payment over many years, and we have had exchanges across the Chamber before. She has brought a huge amount of pressure to bear on this issue, and has pushed this agenda. I strongly agree with the direction of the agenda, and I agree with her on modern slavery, too. We are determined to work with businesses to ensure that supply chains are not infiltrated by the abhorrent crime of modern slavery. There is a new disclosure requirement in the Modern Slavery Bill, requiring all large businesses to disclose what they have done to ensure that their supply chains are slavery-free. That is an important step forward and takes into account the point she made.

New clause 1 would introduce a power allowing a new reporting requirement on the retention of money, require a review, and provide a further power to act on that review, but we already have a new obligation to report on these practices in this Bill. The transparency measures are at the core of the prompt payment changes proposed in the Bill.

We will seek the views of business bodies during the consultation. We are also aware that retentions are particularly prevalent in the construction industry, as the hon. Member from Scotland said—[Laughter.] The hon. Member for Ochil and South Perthshire (Gordon Banks), as I should have said. We are working with industry to move to a position where retentions are no longer necessary, and I would be happy to work with Opposition Members to push that further.

New clause 3 deals with prompt payment. It would introduce a maximum payment term of 60 days, and also place an obligation on the Secretary of State to write annually to all non-signatory FTSE 350 companies asking them to sign up to the code. I am delighted to say that I commit wholeheartedly to writing to all non-signatory FTSE 350 companies asking them to join the strengthened prompt payment code, and we should continue the cross-party push aimed at getting more large companies to sign up. The new reporting requirement will provide sufficient transparency, which will lead to competitive pressure on companies to improve their payment practices.

[Matthew Hancock]

Absolutely, and I would be happy to work with my hon. Friend on that. There are large private companies that are not in the FTSE. Larger companies, however they are formulated, need to be considered.

New clause 4 also deals with prompt payment. It proposes a review of how the new reporting requirement can be used to ensure the automatic payment of compensation by large companies. This is the nub of the proposal, which we discussed in Committee, that interest be automatically allowed to accrue after 60 days. We consulted on something similar during the consultation, and some bodies were in favour and others were against. Some of the bodies representing small businesses, such as the Institute of Directors, were against the proposal because of the way in which it would change contract law. I therefore do not think that the new clause is necessary, but, like Opposition Members, I want to work to strengthen payment practices. We will resist this proposal today, because we do not think the case for it has been made and we do not believe that the unintended consequences have been thought through. However, we will report back publicly on the findings of further work before the end of this Parliament.

[Toby Perkins]

I am pleased to hear what the Minister has said about new clause 3 and the prompt payment code. Given those assurances, we will not press new clauses 3 and 4 to a vote. I hope that we can continue to work together constructively on late payments, because that is a key issue for small businesses.

[Matthew Hancock]

That is terrific. After our voting performance today, I am delighted to hear that.

Amendment 6 proposes that companies disclose details of the circumstances in which, and processes by which, payment terms are amended. I have already said that the Government believe that it is poor practice to subject suppliers to unilateral and ad hoc changes to payment terms. We talked about that in Committee. I agree that greater transparency could increase accountability for this practice, and we are launching a consultation on how that transparency could be achieved. I hope that that deals with the substance of amendment 6.

Amendment 7 seeks to ensure that contracting authorities know about the historical payment performance of potential suppliers before they enter into public contracts with them. It also seeks to ensure that the companies entering into those contracts pay their own suppliers promptly. The new procurement regulations that will be made early next year will place a duty on contracting authorities to pass 30-day payment terms all the way down the public sector supply chain, from the contracting authority to the tier 1 supplier. This has been discussed here today and in Committee. I hope that Members will therefore agree that this amendment is not required in addition to the regulations.

On amendment 1, having prompt payment in procurement is dealt with in the new procurement regulations. The requirement for training in procurement is something I agree with where it is cost-effective. We have delivered that in Crossrail and I very much hope that HS2, which has been mentioned, will also deliver it. That is exactly the sort of training, alongside contracting, that is common in the private sector, but of course we have to drive value for money in the public sector, too. The Government agree that transparency and reporting in public sector procurement is vital, and Departments are already required to report on procurement expenditure with smaller businesses. As hon. Members know, that expenditure has been rising rapidly as a proportion and we are on target to hit the goals we set.

Amendment 2, also on procurement, is designed to ensure that the Minister making regulations under clause 37 is able to specify the reasons why firms may be excluded from entering into contracts. Under the existing procurement regulations a contracting authority can already take account of certain types of past behaviour by an economic operator, such as grave professional misconduct, when deciding whether it is eligible to take part in a procurement process. So that is already allowed for.

Amendment 3 states that any regulations made under clause 37 are subject to the provisions of the Freedom of Information Act, and I reassure hon. Members that contracting authorities, as public authorities, are already required to respond to FOI requests. Amendment 4 is designed to increase the level of parliamentary scrutiny by removing the reference to the negative resolution procedure. I agreed to consider, following the debate in Committee, whether it would be appropriate to change the level of parliamentary scrutiny for these regulations. The Government think that the negative resolution procedure provides the right level, but I did go away and consider the matter. We think that an affirmative process would slow down potential changes when the Government want to remain nimble in responding to the needs of small businesses.

I thank the hon. Member for Brighton, Pavilion (Caroline Lucas) for tabling amendment 91 on UK Export Finance. In our response to the consultation on these issues, the Government rejected such a proposal and set out the rationale: a prohibited list, by its very nature, would not allow the Secretary of State to take an open-minded approach in coming to a decision on whether to support an export falling within an included class. The measures already enhance the support that UK Export Finance can offer, and creating an ability to prohibit support for certain exports which are otherwise perfectly legal goes directly against that goal.

Amendment 92, again tabled by the hon. Lady, relates to the business impact target. I am delighted to debate that with her, because I believe the need for the target proposals set out in the Bill is clear. Too many businesses, particularly smaller ones, find that complying with Government regulation is the single biggest challenge to running their business. We had strong support in Committee for the target. It is only by having a competitive business environment that we can have prosperity, growth and indeed the environmental protections that she is so passionate about. I strongly support, and urge her to support, the deregulation target.

Infant Class Sizes

Toby Perkins Excerpts

Wednesday 3rd September 2014 Commons Chamber

[Tristram Hunt]

My hon. Friend is exactly right about the academic evidence, and I will come to that shortly. To those of her constituents facing ballooning infant class sizes, I say that we know the reason. It is a misallocation of funding away from basic need funding towards a range of priorities that do not support keeping class sizes low.

Some 14,000 kids are cramped into cattle classes of more than 40, nearly 6,000 are stuffed into classes that are plus 50 and, although it is barely believable, last year this country educated 446 children in classrooms containing more than 70 pupils. Is it any wonder that a Netmums survey published last week showed that nearly one in five parents think that schools are squeezing too many children into classes?

Unlike the parties in the Government, the Labour party believes in smaller class sizes because of the academic evidence referred to by my hon. Friend the Member for Warrington North (Helen Jones). In small classes, research shows, there is more individual interaction between teachers and pupils, more teacher support for learning per pupil, more attentiveness to the teacher and therefore less disruptive behaviour from pupils, and teachers spend more time teaching rather than managing pupils.

[Toby Perkins (Chesterfield) (Lab)]

I congratulate my hon. Friend and his team on securing this debate. It is incredibly important that parents across the country know that their child’s experience is not an isolated one and how serious the situation has become. When I read the list of schools with extra-large classes, I was surprised to find my own daughter’s school on it. This is happening in schools across the country, and parents are not aware of how terrible the situation has become.

[Tristram Hunt]

My hon. Friend is exactly right. It is the case in Chesterfield, in Warrington, in Peterborough and right across England. Constituents will want to know what decisions were made and what spending priorities were determined to allow the situation to get out of control.

--- Later in debate ---

[The Secretary of State for Education (Nicky Morgan)]

It is a pleasure to speak in this debate. Let me begin by paying tribute to the hon. Member for Stoke-on-Trent Central (Tristram Hunt), because it shows a huge amount of courage for a Labour politician to call a debate on this of all issues. Perhaps I should address the historian in him by comparing him to Lord Cardigan at the battle of Balaclava: brave but leaderless, charging ahead on a kamikaze mission when everything around him was lost. We all remember the record of the previous Government—the hon. Gentleman’s party—and that makes it very brave indeed to raise this issue now.

As we have heard from Government Members, we remember how Labour cut 200,000 primary school places at the very time that this country was facing a dramatic baby boom. We remember how it cut the funding for basic need places by £150 million at the very time it was needed most, and how they penalised those councils with the foresight to refuse to meet their demands. And we remember how Labour made this all so much worse by allowing immigration to spiral out of control, adding further pressure to the system and leading to so many of the concerns we are talking about today.

[Toby Perkins]

The right hon. Lady is comparing the situation now with that under the previous Government. She will be aware that in Leicestershire, the county she represents, there were 2,376 children in infant classes in January 2014, compared with just 1,000 before. The figure has gone up by 121%. Does not that show that, under this Government, things have got significantly worse since 2010?

[Nicky Morgan]

I thank the hon. Gentleman very much indeed for his intervention, but in terms of basic need funding, which is what we are debating today, Leicestershire’s has gone up from £13 million to £51 million, while between 2007 and 2011 Chesterfield got £9.3 million, but now it will be getting £30 million up to 2017.

--- Later in debate ---

[Toby Perkins (Chesterfield) (Lab)]

Much of the debate has focused on numbers, and will continue to do so. Those include the number of classes with more than 30 or 35 pupils. Shockingly, in my constituency, there are even classes with more than 40. I want to start by looking behind the numbers and discussing why large classes matter to pupils, parents and schools. It has not been clear to me, listening to the contributions from Government Members, whether they consider the increase in class sizes to be a problem. We have heard a lot of denials and the blaming of immigrants, and we have heard a variety of reasons why it is not the Government’s fault, but we have not heard whether this result was the design of Tory party policy or whether it is something they regret. It would be helpful to hear from the Minister whether there is a strategy for class sizes or whether the problem that we are bringing to the attention of the Government is recognised by them.

The evidence on the importance of reducing class sizes has been available since 1982, when a study by an American laboratory for educational research concluded that reductions in class size

“promise learning benefits of a magnitude commonly believed not within the power of educators to achieve.”

Thirty years later and much closer to home, studies have shown that class sizes of more than 30 are particularly damaging for children of low ability or for those with special needs. Small class sizes are central to Labour’s vision of what a world-class and inclusive early-years environment should include. The Government seem to be determined to take education back to some mythical golden age when children learned everything they needed to by rote.

[Nigel Adams (Selby and Ainsty) (Con)]

Will the hon. Gentleman explain what has changed in Labour policy on class sizes since 2008? The then Schools Minister in another place told the teaching union, the Association of Teachers and Lecturers, that it was perfectly acceptable to teach maths to pupils in class sizes of 70.

[Toby Perkins]

That is interesting, as not long ago we heard the Secretary of State talking about class sizes of 70 happening now. I do not recognise that as something that the Labour party wants to see, and my hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt) has secured this debate because he wants to make it absolutely clear that the Labour party’s commitment back in 1997 to rescue our schools from the catastrophic and mediaeval state they were in after 18 years of Tory government burns in his heart. He wants a reduction in class sizes and to get away from the huge increases we have seen under this Government.

On the subject of the vision for education held by the previous Education Secretary before his dismissal—I am sure that my two colleagues on the Front Bench are not the only people sitting on a Front Bench at the moment who were pleased to see him disappear—this Government’s approach has led, in my experience, to a demoralised teaching work force, a betrayal of the Government’s rhetoric when they came to office of a commitment to the early years, and a fragmented landscape that has seen enfeebled local authority provision, schools driven unwillingly into becoming academies and the appalling realisation that although money has flowed towards free schools, often in areas that had sufficient demand, there has been a 200% increase in the number of infant pupils taught in classes sized over 30.

Any MP who has taken the time to visit their local schools cannot fail to be moved by the pressure put on our schools by this out-of-touch Government, but the seeds of that educational approach should have been revealed to anyone who took the time to read the Conservative party manifesto, which was referred to a few minutes ago by my hon. Friend the Member for Stoke-on-Trent Central. It stated:

“A Conservative government will give many more children access to the kind of education that is currently only available to the well-off: safe classrooms, talented…teachers, access to the best curriculum…and smaller schools with smaller class sizes with teachers who know the children’s names.”

I do not know about other MPs, but as someone who has been a councillor, a school governor and a parent in Chesterfield over the 13 years of Labour government I find that description, as though that was what schools were like back in 2010, downright offensive. It seems to be a view of our education system based on the views of someone whose only experience of schools was what they had read in the Daily Mail. But that was how the Tory party represented what education looked like back in 2010. Sadly, it is consistent with how out of touch the Government have been on education and a raft of other issues throughout their time in government.

It is not the fault of Ministers in this Government that the education team was entirely privately educated and that does not prevent them individually from being perfectly good Ministers, but when the basis of their education policy is founded on such a narrow and misguided view of what schoolchildren in my constituency experience, I cannot help but think that a wider perspective across the team would help their approach to be slightly more grounded in reality.

Let me return specifically to class sizes. The old “hug a hoodie” David Cameron used to get it. Back in 2008, when he was still a modern Conservative, he told the Yorkshire Post that

“the more we can get class sizes down the better”.

In the 2010 manifesto, he promised

“small schools with smaller class sizes”

That incarnation of David Cameron—oh, how long ago it seems—understood that every extra pupil adds to a teacher’s work load, with extra marking and planning, and means less time to be spent on pupils. If we want primary education to be about more than just presenting something to pupils, class size is important. Smaller classes mean more attention per pupil and more opportunity for children to develop their analytical thinking skills.

That is why the last Labour Government made class sizes such a priority and made such great strides on this issue. In 1997, as one of our five key pledges ahead of the election, Labour promised to cut class sizes to 30 or under for five, six and seven-year-olds by September 2002. Remarkably, the Labour Government actually achieved that a year early; by 2001 it was clear that it would be met. I cannot imagine that many of the promises made by the current Government will be achieved a year early—they will certainly not be achieving what they promised on the deficit. Unfortunately, those achievements have been thrown away by this Tory-led Government, particularly by two specific policy mistakes they have made.

Whereas Labour outlawed class sizes going beyond 30 for children aged four to seven, so that if a class did go above 30 in one year it had to be brought back down the following year, this Tory-led Government relaxed those rules so that class sizes can be above 30 for several years—we heard the Secretary of State proudly boasting about that today. Worse, the Government’s unfettered and ideological free school programme has diverted funding away from areas that need school places most. Instead, we have heard of the disgraceful situation where free schools have been set up in areas with an oversupply of infants schools and are sat there half empty.

Some people who were planning to set up a free school in Chesterfield came to see me at one of my surgeries. I said to these two parents, “So why do you want to set up a free school?” They said, “We don’t think we can get our kids into Brookfield. We want our kids to go there.” So this entire school was being set up because they could not get their children into one school, even though there were other schools they could get into. When I suggested that they could join the governing body of the school in their catchment area and see whether they could improve that, I was told, “Well, it is a bit of a risk.” So I said, “You are setting up a school that doesn’t exist, that has no teachers, that has no building, that has no other pupils and that has no facilities. That is not ‘not a risk’, is it?” [Interruption.] The hon. Member for Bedford (Richard Fuller) is shouting “yes” and he has a free school in his constituency that is half empty. We heard the Education Secretary saying today that a new free school that was due to be set up has, in the middle of September, when most pupils—

[Richard Fuller]

Will the hon. Gentleman give way?

[Toby Perkins]

Let me just finish the point. The Education Secretary was talking about a school in Leicester that, at a time when most children all around the country are going back to school, has been told that it cannot open, and 69 children are left without a school. She says, “Well, we have to get these things right.” The Government should have looked at that when they were going through all these proposals and giving the money to set up the free school. That is the basis of this education policy.

[Richard Fuller]

I am grateful to the hon. Gentleman for giving way, because the Labour party is trying, yet again, to divide people on the issue of free schools and is pointing to Bedford as an example. Local people and local teachers have worked very hard to make sure that the free school could be part of the family of schools and, contrary to what he is saying, the Bedford free school is one of the largest free schools that have been set up from scratch, with more than 400 pupils. Their parents have decided that that school is right for their children, and I am very proud that this Government have enabled them to make that choice.

[Toby Perkins]

The hon. Gentleman talks about a divisive education system, but I have never seen a more divided education system than the one that has been set up by this Government. We have seen an incredibly divided, fragmented system. We have seen schools that do not want to be academies forced into it because they cannot afford to be anything else but academies. The Opposition made it absolutely clear that we support parents getting involved in their schools, but the ideological approach of setting up free schools in a place that already has adequate supply and at the same time seeing infant class sizes at the disgraceful level that has been discussed in this debate is an utterly divisive way to approach education policy.

National Audit Office reports demonstrate that fully two thirds of all of new places created by the free schools programme have been created outside the areas with the most need. Extraordinarily, that has left some local authorities in a position where they want to build a new school to manage a primary places crisis, only to be told that the Department for Education will allow a new school to be built only if it is a free school and only to find out that nobody wants to build a free school in that area. That approach is utterly against the best interests of our children.

Free schools were supposed to fill gaps in the market, but they are in fact doing the opposite and are stacked up in places where there is already sufficient demand. We have seen the consequence of that approach in my constituency. Across Derbyshire, the number of infant school pupils who are in classes with more than 30 children has increased by 117% since this Government came to office. A freedom of information request to the Department for Education exposed the full scale of the class-size growth scandal. How pitiful the Prime Minister’s promise to cut class sizes now looks.

In Chesterfield, schools are grappling with class sizes that were absolutely unimaginable under a Labour Government. Hollingwood primary school has one class of 36; Hasland Hall infant school a class of 39; Abercrombie primary school a class of 44; and Walton Holymoorside, just over the border in North East Derbyshire—it is the school to which my own children went—a class of 36. For anyone who remembers the huge class sizes that we had under the last Tory Government—the one that actually won a general election—those figures will come as no surprise.

[Chris Heaton-Harris]

The hon. Gentleman is a very nice bloke. I am sure he is an excellent MP for his area and a great parent, but does he think that his children’s education was bad because they were in slightly larger classes? If so, what did he do about it?

[Toby Perkins]

That is a very interesting way of putting it. The education provided by my children’s school was very good. The hon. Gentleman seems to be making the case that class sizes do not have a lot to do with the quality of education. If that is the case, then he will obviously be saying to the voters in Daventry, “Vote Conservative to get higher class sizes.” Evidence suggests that class sizes are an important factor. Anecdotal evidence from teachers points to the fact that they find it a lot more difficult to perform their role in huge classes. Obviously, he is making an alternative case, and he will have to take that to his electorate and see what they think about it.

As I was saying a moment ago, anyone who remembers the huge class sizes under the last Tory Government will not be surprised by these facts. The speech by the hon. Member for North Swindon (Justin Tomlinson) complaining about the private finance initiative took my breath away. The reality is that in 1997, the Labour Government inherited a state education system that had been chronically underfunded. The quality of the school estate was disgraceful. Over 10 years, the Labour Government had to pay off the deficit that had been left behind by the previous Conservative Government. At the same time that we were radically trying to improve our health service and education system, we were also reducing the deficit that had been left. It is absolutely outrageous for the Tories then to say, “It’s a shame you didn’t pay for it all out of Government funds. You tried to bring in the private sector to support some of the building of the schools and you shouldn’t have done that.”

Tory Governments always end the same way—divisions over Europe leading to paralysis, waiting times in the NHS reaching critical levels, hollowed out local government unable to serve the needs of their local communities, and six-year-old children being educated in classes of 44. We can change the faces but they are all still Tories.

The choice for the British public at the next general election is clear. They can back the ConDems, get an ideological commitment to expensive free schools, a refusal to retain laws that keep class sizes down, weakened local authorities, demoralised teachers, a fragmented system that betrays our children and the threat of ever more children crammed into large class sizes. Alternatively, they can choose a Labour future where we transform standards with a qualified teacher in every classroom, a commitment to every child, new schools where they are needed most and real action on class sizes. Why wait until next May to give parents that choice? No one wanted this Government, not even most of those who are in it. Our children deserve better, so let us have a general election.

--- Later in debate ---

[Chloe Smith]

Thank you, Mr Deputy Speaker. I welcome your advice. The topics are linked because they relate to what a local authority can do for the children under its care, and I am coming to the subject of Norfolk county council. Labour Members laugh. They should be ashamed to the depths of their souls to be heard laughing at the children of Norfolk. The hon. Member for Cardiff West (Kevin Brennan) should come to Norfolk. No doubt he would campaign against me if he did, but he would have to justify laughing at the point that I am trying to make, which is that over half of Norwich 16-year-olds recently left school without five GCSEs at grades A* to C including English and Maths. Perhaps he laughs at the future that awaits them; perhaps he laughs at the idea that those are not only figures but real people; perhaps he laughs at the idea that those people may now struggle to gain a job and that some of them may not be able to read, write, add or function very well. That is all extremely serious.

This is about the ambition that we have for our children. It is about how we manage the school system to allow for that ambition. All those children are being let down if we say that low ambition is acceptable.

[Toby Perkins]

rose—

[Chloe Smith]

Does the hon. Gentleman have ambition for Norfolk’s children?

[Toby Perkins]

I am very interested in the topic that the hon. Lady is talking about. She is obviously very concerned about the education of children in Norfolk. What would she say to the parents of the 283 extra children now being taught in classes of more than 30 in Norfolk under this Government? What would she say to them about their educational chances, because they are being failed by this Government, are they not?

[Chloe Smith]

I would say that they are looking for respect in this debate. They are looking for honesty and for figures to be used responsibly. They are looking for a Government who are putting right the messes of the previous Government. The hon. Gentleman stood up to make the preceding speech, for which I thank him—of course, I should have observed that courtesy at the beginning of my comments—and I thank him for reminding us what schools were like in the years following 1997. I sat in a classroom of more than 30 pupils when I was at school, in a Norfolk comprehensive, so I have personal experience, should the hon. Gentleman wish to hear it, of having been at school under Tony Blair. You are about to remind me, Mr Deputy Speaker, to return to the subject of infant class sizes.

--- Later in debate ---

[Fabian Hamilton (Leeds North East) (Lab)]

It is a pleasure to follow the hon. Member for Norwich North (Chloe Smith). We are both graduates of the university of York, of which I am very proud, and I am sure she is too. I want to echo the hon. Member for North Swindon (Justin Tomlinson), who spent 10 years on his local authority before being elected to this place; I did likewise.

I should declare an interest. First, I am the father of three children, all of whom attended local infant and junior schools in Pudsey, Leeds. Secondly, I was a city councillor in Leeds for 10 years and I was on the education committee, ending up as chair of that committee, before being elected here. Thirdly, I have seen at first hand, as I am sure have many hon. Members, the effect of smaller class sizes on the quality of a child’s education—both the children of my constituents and, of course, my own children, who attended what was then a separate infant school in Pudsey.

If the current trend in the growth of class sizes continues, it will be tragic for the educational prospects of our children, because within six years from now up to 450,000 young children could be in classes of over 30. Time and again we have heard evidence that has pointed to the educational benefits of small class sizes. Many right hon. and hon. Members have mentioned that. That is especially the case for children between the ages of four and seven. It is no coincidence that one of the strongest selling points for fee-paying private schools is small class sizes. Surely that is what we would all like for every child. I am sure that no hon. Member would disagree with that.

Like every hon. Member, since 2010 I have dealt with a growing number of parents who cannot get their child into the school of their choice. They face either an appeal, which if won leads to larger class sizes, or their child attending a school miles away, often in a very different community. Imagine the anxiety of so many parents whose child cannot attend the same school as an older sibling; other Members have mentioned that. It is even worse when three children in a family are forced to attend three separate schools, as has happened to some of my constituents. The hon. Member for North Swindon talked about choice, but what choice does that situation leave parents in my Leeds North East constituency? There is no choice.

[Toby Perkins]

My hon. Friend talks about choice. Is there not a difference between the experience of some of his constituents who have three children all going to different schools and that of the entire Government, who all seem to have been to the same school?

[Fabian Hamilton]

I absolutely agree with my hon. Friend.

We talk about choice, but we should recognise that surplus places are needed for that.

--- Later in debate ---

[Kevin Brennan]

I am sure he is working hard—in his other job, in the Cabinet Office, dreaming up more fantasy Lib Dem manifesto pledges at the taxpayer’s expense. Indeed, it appears—just to be topical for a moment—that the coalition Government have now introduced compulsory setting, in that the two Schools Ministers are not allowed to be in the same room at the same time. That perhaps explains why the right hon. Member for Yeovil (Mr Laws) is not here with us this afternoon.

However, it would be useful if the Minister in this debate would clarify in his winding-up speech—[Interruption] —after he has finished reading the Parliamentary Private Secretary’s telephone—the whole shambolic issue around setting, which we have heard about today. We have not really had clarity today; we have just had chaos, in what is, after all, the first major policy announcement by the Secretary of State. It would be good if this House were told exactly what is going on, rather than our having to try to find out from Twitter. Despite the Secretary of State’s earlier remarks about not relying on Twitter for such information, we have to, unless we get it in the Chamber, which is where we should first hear of such things.

The first duty of any Education Minister is to ensure a sufficiency of good school places where they are needed. The figures that have been unearthed in recent weeks and which have been highlighted in today’s debate show that the Government have failed in that basic duty. We all remember the pledge, which has been mentioned in the debate, in the 2010 Conservative manifesto, when the Prime Minister promised

“small schools with smaller class sizes”

and said,

“the more we can get class sizes down, the better”.

That pledge has turned out to be as worthless as a Lib Dem pledge on tuition fees, because we have seen a 200% increase in the number of infants in larger class sizes over 30 since 2010, and the pressure on places is growing.

[Toby Perkins]

I am prompted to rise to my feet by my hon. Friend’s mention of the Liberal Democrats. I wonder whether he would like to reflect on the fact that we have had a debate on schools with not a single contribution from a Liberal Democrat Member. Is it not remarkable, when we think of what the Liberal Democrats once were, that we can get through an entire debate on education without a single Liberal Democrat thinking it worth actually turning up and speaking?

[Kevin Brennan]

I apologise for provoking my hon. Friend, but as I think I explained earlier, this is all part of the Secretary of State’s new policy on setting, in that the Lib Dems are set in a different group for this subject and are not allowed to participate in our discussions.

That pledge by the Prime Minister turned out to be worthless, so one would think, under the circumstances, that every sinew of ministerial effort at the Department for Education would be straining at the task of tackling this issue—that no distraction from the cause of meeting the challenge would be allowed and that scarce resources would be prioritised for the issue, with money spent on creating school places where there is a real need. But no, because according to the National Audit Office, two thirds of the places created in the Government’s pet free schools project have been created outside areas classed as having high or severe primary school need. The Government try to claim that the programme is tackling the shortage of places, but the very essence of the programme—a built-in design feature of the policy—is that the distribution of free schools is essentially random. The Department has received no applications to open primary free schools in half of all districts with high or severe forecast need for school places—not one. In fact, overall, only 38% of approved free schools are primary schools, while over 40% of them are secondary. Given that secondary schools are typically double the size of primary schools, despite the growth of “titan” ones under this Government, far more secondary school places are being created than primary school ones, which is where the greater need exists. As we have seen from the debate, there is an acute need. In other words, this Government’s insistence on ideology over pragmatism in opening new schools is producing the wrong kind of schools—secondary—in the wrong places. That is the very definition of policy failure.

Indeed, the National Audit Office found that 42 schools had opened in districts with no forecast need, with estimated capital costs of at least £241 million out of a projected total of £951 million for mainstream schools. That is not an accident. The Minister of State, Department for Education, the hon. Member for Bognor Regis and Littlehampton used to care passionately about class sizes. He told “Daily Politics” back in 2009 that it was important to get class sizes down,

“particularly at primary school level. This is really dramatic, how big our class sizes are compared with other countries.”

That is what he said in 2009, when there were 31,000 infant children in class sizes over 30; by January this year, that had risen to 93,000, which really is dramatic. Before the general election, the Minister told BBC London:

“A child can wander around corridors of a school anonymously because the teacher will not know the name and face of every child in the school. Smaller schools are much more intimate and it’s difficult for a child to be anonymous.”

Those are fine words, but the number of titan primary schools is soaring, with nearly five times the number of primary schools with over 800 pupils than in 2010. So much for intimate smaller schools as promised by the Minister.

What about this Minister’s views on trying to alleviate growing numbers by targeting the resources to areas where there is a shortage rather than a surplus of places? Here is what he said to “Attain Magazine” in spring 2010 about areas with surplus places:

“If it has surplus places beyond a certain figure, 10%, they will at the moment resist any new school coming in because they’ve got to fill these places first. But we’re saying that’s irrelevant”.

That was his attitude. “Irrelevant”—there we have it; it is not an accident. Instead of directing resources to where there is a shortage of places, more places are created where there is surplus of more than 10%. Why? Because right-wing ideology demands a market solution—creating an over-supply to drive out existing schools, rather than operate supportive and collaborative systems such as the highly successful London Challenge approach under Labour, which raised standards for all, and allow investment in new places to happen where those places are needed.

That is the ideology that lies at the root of the places crisis that we are seeing today, and the attempts to blame the last Labour Government are a smokescreen. The number of pupils in primary schools was falling between 2005 and 2010—it fell by 107,000—and the projections of increased numbers from the Office for National Statistics did not come until 2008-10. The last Government recognised that while overall numbers were falling at the time, in some areas, particularly in larger local authorities, more places would be needed. They provided core capital funding of £400 million a year from 2007-08 to 2010-11 to cover local growth in demand for places. Of course, the current Government never acknowledge that in their attempt to create a smokescreen about their role in the places crisis.

In addition, there was an annual “safety-valve” whereby local authorities, if they felt they needed it, could apply for additional funding to address exceptional growth. Until 2009, very few did, but in 2010-11, an extra £266 million was allocated to 36 authorities to provide primary places for September 2010 and 2011.

Oral Answers to Questions

Toby Perkins Excerpts

Thursday 26th June 2014 Commons Chamber

[Michael Fallon]

I completely agree with my hon. Friend, and I can tell him that of the 30 specific reforms requested by the business taskforce I chaired last year, nine have already been delivered, two further directives were withdrawn last month, and since the transposition rules were tightened three years ago there has been only one example of a European directive being gold-plated, which was the consumer credit directive that banned excessive payment surcharges.

[Toby Perkins (Chesterfield) (Lab)]

The Bathroom Manufacturers Association is just one trade body which feels that regulatory policy has too little focus on enforcement of regulation. That leads to the undercutting of compliant, high-quality British manufacturers by cheap, non-compliant foreign imports. When will the Government understand that a mature and consistent approach to enforcement of regulation is not a burden on high-quality British manufacturing business, but an aid to it?

[Michael Fallon]

I am happy to meet that trade association to follow up its specific concerns. The hon. Gentleman is right that business needs uniform and proportionate enforcement, and we are looking to deliver that through improved guidance with the relevant bodies, such as the Health and Safety Executive and the Environment Agency.