Vince Cable
Main Page: Vince Cable (Liberal Democrat - Twickenham)Small Business, Enterprise and Employment Bill
Vince Cable Excerpts(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text
The Secretary of State for Business, Innovation and Skills (Vince Cable)
I beg to move, That the Bill be now read a Second time.
The Small Business, Enterprise and Employment Bill has two fundamental purposes, one of which is to help small businesses grow and succeed, and the other is to ensure that the UK continues to be regarded as a trusted and fair place in which to do business. It is an extensive Bill, and I fear that if I talked through the 12 parts, 149 clauses and 10 schedules, we would have a speech of Fidel Castro-like proportions from me now, and I do not want to stray in that direction. I apologise to the House in advance that I may therefore have to gloss rather superficially over what are some very complex and meaty issues. There will, as a consequence, be many happy hours spent in Committee. I am pleased to say that the Minister for Business, Energy and Enterprise, my hon. Friend the Member for West Suffolk (Matthew Hancock), who has just enjoyed a welcome and deserved promotion, will be leading our team in Committee.
I thought that the most useful way of introducing the Bill is not to follow through the mechanics of the Bill itself, but to dwell on four big themes that flow through it in different ways. The first relates to employment. We want to make changes to the legislation in a way that benefits both employees and employers to ensure that employees are not disadvantaged by unacceptable practices, be they exclusivity clauses in zero-hours contracts or underpayment of the national minimum wage.
Vince Cable
I am coming on to that matter in detail. I do not know whether the hon. Gentleman will be happy to wait until we get to that section.
Secondly, I want to ensure that our companies are trusted and transparent, so that they cannot conceal ownership or control and that they engage in good corporate behaviour. Thirdly, I want to help our small businesses get access to the finance they need to grow and export, compete in public sector procurement and address some of the issues around late payment. Fourthly, I want to support the Government's regulatory reform agenda, ensuring that ineffective, out-of-date and burdensome regulation does not hold back our businesses. Those are the four basic themes of the Bill.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
There is so much in this Bill that many of us interested in small business welcome. However, there is an undercurrent of people saying, “Has it got enough teeth?” What is the right hon. Gentleman’s response to that allegation, which is being heard from all parts of the House?
Vince Cable
Many provisions that we will discuss are about enforcement, which in everyday language is what we mean by having teeth. When we get to the relevant sections, the hon. Gentleman will see that much of this Bill is about tough enforcement of regulation, not simply about creating rules for their own sake.
Let me just deal with the issues around employment. I think we saw today some of the remarkable and positive developments that are taking place in the labour market. We now have unemployment down to 6.5%, which is one of the lowest rates in the developed world. More than a million jobs were created in the past year, which is a record. That is an extremely positive outcome of the recovery, which is now clear and well-established.
Chris Williamson (Derby North) (Lab)
Although it is welcome that those jobs have been created, will the Secretary of State accept that many of them are insecure and low paid? If people do not have money in their pockets because they are working on zero-hours contracts, that will have a negative impact on the long-term economic recovery of our country—[Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We do not need Back Benchers to join in at this stage. We are all right; I am sure the Secretary of State can handle it himself.
Vince Cable
Indeed, I believe that in the hon. Gentleman’s constituency unemployment has fallen by 46%, and he is gracious enough to have acknowledged that. We are in the first stage of the long-term recovery. There are, of course, issues around low pay and low productivity that will require investment, and that is where our long-term commitment to growth and industrial strategy is important. We want employment that is high-quality and secure, and all the evidence suggests that, compared with most parts of Europe, British employment in this recovery is more permanent and secure than elsewhere, although clearly there is more to be done.
That leads us to zero-hours contracts, which as far as we can establish apply to around 2% to 4% of jobs. The issue has aroused a great deal of concern because of its implication that many people are insecure in their work, and on the back of those concerns I initiated a call for evidence and a consultation on how we should deal with the problem. Two contrasting views came to light. There were indeed shocking examples of abuse, many of which are captured in the problem of exclusivity clauses that we have now committed to end. At the same time, it was clear that zero-hours contracts have a genuine positive role in the labour market and are appreciated by many individuals because of the opportunity they provide, as well as the advantages to employers. Indeed, recent research from the Chartered Institute of Personnel and Development, which has done much of the authoritative work in this field, contrasts satisfaction levels in zero-hours contracts with other work, and whether people are treated with respect by their senior management. It shows that zero-hours contracts are marginally better in both those criteria than other forms of employment.
Jonathan Edwards
The measures in the Bill to prohibit exclusivity in zero-hours contracts are to be welcomed, but why not just ban zero-hours contracts? Is the Secretary of State seriously saying that the only way to have a flexible labour market is to have zero-hours contracts?
Vince Cable
Absolutely not. That is merely one aspect of a positive feature of the UK and a reason why companies wish to invest here. As I said, we want to maintain the best of flexibility while dealing with abuses. The evidence that we gathered led us to reject calls for an outright ban on zero-hours contracts, which some campaigning groups have argued for. Where we deal with abuse, we want effectively to ban exclusivity contracts when those do not guarantee any hours. There are two reasons for doing that. First, it is unfair to the individual that they are prevented from earning, but it also makes a nonsense of flexibility if employers prevent workers from migrating to work. Those are two good and powerful reasons for rejecting exclusivity arrangements, and they came through quite unambiguously in the consultation. Some 83% of 36,000 responses—a large number of responses—argued that such a ban should take place, and we will consult during the passage of the Bill on how we make that effective. Banning zero-hours contracts of any form is not straightforward, and some unscrupulous employers could simply shift to one-hour, two-hour, or three-hour contracts. We want to ensure that whatever we introduce is absolutely guaranteed.
Chris Williamson
The Secretary of State has addressed one of the points that I was going to make about the penalties associated with employers who exploit their employees and try to get round the restriction on zero-hours contracts by migrating people on to a one-hour or two-hour contract. He seems to be moving in that direction, so will he give a commitment that meaningful penalties will be imposed on employers who seek to exploit and get round the measures that he is bringing in, so that a financial penalty is imposed on employers if they step outside the law?
Vince Cable
If the hon. Gentleman reflects on this matter, he will see that it is not about penalties. If the exclusivity ban is made effective—as we are determined it will be—the simple remedy for somebody who is affected is to go somewhere else. The issue of penalties is not relevant; we want to ensure that the ban is effective, which is why we are consulting on the best mechanism for making that happen.
Richard Fuller (Bedford) (Con)
One of the most significant issues in employment is the massive amount of corporate welfare in the form of tax credits for people on low incomes. A move to promote the living wage across a wide range of industries would have a positive impact on employment. Will my right hon. Friend tell the House what thoughts he had in this Bill for promoting the living wage, and say why he did not include those in the provisions under debate?
Vince Cable
Anything that raises wages takes people out of the tax credit net. There are, of course, other ways of dealing with this problem, one of which is taking people out of tax, and that is what the Government have been doing through their tax threshold. This Bill builds on the minimum wage system—I will say a few words about that in a moment—and does not relate to the living wage. The living wage presents all kinds of practical problems, not merely that it is way in excess of the current minimum wage and therefore presents problems for employment levels. There is a perverse feature that the recommended level of the London living wage, which would introduce a regional differential, is highest in London, which is an area with the highest levels of unemployment. If we are concerned with maximising employment, pursuing the living wage may not be the best of way of doing that. None the less, I have given guidance to the Low Pay Commission on how we increase real wages, and that is a major policy objective. I think we are better doing that by strengthening the minimum wage regime.
I assure the House that the Government are taking a series of steps to ensure proper penalties for employers who fail to comply with the minimum wage. In 2013-14, 650 employers received penalties totalling £815,000 for failure to comply with minimum wage law, and we have increased the penalty percentage from 50% to 100% of underpayment. A naming and shaming regime has come in since the new year, and we have increased the maximum penalty from £5,000 to £20,000, which came into effect in March. The Bill goes one step further. The maximum penalty will now apply on a per worker basis, rather than per notice. As a result, in future overall penalties will be substantially higher for employers that owe high arrears to multiple workers.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
I appreciate the points that the Business Secretary is making, but is he aware just how vulnerable some of the workers affected by these arrangements are? Constituents have come to me who dare not go to an employment tribunal. They are already in a vulnerable position because of their employment and dare not pay the costs of that tribunal in case they are unsuccessful. Has the Business Secretary really considered the reality for workers affected by the policies he is introducing today?
Vince Cable
The point of access for people who have such concerns is the pay and work rights helpline, which is free, so the first stage of remedying those faults and getting an investigation into illegal activity does not cost anything. The tribunal is a different process as that involves dismissal, but if we are concerned with remedying abuses of the minimum wage, we have a system in which complaints can be made free of charge—there is access to the system—and in which there is effective and prompt enforcement.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Is the Business Secretary aware, though, that the number of employment tribunals has decreased by 80% since the introduction of these charges?
Vince Cable
Yes, I am aware of a substantial fall in numbers. There are several reasons, which we are currently investigating, one of which could be connected with fees. Another reason is that earlier legislation sought to introduce an arbitration mechanism through ACAS as a first port of call. As I am sure that the hon. Lady will realise when she studies the figures, there has been a very big increase in the number of cases going through ACAS, as I recently discussed with its chair. That is exactly as we wished; to ensure that we headed off a legalistic process and that people were able to remedy their disputes in a more successful way.
Stephen Lloyd (Eastbourne) (LD)
I totally applaud clause 136, which will penalise people who do not pay what they are due when they lose a case at an employment tribunal. One of my concerns, though, is that it is not clear that the employer pays the penalty to the employee who won the case before going to the state. I would be grateful if my right hon. Friend clarified that.
Vince Cable
Perhaps I can correct a matter of fact. There is a penalty, and that is absolutely right: it is outrageous when somebody who has had a tribunal award made against them simply does not pay it. There will be a penalty, but it will go to the Government, not to the individual.
Stephen Lloyd
My concern is that given how the provision is framed, it is possible that the recalcitrant employer could pay the penalty to the Government and not pay the employee what they should have received.
Vince Cable
Any employer foolish enough to go down that route would find themselves subject to multiple penalties and, eventually, to contempt of court if they were clearly malicious in their intention. I understand where my hon. Friend is going with this, and he might wish to pursue it in more detail in Committee.
The final employment aspect of the Bill relates to whistleblowing. If something is amiss in a company, those who step forward and blow the whistle take risks by doing so, and they want an assurance that action will be taken. Last year, a report by the university of Greenwich and Public Concern at Work found that 75% of whistleblowers expressed frustration that nothing was being done about the wrongdoing they reported. This is clearly unacceptable. The Bill will require “prescribed persons”—usually regulators—who deal with whistleblowing to report annually on reports received and actions taken, while maintaining confidentiality obligations for the whistleblower. In that way, we want to improve the general standard of best practice around whistleblowing procedures.
Company transparency has been one of the key themes of our work in Government over the past few years, including in relation to reforms of narrative reporting, reporting on executive pay, and, more recently, the directive relating to the declarations on natural resource payments. I now want to introduce measures that strengthen the provisions on corporate transparency. I will start with an area for which we have not previously had an opportunity to prepare the House. We have discussed the Bill with Opposition Front Benchers and with others, but this issue will be new to them, and it is important that we show them that courtesy. The issue relates to takeovers. I have made it clear publicly that we need to take action in this area that may well—not certainly, but very probably—involve legislation for which this Bill would be the vehicle. The approach we are adopting is that we continue to welcome inward investment as being good for the country.
We also continue to welcome merger activity as a normal part of market processes, although I have to say that the evidence on the benefits of mergers is somewhat ambiguous. What emerged as a result of the recent high-profile case of AstraZeneca and Pfizer was a lack of clarity around the enforcement of assurances. The approach we adopted in Government was to talk to the company where issues of wider public interest were involved—it was clearly involved in extensive research and development activity—to seek assurances. That is what should happen, but then the issue arises of how we make sure that any commitments given are clear and, absolutely crucially, binding. In order to ensure that that aim is realised, we are currently talking to the Takeover Panel. Legislation may well also be necessary to underpin cases where a commitment is not honoured. I will bring these proposals back to the House in due course.
David Rutley (Macclesfield) (Con)
I thank the Secretary of State for expressing his views on this important subject. Does he agree that although Pfizer put forward commitments that it regarded as unprecedented, it was by no means explicit about the number of employees it would have taken on should the takeover have gone forward? This sort of legislative approach—or at least a tightening of the takeover code—would help to improve the situation in future.
Vince Cable
I recall the major role that the hon. Gentleman played in trying to obtain commitments in relation to the north-west and, in particular, his constituency. The same issue will arise in other cases. He is right. Although commitments were made, there is an issue of enforceability. That is what we now wish to address by strengthening the rules.
Let me move on to company transparency. The OECD has reported that
“almost every economic crime involves the misuse of corporate vehicles”.
There are staggering sums of money involved. Organised crime costs the UK alone about £24 billion a year. The European Commission estimates that global criminal proceeds are in the order of $2 trillion. Of course, not all crime flows through companies, but much does. More specifically, in 2011 the World Bank carried out an exercise that suggested that 70% of grand corruption cases involved at least one corporate vehicle to hide beneficial ownership and the true source of funds. Very often, criminals create complex corporate structures spanning multiple jurisdictions to hide the involvement of a company. That is why the UK pushed the agenda for greater corporate transparency during our G8 presidency last year. We obtained agreement from G8 members that all would take action to increase corporate transparency. That is what we are now doing, thus demonstrating our commitment.
We wish to help to deter, identify and sanction those who hide their interest in UK companies to facilitate illegal activities, as well as generally creating a more trusted business environment. That is why we are going to require companies to keep a register of the people who have significant control over that company—their beneficial owners—and provide this information to Companies House, where it will be publicly available. We will lead the way within the developed economies in having an open register. Alongside that, the Bill abolishes the use of bearer shares, which can change hands without any record and have been open to abuse for tax evasion and money laundering purposes.
Mr Jonathan Djanogly (Huntingdon) (Con)
Will the Secretary of State acknowledge that the vast majority of beneficial owners are absolutely legitimate and are not involved in crime, and that his regulatory proposals will significantly attack privacy and reduce the amount of investment going into British companies?
Vince Cable
I do not accept any of those propositions. It will be possible to devise a register—we have devoted a great deal of thought to this—to ensure that individual privacy is respected. We do not want the kind of invasion of privacy that occurred, for example, with life sciences companies in respect of animal testing. That is exactly the kind of problem we wish to avoid. We have discussed this extensively with business groups. We do not believe that it will have a negative effect on investment; we think that the opposite is the case, because honest, transparent transactions will be acknowledged. Indeed, moving to an open register is a process that many organisations, including business organisations, welcome. The hon. Gentleman’s starting point is quite right: the vast majority of companies are completely honest and therefore have absolutely nothing to fear from an open register.
Sir Andrew Stunell (Hazel Grove) (LD)
Somewhat contrary to the previous intervention, I strongly welcome the proposition, which includes a provision for exemptions in certain circumstances. That is no doubt a desirable legal provision, but will my right hon. Friend assure that House that it will not simply be the gateway for mass exemptions, particularly of the kinds of apparatus and companies to which he has referred?
Vince Cable
Yes, I give that assurance. We have thought hard about the balance that must be struck between the protection of privacy and openness. Many of us have had examples in our constituencies—I certainly have—of individuals who were shareholders in companies that were targeted because of animal rights issues and suffered enormously. Naturally, we wish to protect people’s individual addresses, for example, and we will take steps to ensure that the exemptions are carefully thought through and are of that kind. In general, however, the principle of openness is absolutely right.
The final element in the transparency agenda will be to prohibit companies from acting as directors—again, with exemptions—because in the past that was often used to conceal illegitimate transactions.
Catherine McKinnell
I thank the Secretary of State for the work that has been done in this area, but one concern that has been raised is that, although the penalties in relation to maintaining the records of the person of significant control are relatively high at a maximum of two years’ imprisonment, the sanctions for not providing that information to the public register are relatively low at £250 a day, given, as the Secretary of State has said, the staggeringly high amounts of money that are potentially involved. Has he considered whether the deterrent is sufficient?
Vince Cable
We will obviously consider the hon. Lady’s points, but it is worth bearing in mind that the vast majority of companies that register are extremely small and that sums of money that may seem trivial for a big international company may be quite onerous for a small company. We need to keep that proportionality in mind.
Before I leave the issue of transparency, let me deal with two other issues dealt with in the Bill, the first of which relates to director disqualification. We want to modernise and strengthen the disqualification regime, giving the business community and consumers confidence that wrongdoers will be barred as directors. To give an example of the kind of problem that currently arises, it is very difficult in disqualification proceedings at present to take into account serious abuses that have occurred overseas when individuals have been directors of companies abroad. In other cases, directors have often had multiple failures, which is perfectly reasonable in entrepreneurial culture, but some have done it with bad intent. We are familiar with the problem of phoenix companies, which deliberately fail in order to be reborn and exploit consumers. We want to make sure that those considerations are borne in mind in the director disqualification regime.
Lorely Burt (Solihull) (LD)
I have had a lot of involvement with companies that have suffered at the hands of such directors, who subsequently set up again, perhaps by using a pre-pack or some other way. The unsecured creditors are the people who suffer and they may have to absolve their company. One suggestion is that we should have a register to track the record of a company’s directors so that any company wishing to supply could look it up and see what is going on.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Twenty-four Members want to speak, but the Front Benchers have already taken 30 minutes and we have only just begun. We want to get everybody in. I am sure that interventions are helpful, but they may be holding up the end of the speech.
Vince Cable
I was trying to be helpful to Back Benchers by taking their points, Mr Deputy Speaker.
Mr Deputy Speaker
I do not mind the Secretary of State taking interventions, but he will understand that, if Back Benchers cannot get in, it will be because of the amount of time the Front Benchers have taken. He must choose which he prefers—interventions or Back-Bench speeches.
Vince Cable
That is a choice I would rather not have to make.
I entirely agree with my hon. Friend the Member for Solihull (Lorely Burt), who makes a useful point and we will reflect on its practicality. She also mentioned pre-packs. She will have noticed that there are measures in the Bill to deal with bad pre-packs. Of course, many of them provide satisfactory outcomes, but some do not. We are going to try to differentiate them in a more structured way.
The final issue in relation to transparency is the insolvency regime. We are going to introduce measures to give greater confidence to the regime when companies enter insolvency. We will remove administrative burdens, which I hope will save creditors substantial amounts of money. We are talking about having a less complex system of regulation. I think there are eight or nine separate regulatory bodies in the insolvency area, and there are issues regarding insolvency fees and fairness. It is a complex bit of legislation, but an important one.
Moving on to help for small business, I will start with an area that has preoccupied a lot of people in the House, namely pubs. There are 20,000 or so sole traders and small businesses that run tied pubs across England and Wales. In recent research, the Campaign for Real Ale found that 57% of tenants who are tied to large pub companies earn less than £10,000 a year, compared with just 25% of tenants who are free of tie, and 80% of them earn less than £15,000 a year. In other words, a very large number are taking home less than the minimum wage. Through the Bill, we want to address the imbalance in bargaining power between pub companies and their tied tenants, to ensure they are treated fairly by their pub-owning companies.
Vince Cable
Bearing in mind Mr Deputy Speaker’s comments, I will take a limited number of interventions, although I am sure there will be a lot of interest in this particular issue.
Grahame M. Morris
I am grateful to the Secretary of State for giving way and I will be brief. Although many of the proposals are welcome, may I ask him a simple question? Why does the Bill not give the tenants of large pub companies the right to a fair, independently assessed rent-only option? That was the recommendation of the cross-party Select Committee and it was the outcome of the consultation. Why is it not being offered by the Bill?
Vince Cable
I will explain in a moment our proposal in relation to rents. The hon. Gentleman will know that a considerable variety of views emerged from the consultation. I know there are strong views that we should perhaps have done more—there will be plenty of opportunity to air them—but we have taken a big step forward. Let me briefly describe what it is.
The Bill will introduce a statutory code of practice, which I think has been the House’s basic demand over the years, to govern the relationship between companies and tied tenants. It will establish an independent adjudicator to enforce the code that will build on the experience of the groceries code adjudicator, which is building a track record in addressing similar problems. That should result—this is our objective—in getting transparency, fair treatment and the right to request a rent review for all tied tenants if they have not had one for five years, and the right to take a dispute to an independent adjudicator under the enhanced code.
Richard Fuller
Why did my right hon. Friend not exempt small pub companies, given that the problem is with large pub companies?
Vince Cable
As the hon. Gentleman will now have realised, we envisage a two-tier code system. There will be an enhanced code, with more demands on the bigger pubcos. Of course, other people are concerned that the provisions are not extensive enough. We have tried to identify the problems presented by the large pubcos, where we fully accept the major problems lie.
Let me give an example of a case that was drawn to our attention recently that in many ways exemplifies the issues. After seven years with a large pub company and a personal investment of £50,000, a tied tenant was renewing his agreement. His pub company presented him with a rent increase and reduced discounts on the price of beer. That means that, in effect, he will be paying £60,000 to his pub company for a year. Under our measures he would expect a detailed justification for the rent and, if he thinks it unfair, he will be able to go to the adjudicator for independent arbitration.
From the submissions that I have received, I am already aware that there are many concerns about the details, including of how the code will be formulated once the Bill goes through Parliament, as we hope it will. I am certainly very happy to receive any representations that Members want to make about those crucial details.
Another provision affecting small business is the public sector procurement market, which is worth £230 billion. Many small businesses have found it very hard going in the past, with bureaucratic and time-consuming processes. Under this Government, we have attempted to make the burdens less onerous—for example, by lifting the need for pre-qualification questionnaires—and, as a result, we managed to increase the direct spend in central Government procurement from about 6.5% to 10.5% between 2009-10 and 2012-13. It is our firm intention to lift that figure to 25% of central Government procurement next year.
Chloe Smith (Norwich North) (Con)
I thank the Secretary of State for giving way in the short time he has available. He will know that I welcome the measures, to which I contributed during my time at the Cabinet Office. Is it not a shame that Labour Members left no clear data on such procurement when they vacated office, and does he agree with the journal of Spend Matters, which has said that their proposals are “meaningless manifesto fodder”?
Vince Cable
We started small business procurement in central Government from a very low base, which I guess reflects the previous Government’s lack of attention to the problem.
The Bill will provide the Government with a series of measures to help us remove the barriers for small business across the entire public sector—pre-qualification questionnaires in bits of the public sector, such as foundation hospitals, and so on—and it will now be possible to open up procurement much more widely. Moreover, we want to increase the power of the public procurement mystery shopper, by giving it more teeth and ensuring that it has the capability to identify and address poor business contracts.
Another set of critical issues for small business that the Bill deals with involve access to finance. There has of course been an enormous problem of small business access since the banking crisis. We are now beginning to see really positive changes, including the emergence of challenger banks and crowdfunding, and the business bank, which we operate, is making a significant difference, but it is a slow process.
Some things can be helped through legislation. For example, all businesses depend on cash flow, and even successful businesses can run into trouble if there is a long gap between completing a job and receiving payment. Small and medium-sized businesses are currently owed about £40 billion in late payments, and there is a lot of evidence that it is a particular problem for the small business sector. More than 50% of companies experience late payments, but the figure for big companies is much lower. That distinction is not completely clear, but the preponderance is obvious. We will enable a requirement to be placed on large businesses and quoted businesses to report on their business payment practices, thereby giving greater confidence to small businesses entering into new contracts and providing a boost to larger businesses that pay on time by attracting the best suppliers.
Robert Flello (Stoke-on-Trent South) (Lab)
When I met small businesses in Longton a couple of days ago, one point that they made was that whenever they did not pay money to the Inland Revenue on time, there was a penalty, and they asked whether they might please have the same arrangement whenever people do not pay them on time.
Vince Cable
We have looked at the idea of penalties. Certainly one country in Europe—Sweden—applies a penalty system. The problem is that it is often difficult to distinguish between those who “can’t pay” and those who “won’t pay”. Sometimes a large company is in arrears of payments because it is itself struggling, and we need to be careful to identify such matters. We therefore judge a penalty regime to be inappropriate, but greater transparency will certainly help.
There are issues concerning the banks. Despite the emergence of competitors, the four large banks still account for 80% of lending to UK small and medium-sized businesses. To try to broaden competition and choice, we will require larger banks to share data on their small and medium-sized business customers with credit reference agencies, and we will require the credit reference agencies to provide equal access to those data for challenger banks and alternative finance providers, which will make it much easier for businesses to seek loans. We are also looking at the possibility of mandatory referral, whereby banks who pass over a customer must refer them to others, including challenger banks.
Sir Andrew Stunell
I very much applaud what the Government have done with funding for lending, but will my right hon. Friend comment on the fact that the banks have reduced their lending to small businesses while sucking up all the Government money to support that lending?
Vince Cable
The issue is complex. Some banks are now undertaking substantial net lending—that is certainly true of Lloyds and Santander. RBS is the big contributor to net lending being negative, and there are specific issues in relation to the deleveraging that is taking place there. I think that my right hon. Friend is referring to the fact that, as a result of the guarantees we have given, we are now managing to encourage an emerging crowdfunding sector, which is expanding rapidly and replacing the banks.
There are specific issues for export finance. A survey suggests that about 80% of small businesses find it very difficult to get export finance from the banks. For that reason, I introduced some time ago a whole tranche of trade finance provisions for UK Export Finance, which hon. Members may recall as the Export Credits Guarantee Department. As a result, 130 exporters won overseas contracts worth £2 billion last year. Most of them are small enterprises, and we want to go further. Provisions in the Bill will give UK Export Finance broader powers to support small business, react more quickly to changes in the market and offer a suite of products comparable with those on offer overseas.
Lastly in this category, there are two very specific but important provisions. One will remove the legal barriers to invoice finance, which is important for small businesses wanting finance for their cash-flow demands. The other will make it easier to clear cheques. Nine out of 10 businesses still extensively use cheques—I recall that my hon. Friend the Member for Solihull fought a battle to keep cheques—with sole traders and small and micro-businesses. The Bill will make provision for cheque imaging, so that cheques can be paid more quickly and easily, reducing the clearing time from six days to two days or less.
Finally—I apologise for the Castro-like length of my speech, Mr Deputy Speaker—I will deal with the issues of regulatory reform. We want to ensure that businesses no longer have to wade through ineffective and burdensome regulation, and a series of specific provisions will help to guarantee that. Since the Government introduced the one-in, one-out rule, which we strengthened to become the one-in, two-out rule, we have reduced the net burden of regulation by £1.5 billion, while safeguarding the essential protections for consumers, workers and the environment. We have aggressively tackled ineffective and out-of-date regulation, and have scrapped more than 1,000 regulations.
That work must continue. That is why, under the Bill, we will set a deregulation target for each parliamentary term, with transparent reporting against that target. The Bill will also ensure that new regulations that affect business contain a review provision. Finally, some businesses are subject to poor regulatory decisions, such as those that we have discovered through the focus on enforcement reviews. There have been some really shocking examples of regulators giving rise to problems for which there is no satisfactory complaint. For example, a blue cheese maker was told that they could have absolutely no mould on their cheese. There are numerous examples of that kind. The Bill will require non-economic regulators to have a small business appeals champion to ensure that complaints and appeal processes are fair and accessible for all businesses.
There is a variety of other measures, which I will not go into, on child care registration, the work of employment tribunals, which has been mentioned, and education evaluation to provide better information about skills training.
To summarise the provisional reaction to the Bill, the national chairman of the Federation of Small Businesses has said that it
“reflects the growing recognition of the role small businesses have to play in driving forward the economy and the need to do all we can to support them”.
The Bill will make the UK a much better place for business and, therefore, I commend it to the House.
Mr Umunna
No, I have not been to see the Queen yet.
I will be as quick as I can, Mr Deputy Speaker.
It is good to see the Secretary of State back in his place after the reshuffle, leading this debate. I note that he has acquired some new Conservative minders. He no longer has three, but five. [Interruption.] Somebody behind him says that he needs them.
Mr Umunna
For the record, the Business Secretary says that he has seven minders. I am sure that he will not let them get him down.
It is also good to see the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson) back in her place. I know that her shadow, my hon. Friend the Member for Edinburgh South (Ian Murray), has missed their exchanges and looks forward to the lengthy exchanges that they will have in Committee.
The Bill is a long one and comes in 11 parts. The House will be glad to know that I will not go through all 11 of them, but I will deal with the key parts in turn as quickly as possible to allow the maximum time for other Members to get in. First, I will address the purported purpose of the Bill, which was set out by the Secretary of State.
Our wealth creators—our entrepreneurs and particularly our small businesses—are fundamental to growth in this country and create almost two thirds of private sector jobs. They are crucial to the success of large firms and vice versa—the relationship between the two is symbiotic. We recognised that in government and were determined to build an environment in which business could flourish. I am proud to say that by the time we left office, the World Bank ranked the UK the best country in Europe for the ease of doing business and the fourth best in the world, ahead of the US. I am glad to see that where we led, this Government seek to follow with this Small Business, Enterprise and Employment Bill.
We are told that the Bill is designed to reduce the barriers that hamper the ability of small businesses to innovate, grow and compete, and that it seeks to pave the way for the Government to be more supportive of small business. After four years of this Government, it is about time too. We support the purported general purposes and principles of the Bill—how could one not?—but the detail is everything and we will scrutinise it.
However, the Bill and the Government’s policy more broadly do not resolve the underlying structural issues, which I have discussed on many occasions with the Secretary of State, that hold businesses and employment back in our economy. He and I agree that we need a different model of capitalism—one that is more inclusive, productive, responsible and long-term in outlook. The fact is that our economy is still grossly unbalanced by sector and region; short-termism is still endemic in business and government; we still have a dysfunctional finance system; and we have a stubborn and increasing trade deficit. Meanwhile, the use of food banks has soared and many people still struggle. In some wards of my constituency, one in three children is living in poverty.
The recovery is not what we would want it to be, and it looks a lot like the model of growth that we need to get away from. It is a business-as-usual recovery, based on a rising housing market and consumer spending; it is not the export and business investment-led recovery we were promised. Therefore, now is the time to intensify the pace of reform of the economy to build a better-balanced, sustainable economy. It should also be said that the Bill is not just about building an economy with flourishing businesses. We must remember that, if we want to be pro-business, we cannot continually beat up on the rights of the people who work in businesses. I will return to that later.
The first key element is access to finance. Any scheme that helps small businesses to access finance is welcome, but the Government’s record in getting the banks to lend to small businesses is lamentable. Flagship scheme after flagship scheme, from Project Merlin to funding for lending, has failed to deliver. Net lending to businesses is down by £14.2 billion in the past 12 months. In fact, net lending to businesses by banks participating in the funding for lending scheme fell by £2.7 billion in the first quarter of this year.
If part 1 of the Bill does anything to help affairs, for example by making it easier for businesses to seek loans from challenger banks, and lenders other than high street banks and by opening up access to credit data, such measures will have the Opposition’s support. Equally, the measures to ensure that support is available for those who wish to export are welcome, particularly given our need to get more of our small businesses exporting—it looks like the Government are nowhere near reaching the target of getting 100,000 more companies exporting by 2020.
However, we know that increasing late payment, to which the Secretary of State referred, is becoming a more significant challenge than access to finance. In a recent Institute of Chartered Accountants in England and Wales survey, almost twice as many businesses cited late payment as a bigger challenge in managing their cash flow than access to finance. We must end the national scandal of small businesses being effectively forced to bankroll large customers that persist in refusing to pay them on time. According to the Federation of Small Businesses, 51% of the invoices of its members are persistently paid late by large companies. That is wholly unacceptable. The Forum of Private Business has cited the example of Marks & Spencer, which extended payment terms to some suppliers to 75 days, for no apparent defensible reason.
In 1998, the Labour Government responded to that growing problem by introducing the Late Payment of Commercial Debts (Interest) Act 1998. Towards the end of our time in government, we worked with the British Chambers of Commerce, the Institute of Credit Management and others to get FTSE 100 companies signed up to the then new prompt payment code, but we need to go further, because for all our hard work, we were not successful in fixing the problem, and this Government have also not been successful. At this juncture, I congratulate my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), who is in the Chamber, on her work as chair of the all-party parliamentary inquiry on late payments, along with other members of the group. The two measures in part 1 of the Bill are good, but the problem is that, when there is late payment, it is still for the business to pursue and have a row with its customer for payment, potentially losing the customer in the process. We must square that circle. We will return to that provision in more detail in Committee.
I will not say much about the regulatory reform in part 2. Of course, the Opposition support the general principle that we need to be mindful of the quantity of regulation we impose on business, but equally important is ensuring that the quality of the regulation is up to scratch, and that it is written with the small guy in mind, so that they do not need to employ an army of accountants, lawyers and risk managers to tell them what they need to do to comply. We support the publication of a target for the removal of regulatory burdens in each Parliament, which is provided for in part 2. We also support the proposed statutory review provision for new regulations that affect businesses. However, unless the Secretary of State addresses the way in which the Department for Work and Pensions—I spoke to him about this the last time we were in the House—is massively increasing the burden on people in receipt of benefit who wish to start a business, the Government’s credibility will be sorely lacking.
We were told that part 3 aims to remove barriers and help small businesses to gain fair access to the £230 billion of Government procurement contracts through a more efficient process that is more small business friendly. We are broadly supportive of these measures. It is a shame that the hon. Member for Norwich North (Chloe Smith) is not in her place. It is deeply disappointing, and she might recognise this as a former Treasury Minister, that one of the worst offenders in ensuring that small businesses get a look-in on Government contracts is the very Department she used to work in. Just 5% of the Treasury’s direct procurement spend is with small business. If this measure kicks the Treasury into touch, then good.
Before turning to part 4 and measures relating to pubs, I would like to pay tribute to the shadow small business Minister, my hon. Friend the Member for Chesterfield (Toby Perkins), and the coalition of people, including Government Members—the hon. Member for Leeds North West (Greg Mulholland) is in his place—who have worked on this too. It has to be said that I can think of no better day for a pint in a pub beer garden, given the hot weather.
The Opposition have had to force three votes on this issue in the House since 2012, demanding a statutory pub code to put the relationship, between tied pub licensees in England and Wales and the large pub companies, on a fairer statutory footing. Every time we did this most, though not all, Government Members voted against, and in the meantime 28 pubs a week have closed. We are pleased that the Government have finally accepted the need to legislate for a statutory code. We will work with them to help to protect our community pubs, which are national institutions, but we are far from convinced that what they propose goes far enough. We are not convinced that the limited transparency envisaged by the Bill will deliver the Government’s own principle that no publican should be worse off than if they were free of tie. We will also seek to ensure that the Secretary of State gets the right to introduce the mandatory rent-only option for tied tenants in the near future, if these reforms do not deliver.
Part 7—I am trying to go as fast as possible—seeks to increase transparency on who owns and controls UK companies. I very much welcome the measures to create a public register of beneficial owners of companies. A prerequisite to maintaining a register of beneficial owners, of course, is knowing in the first place that companies exist. The Business Secretary and I have had exchanges on this. Never mind the new measures that are envisaged, it is very important that we ensure compliance with existing requirements, for example on disclosing overseas subsidiaries. The Secretary of State kindly wrote to me last year, outlining how 40% of the FTSE 350 had failed to disclose overseas subsidiaries in the first instance. Enforcement is therefore key to ensuring that data are accurate and up to date, and that sanctions of sufficient gravity can be applied to ensure that people comply in the first instance. We must do all we can to persuade others around the globe to comply and adopt public registers too, particularly UK overseas territories and Crown dependencies. Let us send a clear message: what our overseas territories and Crown dependencies do in this area affects the UK’s reputation as a whole, and we will not sit idly by while our reputation is damaged.
Part 9 seeks to strengthen the rules of disqualification for directors, and we have no problems with the measures suggested here. As I think the CBI has said, they will help to boost the UK’s internationally recognised company law regime and promote even higher standards of corporate governance.
That brings me—it is connected—to the measures the Secretary of State mentioned on streamlining insolvency law. Among the changes the Government intend to implement is a measure to abolish the requirement to hold physical creditor meetings in an insolvency situation. I have to say that R3, which represents insolvency practitioners, and a number of creditor representative groups have very serious concerns that this will reduce creditor engagement and undermine the insolvency regime.
Creditor meetings serve an important function, as I know from my professional experience. For example, the insolvency practitioner engaged may have limited knowledge of the company’s history at the outset, but in a creditor meeting they can get useful information about the company and its financial affairs that it might otherwise not have occurred to them to think about. We are therefore not convinced that the proposal to do away with creditor meetings is at all sensible, so in Committee we will carefully scrutinise these proposals and the others on insolvency.
Before I finish up by looking at the employment law reforms in part 11, I want to turn to the measures on public sector workers receiving large pay-outs if they go on to work in other parts of the public sector. Let us be clear what has prompted the inclusion of that measure in the Bill. The Prime Minister promised that there would be no top-down reorganisation of the NHS and then he broke that promise. When the Government embarked on that top-down reorganisation, we warned them about the huge amount of taxpayers’ money that would be wasted, but we were told that our claims were unfounded. What happened? More than 4,000 have been made redundant and then rehired in the NHS since 2010. As the shadow Health Secretary, my right hon. Friend the Member for Leigh (Andy Burnham), has said, that has meant the Government handing out cheques like confetti to people who were rehired. Some £1.4 billion has been spent on redundancies in the NHS alone, at a time when NHS budgets are stretched. That is a complete disgrace. Pay-offs for managers and pay cuts for nurses—that is what we are seeing.
The Secretary of State will no doubt say, “This has got nothing to do with me, guv. It’s not my brief; it’s those terrible Tories sat behind me.” Well he can say what he likes, but everyone knows that he voted for all the changes in the Health and Social Care Act 2012—in fact, he was a sponsor of it—when it was going through Parliament, and now he is having to clear up the mess in this small business and enterprise Bill. What a total and complete shambles.
That brings me to the employment aspects of the Bill, covering employment tribunals, the national minimum wage and zero-hours contracts. If anything demonstrates that this Government have run their course and are running out of steam, it is the employment provisions in part 11. The Government have done the minimum in this part that they thought they could get away with or that they could reach agreement on. I will deal with the points of agreement first. There are measures in the Bill seeking to limit the number of postponements that parties can be granted in a case, with judges being given the power to make cost orders where late applications for postponements are made. Based on my experience of practising as an employment lawyer, I think those measures are sensible, as do others, such as the TUC, which points to the difficulties that witnesses face in getting time off work to attend hearings.
However, improving the process once people get to tribunal will be no more than an academic exercise for those claimants who frankly cannot afford to pay the tribunal fees instituted by this Government. What the Government have done with those fees is erect a barrier to justice for some of the lowest-paid people in the country. They have simply priced them out of the system. That is the reason for the 79% drop in employment tribunal claims that was referred to earlier. It is women and low-paid workers in particular who seem to be the principal losers.