Viscount Younger of Leckie
Main Page: Viscount Younger of Leckie (Conservative - Excepted Hereditary)Enterprise and Regulatory Reform Bill
Viscount Younger of Leckie Excerpts
Lord Razzall
My Lords, if there is one lesson that your Lordships and the Government might draw from this debate, it is that it is a mistake to introduce a major change in the law so late in the process of a Bill going through the House of Commons. The noble Viscount’s department had a very good record of not changing the law without extensive consultation. It is quite clear from the debate today that even one or two noble and learned Lords did not quite understand what it is being proposed in the way that I understand it. That all would come out if there was appropriate consultation on the clause.
The Government’s intention is to try to find a balance between what the noble Earl said about protecting employers from unfair strict liability claims and protecting the rights of the sort of claimants that the noble Lord, Lord Pannick, is referring to. The Löfstedt report made various recommendations and, had we had proper consultation, that would have come out. The Government say that they are implementing what Löfstedt recommended but some would say “Up to a point, Lord Copper”. He did of course say that the strict liability issue needed to be looked at, but with a lot of reservations as well as to how strict liability could be amended. That would have come out in proper consultation. However, we are where we are. As I understand it, the Government wish to remove strict liability to protect the sort of company referred to by the noble Earl. They say that the complainant or the injured workman can rely on the law of negligence to protect them. There is of course criminal liability, and in extreme cases somebody’s offending will be prosecuted, but they are relying on the law of negligence.
I ask noble Lords to imagine the sort of scenario where these two principles would come up each against other. There could be a contractor who has employed a subcontractor to put up scaffolding and the subcontractor does so in a rather dodgy way. Somebody falls off the scaffolding and is seriously injured. Under the current law, the contractor will probably be strictly liable for that accident. The subcontractor, who is a man of straw, has disappeared, and therefore if the contractor is not liable then who is liable, and what compensation is there for the individual? That seems to me in essence to sum up the dilemma produced by this clause.
I do not think that our job here on these Benches—certainly not when we are in coalition—is to defeat the Government; it is to win the argument. I hope that when the noble Viscount sums up he will try to find a way to meet what I think are genuine concerns from all sides of the House about whether this provision can be modified to deal with the problem I have referred to.
Viscount Younger of Leckie
My Lords, this has been an extensive and interesting debate. I think it would be helpful to set out the reasons the Government seek to make this change. The recent report by my noble friend Lord Young of Graffham, Common Sense, Common Safety, and Professor Löfstedt’s independent review, Reclaiming Health and Safety for All, confirm that the perception of a compensation culture generates a fear of being sued. This, together with the confusion created by myths about health and safety, drives businesses to overimplement the law in an effort to protect themselves.
My noble friend Lord Phillips and the noble and learned Lord, Lord Hardie, asked about consultation—or rather the lack of consultation. In preparing his report, my noble friend Lord Young consulted 132 wide-ranging organisations representing relevant professionals, including personal injury lawyers, businesses and associated organisations. He also spoke to more than 100 individuals, including health and safety professionals, Members of Parliament, councillors and leading academics in the field of law.
The problem lies not with the legislation but with the way it is interpreted and applied. Illustrating this, in response to Professor Löfstedt’s review, the Engineering Employers’ Federation said:
“The current compensation system is serving the needs of neither employees nor employers and is the source of many of the media stories and public concern about excessive health and safety. It is slow, expensive and places far too much emphasis on record keeping rather than practical action to control risk.”
I am very grateful for the anecdotal evidence raised today by the noble Earl, Lord Errol, in this respect.
The noble Lord, Lord Browne, raised the issue of record-keeping. I believe he stated that record-keeping will not change, and still does what the law requires, so I think that he was asking what the problem is. I reiterate that there is clear evidence that business overimplements, going well beyond what the law actually requires.
Overimplementation does not lead, therefore, to better protection of employees. It means that employers are spending significant time and effort on activities which are not necessary or far in excess of legal requirements, resulting in significant additional unnecessary costs. Concern about the consequences of “getting it wrong” and confusion about what the law actually requires discourage businesses from exploring new opportunities to expand and diversify and consequently from taking on new employees, a point that I made in Grand Committee.
The Federation of Small Businesses stated in its response to Professor Löfstedt:
“A wider problem for small businesses is that many do not feel confident that they are compliant owing to confusion about what is absolutely necessary, and so feel the need to gold-plate the law to protect them”.
Examples of such gold-plating, according to a recent Better Regulation Executive survey, include a hairdresser unnecessarily paying £1,000 a year for portable electrical appliance testing, a micro-business paying £3,800 for a specialist health and safety consultant to do its basic risk assessment, and an electrical contractor paying £1,000 a month to a health and safety adviser. The impact therefore falls disproportionately on smaller businesses, often run by owner-managers who have less time and resources. This impact is significant for growth because such micro-businesses with fewer than 10 employees account for 96% of UK businesses and around 7 million jobs.
Some noble Lords have suggested that we should not introduce legislation merely to tackle a perception—a matter raised by the noble Lord, Lord Browne—but, as I have explained, the perception causes real problems which we believe require positive action. Clause 62 is one of a range of government reforms to tackle this perception of a compensation culture and to restore a common-sense approach to health and safety.
Amending the Health and Safety at Work etc. Act so that it will be possible to bring claims only for negligence is designed to ensure that responsible employers who have taken all reasonable steps to protect their employees will not be held liable to pay compensation for an accident that they could not reasonably have done anything about. Claims are a burden on employers not just because of the financial costs but due to the time and resources required to deal with them and, importantly, their negative impact on the wider reputation of a business.
This measure will not lower standards. Let me be clear: every death and serious injury at work is a tragedy for the individual, their family and friends. Happily, our record in the UK is a good one. In the 10 years from 2000 to 2010, the rate of fatal injuries fell by 38% and major injuries by an estimated 22%, and our overall performance is better than that of many other European countries. However, there is no room for complacency and we are committed to continuing to improve health and safety standards.
The Government do not accept the argument that this measure sends the wrong signal about the importance of complying with health and safety legislation; in fact, quite the opposite. This is about giving employers the reassurance to focus their attention on the things that have a real practical effect on controlling risks. In Grand Committee and again today, concerns have been expressed that this change represents a backward step by placing the burden of proof on employees and will make cases more difficult and costly to prove—the noble Baroness, Lady Turner, emphasised her views on this.
To be clear, the fact that someone has been injured at work does not and should not mean they are automatically entitled to compensation. Many health and safety duties require the injured employee to show fault on the part of their employer. Currently, claimants do not recover compensation in about 30% of claims. The cases that will be most significantly affected by this change are those which would have previously relied on an absolute or strict statutory duty, a point raised by some noble Lords today. In claims for negligence, the claimant will have to show that the employer failed to take reasonable steps to avoid reasonably foreseeable risks to their health and safety, which led to the injury.
However, unlike in the days before the Health and Safety at Work etc. Act, there is now a codified framework for health and safety at work and a great deal of evidence and guidance in the public domain about hazards in the workplace. Employers are expected to take account of this in carrying out their risk assessments, and this body of information will form an important part of the evidence in this aspect of a claim. This means that injured employees are in a very different and much better position to obtain information about their employer’s actions than they were when the right to sue for breach of statutory duty was first established in the 19th century. I hope that this answers the question raised by my noble friend Lord Phillips in this respect.
The noble Lord, Lord Wigley, and the noble Baroness, Lady Turner of Camden, both raised the important point of whether the provision covers fatal and serious injury. The Health and Safety Executive will continue to investigate fatal and serious injuries. The existing statutory requirements will still be relevant as evidence in claims for negligence to help determine whether the employer’s approach was reasonable. The Health and Safety Executive will also continue to take a range of enforcement action in accordance with its enforcement policy statement, including serving notices of contravention and prosecution against employers who seriously breach the requirements of the criminal law.
Lord Phillips of Sudbury
My Lords, the Minister twice said that where companies had done nothing wrong, they could still be caught and made liable under the absolute liabilities of health and safety legislation. Surely, if it is indeed the case that the legislation is so drafted that a company that had done nothing wrong is liable, the answer is to introduce a qualification to that legislation, along the lines mentioned by, among others, the noble and learned Lord, Lord Hardie, so that the situation does not recur. Would that not be a better way of proceeding, as Professor Löfstedt suggests and as the panel would enable, than to take a step into the deep unknown, with consequences that many of us fear?
Viscount Younger of Leckie
I thank my noble friend for that point, which is simply noted. It does not change the views that I have expressed about where we are with the clause, but it was valuable to hear what he had to say.
Lord Hardie
Before the noble Viscount sits down, may I clarify what is being offered? I hope that I have not misunderstood him, but he seemed to suggest that noble Lords would go through all the regulations and identify which ones should include a right of action, then come to the Government and persuade them? Is that what is envisaged, or will the Government undertake the review of existing regulations to decide which should include the right of action?
Viscount Younger of Leckie
All I am saying at this stage is that we are open to ideas so we can hear where further exclusions, above and beyond pregnant workers, might appear.
Lord McKenzie of Luton
My Lords, I am bound to say that I found the Minister’s response profoundly disappointing. It was his noble friend Lord Razzall who said that it was a mistake to introduce laws without extensive consultation and who urged the Minister to find a balance. Indeed, the same point was made by the noble Lord, Lord Phillips. Yet I do not see any balance in the Minister’s response.
With this power to make exceptions, the Minister is asking us to do the job of the Government. Frankly, that is not the way round that it should be. The Minister always goes back to focusing on strict liability and extrapolates what is perceived to be the issue around that to all other circumstances where people might be injured at work, then causes there to be a restriction on their ability to get justice.
There seems to be an incredible disconnect between an analysis of the health and safety system and the extent to which there is overcompliance with it, with the solution being to restrict the right of people to claim justice when they are injured at work. For a long time there has been a problem of overcompliance, and now there is undercompliance with the health and safety system as well. That is why, as I know, the HSE is engaged in improving guidance, not helped by the Government having restricted proactive inspections so that inspectors can no longer go out and visit as many premises as they did in the past. There is a huge disconnect there, which does not seem to have any justification.
We have had a very impressive array of contributions to this debate today, from very experienced legal minds, all of whom, with the exception of the noble Earl, Lord Erroll, argued in one direction. I would say to the noble Earl, who mentioned agriculture, that this industry is proportionately the most dangerous in the country. There are more fatalities in agriculture than in any other industry. It is absolutely right that there should be a concentration of health and safety regulations in those circumstances.
Viscount Younger of Leckie
My Lords, Amendment 82, spoken to by the noble Lord, Lord Campbell-Savours, concerns sales of property through auctions. I shall turn to that shortly. Amendment 81A and the next group of amendments are aimed at two different types of activity. One is the letting and management of privately rented homes. The other is the management of residential leasehold properties. It is important to make that distinction because, while some agents engage in both these activities, they are different activities, with different clients, contractual relationships and issues. However, a number of the amendments we are debating cover both sectors, so I shall make some remarks about each sector in turn before turning to the amendments.
The Government are aware of the important and growing role played by private renting and residential leasehold. This is true particularly in London and the south-east, where the pressures of growth in housing demand and the challenges of increasing supply are intense. There are now around 3.8 million privately rented and 3 million leasehold properties across England, with the majority of the latter being flats. Obviously, not everyone living in those millions of properties is happy with their property in every respect, whether because of the costs they face in buying or renting it and then living in it, its condition or the quality of its management. Many of them are content, of course, and find that on balance private renting or leasehold meets their needs.
We have heard a number of contributions today, and previously in Grand Committee, describing unsatisfactory practices by letting agents in the private rented sector. This was highlighted today, notably by the noble Baronesses, Lady Howe and Lady Hayter, among others. Indeed, this sector has had a substantial amount of attention recently in the other place, in the media and in recent reports from Which? magazine, the Office of Fair Trading, the Property Ombudsman and others. The Government have been listening carefully to the views expressed on this subject, and recognise that there are issues. I am pleased that the noble Baroness, Lady Hayter, acknowledged this and highlighted it today.
While there are many agents who perform a good and honest service for their clients and serve an important role in the private rental market, there are too many agents who are not acting responsibly. My honourable friend in the other place, Mark Prisk, said in a debate in Westminster Hall last week that the Government consider many of the problems to be a consequence of years of undersupply in the housing market. The imbalance between supply and demand has put rents, the quality of accommodation and standards of service under pressure in some areas of the country. That has had consequences for the way lettings agents, as well as landlords, operate.
Expanding the supply of rented homes is therefore at the heart of the Government’s strategy. We want a bigger and better private rented sector. That is why we established a debt guarantee scheme of up to £10 billion to encourage institutional investment and, alongside that, a £200 million Build to Rent fund. Boosting supply is not just about financial support, however. It also means avoiding excessive regulation that can deter investment and stifle supply. Excessive regulation, however well intentioned, can result in precisely the outcomes we want to avoid. That is why we did not proceed with the proposals of the previous Government, such as a national register of landlords and the full statutory regulation of letting agents.
Nonetheless, there is a role for regulation in preserving standards. We have heard a number of people express the view that the lettings market is totally unregulated. That is not in fact the case. There is a substantial body of consumer protection legislation that covers letting agents. The Consumer Protection from Unfair Trading Regulations 2008 protect tenants from letting agents who mislead or engage in aggressive business practices. Similarly, the Unfair Terms in Consumer Contracts Regulations 1999 protect tenants from unfair conditions, such as unfair restrictions on the ways in which they can use a property. We know that trading standards bodies use these powers to prosecute lettings agents. Some very substantial fines, and indeed prison sentences, have been handed down to agents who engage in serious misdemeanours, such as misrepresenting their membership of professional bodies, or indeed misappropriating clients’ money.
However, my honourable friend in the other place, Mark Prisk, acknowledged that there is a problem with enforcement, and that action is needed on the less serious cases as well as the most serious ones. He stated his determination in Westminster Hall only last week to encourage national trading standards bodies to ensure that they tackle these issues across the marketplace. I am pleased to reassure my noble friend Lord Jenkin that recently my honourable friend indeed stated his case very clearly. I strongly support making better use of existing regulations before we create new ones.
The noble Baroness, Lady Howe, raised the question of bad letting agents harming the reputation of good ones, which is an extremely fair point. That is why we are clear in government guidance to landlords and tenants that they should ask which bodies letting agents belong to. The more that landlords and tenants ask these questions, the more pressure there will be on all letting agents to join such schemes.
The Office of Fair Trading has just produced its report on the lettings sector. It makes some suggestions for regulatory changes, but it makes other, non-regulatory proposals, too. The Government will study the report carefully, alongside the evidence to the Communities and Local Government Select Committee’s inquiry on the private rented sector. Evidence and recommendations are being presented by bodies with extensive expertise. We owe it to them to study the committee’s recommendations carefully.
The noble Baroness, Lady Hayter, referred to the fact that the OFT called for redress and enforcement. The OFT report on lettings agents recommends that the Government should consider whether it would be beneficial to require agents to sign up to a code of practice or to join a redress scheme. The Government will consider the OFT’s recommendations carefully, but we need to see the recommendation to consider mandatory redress alongside other elements of the OFT’s recommendations, some of which relate to making better use of existing laws and non-regulatory mechanisms.
Turning to residential leasehold, I believe that we have to be realistic and to recognise that living in a property where more than one party has significant financial and other interests, and where common parts of a property need to be maintained, is bound on occasion to lead to concerns and disputes. Although complaints procedures and a range of mediation and ombudsman services are already available—and, where those options fail, a number of legal options that can be pursued—we recognise that not all leaseholders are happy. The noble Baroness, Lady Hayter, asked why there is no client money protection in residential leasehold, but I reassure her—as she may know—that statutory protection already exists for leasehold service charges, which the law deems to be held in trust.
Our postbags, and those of Members of the other place, sometimes contain letters from leaseholders whose freeholder—or, more often, whose freeholder’s managing agent—is not providing the service they deserve or expect, or is sending increasingly unaffordable bills. We also hear from elderly and sometimes vulnerable people whose freeholder, or their agent, is failing to follow good practice and, in some cases, may even be breaking the law. Where relationships over the management of people’s homes break down and become adversarial, it can lead to real worry and distress and can in some cases, as we know, culminate in cases before tribunals and the courts.
The Government are aware of concerns among some leaseholders about a range of issues such as management standards and consultation, but remain unconvinced of the case for increasing government regulation at this time. Rather than create new leasehold regulation, the Government want, in the main, to see existing rights and protections on the statute book used to best effect. We therefore welcome current moves towards greater self-regulation by professionals in the sector and are interested in ideas for giving these more support and encouragement. The Government are aware that there are failings and even abuses in some parts of both sectors and will continue to address them. We have carefully considered the amendment of the noble Baroness, Lady Hayter, and her arguments for regulating letting and management in the private rented and leasehold sectors, and I can assure her that the Government take her concerns very seriously.
The amendment would amend the Estate Agents Act 1979, extending the definition of “estate agency work” to include those involved in letting and managing agency work. This is intended, as we understand it, to give the Office of Fair Trading powers to prevent letting and management agents conducting business and to require agents to have in place redress schemes, client money protection and to meet the other requirements of the Act. While we acknowledge that there are issues that need addressing, we do not believe that the answer is to regulate letting and managing agents in the way that the noble Baroness proposes. The regulatory burden could be substantial, adding to costs borne by landlords and, in turn, tenants.
In his report for the Property Ombudsman, Professor Michael Ball set out a range of costs that this would entail. The noble Baroness, Lady Hayter, and my noble friend Lord Sharkey both brought up the issue of the cost of compliance with a mandatory scheme, and both stated that there would a debit of only some £800. Indeed, there are costs to bear in mind, including of extra staffing and other administrative work, to ensure that the business is run according to the relevant codes of practice. Our own figures suggest that these are on top of costs of perhaps £170 per office per year for redress, £300 for client money protection and £300 or more for professional indemnity insurance.
Lord Jenkin of Roding
Before my noble friend goes on to discuss auctions, will he give some indication of how long it will take for the Government to study the substantial report to which he referred, and how long he thinks it will take for the DCLG Select Committee at the other end to produce its report? I understand both his arguments—there is a substantial report from the OFT and there is also that Select Committee report—but we really do not want to have to wait for ever.
Viscount Younger of Leckie
My noble friend makes a very good point. I can reassure him that the Select Committee report is due out very soon. It is likely to be in May; it may even be as early as April. That is not a guarantee, but I hope that it gives a helpful indication as to what the timing might be.
None the less, I recognise that the issue of a lack of redress is a serious one, and I know that my honourable friend in the other place, the Housing Minister Mark Prisk, considers this a serious issue, too, and is giving it the most serious consideration. We will reflect very carefully on this and other recent debates, and I am sure that the Housing Minister will keep in touch with Peers who have spoken today.
I shall turn as fast as I can to Amendment 82. I thank the noble Lord, Lord Campbell-Savours, for having brought this issue to my attention and to that of the House. I have considered carefully the amendment and the arguments for introducing it. The Government are of course concerned to hear that buyers may be experiencing difficulties when trying to purchase a property at auction, especially if it involves first-time buyers. I am pleased to say that there is already legislation in place designed to address just this sort of unfair practice. Therefore, new legislation will not change the position regarding consumer protection in such matters. I will explain why.
Under the Consumer Protection from Unfair Trading Regulations 2008, auctioneers, like traders in all sectors of the economy, are required in their dealings with consumers to treat them fairly and not mislead them. Under the CPRs, there are also a number of business practices that are considered unfair in all circumstances and are prohibited. When marketing a property, it is prohibited to use bait tactics such as luring bidders to auctions using pricing techniques, which the noble Lord raised as an example. OFT guidance on the CPRs published last September, of which the industry should be fully aware, gives the specific example of guide prices not being distorted to attract potential buyers.
Where traders treat consumers unfairly, they may face criminal or civil enforcement action. Enforcement of the CPRs is by the OFT and local authority trading standards services. We are, of course, in the process of better equipping trading standards to take greater responsibility for consumer law enforcement, and will be transferring central government funding for national leadership and co-ordination of enforcement activity from the OFT to the National Trading Standards Board. In addition, the new Competition and Markets Authority will have consumer enforcement powers to address business practices that distort competition or impact on consumer choice in otherwise competitive markets.
Furthermore, I understand that the industry encourages fair practice in this area and offers guidance and training. For example, the Royal Institution of Chartered Surveyors provides best practice guidance for auctioneers selling real estate. Such guidance addresses price guides and states that these guides must not be misleading, advising that a price guide that is clearly below the figure that the seller will accept is misleading. As best practice it also says that auctioneers should clearly indicate in the catalogue that price guides may be subject to amendment during the period leading up to the day and time of the auction sale.
In the light of the consumer protection legislation already in place, and as we have not seen any evidence on which a change of legislation could be justified, we do not feel the necessity to change legislation in this area. The noble Lord may wish to write to the OFT, providing evidence of the experiences and findings in this matter that are causing him concern. I hope that he is reassured by my answer and that he will therefore not press his amendment. I note that this is a new issue that was not raised in Committee and I acknowledge his apology. However, I believe that he raised some interesting points that we will keep in our sights. I also ask the noble Baroness, Lady Hayter, to withdraw her amendment.
Baroness Hayter of Kentish Town
My Lords, this amendment simply asks that letting agents should have to sign up to a redress scheme. We have checked it with the lawyers, and it does not apply to development land or anything else. If that was the case, and if the noble Lord had said he that accepted the need for redress, that it was just the wording that needed changing and that it was coming back at Third Reading, I would be happy to withdraw. Sadly, that is not what the Government have said.
The unfair trading regulations do not work. You cannot go to trading standards; it does not give redress. The Government have given no answers other than self-regulation or, “Wait for another committee”. Consumers want this; Mark Prisk wanted this in 2007; Lib Dem policy is in favour; landlords and tenants want it; the OFT wants it; and so does the industry, despite the costs. I thank noble Lords who have all spoken in support—there has been nothing but support from all around this House. I believe that, in addition to that list, the House will support the amendment. I beg leave to test the opinion of the House.
Baroness Hayter of Kentish Town
My Lords, not surprisingly we support these amendments. I have been working with ARMA on trying to get some of this done. There will be a voluntary scheme, but only the good ones will join. The advantage of these amendments is that they will make sure that everyone, not only the good, will have to meet those standards.
Viscount Younger of Leckie
My Lords, I am grateful to my noble friend Lady Gardner for the thought and effort that she has put into the preparation of the five amendments we are now considering. Her ideas and broad experience of the housing sector are an invaluable resource to this House. Her amendments, like those of the noble Baroness, Lady Hayter, address the private rented and residential leasehold sectors. I will not repeat what I have already said about those areas.
I have carefully considered my noble friend’s Amendment 81B on the ability of freeholders to recover their legal costs from leaseholders and I take her concerns very seriously. This amendment aims to limit the circumstances in which costs of proceedings incurred by a landlord or other party with an interest in the property at a leasehold valuation tribunal could be charged back to leaseholders. I should point out that where a freeholder is able to recover costs in connection with proceedings from the leaseholders, this is contractual matter between them and will be set out in the lease. I am aware that leaseholders are increasingly concerned about the recovery of such costs as administration charges where the lease permits this and I understand that my honourable friend Mark Prisk is thinking about this issue. I am concerned that my noble friend’s amendment would not achieve her goals and would not in fact provide any greater protection for leaseholders than already exists.
I know that my noble friend, as she said, recently took part in a high-level round-table discussion on residential leasehold issues. I understand that a number of practical ideas for improving awareness of leaseholders’ rights emerged from that event and that the Department for Communities and Local Government is committed to working with the Ministry of Justice and others to take those ideas forward. The issue of recovery of legal costs as an administration charge, rather than a service charge, requires detailed consideration. For this reason, I believe that the current Bill is not the best place to consider this complex issue.
“Abolition of Agricultural Wages Board and related English bodies
(1) The Agricultural Wages Board for England and Wales is abolished.
(2) Every agricultural wages committee for an area in England is abolished.
(3) Every agricultural dwelling-house advisory committee for an area in England is abolished.
(4) Schedule (Abolition of Agricultural Wages Board and related English bodies: consequential provision) (abolition of Agricultural Wages Board and related English bodies: consequential provision) has effect.”
Viscount Younger of Leckie
My Lords, these amendments will simplify employment legislation for around 40,000 farm businesses in England and Wales. They will ensure the same levels of employment protection for agricultural workers as for workers in all other sectors of the economy. They will also abolish 31 public bodies whose functions are now used infrequently or have simply fallen into disuse. This is an important reform, which will contribute to the Government’s key objective of encouraging economic growth as well as the programme of reducing the number of public bodies. We brought these provisions forward in Grand Committee but they were not accepted. We believe that the case for them is very strong and therefore we have reintroduced them.
The agricultural wages committees were set up in their current form nearly 65 years ago, just after the Second World War, although their origins go back even further. The Agricultural Wages Board is now the only remaining sector wage council; the 26 others were abolished 20 years ago, in 1993. Agricultural workers represent 0.5% of the total workforce. There is no reason why they should be treated differently from the other 99.5% of workers, who are all protected by the national minimum wage and other statutory employment provisions.
Agriculture today is very different from 65 years ago. It is a now a global, international business. Farmers compete against not just each other but farmers overseas to sell both here and in international markets. Technological developments and increased mechanisation mean that workers need to be highly skilled and qualified to operate complex machinery, and to be able to keep up to date with modern animal husbandry methods. The industry is also becoming increasingly diverse, particularly as businesses move away from mixed farming to specialise in specific sectors. Around a quarter of farms now also operate non-agricultural businesses; for example, a farm shop or bed and breakfast. This means that many farm businesses have to employ workers under both the agricultural minimum wage and the national minimum wage regimes. They therefore have to comply with two sets of employment legislation, which is an unnecessary cost to farm businesses in both time and resources.
Even within what are traditionally regarded as agricultural activities, there are grey areas where a farm business has to determine whether employees are employed in agriculture and entitled to the agricultural wages order terms and conditions as opposed to general employment terms. For example, livestock and poultry rearing would normally be considered agricultural activities and covered by the agricultural wages order, but this is not necessarily the case for on-farm slaughtering operations. Similarly, where there is a farm packing business, packing of produce grown on the farm would normally be covered by the agricultural wages order, whereas packing of bought-in produce is not.
The abolition of the agricultural minimum wage will remove the need for farm businesses to operate two employment regimes and end the confusion of whether activities fall within the national minimum wage regime or the agricultural minimum wage regime. It is widely accepted that the legislation which underpins the Agricultural Wages Board is outdated and hampers the ability of the industry to offer more modern, flexible employment packages. For example, it effectively dissuades employers from offering the payment of annual salaries, which is disadvantageous for workers as it hinders long-term financial planning—and thereby better security for farm workers and their families.
The abolition of the Agricultural Wages Board and the agricultural minimum wage regime will allow farmers to agree terms and conditions that take account of the requirements of the farming sector and suit the particular circumstances of both employers and workers. It will make it easier for employers to offer opportunities for workers to work the same number of weekly hours, but over a compressed period. This could be beneficial for businesses, who may want to provide for longer shifts, and for workers with family and domestic responsibilities.
Abolition will enable farm businesses to compete for workers on a level playing field with other local employers. It should encourage longer-term and more permanent employment of farm workers, which will boost growth and have wider benefits. For the avoidance of doubt, research suggests that there will continue to be considerable demand for farm workers in the years ahead, which will mean that employers will need to offer competitive pay rates to attract new workers. A majority of workers already receive terms and conditions above the agricultural minimum wage rates, and as contracts are already in place their wages should not be affected if the board were abolished.
The underlying market conditions suggest that there will be a sustained demand for agricultural workers. The 2011 survey from the UK Commission for Employment and Skills indicates a shortage of workers with relevant skills within the agricultural sector, and that this shortage is higher than comparable shortages in other areas of the economy. The agricultural workforce is also ageing: 55% of the sector’s workforce is aged over 45, which again is higher than in other sectors of the economy. These factors mean that we can expect demand for both workers and skills in the sector to increase over the next 10 years and beyond, which means that market drivers will ensure that wages remain competitive. Farm businesses will be wise and prudent to provide career and development opportunities to encourage workers into agriculture and offer attractive terms and conditions to retain them.
It is also important to remember that agricultural workers who have contractual rights reflecting the terms of the agricultural wages order at the time of the board’s abolition will retain those rights until either their employment contract is varied by agreement or their employment comes to an end. New workers coming into the industry or workers who negotiate a new contract will have the same level of employment protection as workers in all other sectors of the economy. Furthermore, agricultural workers who are supplied by a labour provider and who may be at the lower end of the wage scale will continue to have the added protection of the gangmaster licensing legislation.
Turning to the 15 agricultural wages committees in England, most of their functions have now lapsed in practice or have been replaced by wider legislation. Their only remaining active function is to appoint members of the 16 agricultural dwelling house advisory committees in England—or, as they are more generally called, ADHACs.
Viscount Younger of Leckie
My Lords, this has been an interesting and lively debate. I am very grateful to all noble Lords for their contributions.
I turn to some of the points raised by noble Lords during this debate. First, the noble Lord, Lord Whitty, raised the issue of the impact assessment, and the noble Lord, Lord Curry, referred to this as well. The noble Lord, Lord Whitty, pointed out that the Government’s best estimate is a cost to the rural workers of £236 million over the next decade. Abolishing the Agricultural Wages Board would bring agriculture into line with all other sectors in the economy. Allowing farmers to compete fairly in the labour market and allowing agricultural wages to follow market levels will enhance the competitiveness of the sector and may increase employment. This would in turn encourage long-term prosperity in rural areas.
The impact assessment itself gives a range of impacts and makes it clear that there is considerable uncertainty, with a potential £238 million impact for workers being at the upper end of the range. The impact assessment also makes clear that there may be, in fact, no reduction in wages or worker benefits. I would like to give a little more information than was asked for in terms of how we arrived at these figures. I stress that the figures are the upper estimate, based on empirical research comparing wages in fisheries and the agricultural sector over an 11-year period up to 2010. The figures are based on two particular issues. First they are based on existing workers. With the abolition of the Agricultural Wages Board, one assumes that existing workers on contracts would not receive a pay rise over 10 years. Therefore there would be a definition of wage slippage, allowing for inflation. Secondly, it allows for new workers who may be taken on at the national minimum wage rate, not the old agricultural wages rate, if the Agricultural Wages Board was abolished. So it assumes the very worst scenario, with no increase at all on what there was before, and it assumes, in effect, that farmers would be sitting on their hands. I would argue that this would be highly unrealistic.
As I mentioned earlier, the reality on wages will depend on demand, and evidence shows that demand is increasing. Farmers will want to be more flexible and will be able to be more flexible with the abolition of the Agricultural Wages Board.
Lord Hunt of Kings Heath
What impact has the Minister’s department assessed there will be as a result of supermarkets forcing down costs on farmers, and what will be the impact of that on wages?
Viscount Younger of Leckie
I am glad that the noble Lord has brought up this point because I was about to move on to the issue of supermarkets which was raised by the right reverend Prelate the Bishop of Hereford and, indeed, by the noble Lord, Lord Whitty. From our perspective, we do not have any evidence at all that supermarkets—some names were mentioned by the noble Lord, Lord Whitty—would put pressure on farm workers’ wages.
Viscount Younger of Leckie
If I may be allowed to finish, prices paid to producers are determined by international markets, not just supermarkets. Supermarkets now recognise that they have their reputations to protect. Since February 2010, all contracts between major food retailers and their direct grocery suppliers must comply with the groceries supply code of practice, the aim of which is to ensure that those who directly supply the large grocery retailers do not have unexpected costs or risks transferred on to them. I finish by saying that the horticultural sector similarly operates in international markets, with imports representing nearly 40% of fresh vegetables and over 90% of fresh fruit sold in the UK.
The right reverend Prelate the Bishop of Hereford also raised the issue of workers who worked in the farming sector who were below the school leaving age, if I understood him correctly. He argued that they would be disadvantaged by the abolition of the Agricultural Wages Board. I would like to reassure him that the National Minimum Wage Act 1998 does not apply to children below compulsory school leaving age. Therefore, following the abolition of the Agricultural Wages Board, no minimum rate would be set for young workers in agriculture in this age group. However, this would leave them in a similar position to children who work in other sectors such as shops, hotels and hairdressing salons. They will continue to be protected by general employment law and by health and safety legislation. Children of school age should be in full-time education and it is not the Government’s policy to encourage them to seek work.
The right reverend Prelate the Bishop of Hereford, in quoting Winston Churchill's words “sweated workers”, raised the question of protection. There is now a raft of protections for all workers under general employment legislation including the national minimum wage, working time regulations, the Employment Rights Act, equal pay and equality legislation and legislation for fixed-term employees, part-time employees and agency workers. If the Agricultural Wages Board were abolished, agricultural workers would enjoy the same protection as workers in all other sectors of the economy. That emphasises how far we have come since 65 years ago. It is interesting that there is quite a long list there.
To conclude on the issues that the right reverend Prelate the Bishop of Hereford raised, he made the point that there should be a defined living wage. I support that and in fact the Government support the concept of a living wage and encourage employers to take it up where possible. But the decision on what wages to set is one for employers and workers.
My noble friend Lord Greaves raised the issue of the consultation and much discussion was had in Grand Committee on that. The noble Lord, Lord Whitty, also raised this matter concerning Wales. I believe that I wrote quite a long letter to the noble Lord, Lord Stevenson, and copied it to a number of other noble Lords to address this matter.
The policy of the abolition of the Agricultural Wages Board and related committees was first announced in July 2010 so stakeholder and interested parties have had plenty of time to consider the matter. During this time, key stakeholders also had the opportunity to make their views known to Defra during meetings of the Agricultural Wages Board and agricultural wages committees. The department felt that a four-week consultation period was proportionate and realistic given the length of time that the policy had already been in the public domain.
The noble Lord, Lord Whitty, raised the issue—which, again, I believe was raised in Grand Committee—over the lack of use of the Public Bodies Act. To address this directly, the Public Bodies Act was only one method by which the Agricultural Wages Board could have been abolished. The Government are perfectly free to bring forward primary legislation to abolish the board.
The removal of the board will provide simplification and greater flexibility and allow the agricultural sector to compete on a level playing field with all other sectors of the economy, encouraging employment and competitiveness which will benefit all those in the industry. The noble Lord’s amendments would retain the Agricultural Wages Board and the separate employment regime for agriculture. This would continue the dual regulatory burden for farm businesses. The proposal that the board should be able to fix minimum pay rates by reference to any periods of the employment is intended, we presume, to make it easier for the board to provide for annual salaries. We are not convinced that the amendment would serve its purpose.
The provisions on the enforcement of the agricultural minimum wage are derived from the National Minimum Wage Act, which dissuades farm businesses from offering annual salaries. Moreover, the introduction of salaries would not be enough in itself to bring employment in agriculture into the 21st century. If the amendment were accepted, the opportunity for the agricultural industry to move forward and modernise would be lost. Instead, agriculture would be stuck in the past with an antiquated system of statutory wage fixing and prescriptive regulation of employment practices.
The Duke of Montrose
My Lords, I wonder whether my noble friend could also answer the point that I raised earlier. Does he know of any form, format or regulation that will deal with the question of what payment rates should be for work over and above the minimum hourly rate?
Viscount Younger of Leckie
I thank my noble friend the Duke of Montrose for that question. It is best that I get back to him in writing after the debate.
While I welcome that the amendment acknowledges the need to abolish the 15 agricultural wages committees and 16 agricultural dwelling house advisory committees in England, we do not consider that there is a need to retain any of the functions. The amendment tabled by the noble Lord provides the Agricultural Wages Board itself to take over the functions of the ADHACs in England. The Government are committed to growing the rural economy. A key part of that would be to ensure a dynamic and prosperous future for the agriculture industry.
We are already taking forward the recommendations of the Farming Regulation Task Force which will remove a range of unnecessary regulatory burdens from farm businesses. We are improving access to superfast broadband and the mobile network coverage in rural areas, which will make it easier for farm and rural businesses to operate. We have provided almost £57 million to the Welsh Government to ensure that broadband access is available to homes and businesses including the hardest to reach areas in Wales.
Some £100 million is being invested from the Rural Development Programme for England, which will help small rural businesses to improve their skills, facilities and competitiveness. We have also introduced a pilot of rural growth networks to share lessons learnt to stimulate sustainable economic rural growth.
This whole package of measures, together with the ending of a separate agricultural minimum wage, will support the agriculture industry in having a successful and competitive future, which will benefit all those who work in agriculture and the rural economy.
The abolition of the Agricultural Wages Board is supported by industry bodies, including the National Farmers’ Union, the Country Land and Business Association, the Tenant Farmers Association and the Association of Labour Providers. It is supported by independent professional advisers, such as the Central Association of Agricultural Valuers and the Agricultural Law Association. In view of the above, I hope that the noble Lord will feel able to withdraw his amendment and I commend the government amendments to the House.
Lord Greaves
On the question of dairy prices, is the Minister aware that for many dairy farmers, many of whom have been forced out of business, the farm gate price which has been forced on them by the market power of supermarkets and milk processors has been around or even below the cost of producing the milk? The supermarkets and milk processors have been able to use their market power to force down prices. The fact that there may be cheap milk imports means that the supermarkets can do that. But it is the supermarkets themselves who are responsible.
Viscount Younger of Leckie
I thank my noble friend for his comment. I understand that the code adjudicator is called in in this particular case. But I owe my noble friend a full answer to his question and I will follow up after this debate.
Lord Whitty
My Lords, I thank the Minister and everyone who has participated in the debate, particularly those who supported my amendments. Those who objected to my amendments, including the Minister, seem to have two points—that we have to get rid of archaic bureaucracy and that this will not have any effect because wages will be paid well above the rate and that farmers as employers will not notice the disappearance of the Agricultural Wages Board.
As for bureaucracy, most of us are on the same page. We are happy to see the abolition of the 31 bodies. Our amendments would allow significant modernisation and simplification of the procedures and substance of the Agricultural Wages Board. To answer the noble Baroness, Lady Byford, that is why that form of phrasing is there—to move to annual salaries and so forth.
Indeed, when I was Minister, as the noble Lord, Lord Curry, will recall, I tried to get a lot of modernisation through on the Agricultural Wages Board but to retain essentially the legal underpinning which is needed in this unique industry for an isolated, sometimes exploited workforce. We have had a benign picture of the way that farming operates, but actually we know that in large parts of farming and probably most obviously within horticulture, there is still some serious exploitation of workers in all their terms and conditions including their minimum wage. The Government have not answered my points regarding amendment and reform of the Agricultural Wages Board rather than abolition.
On the point about wages, we are facing a serious dilemma. By abandoning the Public Bodies Act route, the Government have not presented to the House detailed information. The impact assessment to which we have all referred is an authoritative document. It says that the Government’s best estimate—not the most extreme case, not the worst case, not the lowest case, and not the highest case either—is that in aggregate £240 million will be taken out of the pockets of current and future workers within the agricultural sector. That is the view and best estimate, not of the Minister’s department, but of the department of the noble Lord, Lord de Mauley, of what is going to happen. Obviously, there is a range of probabilities, but the Government’s best estimate is that this measure will lead to a reduction in wages in the agricultural sector by £250 million. That is the bare fact of this.
No doubt, in many of the enterprises of the noble Lords, Lord Cavendish, Lord Cameron and Lord Curry—I am sorry to fall out with him, but at least we are both being consistent on this issue—there will be better pay and little impact. But all the Government’s statisticians, agronomists and economists are looking at the total situation and saying, “The net effect of all this in aggregate across the whole of the agricultural and horticultural sector will be a loss of wages of that order”. That is their best estimate and that is at odds with the noble Lord, Lord Cavendish, and the circle of farmers in which he moves. Although clearly they are in the same geographical area, they are a different lot from those among whom the noble Lord, Lord Greaves, moves. But, even if he is right for all those farmers, the Government’s view is that is not the total effect on the sector. Either the Government’s impact assessment is utterly wrong, or the anecdotal evidence from those who are close to land-owning interests in this House is not accurate.