Only a few days to go: We’re raising £25,000 to keep TheyWorkForYou running and make sure people across the UK can hold their elected representatives to account.Donate to our crowdfunder
I beg to move, That the Bill be now read a Second time.
I recognise that we face serious competition this afternoon, but let me begin by putting the Bill in the wider economic context. Our economic strategy has two key elements, one of which is to maintain a credible fiscal policy. That policy has led to this country’s borrowing costs dipping to record lows in recent weeks. If we were without a believable deficit reduction strategy, we would have been forced to adopt one by market panic. Although fiscal credibility is necessary, it is not sufficient. A lasting recovery has to be built on the back of sustainable sources of demand and, above all, exports and stronger business investment. We are seeking to bring that about in extremely difficult international conditions, though some encouragement can be derived from the fact that 630,000 private sector jobs have been created in the past two years—almost twice the number lost in the public sector.
We also need to deal with the persistent imbalances that the previous Government did so little to address. Gross financial imbalances, a bloated banking sector and property speculation are not a basis for a sustainable recovery. A reliance on domestic demand and the neglect of exports has meant that we have been left behind in international markets. Legislation cannot, of itself, remedy those problems and generate economic activity, but the Enterprise and Regulatory Reform Bill is an important building block none the less. This far-reaching package of measures will scrap the unnecessary bureaucracy that is holding back companies, overhaul the competition framework, and boost business and consumer confidence.
I can give a categorical assurance. Of course, as the report has now been published, the hon. Gentleman may be aware that it contains a number of proposals, many of which are admirable, sensible, and being implemented, but on the particular proposal that he mentions, we will most definitely not be proceeding in the way that he outlines.
I am concerned that the Secretary of State could bring forward proposals in the Beecroft report that would make this an even more scrappy Bill. Does he think it important that his Department looks to bring about growth in the context of the green economy? I do not see the background for that in this scrappy Bill that he is bringing to the House of Commons tonight.
We do see that as part of our mandate; indeed, it is the first item that I will discuss in detail. Specifically to support enterprise, we propose legislating for a green investment bank—that, I think, is the issue that is of concern to the hon. Lady. We propose improving the employment tribunal system and promoting resolution of disputes—that, I think, deals with the first intervention. We propose giving shareholders of UK quoted companies binding votes on directors’ pay; promoting competition through a single competition and markets authority; strengthening powers to address anti-competitive behaviour; and encouraging innovation and investment in design by enabling copyright owners to prevent the importation of replica products.
To simplify regulation and strip away unnecessary red tape, we propose extending the primary authority scheme to more businesses, for one-stop advice; repealing unnecessary regulatory requirements on business; and providing greater powers to time-limit new regulations—that is, to apply sunset clauses to new measures.
Does the Secretary of State accept that copyright is the legal expression of intellectual property rights, and is not a regulation? Is he aware of the widespread concern among the creative industries about clause 56, which will allow copyright to be amended by statutory instrument without full parliamentary debate? Will he assure the House that the Government will not change copyright in that way without proper parliamentary scrutiny?
Yes, I can give assurances on that. We will deal with this subject later, but I totally accept the hon. Gentleman’s crucial point: intellectual property rights are a key part of a market economy. They are not “regulation” in the pejorative sense in which we normally refer to it—absolutely not; but we have to strike a balance between access to information and copyright protection. We think we are striking the right balance, and we are proceeding to implement the Hargreaves report, which has many of those ideas at its heart. On a personal level, I introduced the private Member’s Bill that strengthened criminal penalties for copyright theft, so I have a long-standing interest in upholding that legislation.
Let me deal with the first issue I mentioned—the green investment bank. The transition to a low-carbon economy is a very big challenge. Some analysis suggests that there will be demand for more than £200 billion of investment in the next decade to develop the innovative technologies and products that will underpin it. The challenge is all the greater, given the novelty of these markets and the long-term nature of returns on green infrastructure investment, which may deter private sector investors. There is a market failure here that the green investment bank will address. The bank will break new ground in the financing of projects, while demonstrating to the market that such investments can deliver commercial returns.
Let me finish, and then I will take interventions.
The bank will also demonstrate the Government’s lasting commitment to important green objectives. For these reasons, I am sure the Opposition will welcome and support its objectives, as I am sure the hon. Lady will.
The Secretary of State may be aware that a number of months ago the Deputy Prime Minister committed money from the green investment bank to capitalise the initial run of loans for the green deal, which is supposed to launch in a few months, yet we heard at the end of last week that a number of companies, including British Gas and Kingfisher, are halting their plans to proceed with the non-profit-making green deal finance company because the money that they are expecting from Government has not been forthcoming. Will the Secretary of State say when they should expect those funds to come forward?
I am aware that the team currently working on this, UK Green Investments, has been looking at the green deal proposal. Of course it must be commercially viable, as well as environmentally sound, and I cannot give the hon. Lady a precise answer as to when the team will have completed its analysis. I think a good deal more information is still required.
It has been described as a bank by the Financial Services Authority, which is the relevant regulatory body, and it will be able to borrow after 2015 in capital markets, subject to the overall debt position of the Government at that time. It is a bank.
Is it not the case, though, that without the certainty that it will be possible for the bank to borrow on the open market, the first few years of the green investment bank will be uncertain? We will not know definitely that it will be able to borrow when the time comes.
The bank will have the certainty of knowing that it has £3 billion committed to it from the Government and it is in the process of developing the projects to utilise that efficiently. I shall point out to the House some of the steps that have been taken to provide that concrete certainty about which the hon. Lady asks.
We have formed the bank as a public company, called the UK Green Investment Bank plc. It will be headquartered in Edinburgh. I have appointed Lord Smith of Kelvin as the chair and Sir Adrian Montague as the deputy chair. The bank will be funded with £3 billion to 2015, and the first £200 million of that has already been allocated by UK Green Investments. It will have borrowing powers from 2015, subject to a quite proper test of improving public finances. The Bill specifically provides for complementing this work by ensuring that the bank must have a statement of objectives clause in its articles of association.
The Bill also embeds the bank’s independence, which is crucial for its success. To achieve this, the Bill requires me as Secretary of State to lay an undertaking before
Parliament not to interfere with the bank’s operational independence or commercial activities as a condition of designation. I provided this undertaking to the bank on its incorporation. This will ensure that the bank operates on commercial terms, funding these nascent and important environmental markets.
I welcome the establishment of the green investment bank in Edinburgh. What measures are the Government putting in place to ensure that small and medium-sized businesses can benefit from the green investment bank? Will there be a procurement code, as requested by the Federation of Small Businesses?
I do not think a specific procurement code is required for this institution, though of course Government procurement raises wider questions. If the hon. Lady looks at the first tranche of commitments—the £200 million—she will find that that is for a fund dealing with a substantial number of waste projects, which have small-scale enterprises as part of their supply chain. That is the way that SMEs will benefit.
Will the Secretary of State confirm that not only are the Government committed to the green investment bank, which is a very good thing and has long been called for, but that there is a wider strategy in his Department, the Department of Energy and Climate Change and the Department for Communities and Local Government to make sure that we develop the green economy, producing a significant number of extra manufacturing jobs and apprenticeships and growth, and that that is a very significant part of the Government’s policy as a whole? It is not just about a bank and £3 billion being lent over a certain number of years.
My right hon. Friend is right. We have the Green Economy Council, which is an over-arching body representing the key Departments in the Government to make sure that our work in this area is integrated and properly joined up.
I have every confidence in the sense of the Scottish people, and I have every confidence that the bank’s headquarters will remain viable and expanding in Edinburgh.
On employment law, the Government are acutely aware of the need to do all they can to support business expansion and job creation. That is why the Bill contains provisions to reform the employment tribunal system and encourage dispute resolution through conciliation. Smaller businesses have consistently told us that the fear of ending up in a tribunal is high up their worry list and is a real disincentive to taking on staff. I have made it absolutely clear that I have no truck with the idea of a free-for-all hire-and-fire culture, and responsible British businesses do not want to go there either.
I congratulate my right hon. Friend on his introductory comments on this important Bill. Government Members strongly believe in business, and we do not want to hold it back. On the other hand, we want regulation that is necessary to protect the work force, and we want to help them. We need a change in the law to help businesses grow and flourish.
I am grateful to my right hon. Friend for saying that he will have no truck with compensated no-fault dismissal, but with many businesses, through the Institute of Directors and the Federation of Small Businesses, making the case for compensated no-fault dismissal, what representations has he had on that? Why has he been so strenuous in saying that he will have no truck with it?
I think the hon. Lady is referring to a survey of small business that my Department did. Indeed, roughly that order of businesses ranked that as their top priority, as opposed to market demand and bank lending. Even though it may not be at the top of everybody’s concerns, for many small companies there is a legitimate fear, as my hon. Friend Mr Evennett pointed, about the tribunal system and the way it functions.
Does the Secretary of State agree that the Beecroft proposals about no-fault dismissal amount to a charter for intimidation and harassment, including sexual harassment? A boss could say to an employee, “Will you sleep with me?”, and if she said no, she could find herself sacked.
The Bill does not contain measures on some of the matters on which the Government are consulting in respect of employment law, following the red tape challenge. Does the Secretary of State intend to bring forward more proposals during the passage of the Bill—in relation, for example, to employer liability for third-party harassment, to the ability of an employment tribunal to make a decision that will then apply to all staff, or to the statutory questionnaire?
In 2004 Germany exempted micro-businesses from unfair dismissal-style protections. Has the Secretary of State looked at the German experience and noted, as I have, that youth unemployment there has halved, from just over 12% to just over 6%, in the seven years since the changes were made?
As it happens, I was in Germany a few weeks ago—I unfortunately had to miss Business, Innovation and Skills questions—and one of the points clearly made by the various employers I met was that their procedure is far more cumbersome than ours, even for small companies. Indeed, small companies are required to adopt the two-tier system, a works consultation, which is very cumbersome indeed. There is no evidence that the German model, although admirable in many ways—I wish we had many of its aspects here—in any way helps to deal with this problem.
I had hoped to see in the Bill further measures taken from the German book, particularly the exclusion of micro-businesses from many of the regulations that hamper them right at the start of their life. Is the Secretary of State willing to consider that and perhaps accept an amendment to that effect in Committee or on Report?
We will obviously look at any proposals on their merits, but our current regulatory system does have a micro-business exemption and we test all our proposals against that possibility. My hon. Friend should perhaps look at the FSB’s submission, because one of the problems the small business sector often highlights is that it does not wish to be regarded as a second-rate tier of employment that is colonised by cowboy employers. It makes it very clear that it is small businesses that resist the segmentation of the labour market.
Does the Secretary of State agree that the current employment tribunal system is not simple, transparent or inexpensive for employers, because for many of them dealing with an individual case or a class action-type case is incredibly expensive and long-winded, and that serves as a barrier to businesses hiring new staff? They know that if things go wrong it is very complicated, so simplifying the system and enabling them to deal with it without resorting to disputes should be the way forward in the Bill.
I totally agree with my hon. Friend, who anticipates many of the things I will say. He is absolutely right that the process is very cumbersome and time-consuming. There is currently an enormous backlog of 430,000 cases and it is very costly, particularly for small companies. The whole thrust of the changes I want to introduce relates specifically to making the tribunal system much simpler and avoidable where possible.
May I say how welcome the Secretary of State’s balanced view is, in contrast to those of some Members behind and beside him? On the question of changing the tribunal system, what increase in resources will he make available to the Advisory, Conciliation and Arbitration Service if everyone who wants to put a claim to a tribunal must first put it to ACAS?
My experience is that colleagues behind and beside me have a very balanced view of this question—we have no difficulties in this area at all. We will indeed rely heavily on ACAS and it is important that it is properly resourced, so we will obviously have to look at that, but we have had no warnings that it cannot handle the processes that we propose to introduce. If the right hon. Gentleman will let me, I will try to describe what those are.
Our reforms are not about removing individual employment rights; they are designed to ensure that the tribunal system is fair to all parties and supports labour market flexibility. They are meant to improve the prospect of employers and workers sorting out problems through reconciliation—ACAS-based dispute resolution—rather than the adversarial and costly method of going to court, as my hon. Friend Mr Gyimah admirably pointed out. Tribunals are a costly and stressful process for everyone involved. Giving all parties a new opportunity to resolve disputes through ACAS will maximise the chances of resolving a problem without going to a tribunal.
We want to do more to encourage parties to reach an agreed solution at an earlier stage. We will therefore introduce an additional clause in Committee to ensure that the offer of a settlement cannot be used against an employer in an unfair dismissal case. That will facilitate the use of settlement agreements, making it easier and quicker for employers and employees to come to an agreed settlement where an employment relationship is not working.
I welcome the decision to move forward with settlements and compensation, which is a really good move, particularly for small businesses, and thank the Secretary of State for listening to many Government Members who have put the case for more clarity for smaller businesses.
I thank my hon. Friend for his positive response. The Under-Secretary of State for Business, Innovation and Skills, my hon. Friend Norman Lamb, who will guide the Bill through Committee, will be able to develop that a little more, and any insights that my hon. Friend has for improving that new idea will be warmly received.
Of course, if an employee and an employer have “without prejudice” discussions that involve an offer to pay off and for the employee to depart on that basis, at present that cannot be adduced at tribunal. The Secretary of State will know that a relationship of trust and confidence is essential to the existence of an employment relationship. How does he see that working if an employer’s offer to pay off has been refused by the employee who feels that there is no reason why they should leave?
If the dispute is then unresolved, which is the implication of the last phrase in the hon. Gentleman’s question, it would of course remain and would have to be resolved either through conciliation or, ultimately, a tribunal, so he is referring to an unresolved dispute rather than a resolved dispute. What we are specifically proposing is that, if there is an agreement and the dispute is resolved, the matter cannot subsequently be raised in a tribunal case—[ Interruption. ] He shrugs his shoulders, but our understanding, having talked with business groups and trade unions, is that that would be a very helpful step, and I think that that reinforces what we have just heard.
In addition, we are streamlining the tribunal process itself, including providing for the introduction of a rapid resolution scheme, so that straightforward cases can be dealt with more quickly, and reducing the burden of resolution for users of the tribunal system and the taxpayer.
Yes, and I thank my hon. Friend for making that important point. It is not simply employers who have problems with the existing system; often payments are far less than the people who bring the cases expect, the process is stressful and lengthy and the current system simply cannot handle the volume of claims.
In addition, there will be a discretionary power for employment tribunals to levy a financial penalty against an employer where there has been an aggravating breach of an individual’s employment rights, which will also encourage employer compliance. Taken together, these measures will help shift the emphasis from confrontation to conciliation when resolving workplace disputes and give businesses the confidence to expand and take on new staff.
On the point about business confidence and taking on new staff, having worked as a freelance software engineer, one thing I see missing from part 2 is anything to resolve the difficulties and ambiguities with the status of freelancers. Will the Secretary of State use the opportunity in Committee to do something about IR35?
I am tempted to engage in a long disquisition on that subject, having been involved in the debates on IR35 10 years ago. It is primarily a tax issue. As some Opposition Members will remember, the IR35 measures were introduced primarily to avoid a particular form of tax avoidance using national insurance, so if we have to do more on IR35 we will look to my colleagues in the Treasury, rather than this Bill.
Let me turn to directors’ pay. Fairness is important, and never more so than when the fiscal situation we inherited has forced upon us difficult decisions that affect everybody in society. That principle extends to executive pay, which for some years has behaved in a way that is unrelated to the rest of the economy or performance.
There is a well-established case for the regulation of directors’ remuneration, given the inherent conflict of interest when directors set their own pay. Moreover, shareholders in a number of companies have shown that they are increasingly angered by soaring pay for top executives that is unrelated to company performance. Their willingness to challenge rewards for failure is admirable, but I want this “shareholder spring” to be more than just a passing, seasonal phenomenon.
In developing our proposals, we have worked intensively with businesses and investors to create a workable package that helps shareholders to hold directors to account, while avoiding unnecessary red tape on business and unrealistic demands for investors to micro-manage pay. Responses to our consultation showed clear support for strengthened shareholder voting rights in order to improve the link between pay and long-term performance, while still allowing boards the flexibility to devise and deliver pay policy.
In the past it has been too easy for companies to ignore a significant adverse vote from their shareholders. That is why the Bill includes a provision to give shareholders binding votes on directors’ pay. We intend to introduce new clauses in Committee, when we have analysed in detail the responses to our consultation and finalised our proposals in that area.
What consideration has the Secretary of State given to creating remuneration bodies that include company employees? Surely such bodies would have a wider remit and far greater buy-in.
That is an issue on which we have frequently exchanged views across the House, and we do indeed want to see employee consultation, but we are not mandating employee representatives on boards, which I know some people have called for, and we have made that very clear in the past.
This is one of those issues that the Government inherited. It is the scandal, left by the previous Government, of absolutely obscene pay for top executives—uncontrolled by shareholders. I therefore welcome the proposals, but will my right hon. Friend clarify that the Prime Minister and Government still take the view that in the public sector the ratio should be a maximum of 20:1, and that in the private sector, where it is not a matter for government to determine, all shareholders will have adequate notice of any proposals, so that there is both private and public participation in the debate as well as a binding vote on the remuneration package for the executives at the top of private sector companies?
There are separate developments taking place that do not require primary legislation, and they will improve the quality of information available to shareholders. The Financial Reporting Council has responsibility for that, and I do not have the powers to direct it, even if I wanted to, but the quality of information is intended to improve, and we certainly want to see a range of information made available, including the aggregates that my right hon. Friend describes, as well as simpler and clearer information. That process is taking place in parallel with this Bill.
The Bill will improve the way in which competition is promoted and policed. The UK’s support for a free and open trading system remains fundamental to our economic strategy, and the steady pressure from competitive markets ensures that businesses boost productivity and consumers benefit. Our competition regime has been well regarded, but it can be too slow, and recently there have been some worrying criticisms about how it has managed cartel offences.
The reforms that I propose are designed to improve the effectiveness and efficiency of competition enforcement, operating through a new competition and markets authority, backed by streamlined and strengthened powers. The current division of responsibility for the two phases of the markets and mergers regimes, between the Competition Commission and the Office of Fair Trading, can lead to a duplication of activity and the inefficient use of resources. Further, the time it currently takes to complete mergers, markets and anti-trust cases is often far too long, and that in turn imposes additional costs on business, including on those that pose no threat to competition.
Our reforms to the competition regime are designed to create a single, strong voice for competition and a one-stop shop for business; to create greater certainty for business, thanks to faster, clearer and, indeed, statutory time frames; to provide for more effective action to tackle anti-competitive mergers, including the discretion to suspend them; and to provide for robust action to tackle cartels, which can damage business and consumers alike, by removing, for example, the need to prove dishonesty. In addition, it will be easier for businesses to ask the new competition and markets authority to halt uncompetitive practices while investigations are ongoing. These measures go hand in hand with proposals, on which we are currently consulting, to allow businesses to take private actions to stop anti-competitive practices and to achieve redress.
Another aspect of our reforms relates to intellectual property rights, an issue that the Chair of the Culture, Media and Sport Committee, Mr Whittingdale, raised a few moments ago. The modernisation of copyright is critical to investment in the UK’s creative industries, one of our most successful export sectors. Research by Imperial college and the Intellectual Property Office shows that annual copyright investment in artistic originals in film, TV and radio, books, music and art was about $5 billion, twice the original estimate. Spending on UK design amounts to almost £33.5 billion, and there are about 350,000 people in core design occupations of all kinds.
The sale of unauthorised replicas of classic designs, such as a lamp or a piece of furniture, means that firms that depend on design can lose out, so the Bill ensures that those designs that are also artistic works and, therefore, qualify for copyright protection will be protected for 70 years from the creator’s death, instead of for the current 25 years.
The Bill also creates an order-making power that will allow the Government to make any future changes related to copyright exceptions or exceptions to rights in performances. The practical consequence of that will be to maintain the level of criminal penalties, in which as I said earlier I have a personal interest, given that my private Member’s Bill introduced the current maximum penalty level of 10 years’ imprisonment
In addition, the Government have made a number of proposals in response to the Hargreaves review of intellectual property and growth and subsequent consultation. They are needed to ensure that the copyright system is fit for purpose in the digital age. It has been decades since the intellectual property regime was overhauled, during which time the world has changed beyond recognition. It would be negligent to leave unchanged a system suited to the cassette recorder in an era of iPads and cloud-based music services.
Primary legislation will be required for three of those reforms: the introduction of a scheme to allow extended collective licensing; one to allow the use of orphan works; and, finally, a back-stop power to allow the Government to require a collecting society to implement a statutory code of conduct, should it fail to introduce or adhere to a suitable voluntary code.
The Government’s proposals on extended collective licensing and on the use of orphan works are designed to make it simpler for users to use copyright works legitimately, while protecting the interests of rights holders. At the same time, introducing codes of conduct for collecting societies will provide valuable reassurance to the thousands of small businesses and other organisations, including creators, that deal with them.
The Government are finalising their response to the consultation on those three proposals, and if we decide to proceed we will want to move swiftly. The Bill presents an opportunity to do so, and I shall announce a decision on the matter as soon as possible.
How does the strength of law on copyright compare with that on patents? I am thinking of the international duplication of a copyright, such as on a chair, as the Secretary of State said, and how the law will be enforced internationally.
I do not think that there is any link between patents and copyrights in this case; they are separate systems of law. The hon. Gentleman will know that in the European Union there is already a unified approach to patents and to copyright, but we are trying to ensure that in the UK context copyright protection is properly enforced. That is the purpose of the changes before us.
The Secretary of State will be aware that in the Hargreaves report a number of the proposals relating to possible extensions of copyright exception are causing real concern in the creative industries. Can he provide an assurance that they will be introduced not by statutory instrument, but in proper, primary legislation?
I am not going to give the hon. Gentleman a very precise answer because I will need to check on the exact legal position. I am aware of the concerns, and he is one of several people who have expressed them. I will endeavour to reply to him in writing to give him the precise answer to his question.
A further set of reforms accelerates the Government’s drive to tear up unnecessary red tape. We inherited over 20,000 separate rules and regulations affecting business in the UK. Cumulatively, this regulation stifles growth and strangles innovation, and in the past two years we have launched a concerted drive to tackle the problem. We introduced the one in, one out rule to stem the flow of regulation to business. The aim of one in, one out is not only to force regulating Departments to deregulate more but to change the Whitehall culture to encourage Departments to use regulation only as a last resort. Under the red tape challenge, 20 regulatory themes have been launched for comment on the website, involving more than 3,700 regulations. Decisions have been announced by Ministers on 1,500 of those, of which well over 50% will be scrapped or improved.
I was going to mention that measure at the end of my speech. We see it essentially as a bit of legislative tidying up; we are not going to argue that it has significant impacts on business. However, we can pursue the detailed implications.
The Bill introduces further measures and makes it possible to include a sunset or review clause in any new secondary legislation to ensure that legislation is fit for purpose and is regularly reviewed. It also extends business eligibility for the highly successful primary authority scheme, which allows firms to get assured advice from one local authority on a particular regulatory issue. Often what businesses find most bewildering is not the regulation itself—they recognise that rules are often necessary—but the inconsistent application of the rules so that they have to adjust their systems depending on the whim of a local official. The primary authority scheme deals with that.
On reviewing regulations that have already been passed, one regulation that springs to mind is the agency workers directive, where, on issues such as pay, bonuses and holidays, we have gold-plated what Brussels originally introduced. In so doing, we have made what is supposed to be flexible, temporary work more like permanent work, which it should not be. Would we be able to review that legislation under the sunset clause that the Secretary of State mentioned?
This would not be the context in which to do it, because it is, of course, now part of the law. We have looked at this in considerable detail because a lot of concern has been expressed about it. The UK’s implementation of the agency workers directive came about as the result of a negotiated agreement between employers and employees and their representative bodies. We explored the possibility of easing some of the burdens on business arising from the directive and came to the conclusion that in practice we could not do so. However, I hear the hon. Gentleman’s concerns, which were expressed by many companies.
I understand that the TUC and the CBI, as European social partners, were very involved in the negotiations between employees and business, but representatives of small businesses were not, despite the fact that the impact of such legislation on small businesses can be particularly draconian. I urge the Secretary of
State to consider a way of reviewing the gold-plating of such legislation, especially where it applies to small businesses.
I have an open mind if the hon. Gentleman has good ideas as to how that can be done. We have committed ourselves to removing the gold-plating of European legislation as it applies to Britain, and if he has good, constructive ideas, we are happy to look at them.
Has the Secretary of State given any further thought to including EU directives and legislation in the quarterly statements that are being produced by his Department? Earlier, he said in answer to a question of mine that he might consider it, and I would be interested to know whether he has done so.
Following the dialogue that has just taken place, I am left unclear whether the Secretary of State agrees that agency worker regulations are gold-plated. If he thinks that they are gold-plated, in what sense is that the case, and if he does not think so, will he make that statement clearly?
As I said, that case has been strongly made to us by people in the business community. I also said that the directive’s current form in British law was the result of a consensus among the main social partners. Although the CBI has small business membership, it would not consider that area to be its primary function. If there are specific proposals on how some of the gold-plating, if that is what it is, can be alleviated in a sensible and fair way, I am always willing to look at that. I do not have a closed mind on these issues.
What small businesses usually mean by gold-plating is that they spend a great deal of time filling in forms, ticking boxes and complying with regulatory measures that impede their business activity. If that is the case in this respect, as in others, we are happy to look at it.
Also in a deregulatory spirit, the heritage measures in the Bill implement commitments to legislation made in the Government’s response to the Penfold review of non-planning consents, which aimed to ensure that non-planning consent regimes operate in the most flexible and simplified way. The measures include bringing greater clarity on what is and what is not protected within listing buildings, and they will enable owners and local planning authorities to enter into voluntary partnership agreements to help them to manage listed buildings more effectively.
The measures that I have outlined are designed to improve the business environment and to help to restore the UK economy to health by laying the foundations for lasting recovery.
I am coming to the end of my speech.
I have acknowledged that legislation by itself will not solve the economic challenges we face, but these measures will help to create a platform for sustainable recovery. I commend the Bill to the House.
I beg to move,
That this House, whilst supporting the principles of the Green Investment Bank and affirming its belief that active government should work in partnership with business to encourage long-term sustainable economic growth, facilitate enterprise, protect the rights of all, particularly low-paid, workers and simplify regulation where necessary, declines to give a Second Reading to the Enterprise and Regulatory Reform Bill because it does not provide a strategy for economic growth;
believes that the Bill contains inadequate measures to boost business confidence, enhance this country’s international competitiveness, increase competition in consumer markets or protect consumers from powerful vested interests;
further believes that the Bill fails to provide sufficient support to empower shareholders, investors and employees on executive remuneration to bring to an end excessive rewards for corporate failure;
and is concerned that the Bill grants the Secretary of State additional powers to alter compensatory awards for unfair dismissal and contains provisions relating to the conciliation process that could dilute the rights of people at work.
I will deal with each element of the Bill in turn and, in so doing, explain our amendment. Given the very varied nature of the Bill, that will take some time, but I will do it as swiftly as possible because many others want to take part in the debate.
First, I want briefly to consider what the Government claim the Bill will achieve overall. In January last year, not long after the Government’s spending review, the Secretary of State told this House:
“economic growth is now strong. It will become stronger as a result of the work that the Government are doing in stabilising finances”.—[Hansard, 13 January 2011; Vol. 521, c. 429.]
Quite the opposite has turned out to be the case. Since the spending review, the economy has shrunk by 0.4%, we have been tipped into a double-dip recession, over 2.6 million people are now out of work, and 50 businesses are going under every single day. That was not the case back in May 2010; it is now, thanks to the policies of this low-growth Government. When my party left office, the World Bank ranked the UK fourth in the world and first in Europe for ease of doing business. This year, we have slumped to seventh place. Businesses face an increasingly difficult operating environment, not least because of the problems that sound and successful firms have found in accessing finance, with net lending to business contracting year on year in every month since this Government came into office.
In fairness to the Secretary of State, he has recognised his and the Government’s failings. He said that they have no “compelling vision” for the country, that they lack
“a confident message on how we will earn our living in the future”, and that there is
“no connected approach across government” to driving growth. He suggests that the Bill will change all this. Indeed, on the day of its First Reading he said:
“The measures in the Enterprise and Regulatory Reform Bill will help make Britain one of the most enterprise-friendly countries in the world.”
He said that it would resolve the ongoing issue of no growth. That remains to be seen. I sincerely hope that that will be the case for the sake of our country, but I and many businesses doubt it.
I challenge the hon. Gentleman’s point that Labour left the country in a good regulatory state. The CBI states that 107 of the 152 employment regulations were put on the statute book during Labour’s period in power. Was that leaving the country in a good regulatory state?
What I cited was the World Bank’s assessment of the state in which we left the environment for businesses to carry out their work. If the hon. Gentleman reads the guidance that has been issued by his Government, he will see that we have been praised for doing things such as introducing the primary authority scheme, which was supposed to, and did, reduce the regulatory burden on businesses.
Perhaps the Secretary of State’s most damning criticism of his and his Government’s actions is that they are “frankly, rather piecemeal”. At first sight, that is precisely what the Bill is. It is a hotch-potch of measures that provides no discernible overall vision or confident message. There is no evidence of a connected approach across Government to drive growth.
Business was straight off the blocks with its criticisms of the Queen’s Speech, the centrepiece of which was this legislation. The director general of the British Chambers of Commerce said what many people have been saying for many months:
“There is a big black hole when it comes to aiding business to create enterprise, generate wealth and grow.”
He is right. Our amendment makes it clear that the Bill, viewed as a whole, does not change that assessment.
I will quickly go through the parts of the Bill and set out our position on each.
I will make a bit of progress, because I want to ensure that there is time for others to get in.
Part 1 will set up the green investment bank. I have stated on many occasions, as has the Leader of the Opposition, that it is crucial to long-term economic growth to have an active Government working in partnership with the private sector. In our view, the Government should work with business to identify the sectors from which future demand will come and to ensure that companies are set up to meet that demand. There is and will continue to be a growing demand for green technologies, so we need an active industrial strategy to support the low-carbon economy, as I and my right hon. Friend Caroline Flint have argued.
A critical component of that is the green investment bank. That is why we set up the green investment bank commission in 2009 with a view to establishing such a bank, and why we committed ourselves to establishing such a bank in our 2010 manifesto. We will therefore not oppose the bank—our amendment makes it clear that we support it in principle. Also, I do not want to add further long-term policy uncertainty in this area, after the huge uncertainty that the Government have heaped on the low-carbon sector since coming to office. I note that the deputy leader of the Liberal Democrats, who has left his place, conveniently ignored the decision on feed-in tariffs, which is perhaps the most glaring example of the uncertainty that has been created.
As the Secretary of State said, Lord Smith of Kelvin and Sir Adrian Montague were appointed as the chair and deputy chair of UK Green Investment Bank plc during the Whitsun recess. We welcome their appointment. Having heard what the Secretary of State has said, I suggest that until this entity is given the power to borrow and to lend, allowing it to leverage its initial equity to make more capital available, it will not be a body that most people would recognise as a bank. It is a fund, whereas it is an operational bank that the country needs. The Secretary of State made has made it clear that it will not be allowed to borrow—he repeated this today—unless public sector net debt is falling as a percentage of GDP in 2015. The earliest it is likely to be able to borrow is therefore 2016. That is a delay of four years from now. Ed Matthew, the director of Transform UK, the business alliance campaigning for the bank to be set up, put it well:
“Allowing the bank to borrow is the key to generating growth and rebooting the UK economy. Delaying this power until the economy has recovered is like a doctor waiting for a seriously ill patient to recover before giving him life-saving medicine”.
I am listening carefully to the shadow Secretary of State’s comments on the green investment bank. He has talked about the importance of low-carbon industries. Does he agree that the scope of the green investment bank should include the nuclear supply chain, which is far and away the biggest low-carbon industry in our country? That would enable us to lend to Sheffield Forgemasters, a company that I have heard him talk about many times.
We will wait to see the detail that the Government come forward with in Committee. We are clear that the bank needs to step in to fill the funding gap if we are to green our economy. It is with that in mind that we will decide our position, as and when the Secretary of State comes forward with the detail.
To go back one step, what my hon. Friend just read out about the need for borrowing powers was exactly the recommendation of the Environmental Audit Committee. In the Public Bill Committee, will he explore with the Government what progress has been made in respect of state aid rules to ensure that there is no impediment to getting this off the ground?
Does my hon. Friend agree that the green investment bank must not be a bank of last resort that simply takes the projects that no one else is prepared to take, but must drive investment forward, taking the private sector with it, particularly in areas such as offshore wind, tidal power and carbon capture, which we have plenty of opportunity to develop further?
I could not agree more. The Government have committed to additionality and we will look to ensure that that occurs.
Part 2 of the Bill relates to employment law, which has attracted much public concern. As I have said before, we are not in a double-dip recession because of the rights that people in this country enjoy at work. No amount of sabre rattling and nonsense from Government Members about the need to allow employers to fire employees at will is going to get us out of recession. That is a simple fact. We are in a double-dip recession because of a lack of demand. Watering down employee rights will not boost demand. In fact, it is highly likely—
I was wondering when a Government Member would seek to intervene. I will give way shortly.
Watering down employee rights will not boost demand but is highly likely to do the opposite. As the Chartered Institute of Personnel and Development said last week, increasing job insecurity is more likely to damage growth and consumer confidence than increase them. I say to Richard Fuller that the Federation of Small Businesses has been in contact with us today about the Government’s proposals to allow no-fault dismissal, with fewer employment protections for those working in small businesses, for which he has argued. It has said that
“those who do take employment in small firms could be lower skilled, less productive workers willing to accept lower protection, making it even more difficult for these firms to grow” and that
“there is a question that with weakened rights, employees in small firms would find getting access to credit more difficult. If so, that would make labour recruitment for small firms even harder.”
There is a fundamental misunderstanding here. It is a misrepresentation to say that any conversation about making it easier for both employers and employees to exit a relationship that is not working is an attack on workers’ rights. That is simply not true and it is not what the Bill tries to do. The shadow Secretary of State has mentioned that we need growth. It is important to remove everything that stops investors being confident enough to invest. Access to finance is one such thing, but so is the confidence to hire people. That is why the Bill seeks to simplify the employment tribunals system.
I will expand on that point in more detail later, but what I can tell the hon. Gentleman now is that when I ask businesses what is currently holding them back, most say a lack of orders and demand, not the rights that their employees enjoy at work. If we are looking to encourage businesses to hire people, why not give all micro-businesses a national insurance break—I believe he has a seat in the south-east—when they take on extra workers? That would do more to help them grow their businesses.
I know that the shadow Secretary of State admires experience. He knows that I founded two companies that collectively employ 260 people. He knows that we deal with many, many small businesses, and I am involved with them on a weekly basis. I can tell him that many small businesses are frightened to take people on because they are frightened of being blackmailed, should it not work out. That is a real problem, which his party needs to face up to.
I acknowledge the hon. Gentleman’s great wisdom and experience, but I respectfully disagree with his overall depiction of employees blackmailing their employers willy-nilly. I say that as a former employment law solicitor who has advised businesspeople like him, but employees too.
May I point out that this is the Secretary of State’s Enterprise and Regulatory Reform Bill, not mine? I am sure that mine would be somewhat different. The shadow Secretary of State talks about job protection, and about the recession and demand, but does he accept that it goes a little deeper than that? Recent experience in the UK and the US shows that when we have recovered from recessions, we have not created jobs as swiftly as we did in the ’50s, ’60s and ’70s. In that context, does he not think it is worth looking at the recommendation made by Beecroft?
I am not sure exactly which proposal the hon. Gentleman thinks it is worth having a look at. If he is talking about the proposal to allow no-fault dismissal in firms of fewer than 10 employees—which I believe is what he spoke about earlier—the answer is no. I do not agree that it is worth looking at, partly because there is no evidence that having no-fault dismissal encourages or helps firms to grow, as was previously made clear in business questions by the Minister responsible for employment relations, the Under-Secretary of State, Norman Lamb.
I do not deny that employment law and regulation more generally are matters of concern for small businesses. It would be absurd of me to make such a claim, and I am not making it. However, it is the state of our economy that has been consistently identified by small and medium-sized enterprises as the main barrier to their success. We know this because that is what they have been telling Ministers. In the Government’s latest “SME Business Barometer”—which I think the Secretary of State mentioned earlier—32% of SME employers said that the state of the economy was the main obstacle to the success of their business, followed by issues such as cash flow, taxation and finance. Just 7% cited regulation as the main obstacle to their success.
Let me be absolutely clear: we on this side of the House will not countenance watering down the rights that every constituent of every Member of this House enjoys in the name of growth. I should also note that Conservative Members—nobody has made this comment today, but they have before—have been keen to present this as solely a union issue. It is not: it affects just about every working person in this country, regardless of whether they are a member of a trade union. While everyone else has been worrying about losing their job—thanks to the Government’s economic incompetence in my view—their rights at work have, frankly, been used as a political football in the Government, among Departments and between the two governing parties. That does nothing to dispel the overall impression of shambles that hangs over the Government. However, Minsters and those who have been briefing the media on their behalf should also reflect on the huge worry that such briefing on employment law is generating among those who work in our businesses, with all the talk of further liberalising our labour market, which is one the most liberalised labour markets in the western world.
Yes it is: it is precisely what they have been doing with the promotion of the Beecroft report by the Prime Minister and others. I should say that the Secretary of State is no innocent bystander. His little chat with The Sun on Saturday evening generated an article in that paper yesterday carrying the headline “Quick Cash for Sack”. This hardly reassures vulnerable employees who are anxious about their job security.
That article was, of course, the pre-spin for the new measure—which has been mentioned today—to prevent employees from using a pay-off offer as evidence in a tribunal. The measure will presumably be inserted in the provisions in the Bill that deal with the new settlement agreements. We were notified of the proposal only when I read my copy of The Sun yesterday, as it did not appear in the Bill or the explanatory notes, so we have not had proper time to consider it. At first sight, it is questionable whether it would work in practice. As a former employment lawyer like me, the Minister responsible for employment relations will know that essential components of an employment relationship are trust and confidence between the parties. How on earth can trust and confidence continue to exist if a pay-off offer is made out of the blue when the employee has done nothing wrong and decides to reject the offer? What happens then? This needs further clarification. So too do the Government’s intentions in relation to the employment law provisions of the Bill and the Beecroft report, because, further to the questions that Labour Members have asked the Secretary of State, I am no clearer about how many parts of the Beecroft report will potentially be inserted in the Bill.
I assume that the hon. Gentleman, as a former employer lawyer, was involved in negotiating compromise agreements. Surely the proposals that we are discussing this evening are just simplified compromise agreements for smaller companies which will be much easier to administer and will not involve payment of the fees that I am sure he earned advising bigger companies on such agreements.
No, the hon. Gentleman is wrong. As things stand, the position in law is that if a pay-off offer is made during a “without prejudice” discussion between an employee and an employer—which would take place if there was an ongoing dispute—that cannot be adduced as evidence in court. However, if a pay-off offer was made out of the blue where there was no pre-existing dispute, that could be adduced as evidence. What I discern from what is being proposed is that the Government are seeking to ensure that that situation is covered too, so that such an offer could not be adduced in evidence in court either. [ Interruption. ] I believe that the Minister responsible for employment relations is agreeing with my interpretation. My issue with that is that if an employee in a firm is quite happy and believes that they have done nothing wrong, but the employer does not like them for some reason, decides that they are going to get rid of them and offers them a set sum, the employee should be able to adduce that as evidence to show that the employer was intent on getting rid of them come what may. That is the point that I am seeking to make.
Further clarification will be needed. However, let me once again ask the Secretary of State—I will give way to him on this point—how many parts of the Beecroft report are going to be inserted in the Bill by way of amendment, if any. He has—I think—been clear with us today that the proposal for a no-fault dismissal measure, on which the consultation has just closed, will not feature in the Bill. How many other parts of Beecroft are likely to feature in the Bill through amendments? I am happy to give way to him if he is willing to answer that question.
As far as I am aware there are none, but the hon. Gentleman will be aware that the Beecroft report covers a wide range of activities, including things such as immigration control, which clearly do not belong in this Bill. However, as far as I am aware, no other provisions are allowed for in this case.
I am slightly surprised by that answer because of the equivocation. The Secretary of State commissioned the report—it was his report—and this is his Bill, so surely he can provide us all with a categorical assurance now that no elements of Beecroft will feature in the Bill. I am happy to give way again, if he wishes to clarify that point. No? I think that people will note his failure to reply.
With regard to what is in the Bill, our amendment makes it clear that the proposals to grant the Secretary of State new powers to vary the limits for compensatory awards in unfair dismissal cases are totally unacceptable. Clause 12 proposes to give the Secretary of State the power to cap the compensatory award, which is currently capped at £72,300, at a maximum of between median earnings and three times median earnings—that is, between £26,000 and £78,000—or one year’s earnings, or whichever is the lower of the two. No advance warning of this measure was given, and there has been no consultation on it. Why? It is also hard to see the justification for the proposal when we consider that the median award for unfair dismissal came in at just over £6,000 in the past year.
The practical effect of the proposal would be that those on average or above-average earnings—middle income earners in particular—would not be properly compensated if they were treated unfairly by their employers. Let us be clear who we are talking about. This would affect accountants, architects, chartered surveyors, insurance brokers, lawyers and mechanical engineers, as well as many other public service professionals. Those people are all in occupations that attract average or above-average earnings. Lower income earners in this country have already been hit hard by the Chancellor’s Budgets since this Government came to office. It is middle income earners who stand to suffer most from this change. Of course, those earning millions every year—who have just been given a huge tax break by the Government—no doubt have plenty in the bank and will not have to worry about this, but that does not apply to the majority of earners in this country.
I think it is reasonable, when people have been treated in an appalling and unfair fashion by their employers, that they should be properly compensated.
The Bill contains a related measure to give the Secretary of State the power to vary compensatory awards for employers of different descriptions. The Employment Lawyers Association, of which I used to be a member, said last week that having different rules for micro-businesses, for example, would make people think twice about working for small businesses, knowing that they would have less employment protection than if they worked for a large employer.
We have no objection in principle to the proposal to introduce early conciliation by ACAS in advance of the full submission of a claim to the employment tribunal. I understand, however, that the Government intend to spell out more of the detail in secondary legislation. It is therefore essential that any future regulations be subject to the proper scrutiny of the House. Early conciliation will result in a claimant who is seeking redress having to go through two different processes, with different time limits and different forms to fill in, before instituting a claim. It will therefore be important to ensure, particularly in relation to unrepresented claimants or those with poor literacy and numeracy, that the new regime does not act as a barrier to justice for those seeking redress.
Above all, it will be important to ensure that ACAS is properly resourced to carry out its proposed new expanded role. We know that its resources have already been reduced. The Secretary of State and his Ministers will need to give proper assurances and guarantees that it will be properly resourced to carry out this work.
The Bill also contains measures relating to the composition and workings of employment tribunals. As I have said before, we are not opposed to reforming the way in which employment tribunals work, given the frequent problems that employees and employers experience while navigating their way through the system. That is why we supported the establishment of the Underhill review. However, that is quite different from tampering with people’s fundamental rights at work, which we oppose.
Is my hon. Friend aware that, in Wales, 70% of procurement goes to small and medium-sized enterprises, half of which are based in Wales? In England, however, the figure is around 7%. Would it not be a better strategy for rejuvenating small businesses in England if we were to focus the power of procurement—green procurement in particular—on those businesses, rather than slashing the rights of the people who work in them?
I certainly agree that we should increase the procurement opportunities for our SMEs. When we were in government, we put in place a number of targets, which this Government have sought to build on. We should certainly ensure that those businesses have better access to those opportunities; I speak to many such businesses that tell me that they do not.
Further to my hon. Friend’s point about the additional costs and duties that will descend upon the shoulders of ACAS, does he agree that this Government have a poor record, particularly in the area of the fitness to work test? What might seem to be a saving often ends up costing them an enormous amount of money. I do not wish to distract him with the good news that has just reached us of the inspirational leadership of Roy Hodgson in Donetsk—I believe that 1-1 is the precise figure—but does he see a need for primary legislation or orders to provide the additional sums that ACAS will inevitably require, or does he think that an amount of money been put to one side for the purpose? ACAS will be facing a heavy demand and will require a great deal of money.
I stand corrected. On my hon. Friend’s point about the resourcing of ACAS, we do not know what its budget will be for the next three years. We shall study that question carefully in the light of the, I think, £12 million reduction in its budget over the recent period.
I shall return to the composition of employment tribunals. The Bill envisages simple or low-value claims being decided by a legal officer without the need for a hearing. That might assist in the rapid resolution of disputes, which would be welcome, but it is important that any decision made by those officers should be able to be reviewed by an employment judge if either party so wished. We are currently considering a four-track system: simple claims covering issues such as amounts of holiday pay could be dealt with outside the tribunal, perhaps by a legal officer; standard unfair dismissal claims would be dealt with by tribunals in the usual way; complicated equal pay claims could be dealt with by a specialist court; and high-value claims could automatically be dealt with by a higher court.
We do not welcome the Government’s proposal that all employment appeal tribunal cases be heard, in the main, by a judge alone, instead of by a panel including lay members. We oppose that—[ Interruption. ] The Under-Secretary of State for Business, Innovation and Skills, Norman Lamb says, “For goodness’ sake”, but lay members are very much welcomed by employees and employers as they provide balance and perspective to deliberations. That extends to deliberations in the employment appeal tribunal on legal issues.
Before I move on to the competition aspects of the Bill—I am aware that I am going on—I want to mention that there are other employment proposals that we will address in more detail in Committee.
I will make some progress, so that the hon. Gentleman will have more time to speak later.
Principally, those proposals include: the provision of financial penalties to be paid by employers where there are aggravating features to their wrongdoing; the introduction of a public interest test to whistleblowing—which we have concerns about—to clear up the uncertainties in that area; and changes to the annual increases to the limits to statutory redundancy pay.
I will now deal as quickly as possible with the competition aspects of the Bill. Healthy, competitive markets reward the innovator, the insurgent, and the risk taker. They keep incumbents on their toes, benefiting consumers, and they create the disciplines at home that drive success abroad. That does not happen by itself, however, because markets are not always efficient. I know that that view is not shared by all Government Members. So even when policy frameworks can correct market failures, markets require active stewardship, constant vigilance against unhealthy concentrations of power—News International —and, above all, the deliberate promotion of competition through a strong, robust competition regime.
The Government said in their consultation paper on options for reform published last year:
“The Government acknowledges that it has inherited a competition regime which has been independently assessed as world class.”
In 2010, the Global Competition Reviewawarded the Competition Commission its highest rating of five stars, and the Office of Fair Trading was awarded four and a half stars, with both bodies appearing in the top five agencies in the world. We Labour Members are rightly proud of the legacy our Labour Government bequeathed to the current Conservative-led Administration.
In principle, we support the Bill’s proposals to improve our competition regime. There is definitely some sense in combining the OFT and the Competition Commission into one body, removing duplication and concentrating expertise in one place. However, the yardstick against which we will measure these reforms is whether they will improve on the existing regime or not. The OFT estimated that in ensuring a level playing field, our competition regime benefited businesses and consumers to the tune of £700 million last year. As the
Financial Times has pointed out, the expected savings of £1.3 million a year from the merger could be smaller than the cost to consumers and businesses if these reforms change our competition regime for the worse.
In addition, the lack of competition is, sadly, nowhere more stark than in the small and medium-sized enterprises lending market where 85% of SME lending is concentrated in the hands of our four biggest banks. This can be contrasted with Germany, where just 14% of business loans come from its biggest banks and 60% come from its smaller local and co-operative banks, which I met when I was in Germany in February. It is a shame that the Government have shown no interest in pursuing the idea that we have been promoting for some time—of having a British investment bank to help address this issue. It is a concept that enjoys the support of the British Chambers of Commerce, among others. We are also concerned about the withdrawal of consumer competences entirely from this new body. Indeed, we have argued that the Queen’s Speech should have delivered a fair deal for consumers with a consumers Bill that would give new powers to the Financial Conduct Authority and the Competition and Markets Authority to stop rip-off surcharges by banks, low-cost airlines and pension firms.
Let me move on to part 5, which deals with the reduction of regulatory burdens. We should seek to reduce regulatory burdens where we can, but—very importantly—not by compromising the rights of employees or the health and safety of employees and customers. This is an issue not just of the quantity of regulation, but of its quality, too: regulations should be drawn up with the small guy in mind—people who do not have the resources to pay for an army of lawyers, accountants and risk managers to advise on how to ensure compliance. As I said earlier, with that in mind, when in government, we introduced the primary authority scheme so that any business operating in multiple local authorities could, to ease the regulatory burden locally, form a partnership with a single local authority to access advice and support for its regulatory responsibilities. I welcome the fact that the Government seek to extend the scope of the scheme through the Bill.
What are far less welcome in part 5 are the measures touching on the Equality and Human Rights Commission, which the Secretary of State has just referred to as “regulatory tidying-up”. This Bill seeks to amend the Equality Act 2006 by repealing the commission’s general duty to exercise its functions with a view to encouraging and supporting the development of a society in which people’s ability to achieve their potential is not limited by prejudice or discrimination, in which there is respect for and protection of each individual’s human rights and respect for the dignity and worth of each individual, in which each individual has an equal opportunity to participate in society, and in which there is mutual respect between groups based on the understanding and valuing of diversity and on shared respect for equality and human rights.
This Government have an image problem. They are seen as out of touch, and they are seen as implementing policy changes that adversely impact particularly on vulnerable and poor people. Just yesterday, the Prime Minister’s former speech writer said the Government’s latest proposals on immigration policy showed that the Conservatives were a “nasty party” that risked losing votes among ethnic minority communities. In this context, why on earth are this Conservative-led Government seeking to repeal this general duty that seeks to promote fundamental values of humanity and decency in our society? I am at a complete loss to understand why they should seek to do this when that duty enjoyed cross-party support when the Equality Act 2006 progressed through Parliament.
The Government also want to change the commission’s statutory remit, contract out its helpline, stop its grant programme and slash its budget by 60%. This is not regulatory tidying-up; it is undermining the effectiveness and independence of the organisation. If what we are seeing here is the beginning of the end of the commission—and in the light of what I have said, it is entirely reasonable to raise this as a question—for the avoidance of doubt, let me say that this party will fight tooth and nail against any such move.
Finally, I shall deal with part 6, which puts in place additional measures to deal with executive pay. In order to build a more productive and responsible capitalism, it is important to ensure we bring an end to excessive pay and rewards for failure, which are bad for our economy and for our businesses. The Prime Minister and the Chancellor have sought to insinuate that proponents of reform in this area are being “anti-business”, but the recent wave of shareholder revolts has shown just how out of touch they are with business and investor opinion on these issues. Shareholders at Citigroup, Credit Suisse, Barclays, Mann Group, Aviva and other companies have all either been protesting or voting against remuneration packages over this last couple of months. WPP shareholders will be voting on the remuneration of that company’s senior executives later this week.
In fact, the highly respected business leader, Sir Michael Darrington, the former group managing director of Greggs plc, has founded a pressure group—“Pro-Business, Against Greed”. Its aim is to reduce the excessive and growing difference in net pay between the highest paid and the majority, which he says
“is intended to help promote a happier, healthier and fairer society as well as being better for pensioners and investors.”
We congratulate him on that initiative because change and reform must be led by people like Sir Michael, who is also a shareholder in Aviva and Trinity Mirror, with Government backing.
In government—it is a shame that Simon Hughes is not in his place to hear this—we started to improve corporate governance in this area and to empower shareholders. We introduced advisory shareholder votes on remuneration reports, which are creating so many headlines at present. It is not fair to say that we did nothing about this matter in government.
Currently, there is a prohibition in statute on the remuneration of executives of quoted companies whose pay is contingent on the outcome of a shareholder resolutions. This Bill will remove that prohibition, paving the way for further reform. It will enable the Government to build on our reforms by, for example, having an annual binding vote on future remuneration policy, increasing the level of support required on votes on future remuneration policy and so forth. I was glad to hear the Secretary of State confirm that he intends to bring those reforms forward as amendments to the Bill as it passes through this House. That is welcome.
On the annual binding shareholder vote in particular, we agree with the suggestion put forward by asset managers Fidelity Worldwide Investment that a 75% majority should be required in respect of a binding vote on future remuneration policy. I would be interested to hear what the Secretary of State thinks of that, as I must say that it was with great disappointment that we read that he is likely to row back not only from that proposal, but from the one to have these votes on an annual basis. That represents quite a watering down of his initial proposals. If he would like to disabuse me of that, I would be happy to give way to him now.
Current thinking—we are yet to report back to the House formally on the consultation—is that there will be annual votes if pay policy is changed by companies. The investor community made it absolutely clear that it sees that as a much more productive way of progressing its concerns.
I am glad to hear that, but I wonder where all the briefing in the Sunday newspapers yesterday, including The Sunday Times, The Sunday Telegraph and others, came from. I am sure that the Treasury had absolutely nothing whatever to do with that. We, of course, have already called for the full implementation of the High Pay Commission’s recommendations, including the proposals for employee representatives on remuneration committees, which the Government continue to refuse to implement.
On copyright, the proposals in clause 56 to amend the Copyright, Designs and Patents Act 1988, which I think the Secretary of State mentioned, are broadly drawn and, in our view, need greater clarity, not least to indicate that this power cannot be used to weaken the copyright regime.
Let me conclude. It has admittedly been something of marathon working through this Bill because it is such a hotch-potch of measures. As I have explained, there are parts of the Bill, taken separately, that we support in principle and will seek to improve in the later stages. However, other parts, particularly relating to employment, are, as drafted, simply unacceptable. Yet again, after going through all this, we find ourselves back where we started: in a big black hole when it comes to helping businesses to create enterprise, generate wealth, and grow. There is no compelling vision, no confident message about how we are to pay our way in the world, and no connected approach across Government to drive growth. That is the point that we sought to make in our amendment, which I commend to the House.
Order. Before I call the next speaker, I must inform the House that all Back-Bench speeches will be limited to eight minutes from now on. Many Members wish to contribute, and if we do not make enough progress to enable all of them to do so, it may be necessary for the limit to be reduced further.
It is always a pleasure to listen to Mr Umunna, who invariably makes his case with courtesy and rationality, but on this occasion I do not agree with the thrust of his speech.
Making the United Kingdom economy much more competitive is vital if we are to weather the storms following the fallout from the eurozone catastrophe while also facing the inexorable rise of far-eastern economies. Deregulation is a key part of that.
All Governments launch initiatives to create bonfires of regulation and to slash red tape. But is it not remarkable that the intended beneficiaries of such anti-regulation drives so rarely tell Members of Parliament that they believe that the regulatory burden has been reduced? After 15 years in the House, I have yet to meet a business constituent who has said that. In each year of the last Parliament—this will be the only instance of my straying into the realm of party-political knockabout—the Labour Government created six new regulations every working day, and as a result the coalition Government have a massive burden of over-regulation to identify and, in my view, eliminate.
The changes relating to employment in part 2 of the Bill are certainly needed. The number of unfair dismissal claims doubled from 100,000 in 2002-03 to 218,100 in 2010-11. That is a staggering increase, and, according to the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend Norman Lamb, it costs businesses an average of £4,000 to defend each claim. It is hardly surprising that employers say that they are discouraged from taking on new employees at the margin, especially at a time when business confidence is so low.
Let me give a parochial example. Two self-made businessmen, one working in food retail and the other in furniture retail—both started with nothing, and both are very good employers—told me that the chief factor in the decision whether to take on new employees this year was the problem of unfair dismissal claims and vexatious claims. Both had had unfortunate experiences in the last year. I visited their companies, and I do not think that they were telling porkies.
We should not accept the caricature presented by some Opposition Members who have suggested that liberalising the labour market even further is an exclusively right-wing idea. Those who follow these matters carefully rather than jeering in the cheaper seats in the back will know that, according to the distinguished left-of-centre employment law professor Pietro Ichino—he is very much on the left of Italian politics—there is an equality issue between the very well-protected employed and the unemployed who stay unemployed because of over-regulation in the market.
Unfortunately, although the Secretary of State has already raised the qualification threshold for unfair dismissal from one to two years, he has ruled out exempting small businesses—micro-businesses—from various employment laws. Perhaps the Minister will explain why the Government have turned their face against exempting businesses that employ fewer than 10 people from the full panoply of unfair dismissal law when it comes to young workers. The high cost of youth unemployment surely suggests that we should try that, if only for a limited period, to see what the results are. I should have thought that those who are worried about youth unemployment could not disagree with such a proposition for a minute, but if they are not satisfied with my argument, what about the evidence?
In 2004, businesses in Germany with fewer than 10 employees were exempted from the requirement to provide cause when letting an employee go. Before that, the threshold was only five employees. Did unemployment rise as a result? No, it did not. In 2005, overall unemployment in Germany was more than 11.5%; now it is 7.5%. Among those under 25, it has fallen from 12.5% to 6.3%. That is due not only to the slightly more relaxed regime for small businesses in Germany, but to the fact that mini and midi-businesses were subject to much more generous and simpler social security contribution regimes. The hon. Member for Streatham suggested national insurance breaks for small businesses employers, and I am sympathetic to that idea, but the evidence shows that the exemption system worked in Germany.
No, I want to make some progress.
Part 5 deals with legislative burdens more generally. Clause 49 proposes an increase in Ministers’ power to introduce sunset provisions, and I welcome that. We may be one of the first countries to use sunset clauses as a matter of course in all regulatory policy. Some states, such as Germany, use them sporadically, but no EU states use them systematically, and not even the United States uses them across the board. Our Government are leading the way in reducing regulatory levels by providing for their use in all legislation, as far as possible, throughout Whitehall.
Finally, let me say something about one in, one out. There has been some early modest success in that regard, but I should be grateful if Ministers would consider a proposal which the last Government toyed with, but did not proceed with, in 2008. I refer to regulatory budgets, which would set a figure for the value and cost of regulations in any particular Department. That proposal was not included in the 2008 Labour consultation, but many of us have been considering ways in which, if a budget went bust because too many regulations were being imposed on business, the Department would be subject to the sanction of reductions in its public expenditure settlement with the Treasury. That would certainly hold Ministers’ and senior civil servants’ feet to the fire. Perhaps the Minister will tell us whether the Government will consider it.
Several weeks ago, the Business Secretary revealed publicly to The Guardian something that the country already knew to be true: that the Government have no convincing narrative when it comes to running the country. That is particularly true in relation to the disastrous state of our economy. The Office for Budget Responsibility has downgraded the forecast for the growth in business investment in the wake of this year’s Budget from 7.7% to a pitiful 0.7%, which is well below the forecast for Germany and the United States, while in Scotland, the Bank of Scotland’s purchasing managers index revealed only this morning that private sector growth was at a 17-month low.
The Bill should therefore have presented an opportunity for a radical change of course. It should have started the process of dealing with the crisis of lack of economic demand, as well as the shortage of work in our country, which means that 20 people chase every job advertised in my constituency, and the lack of business investment, particularly in the green economy. With youth unemployment standing at over 1 million, the Bill should have made it easier to hire young people through an employers’ national insurance holiday, and have started to tackle the crisis of underemployment in our country, with 6.3 million people crying out for full-time work but unable to find it, rather than promoting a failed ideology by making it easier to fire people.
The Bill fails to acknowledge that the Government promised they would grow the economy and cut debt, yet since the 2010 spending review they have shrunk the economy and grown national debt. They choked off the economic recovery that was taking root under the previous Government in early 2010, and have instead presided over the slowest emergence from a slump since the long depression of the 1870s.
We were told that, by slashing the public sector quickly and deeply, the invisible hand of the private sector would be free to guide a strong recovery. Who among Members on the Government Benches would credibly make that claim today, when in this financial year, with the cuts in public spending due to start biting hard, the OBR has downgraded its projected growth for the economy from 2.5% to 0.7%, followed by the OECD and the Bank of England?
Our financial system is failing to generate credit to stimulate sufficient private sector activity. Lending to small and medium-sized businesses has fallen for five consecutive quarters, while, even at the height of the recession, in Germany, with its more balanced banking system, bank lending by the Sparkassen, or local savings banks, continued to rise.
The Business Secretary trumpeted Project Merlin and then credit easing as the answers, but the truth is that British businesses face a shortfall in available finance of £190 billion over the next decade, while £700 billion of private sector capital is failing to be put to sufficiently productive use in our economy.
The Bank of England has printed £325 billion through quantitative easing for use in its asset purchase scheme, and that has provided some monetary stimulus for growth, but this money has mainly been used to purchase gilts and to prop up bank balance sheets, instead of finding its way directly to SMEs or into the real economy on our high streets. Only today, Adam Posen, the external member of the Bank of England’s Monetary Policy Committee, has reiterated his call for that money to be used to purchase private sector assets, by emphasising the argument that a lack of economic confidence can feed on itself. That shows the scale of the missed opportunity in this Bill.
In the 1930s, the lost output was restored within 48 months of the beginning of the economic crisis. Now, under the business policies followed by this
Government—which are not reversed by this Bill—as the National Institute of Economic and Social Research suggests, it may take 72 months, and counting, to restore the lost output, as the economy has spluttered to a halt in the last two years.
Real wages have fallen every month that this Government have been in office, amidst the biggest squeeze in living standards since the 1920s. This Bill should have marked a turning point away from what even the credit rating agencies have described as an entirely self-defeating policy of austerity.
Some of the Bill’s measures are welcome in so far as they go, but even with the establishment of the green investment bank, the whole is less than the sum of its parts and fails to meet the scale of the challenge in respect of the potential for green growth, as stated by the UN Environment Programme in its report of last autumn. WWF UK has estimated that infrastructure investment on a scale of between £220 billion and £330 billion is needed to create the number of green jobs required over the next decade, yet the bank will have start-up public capital of only £3 billion, which is just 0.2% of GDP, with no likelihood of borrowing powers by 2016. That is a result of the Chancellor’s failure on growth, leading to borrowing being £150 billion higher than he forecast in June 2010.
The Bill presented a real opportunity for the Government to consider the Opposition’s proposal to establish a proper national investment bank and make use of the UK’s current low long-term interest rates. In 2008, business investment in the US, Germany and France was 11.7%, 12.3% and 12.7% respectively, whereas in this country it was only 10.2%. As Gerald Holtham demonstrated in a report for the Institute for Public Policy Research last year, a properly capitalised national investment bank could be achieved, increasing investment in manufacturing and the green economy without breaching even this Government’s fiscal rules.
This Bill should also have marked a shift towards restoring the link between economic growth, living standards and productivity. As the Resolution Foundation showed last year, in the 30 years from 1977 the share of every £1 of GDP going into the wage packets of people in the lower half of the income scale fell from 33p to just 12p. There should have been policies to establish a proper living wage as well, given that the Resolution Foundation has also shown that the costs, even to big business, of such a move would be in the order of less than 1%.
It is especially alarming that the Government are considering watering down their extremely modest proposals to tackle the inequality gap between top pay and the pay received by rest of the country. Given both that and their attitude on rights of work, the Government show in this Bill that they have no plan to stimulate demand. This is the no-change Bill from the no-growth Government.
I welcome the many excellent measures in the Bill that lay the foundations for a low-carbon economy, with the green investment bank being established and the proposed changes to the competition regime, which should simplify matters for business and reduce costs.
I want to focus on the employment law reform provisions, however, as that is the one part of the Bill on which I hope the Government will be persuaded in Committee to move. I want them to go a little further in redressing the balance in law between employers and employees. In no way do I seek to establish some sort of “hire and fire” culture; I very much agree that that would be to the detriment of not only employees, but business. However, I welcome the provisions enabling disputes to be resolved at a much earlier stage, without the need to go to an employment tribunal. That will be a help to both employer and employee, and it is anticipated that 25% fewer claims will end up going to a tribunal as a result, which will save public money and company time and resources. We have also heard this afternoon that any employer offer of a settlement earlier in the process will no longer prejudice the company’s position in any subsequent tribunal hearing. That is a welcome development, and I look forward to hearing further details.
Contrary to the fears that some Opposition Members have expressed, nothing in this Bill changes an individual’s statutory employment rights, but that causes a degree of concern to many of us who have been in business and therefore know how far the balance has tilted towards the rights of the employee, especially in unfair dismissal claims. I took some soundings from people with whom I have in the past been in business, and I want to quote the comments of somebody who does not want to be named. She told me:
“Tribunal culture in the UK means the employer is on the back foot. We have agreed to pay off employees (who have appointed no win-no fee lawyers) that have threatened to take us to court, even when they have no real case, as the amount of time/energy it takes us to fight our case at a tribunal is too high, even when we as employers think we are in the right. This area I feel is the most onerous for me as an employer currently. And for someone with a social conscience, I don’t like paying someone off when they are in the wrong, just because it is the most cost effective thing to do for the business.”
Research by the chamber of commerce among firms employing between 10 and 49 people has confirmed what that individual told me. It revealed that 21% of respondents had been threatened with an employment tribunal in the previous three years, and of those 37% had opted to settle out of court. Many employers of fewer than 20 people simply cannot afford the specialist HR resource required to enable them to defend their position in a tribunal. Only 20% of respondents to the survey defended their claim, and although it was heartening to read that, of those, three quarters won their case, some of the comments quoted verbatim in the research are salutary. One HR director said that he
“cannot emphasise enough how burdensome and draining it is to dismiss people who are performing very poorly or are abusing the rules.”
“We won our claim, however the stress was off the scale, it cost our company over £20,000 for something that was never our fault.”
I welcome the review of a related matter—health and safety regulations—being undertaken by the Department for Work and Pensions. That has a considerable bearing on employment law. Although it is beyond the scope of the Bill, I hope that Ministers will confer with their DWP counterparts, as 54% of respondents to that chamber of commerce survey cited concerns about the operation of health and safety rules. A company in my constituency employing between 100 and 150 people, even though it is in many ways a model employer, suffers two or three cases a year of vexatious claims by employees, and even ex-employees, who have created a spurious claim based on an accident they had at work. The company is then in the position of having to prove to the court that it created proper conditions that should have prevented the accident—the onus is on the company to prove that it took adequate measures. That is but one example of the many areas beyond unfair dismissal where, I believe, the rights of the employee are now too far out of kilter with the rights of the employer.
I think my hon. Friend gets an extra minute for taking my intervention. Does she agree that there is an impact on growth, because when a small company is having to deal with all these issues in employment tribunals, it is not able to focus on creating more jobs and growth? That is what Opposition Members sometimes appear to fail to understand.
My hon. Friend makes a good point. The problem is not just the cost of defending claims, but the management time involved. That detracts from the energy that companies need to fight in the market for business. There is no doubt about that.
I am most grateful. Does my hon. Friend recognise that, for some small businesses, two days and the prior work necessary to attend a tribunal cost £10,000? Many shy away from taking that course, even though they think they are right, because they simply cannot afford that.
Order. It is quite true that the hon. Lady gets extra time for taking interventions, but of course that takes time from Members who are waiting to speak. Mr Binley and Mr Smith, you might remember that.
Thank you, Madam Deputy Speaker. I am conscious of that and I will not take all the additional time allotted.
My hon. Friend Mr Binley made a good point. The cost in time and money of fighting claims is a huge disincentive, especially to very small companies. That is why I believe we should give micro-businesses special consideration and partial exemptions from some of the measures in the Bill. I hope that the Government will take on board the views expressed by my colleagues and I today, and the concerns voiced by the many reasonable employers who try to do the right thing by their work force. The volume, complexity and, I believe, bias of current law, which allows vexatious and sometimes spurious claims to be brought in the first place, is what needs to be changed fundamentally, alongside the very good measures the Government propose in the Bill.
I rise to support the reasoned amendment. I consider that the appropriate course, because although there are some bad things in the Bill, it also contains a lot of good measures that should be supported.
What is bad is the fact that, as far as business is concerned, the Bill is about as good as the Government are prepared to offer. At a time of double-dip recession, when consumer spending is squeezed and could well contract further, manufacturing is struggling and private sector investment is almost negative, there was an opportunity for the Government to produce a Bill that would play a major role in reversing those trends. Instead, we got a rag-bag of measures, some quite good in themselves, cobbled together in an omnibus Bill that has no focus and no clear relevance to meeting the challenges facing our economy today. Businesses are crying out for something far more dramatic, such as investment in construction or a business bank—major action by the Government that will help to stimulate private sector investment, increase employment and improve consumer spending—but this Bill is all they have got. Even the Secretary of State admitted that the measures in the Bill would not reverse the current economic problems.
Many of the measures are Labour’s ideas—the green investment bank, the provisions on shareholders and the primary authority scheme. I admit that the present Government have developed those ideas, but given the controversy that some of them have generated within the Government ranks, they cannot avoid the overriding perception that this Government appreciate the logic of what Labour initiated, but do not have the political conviction or passion to implement those ideas in a way that will deliver on their objectives.
I welcome the green investment bank. Originally Labour’s idea, its implementation has taken two years, amidst oft-reported squabbling between the Department and the Treasury. In three years, it will—perhaps—be able to do what banks are expected to do: borrow and recycle the money; however, that is subject to the public accounts being in an appropriate state. That is hardly the sort of approach that will generate the certainty needed to encourage investors to put money into the bank, so funds will be available for redistributing.
The hon. Gentleman is making an interesting point, but surely he must accept that the fact that £750 million is available this year to invest in green projects is a massive step forward.
I accept that that is better than nothing, but it falls far short of the Ernst and Young assessment of what is needed for the green investment bank to generate a green economy. Other surveys also underpin the original Ernst and Young one. No provision is being made for reviewing and reporting on the bank to obtain some sort of public estimate of just how far it is fulfilling the role it should have. No provision is being made for procurement for small and medium-sized enterprises, although I welcomed the Minister’s comments about the amount of funds that are going in their direction. In addition, there is a real risk that the opportunity to develop a green economy will be lost because the so-called “green investment bank” will just become a niche fund, instead of being what it should be—a driver to develop a green economy, with all the benefits and all the employment that will come with it, as we see in Germany.
A lot has been said about regulation, and I echo the welcome my hon. Friend Mr Umunna gave for measures to provide for a conciliation service that will obviate the need for some employment tribunals; anything that can make easier the complex and sometimes stressful process—for both employee and employer—is to be welcomed. My concerns centre on the resource and funding issue for ACAS that has been raised by a number of hon. Members. Undoubtedly, the Bill places far greater stress on ACAS, giving it a far greater role and far greater responsibilities, but there is no evidence that the resources will be put in place to enable it to match those responsibilities. I would be interested to know whether the Government have done any research on whether this approach will generate more complaints. Undoubtedly, some employees do not take their employer to a tribunal because they would find doing so too stressful. If the option of a conciliation service that avoids the need to go to tribunal is available, that may actually generate more claims. I do not know whether that will be the case, but the Government should examine the matter, particularly in the context of their funding for ACAS.
The proposal for the competition and markets authority is, in general, good, but I have concern about one particular aspect: the offloading of some of the consumer education role of the Office of Fair Trading to Citizens Advice. I have nothing but praise for Citizens Advice, but I am concerned, given the funding cuts it is enduring at the moment, about whether it will be in a position to carry out that sort of additional responsibility in a way that will benefit the community. The Government need to examine that resourcing issue.
I promised that I would not use up all my time, so I shall conclude by saying that although the Bill is not all bad, it totally fails to address the major challenge that is confronting the Government and which the business community wants it to confront. The Bill is symptomatic of a Government who have few ideas, and I suspect that those they do have are being strangled by Treasury orthodoxy. The Government need growth and the country needs growth, but these measures will not deliver it.
As our national economy searches for growth, we look for direction. As our small businesses, our shopkeepers and our entrepreneurs struggle with unyielding burdens, they look for relief. As many who are unemployed, both short-term and long-term, continue their search for employment, they ask for hope. And so we turn for inspiration to the Enterprise and Regulatory Reform Bill. Here was our chance to send a clear message that we were going to roll back the European regulation that is calcifying the spirit of enterprise. Here was the opportunity to come forward with new ideas and initiatives for new funding sources to assist in dealing with the gap in funding for our small businesses.
Here was an opportunity to press for changes in the jobs tax and to look for more tax deductions for people who wish to put their capital at risk in our small businesses. Here was an opportunity indeed to send a clear message to our local bureaucrats, with their pettifogging rules and regulations which are causing more misery to shopkeepers in our town centres, that they should stand back a bit and understand how hard it is in many town centres for small businesses to make progress. This Bill was the opportunity to address all those things, and I look forward to hearing in Committee how we have done on all of them.
I wish to address one part of the Bill, and it relates to what has been termed “hire and fire” and what has been termed “compensated no-fault dismissals”. I do this because I do not feel that Adrian Beecroft’s proposals have been given due consideration. There are strong arguments on both sides as to whether or not we should implement them, but we have not investigated the issues sufficiently carefully and it is wrong to dismiss the proposals with ridicule, with abuse or with fearmongering. Let me explain why that is.
If we look at the issues in developed economies, particularly those of the United Kingdom and the United States, relating to how we recover from recessions, we discover that our economies are finding it tougher to create jobs as we recover. In the period before the 1990s, it took on average about six months from the economy recovering for it to reach full employment. Since the 1990s, the figure has gone from an average of six months’ further delay to one of 15 months or more. The United States is a much better economy at recovering from recessions than the United Kingdom is. In the US, it takes on average four to five years for the economy to bounce back, but in the UK it takes eight to 10 years. There are therefore two strong reasons for examining why the UK is not as good at recovering employment as other countries are and why, even in those countries, it is becoming more difficult to associate growth with employment.
Interestingly, the OECD has the UK as the second worst country out of 36 in the developed world for employment rights—only the US is worse—yet the record shows that countries such as Germany, with much better employment rights, have come out of recession faster. Is that not the lesson we should be learning tonight?
I appreciate the intervention, but I am not as clear as the hon. Gentleman is about those particular statistics and I am not sure that they paint the correct picture for the United Kingdom. The shadow Secretary of State cited the World Bank earlier when he looked at the overall statistics on doing business and said that they had—surprisingly—got better under the previous Government. If we look at the same World Bank statistics and the issues to do with the labour markets, we find that this country declined from 17th to 34th position in the period from 2007 to 2010. In terms of the need for change in the labour markets, it has been shown that we need to get a little better.
Statistics are extremely interesting, but what is the connection between what the hon. Gentleman is talking about and no-fault dismissal? Where is the evidence for that?
Many people look at the “dismissal” part of no-fault dismissal, whereas for Government Members and some Opposition Members the other part is how willing employers are to take someone on when they understand what the risks may be of having to hold on to them. That is the connection. My focus is not on the fear of what might happen in firing situations, which has rightly been expressed by Opposition Members, but on dead-weight costs and the number of people who have not been hired because employers are not prepared to take the risk with their businesses. All hon. Members and all businesses are concerned about achieving growth. To achieve growth, businesses need certainty, but equally they need to have certainty that any additional staff they hire will work out well. For a small businesses of three, four, five or 10 employees, hiring one person is an incredibly big decision. As my hon. Friend Margot James said about a business in her constituency, such costs have a significant impact on cash flow and perhaps viability.
For those reasons, I hope that in Committee we can look again at the issues that Adrian Beecroft has raised, although I think the Secretary of State has dismissed them. I hope we do so by saying, “We aren’t yet sure what the right answer is, but we are not going to be put off by scaremongering tactics.” We need to understand whether such proposals will have an impact.
Those are the main issues. If we are to achieve growth in our country’s economy, it must be founded on a better approach to getting people back to work quickly. We do not have the answers from our recovery from recessions of the recent past. I believe that making it easier for people to understand the risk involved when they hire people will be a major step forward in that regard.
It is a pleasure to follow Richard Fuller, although I do not agree with him. I do not deny that there could be reform of, for example, the tribunal system, but no-fault dismissal is an attack on workers’ rights. That is not, as some say, a misunderstanding on the part of the public. My constituents know when their rights are under attack, especially when they are already worried about employment stability. The Secretary of State for Business, Innovation and Skills has ruled out proposals on no-fault dismissal in the Bill, and I hope that the Minister reaffirms that in his winding-up speech.
I welcome the green investment bank, particularly as it will be based in Edinburgh. I am sure that my fellow Scots will have the good sense to realise that that and many other aspects are good reasons why we should remain part of the United Kingdom as opposed to being separate.
Having said that, I shall try to keep my speech short and concentrate on clause 51, which is so important to the Secretary of State that he mentioned it only in response to an intervention from my hon. Friend Mr Umunna. I do not agree with the Secretary of State; it is an important measure. It is not, as he said, just a tidying-up exercise.
The clause removes powers from and reduces the duties of the Equality and Human Rights Commission, which was set up by the Equality Act 2006 as an independent statutory body and regulator. It is responsible for enforcing equality legislation on age, disability, gender, race, religion or belief, sexual orientation, or transgender status, and for encouraging compliance with the Human Rights Act 1998. It has a duty to challenge prejudice and disadvantage and promote the importance of human rights. It works to reduce inequality, eliminate discrimination and strengthen good relations between people.
According to the Government, that apparently means that the EHRC is biased, which goes to show how shallow their grasp is of the serious, endemic problem of discrimination in our society, and how little commitment they have to tackling it. Perhaps that is why the Business Secretary did not bother to mention it apart from in response to an intervention.
Undertaking those functions effectively requires proper funding and the retention of the EHRC’s full legal remit. We know that the Government have had it in for the EHRC for some time and have sought to undermine it, but that is not to say that there have not been problems. It is a new and innovative organisation, and to some extent such problems are to be expected. In my Westminster Hall debate only a few weeks ago, I highlighted the EHRC’s 62% budget cut and 72% cut to staffing by 2015 from the original 2007 level. The cuts to its resources and remit almost annihilate the commission, and render it little more than a talking shop.
That is a great pity, because the establishment of the EHRC was groundbreaking. Legislation to outlaw discrimination has existed for more than 40 years, but, typically, new Acts have focused on one area of policy—for example, on pay, equal treatment of women or race discrimination. The body of law was introduced in a piecemeal way over a long period and developed inconsistencies. The 2006 Act harmonised existing law in a more coherent whole and introduced new requirements. It was subject to extensive pre-legislative scrutiny and had support from civil society and had all-party support. Having sat through the proceedings, I can say that the Liberal Democrats continually lectured the then Government on how the measures did not go far enough, and said how keen they were on the public sector equality duty, which is now up for review.
Consensus was achieved on the introduction of the Act, but the Government’s so-called consultation on building a fairer Britain was a bit of a farce. They have ignored the majority of responses which, by their own admission, were against the changes they propose.
The socio-economic duty is not currently in force, but its repeal is a political totem for the Conservative party, which has always opposed it. Everyone knows that socio-economic duties are not the Conservative party’s thing, but the Minister for Equalities, a Liberal Democrat, also took part in proceedings on the 2006 Act. At that time, she thought the socio-economic duty was so important that there should be separate legislation to deal with socio-economic issues. Will the Minister tell us when the Government will introduce such legislation?
The Government want to repeal the general duty in the Act because they say it has no specific legal purpose and does not help to clarify the precise functions that the EHRC is required to carry out. Not surprisingly, many do not agree with that. It is a purpose clause that sets out the broad goals and underlying principles of the legislation. The Government have admitted that the majority of respondents to their consultation were opposed to repeal by nearly six to one, and were concerned about losing the guiding principles and values set out in the general duties as debated in the House during the passage of the Act.
The Joint Committee on Human Rights at that time agreed with those principles, as did other hon. Members, including the then Member for Daventry, now Lord Boswell, who said:
“I have no difficulty at all with the general duty in clause 3 —that is what most of us are in politics for.”—[Hansard, 21 November 2005; Vol. 439, c. 1331.]
I know that to be true of him from the many contributions he made in this House, but it is not true of the coalition.
The purpose clause on the socio-economic duty is about values. Crucially, it illustrates how our society views, and attaches importance to, matters of equality. It is a pity that the French experience will now be superior to ours. The French have adopted the duty in legislation but, unlike us, are not cutting back when it comes to carrying it out.
I sat through proceedings on the 2006 Act. Hon. Members will have realised that I have strong feelings about these issues, so I shall cut my speech short. Clause 51 is not a tidying-up measure; it takes us backwards. It should not be supported and it should not be in the Bill in the first place.
I congratulate Sandra Osborne on a forceful defence of equalities. It was well received, and she should feel that she has done her job very well indeed.
This is an important Bill, and I will concentrate not on equalities but on small and medium-sized businesses. They are where our growth will come from, which is why we have to prioritise them. Over the past decade we have failed to recognise the contribution that new and growing businesses make to our prosperity. It is small businesses that deliver employment growth. Private sector employment increased by 45,000 in the final quarter of last year to 23 million, the bulk of whom are in small businesses. They represent more than half the people employed in this country. As the public sector contracts to sustainable levels the private sector will grow, and small and medium-sized businesses will create the jobs that we need. They need help and impetus, and that is what I want to concentrate on today.
The Secretary of State mentioned the situation in Germany, where very small businesses are well looked after because they are seen as the future oak forests of the German economy. They do not have to be on the trade register, they do not pay turnover tax, they do not specify turnover tax on their bills and they can calculate their profit for income tax purposes on the basis of revenue surplus. Additionally, they are not paid back the turnover tax that they pay to other businesses, and they are subject not to the rigid regulations of the commercial code but to the more protective regulations of the civil code. In other words, the Germans recognise the need to nurture their new and growing businesses. I am disappointed that we have not taken that route in the Bill, and I implore the Minister to consider that very seriously.
Much has been said in the debate about regulatory reform, but small businesses have heard much of it before. Large multinationals have the resources to use expensive consultants and employ compliance departments, unlike almost every small business that I deal with. In commensurate terms, the burden placed upon small businesses is sometimes 30 times greater than that on a plc, yet we expect them to deal with the problems of employment tribunals, health and safety at work and human resources. They simply cannot do that and grow at the same time, and we need a Government who recognise that. I recognise some of the good that the previous Government did in this area, but they did not really understand that point. I fear that we will not understand it either, and I beg the Minister to consider it very seriously indeed.
Given what the hon. Gentleman has said, would it not be more sensible for the Government, instead of attacking employee rights, to give small business people access to such things as good-quality legal aid, so that they can take people on and exploit the system in the right way?
I consider the hon. Gentleman to be a friend, and our views meet on a number of issues, particularly clean coal. However, they do not meet on this matter, because his suggestion would only add even more bureaucracy to small businesses. We need to lift that bureaucracy, and I ask that that point be appreciated.
I agree with 99.9% of what the hon. Gentleman is saying, especially about small and medium-sized businesses, which are the backbone of this United Kingdom. Does he agree that it is the Government’s role and responsibility to create the environment that will help those businesses to succeed?
I agree entirely, and I am most grateful to the hon. Gentleman for making that point much more succinctly than I did.
The Government recognise that employment regulation needs to be addressed. It is in everybody’s interests that workplace disputes are resolved as speedily as is practical. I share the concern of my colleagues on the Business, Innovation and Skills Committee that we must be assured that introducing a mandatory process will expedite matters. It is conceivable that ACAS will be involved in trying to conciliate more than 200,000 cases a year. Can the Minister provide an assurance that that will speed up the process?
In response to the earlier consultation, the Government recognised the need to increase ACAS’s resources, arguing that that would be paid for by savings from cases that would not proceed to a tribunal. However, ACAS’s report makes it clear that three quarters of claims are already resolved before that phase. What further reduction do the Government envisage under the mandatory system, and will the additional resources be provided up front? Otherwise, if we are not careful there will be as big a road block as there is in the European Court of Human Rights in Strasbourg. I ask the Minister to consider that very carefully. ACAS acknowledges that
“problems at work can be a barrier to growing a business”, and I support that view, but it has to be properly funded if it is to do the job that the Government will ask it to do. I am not sure that we have been assured that that will be the case.
I welcome the provisions in the Bill to improve competition policy. Small businesses are capable of performing robustly in a competitive market, and we should ask whether we are doing enough to enable them to compete. When market forces fail to deliver a competitive environment, it is proper that authorities should intervene, but we need to make our competitions investigations speedier. Cartel investigations and dominance inquiries in this country take an average of more than 30 months, which is simply not good enough. We can imagine the cost involved for small businesses at the larger end of the scale that are involved in such process—it is enormous. All that we are doing is stopping good people managing their businesses for growth. We are making them defend their position simply because the law says they must. The law needs to be more helpful and understanding to them in that respect, and I ask that that matter be looked into more deeply.
Finally, I welcome the extension of the primary authority scheme in clause 52. It is essential to widen small businesses’ opportunity to participate. The existing arrangements are too prohibitive, so the reform is positive. I pay tribute to the Labour party for introducing the scheme when they were in Government—I always want to recognise value where it exists, because the House is better when it works together than when it works apart.
I repeat that this is an important Bill, and it has been brought forward at a sensitive time in the economic cycle. The voice of business could not be clearer. We need to create a simple, predictable, reliable and agile regulatory environment. We need to encourage entrepreneurs to start businesses and want to grow them here, and we need a competition regime that champions competitiveness and opportunity. Those are tough asks, and it remains to be seen whether the Bill will perform those tasks. It will if Ministers allow it to be amended effectively in Committee and on Report. I want an assurance from the Minister that the Government will be that understanding.
It is always a pleasure to follow Mr Binley, provided that one does not follow him too far down his idiosyncratic paths.
It is difficult to speak about the Bill, as it is very much a rag-bag of a Bill. I would say it was a curate’s egg of a Bill, if we could assume that curates ate pterodactyl eggs that were good in parts but monstrous in others. It is a very mixed bag and it looks to me as though the Secretary of State for Business, Innovation and Skills, who is, I think, the only wise man in Government—certainly in the Cabinet—has had a difficult fight beating off some of the more lunatic proposals that were put to him by Beecroft and others in the Conservative party. He has finished up with not a Bill but a bric-a-brac stall, with several bits that are very broken and others that are very messy.
We were told that the Bill is about growth—that it is about “encouraging long-term growth”—but that is completely crazy. Our economy is not growing because of the way in which the Government are handling it. They are obsessed with debt rather than the real problem with the British economy, which is demand. In an attempt to cut debt, they are cutting spending, firing public servants and reducing public spending, but those actions in turn are reducing demand with the result that we are acquiring more debt and that the burden of debt weighs more heavily on the shrinking economy. The economy was 4% below its GDP in 2008 and if we count the growth it should have had in the interim years, we can see that it is well below what it should be. Ours is the only economy in the world that has fallen that low, yet the Government are compounding the problem by trying to cut debt while widening the deficit, requiring more debt to pay the wages of misery and unemployment. That is an economic folly and what the Bill does to encourage growth is as nothing when set against that.
It is a deceit to pretend that business is hung down with regulations, tribunals and employment regulations, that that is the cause of the problems and that if we get rid of all the regulations and obligations to the workers, we will suddenly have a surge of energy and enterprise. That is absolutely not true. Workers in this country have less protection and fewer rights than those in nearly every other advanced country apart from two. Less protection, fewer rights. We have heard some tear-jerking examples today of small businesses being unable to fire people. I accept that there are some problems, but it is easier for such businesses to fire people than it is in most comparable countries. When multinationals want to reduce their international work force, they notoriously always fire people in this country first because it is easier and less expensive in redundancy payments. No surge in employment will come through concessions to small businesses in the form of regulation. Speakers from the Government Benches have been rather like the captain of the Titanic, locked in his cabin discussing how to reduce the conditions and pay of the stewards while the ships sinks with an iceberg making a great hole in it. That is the level of the debate on those Benches.
Let me look first at what the Bill does not do, because its inadequacies are more glaring than its adequacies. It offers a green investment bank—or, to give it its proper name, a pale green investment bank—that is not a bank and that is certainly too little, too late. It is much like the time when Michael Heseltine used to go around distressed towns in the north in the 1980s offering them a garden festival; the green investment bank is the Liberal party’s wreath from Government. What we really need is not a green investment bank with very little money at its disposal but a national investment bank that will raise money on the markets—it could use some of the proceeds from quantitative easing, too—and invest it in business, in housing projects and in infrastructure projects to get the economy moving.
No, I want to be very brief.
We are being offered a marginal increase in shareholder rights when what we need is an increase in worker rights and worker representation, particularly representation. Workers are the ones with the interests of the company at heart and they want to see the company maintained, viable and healthy. Workers, as well as shareholders, should be represented on the remuneration committee, on the audit committee, which should have a central role, and on works councils, such as those that they have in Germany. I would move rapidly towards the Mitbestimmung system of co-determination and partnership that they have in Germany. The Bill does not do that, which is a failure. It offers a simplified structure for competition issues when what we need is a British version of the Securities and Exchange Commission in the United States and a business commission to enforce effective corporate governance of British companies and to impose tougher rules on mergers and foreign takeovers.
As Alex Brummer shows in his latest book, we have very few national champions left in this country and a higher proportion of our big firms have been taken over by foreign firms than in any other country. That means that they are dancing to a tune dictated from Zurich, Hamburg, Delaware or wherever else rather than to a British tune when making their investment decisions. We need to check and control foreign takeovers on that stage.
Let me make a brief mention of what the Bill does; it has to be brief, because it does not do all that much. First, the simplification of the tribunal process is okay and acceptable, provided that ACAS gets the extra staffing and money that it will need to take over the conciliation process before industrial tribunal. Secondly, we need a one-track approach, rather than having to go first to ACAS and then to the tribunal. The approach should be integrated down one track.
We need better protection and provision for whistleblowers. In many cases, that is the only way we will find out what is going on inside companies such as A4e—we heard all the revelations about what that company had been doing because they do not have an adequate audit structure or control structure. That means that fraud can be perpetrated at the lower levels, whereas the top management is not concerned and does not want to know what is going on. We need proper control structures and some system of strengthening and protecting whistleblowers to encourage them to come forward and reveal what kind of business practices are going on. If the Bill does not provide that, it will fail. Those are important provisions that must be implemented.
I welcome the Bill and commend my right hon. Friend the Secretary of State for his opening speech. I was rather disappointed by the shadow Secretary of State’s lack of passion and belief in business. He seemed wedded to regulation and control and gave us rather a lawyer’s lecture. However, I enjoyed the passion in the speech made by my hon. Friend Mr Binley and I congratulate him on that.
Business, enterprise and enthusiasm are present across our country. Individuals and small and medium-sized businesses are willing and capable to take on the world and to succeed. I am sure that there is a real appetite to develop, promote and sell goods and services, not just to home demand but to Europe and beyond. All enterprises need help, however. They need the right economic conditions, the appropriate regulations, a trained and skilled work force, low taxation, a sympathetic and encouraging Government and, of course, hard work—together, I believe, with luck. We approach the Bill with those requirements and I am pleased that we have a Government who understand and support enterprise.
There are 4.5 million small businesses in the UK, so any improvement we can make to the system of regulation and inspection will have a wide-ranging impact and could be of real benefit to the economy as well as to businesses. The most competitive and successful nations have clear strategies to support business. They have lighter regulation, less interference, competitive tax regimes, banks that support them and employment laws that make it easy to hire people. During the last decade, we have lagged behind in some areas as the previous Government seemed uninterested in business and more interested in the public sector. In the past two years, this Government have made real progress. Corporation tax has been cut and there is a greater number of apprenticeship places and more financial assistance to support work-based learning. The red tape challenge campaign was launched so that we listen to businesses’ concerns about regulation. A national loan guarantee scheme has been introduced so that businesses can get access to the credit that they need either to survive or to grow, and young entrepreneurs are being supported with start-up finance.
Of course, much more needs to be done to help business, and the Bill will help dramatically with that. Regulations are a real problem, and over-regulation is a problem for small businesses particularly. According to research by the Federation of Small Businesses, 27% of businesses say that increased regulation created difficulties in expanding their business, and 33% said that regulation was the biggest potential obstacle to growth.
I regularly visit businesses in my constituency that work in different sectors, including manufacture, retail, child care and education. Since the last election, I have been pleased to meet representatives of companies such as the Kenton Group, an innovative network research and manufacturing firm in Crayford; the Kip McGrath education centre in Bexleyheath, which provides extra learning support for children; and Pulp Friction in Erith, a growing firm of paper recyclers with depots across the country. Those firms are working hard to develop products and services that people want and need, and to generate wealth and prosperity. However, I remain concerned about the number of complaints that I regularly receive about the regulation and unnecessary bureaucracy that firms have to deal with and that take them away from more crucial tasks.
The hon. Gentleman and I agree on many things when it comes to promoting enterprise. Does he agree that if he were in my region, he would have a very different perspective on how the economy was doing? Yorkshire and the northern and midland regions have been in recession for three years.
I appreciate the hon. Gentleman’s comments. We want to get the economy moving across the whole country, and make sure that there are jobs and opportunities. Training, enthusiasm and a determination to help small businesses is fundamental across the country, but I accept that different parts of the country have different problems.
Another excellent firm in my constituency is Texcel Technology, an electronics firm involved in international projects. Its managing director, Peter Shawyer, recently told me:
“The whole gambit of employment law causes us untold stress...Any dealings that affect employees are slow or impossible to implement without the threat of employment tribunals.”
He also said that things are more difficult for smaller organisations that do not have a large human resources department with expertise from which they can benefit.
Steps have already been taken on employment law reform. These include launching an employer’s charter, so that employers know what they can already do to address staff issues in the workplace. However, there is much more to be done, and I welcome the proposals, which will achieve many things.
Small and medium-sized businesses will be able to benefit from reduced costs. Costs are a vital concern to SMEs. If the Government can provide a better way to agree settlements with employees, businesses can save money on administrative costs. More importantly, that will avoid costly employment tribunal processes, which can be a burden to businesses.
One of the concerns that the Federation of Small Businesses raised about the conciliation proposals is that they may necessitate employers having to pay for more legal advice, not less.
I know, but I think and very much hope that the FSB is wrong on this. We need to look after both employers and employees, and get them working together, and I believe that the proposal is the way forward. Quicker resolution of employment disputes will be good for everybody, particularly employees.
New arbitration requirements could prevent the need for tribunals. I welcome the clause that will provide for that, and the fact that ACAS will be involved. However, we need to make sure that both businesses and employees benefit and reach a satisfactory conclusion.
There is another important aspect to this Bill: it will strengthen competitiveness. Effective competition is vital if markets and industries are to flourish. Through competition, research and innovation are enhanced, jobs are created and wealth is generated. It is also of great benefit to the consumer, who gets better choice, quality and price—something we all value. The Government’s plans will help to improve the regime that oversees competition law, ensure that the right cases are taken forward for investigation, and make the system quicker and more predictable for businesses. I support the proposal of merging the Competition Commission with the competition functions of the Office of Fair Trading to create a new body, the competition and markets authority. It will be the principal competition authority, and I hope that it will pursue cases of anti-competitive behaviour rigorously and fairly, so that consumers are protected and businesses are treated fairly. That is a very positive step.
The CMA will have responsibility for introducing time limits on the markets and mergers regimes, speeding up anti-trust enforcement and ensuring good working relationships with other regulators. Overall, the new regime will improve transparency, streamline processes and increase efficiency. The measures will benefit businesses, consumers and the economy in the long term, so that markets are truly competitive.
The regulatory reform aspects of the Bill are probably the most important parts of it, as they repeal regulations and legislation that businesses have said should be abolished. The Government are to be commended for listening to business, taking on board its views, and taking action to help create the conditions that will stimulate growth and bring about the economy that we want across the whole country.
The primary authority scheme has helped to reduce administration for companies by allowing them to form relationships with a single local authority. The scheme makes local regulation more effective, and means that robust and consistent advice is given to other councils when they are carrying out inspections or compliance checks. The scheme has been running since 2009; it is one of the two positive things that the Labour Government did to help business. So far, it has delivered real benefits.
To date, it has been larger businesses that have benefited from the arrangement. At present, a company has to operate in more than one local authority area to be eligible. The Bill will extend the scheme in an innovative and beneficial way, so that it supports more firms. Under the proposals, a business will now be eligible if it shares an approach to compliance with at least one other business and, collectively, those businesses are regulated by at least two different local authorities. That means that trade associations or franchises of the same company could benefit from this simpler and more effective regime.
I applaud the Bill and all that it is trying to achieve. Of course we want to make a real difference for businesses across the country. We want to free small and medium-sized businesses from the burden of excess regulation. Employment rules will be reformed, so that the tribunal process is fair for all parties in any dispute; arbitration will be required first, and hopefully that will reduce costs. Markets will be reformed so that competition is fair and enforcement is effective. Regulations will also be removed where businesses have told us that they should cease, and where they are irrelevant.
Good regulation must play a part in ensuring fairness for consumers, businesses and employees alike, but it is the Government’s duty to take action when those rules inhibit companies from taking on new staff. We desperately need new jobs, particularly for young people, and we want to make sure that firms are not prohibited from taking on young and new employees; that would help firms and individuals. I believe that the Bill will tackle those issues, create the right environment for our firms to grow, and stimulate our economy, which is in all our interests.
I want to speak about the proposed changes to employment legislation, an area in which I have many years of experience and in which I get increasingly frustrated by comments made by Government Members who either do not understand the limitations of current employment legislation or deliberately want to take us back to the days when mill and pit owners could treat their employees like slaves, work them till they dropped, and pay no regard to their health and well-being.
The UK does not have wonderful employment rights; of the 36 richest countries, we come 34th. Only Canada and America are worse. That should not say to anyone that employment rights are holding back our growth. Indeed, we know only too well that when international companies want to close factories in Europe, they close a factory in Britain before they close one in France or Germany because of the cheapness and simplicity of making workers here redundant.
The Minister gives one example, and we could collectively give many examples in which the opposite has happened—many examples over the years when it has been British factories that closed and French and German ones that stayed open.
There is already an inequitable relationship between employer and employee. Before Government Members nod their heads in agreement, let me say that power is still firmly in the hands of the employer. Employers can do as they like as long as they follow simple and fair procedures. If an employer wants to dismiss a worker for misconduct, all they have to do is carry out a proper investigation, allow the employee representation and give them the right of appeal. As long as the employer has a reasonable belief that the employee has done something wrong, they can dismiss them.
I agree with my hon. Friend that the Beecroft proposals are appalling as they relate to the rights and defence of individual workers. I shall say a little more about that in a moment.
In order to dismiss somebody, the employer does not have to prove that the employee has done anything wrong. The employer just has to have a reasonable belief that it was them. As long the employer has followed a simple procedure and carried out a proper investigation, the employee has no case at a tribunal. The tribunal will not re-hear or re-judge the case and can find in favour of the employee only if the employer has not followed a fair process. If an employer wants to fire an employee for capability, all the employer has to do is tell them where they are failing and give them the opportunity to improve—again, a simple, fair process.
The employee is not protected if they are disabled or sick. The courts have already said that the employer does not have to behave like a charity. If the employee is unable to fulfil their contract of employment, they can be dismissed. Yes, they may have a case for discrimination if the worker is singled out and treated differently from non-disabled workers, but if a fair procedure is followed and a reasonable adjustment is made if necessary, the worker can be dismissed.
Let us not forget that an employer has two years to decide if an employee is suitable—two years to decide whether an employee is an asset to the company or not. Unless the employer is discriminating on the grounds of gender, race, sexuality and so on, the employee cannot go to a tribunal at all.
I do not believe that we have thousands of bosses out there who want to dismiss workers with no just cause. Why would they, when it costs so much to recruit and train a new worker? Even if we do have rogue employers, they can already dismiss workers on a whim. All they have to do is pay them what a tribunal would give them—redundancy pay, and not even at the rate of the company scheme if it is better than the statutory scheme, any holiday pay and any notice period. The only extra sum that an employment tribunal will ever give is an award for future losses. That is not normally more than six months’ pay and the average is considerably less. To get that, the employee must prove that they were unfairly dismissed and show that they have been applying for jobs with no success.
It sounds as though I am giving a lesson on how to be a bad boss. I am not; I am simply trying to point out how the employer already has massive power. I have lost count of the number of times I have had to use the trade union mantra, “Unfortunately the law is as it is, not as we would like it to be,” when I have had to give the news that an employee who had been dismissed had no case for a tribunal. Let me give the House some examples. A senior manager in the railways was charged with gross misconduct. We fought the charge and he was found not guilty. A month later the employer paid him off— 30 years of service down the drain, limited chances of another job and no chance of going to a tribunal.
A travel centre worker with 17 years’ experience had no problems until her manager changed and she ended up off work with stress. She could not prove that her manager had bullied her, and because the employer followed proper processes, she was dismissed under capability procedure. A worker who had worked for the same company for 30 years was selected for redundancy on the basis of last in, first out—after 30 years—even though this is not allowed to be the sole criterion. His redundancy payment made it impossible for him to go to a tribunal. I could go on and on with examples.
A great deal has been made of the cost to employers. They can get free legal advice from ACAS on all their policies and procedures. They do not need to employ a solicitor at a tribunal. As long as the employer has been fair and has not discriminated, they have nothing to fear. ACAS already offers mediation and I welcome the extension of that, but I believe that the proposed fees for tribunals are wrong and will act as a barrier to justice for those least able to pay. The judge can already make a deposit order of £1,000 to a claimant if the judge believes that there is no reasonable prospect of success at the tribunal.
Let us imagine ourselves in a situation that far too many people find themselves in. They are sacked. They have no idea how they are going to meet their mortgage payments or put food on the table. Then they have to find money to take their case to court. The Government are just so wrong on this. They seem to have missed the point that many claims to tribunals are for very small sums—unpaid holiday pay, no notice pay, or wrongly calculated or no redundancy pay. Such simple cases are already heard by a judge sitting alone and are often worth less than the proposed fees.
The Government are also wrong to dismantle our successful and admired tripartite industrial jury system of employment tribunals and employment appeals tribunals. As the Law Society has stated:
“Lay members add to the concept of justice and they enhance the fairness of the tribunal by bringing practical experience in employee and employer relations.”
As my hon. Friend Mr Umunna said, the Federation of Small Businesses is wholly against the proposals for compensated no-fault dismissal. It states that it has seen no evidence from countries where compensated no-fault dismissal is in place to demonstrate that it encourages employers to hire. In fact, it believes that it might lead to more employment tribunal cases on the grounds of discrimination, thereby producing exactly the opposite result to the main policy objective.
The FSB also believes that there is a risk of creating a two-tier labour market and, specifically, that lower protection creates a risk that workers will not be attracted to small companies, making it harder for them to recruit. Those taking employment in small firms could be the lower skilled and less productive workers willing to accept lower protection and those finding it harder to access credit, such as mortgages. The FSB also believes that that would fundamentally change the dynamic relationship between workers and their employers and could deflect attention from the need for good management and replace it with a hire and fire culture. I could not agree more.
The Government have stated that they must make changes to the tribunals system because of the rising number of tribunal cases, but the level of single claims, where individual workers make complaints about their treatment, has remained fairly steady—in fact, it fell by 15% between 2010 and 2011. Around 60,000 individual cases a year, of a work force of 26 million, does not seem all that excessive. Anyone listening to Government Members would believe that tribunals were a real cash cow for the employee, but the average award is £5,400 and the average cost to the employer is £8,500.
I welcome the possibility that tribunals could impose financial penalties on employers who break the law. I have never understood why employers can break employment laws with impunity. The law is the law, it seems to me, and those who break it deliberately, especially if they do so regularly, should be punished. I am also concerned by all the statements we have heard from Government Members about health and safety and ask the Minister to assure us that no amendments will be made that relate to health and safety legislation.
The economy is in recession not because workers have too many rights, but because the Government are cutting expenditure too far and too fast, hitting business confidence and choking off growth. Removing the rights of workers will only increase job insecurity, harm work force morale and productivity, and lower consumer confidence. This is not about making it easier to hire workers, but about making it easier to sack them. It is unwanted by responsible business people, unnecessary and yet another example of a Government who are out of touch and have no idea how to govern in the 21st century. It seems to me that they just want to take us back to the 19th century. With 2.7 million people unemployed and more than a million young people unemployed, the Government should simply get a grip.
It is a pleasure to follow Julie Hilling, who chairs the all-party group on rail in the north, of which I am a member. I agree with her so much about rail investment but, with regard to the particular points she has made, I do not believe that the Government are leading us back to the 19th century and will say something about that in a minute.
I will begin by talking about the aspects of the Bill on which people agree. I am pleased that most Members agree that the establishment of the green investment bank is a good thing and, like other Members, look forward to a time when it can lever in private sector investment. However, I would have preferred us to open up the location of the bank and suggest that it could have gone to a greener area, perhaps in the north of England, and perhaps to some small, historic town such as Lancaster, but I accept that it was a Government decision and will not be reopened.
I welcome the Bill’s enabling powers giving shareholders greater control over the pay of their company directors. Given recent trends, it is right that those powers should be considered. I also welcome the measures to cut bureaucracy and red tape. For as long as I can remember, Governments have talked about cutting red tape but it rarely happens in practice. In stark contrast, the Government have already introduced a one-in, one-out rule for regulation. The notable exception is my right hon. Friend the Secretary of State for Communities and Local Government, who has gone for twice as much by introducing a rule in his Department whereby two pieces of legislation must be scrapped for every new measure brought in, which I think should be the gold standard we aim for.
The Bill moves forward the cause of smaller government and a freer business environment, with sunset clauses on new regulations, a reduction in various inspection regimes and the repeal of many regulations that have been deemed unnecessary. I am sure that many more will be identified over the coming months and sincerely hope that the battle against regulation continues throughout this Parliament. This Bill is just a start.
I have referred to my disagreements with the hon. Member for Bolton West and others, and what I really want to deal with is employment tribunals, directing my remarks at the clauses that deal with employment and workplace disputes. Other Government Members, such as my hon. Friend Mr Binley, are passionate about the issue, and we all agree that small businesses and, below them, micro-businesses are the lifeblood of this country and where real growth will come from. Cuts in the rate of corporation tax may help to attract big business to invest in the UK and are welcome, but, if we want more small businesses to start up and to succeed we need to make it easier for them to employ people and to manage their staff effectively.
Opposition Members do not understand the issue, as was shown by the hon. Member for Bolton West when she talked about paying, because in a micro-business the boss is the HR department, the sales person, the production manager and the health and safety officer.
That issue has been raised with me, and I have one, real example to back up what my hon. Friend Margot James said. An employer wrote to me, saying:
“Employing people is the hardest thing I’ve ever done in my life, by some considerable distance.”
He already had investments in various houses, and he went on to buy a small café, with the hope of establishing it and building it up. He employed two full timers and, for mainly busier days and to cope at weekends, a few more part-time staff, but he was forced to make some redundant when financial circumstances took a downward turn, so he naturally kept on those employees whom he found best at their job, who had a good attitude and who were flexible.
One employee who lost their job threatened to take my constituent to a tribunal, however, on the grounds of age and sex discrimination, later adding religious discrimination, too, unless they were paid £1,200. The hon. Member for Bolton West may think that the employer should have just paid up, but, for the owner of a micro-business—a café—with a couple of employees, £1,200 would have meant his profits gone for a few weeks.
A meeting was therefore convened, but the decision remained the same, in support of the employer, so the ex-employee went to a tribunal, the stage at which my constituent feels the whole system is organised against employers. He had no recourse to free legal advice, but his ex-employee found immediate help from Citizens Advice and, subsequently, a pro bono barrister. My constituent had to defend himself because he could not afford legal assistance.
The ex-employee’s claim went up from £1,200 to £4,500 and, by the time it was heard at the tribunal, had increased by almost tenfold to £10,000, partly because the NHS had advised that legal action be taken against my constituent for injury to feelings.
I find that part of the story strange, because I can fully understand an NHS therapist confirming in writing that someone’s health had suffered as a result of losing their job, but I do not see why or how they should advise people to take their employer to court.
The case went on for 11 months, with my constituent representing himself while trying to run his café and organise it during a downturn. Eventually the tribunal found in his favour, concluding that the employee was sacked for financial and flexibility reasons, as well as for performance and attitude issues.
The case finally came to an end, but my constituent was out of pocket, having had to appear by himself at all tribunal hearings, and I am sorry to say that he has now decided to sell his business. He never wants to go through such a battle again, and he has made it clear that, if people ask him for advice on setting up their own business, he will tell them not to bother as it is not worth the stress, strain and hassle. That is not only sad for him and for other businesses, but bad for the local economy and for local people looking for work, because as business picked up I am sure that my constituent would have ratcheted up his part-time work force.
We need to ensure that such scenarios do not damage businesses. I do not know what Labour Members get in their post, but people from micro and small businesses continually repeat to me their experiences of the problem of employment. As my hon. Friend Richard Fuller made clear, we are not talking about attempting to allow employers to sack more but giving them the confidence to hire more and take people out of unemployment. I gave the example that I did because of its particular nature. The sad fact is that that business is now lost to my town because of the inflexibility of the tribunal system.
I commend what Front Benchers are trying to do in improving the situation, and I look to further improvements when the Bill goes into Committee. We need to get employment up and give employers the confidence to take people on. At the end of the day, a micro-business owner wants their employees to do well because it is their business; he or she is working alongside them. It is not some great game. Unfortunately, because of current regulations, the situation has become inequitable and costly for employers, who are doing what my constituent has done and refusing to take on more staff, which is bad for all of us.
Before I call the next speaker, I am going to drop the time limit to seven minutes. It is only fair that the Members who have been sitting here get a chance to speak. If anybody is upset, please remember that the Front Benchers took up a lot of time at the beginning.
Like everybody else in this Chamber, I represent a diverse community that is not just based on big businesses or the public sector but has very many small businesses. The issues that people from those businesses raise with me are not about employment rights but whether the banks are going to start lending some money so that they can afford to expand and take more people into the workplace.
My problem with the Bill as regards employment rights is that it is not based on evidence or need, or on great demand from the people of this country; rather, it is based on prejudice, opinion, conjecture and bias. It builds on the attacks that the workers of this country have already been suffering under the guise of deficit reduction. We have had mass unemployment, pay freezes, reductions in pension entitlements, and people being made to work longer for fewer benefits. Now, as a result of the Downing street double-dip recession, we are seeing another front opening up in the attacks on workers at home and at work. This is a hugely important matter for the people of this country, because these proposals will be seen by some employers—not all—as a right to exploit their employees.
None of this is new. The Conservatives have never supported positive rights for working people; they have spent the last two centuries attacking and undermining them. Even in the recent past, they were against the national minimum wage and, as we heard earlier, protections for agency workers. They were against the right to paid and increased holidays. Now, most of those rights that have been won for the most vulnerable and the worst-organised sectors of our society are under threat. On the last day before the recess, we saw the disgraceful slipping out of the information that the gangmasters legislation is to be watered down. What an atrocious thing to do; people must have no memory or no respect. These are basic rights in civilised nations, and they should be celebrated, not denigrated.
The Conservatives have shown their true colours with an anti-worker, anti-trade union agenda disguised as a means of promoting growth. I would say that, wouldn’t I? I have been a trade unionist for 44 years, and I admit to being biased, but it is not just me who is saying it. Listen to Mike Emmett of the Chartered Institute of Personnel and Development:
“If the Government is serious about stimulating economic growth, it will look to support employers’ efforts to build an engaged workforce. Taking away employment rights is not the answer.”
There is disagreement even within, although not at the heart of, Government. On
“Some people think that if labour rights were stripped down to the most basic minimum, employers would start hiring and the economy would soar again. This is complete nonsense. British workers are an asset, not just a cost for company bosses. That is why I am opposed to the ideological zealots who want to encourage British firms to fire at will.”
So who wants it apart from the zealots in No. 10 and No. 11 Downing street? Well, Adrian Beecroft wants it—the man who gave the Tories half a million pounds. Give him his due: at least he is honest. He said:
“Some people would be dismissed simply because their employer did not like them. While this is sad…it is a price worth paying”.
Now where have we heard that before?
It is clear from our discussions that nobody who represents employees believes that the Bill will improve growth. As was said earlier, the OECD has said that even though we have some of the weakest employment rights in the developed world, countries with more stringent rights are performing much better than we are. It is quite clear that it does not work.
Beecroft said that the consequences are a “price worth paying”, which of course is what the Prime Minister’s former boss, Norman Lamont, said in 1992—the last time there were 3 million people on the dole in this country. We have seen the truth. The Conservatives believe that mass unemployment is a tool of public policy. They believe that bosses should be able to fire people just because they do not like them. They believe that it is in the national interest for the work force to have to accept poor pay and insecurity at work, and to be made to work without the right to complain.
The legislation will be used to get rid of union representatives. It will be used to dilute the impact of health and safety representatives. It will be used to get rid of those who question authority. It will protect and promote the blue-eyed boys and girls who put up with anything without complaint and who do exactly what the boss wants, regardless of the consequences.
This is like a rerun of “Back to the Future”. The Secretary of State is Doc Brown, the well-meaning but hapless boffin. The Chancellor is Biff the bully, who will not let anyone get in his way. The workers of this country are playing Marty McFly, the poor guy who has to run to stand still, while all around him everything he has ever done is disappearing before his very eyes. Unfortunately, this is not “Back to the Future”, because that, as people know, had a happy ending.
A happy ending is possible only if one of the following things happens. First, the Government could see the error of their ways and pull back from these callous and calculated attacks on working men and women. Secondly, the yellow human shields of the Liberal Democrats in this House could finally get some bottle and give their Secretary of State the backbone to stand up for what he believes in. Having seen the attendance of the Liberal Democrats tonight, I guess that that is not going to happen. Thirdly, if the Bill goes through and workers’ rights are attacked, those on the Labour Front Bench must commit unequivocally to repeal the legislation at the first opportunity when we return to government. Anything less will be seen as a betrayal of the workers of this country and will not be easily forgiven or forgotten.
We should be focusing in this debate on how we can support businesses to hire more workers, not on how we can legislate to help the rotten ones to fire workers. This pathetic Bill says more about the nature of today’s Government than almost anything else that they have done and it must be resisted both inside and outside this House.
I will restrict my comments to the regulatory aspects of the Bill.
The Government were left a regulatory nightmare by the Labour Government. The last Government introduced six regulations a day, the CBI estimates that employment law alone has cost British business £100 billion since 1998, and 107 of the 152 employment regulations on the statute book were added under the Labour Government. Better regulation attempts came and went under Labour. Regulation tsars reporting to the Prime Minister were placed at the top table for about 10 minutes and then quickly dropped. In the good years, Labour not only lost control of our budgets, but added piles upon piles of new rules and red tape on British business and the public sector.
Regulation has a vital role to play in a market economy, but it also imposes costs that can stifle innovation, present barriers to market entrants and deter economic activity, as we have heard in numerous examples tonight. I do not understand the evidence given by the shadow Secretary of State. A recent MORI poll for Capital One’s report, “The ties that bind?”, confirmed that regulation tops the list of issues facing very small businesses, with 64% of micro-businesses believing that the regulatory burdens that they face are far too high.
The Government have done a lot on this issue: they have set up the independent advisory committee on regulatory reform; they are publishing quarterly regulatory statements; there has been the red tape challenge, which is now part of the Bill; there is the ongoing employment law review; and the one-in, one-out process is firmly under way and is holding each Department to account.
The Government have done much more serious work on regulation over the past two years than Labour did in 13. This Bill is part of that good work.
Since 2010, the Government have introduced a number of measures to simplify the employment environment, raising the qualifying period for unfair dismissal from one year to two, reducing the risk of vexatious tribunal claims, and introducing fees for those wishing to pursue a tribunal claim. As we have heard, being taken to a tribunal is one of the biggest fears of our smallest employers. The main change—introducing mandatory pre-claim conciliation—will help. Indeed, the Forum of Private Business has already said that 70% of its members believe that more conciliation is a positive step in avoiding cases escalating. Such an approach is also good value for money—ACAS has had a 75% success rate in the discretionary conciliation cases it has dealt with—and will save businesses the cost of defending themselves, which comes to £4,000 on average.
However, I have a few observations. If we are to give ACAS this further power, does it have the resources for it? That issue came up in the consultation. Also, do we need to restrict mediation to ACAS? Can we not include private and other providers to help in mediation? I would be interested to hear the Minister’s comments about that. ACAS also has to secure permission from the employee to contact the employer during the conciliation process. We need to give the mediator absolute access to both the employee and the employer, so that it can properly conduct the mediation process. We also need to ensure that the mediation process is as informal as possible, so that the employer does not have to get tooled up with expensive lawyers, which is an issue that the Federation of Small Businesses has raised. I am concerned about the proposals for fines because, as the CBI has argued, tribunals are a form of grievance resolution, not a criminal court. If we are going to have fines, there needs to be some sort of exemption based on company size.
However, let me get back to the positives. The change to unfair dismissal compensation is a good move. It will mean that companies of different sizes should be able to get different awards, which is much fairer for the very smallest businesses in our country. On unfair dismissal, I pay tribute to the Minister, because with these compromise statements he has got the key to exactly what businesses want. I think they will be known as “Lamb statements”, because they will make business much easier for our smallest employees and will make compromise agreements—which have previously been accessible only to very well-off companies—accessible to our smallest firms.
Let me turn to regulation more generally. There have already been some good moves, which I outlined earlier. The sunset clauses in the Bill, the relaxation of inspections, the red tape challenge and the primary authority changes are all good moves too. However, I urge the Government to be a bit more ambitious. May I urge Ministers to look at the one-in, one-out rule sector by sector, and segment of law by segment of law? Can we include European directives as soon as possible? Can we also take a hard look at the infrastructure of our regulatory reform? If we look at what the Americans are doing with OIRA—the office of information and regulatory affairs—we see the disparate construction of our different deregulatory bodies, with the Better Regulation Executive in BIS, the local regulatory offices and various other groups. We should be trying to bring things together, as the Americans are doing, so that we can make a serious attempt at reducing regulation in future.
A lot has been done, but we need even more ambition. I urge Ministers at all times to listen to the voice of business, particularly those not represented by business organisations, which at the moment are crying out for the freedom just to get on with their jobs.
As a Member who is due to give evidence to the commission on the West Lothian question later this week, I am particularly conscious of the fact that this Bill is something of a chequerboard in terms of its territorial application. One of the key elements that obviously applies UK-wide is the green investment bank. I welcome the moves to develop the green investment bank, but I regret the fact that, as the amendment states, it is not as well resourced as it might be. The Bill does not give me cause to believe that it will be as active a driver and supporter of the green economy in the long term as it should be.
My more particular concern is to ensure that when the Bill is processed through the House, the provisions relating to the green investment bank are tested to ensure that the references to the green economy in the UK are not inordinately exclusive in regard to Northern Ireland. Many of the projects there that might seek support from the green investment bank could have a cross-border, cross-jurisdictional character. In offshore wind projects, for example, the geography and topography of natural resources and renewable energy point to it being sensible for those projects to cross borders. The present renewables obligation certificates regime discriminates against and excludes cross-border projects, and we need to ensure that that mistake is not repeated with the green investment bank if we are to maximise its opportunities.
Similarly, a large number of the provisions on competition and markets are UK-wide, and I want to see some aspects of them teased out—and possibly ironed out—not least in relation to their possible application in Northern Ireland. Among those measures is the proposal to take the consumer education role of the Office of Fair Trading and give it to Citizens Advice. Given that the citizens advice service in Northern Ireland operates on a different statutory footing from the one in England, we must ensure that there are no oversights and no inadvertent black holes in relation to that key issue.
The provisions on employment law will clearly apply to Great Britain, but the reality is that changes of that nature are likely to become predictive legislation for Northern Ireland. They set the conditions in many ways, which is why I join my hon. Friends in expressing my profound reservations and objections to some of those unnecessary changes. Given that the Prime Minister seems reluctant to dismiss anyone even when there are compelling reasons to do so, I find it strange that he wants to make it his business to ensure that other people can be fired without any compelling reason whatever.
There is one element that I would have liked to see in the Bill. On this, I disagree with my hon. Friend Austin Mitchell. He called it a “ragbag” of a Bill, but I am asking for a further element to be added. I note that part 3 of schedule 17 contains a small amendment to the Insolvency Act 1986 in relation to early discharge from bankruptcy. It refers to section 279 of the Act, but I believe that the Government should use the Bill to reform section 233. I asked the Minister about this at topical questions: on the subject of administration costs, businesses that are in administration are being held to ransom and put out of business by suppliers.
As it stands, the Insolvency Act fails to give businesses here the same kind of protection that is provided by chapter 11 in the United States. Under chapter 11, suppliers have to continue to supply a business under the existing terms. Here, suppliers are asked to continue to provide, but there is nothing to prevent them from changing their terms. Many demand increased tariffs and ransom payments, and many cut off supplies and create a new contract. Businesses in that situation find it very hard to cope. They also find it hard to persuade the banks to support them through their administration, at a time when they are vulnerable to being held to ransom by such predatory action by suppliers.
When the Insolvency Act was passed in 1986, the concept of on-suppliers—people with whom firms have a contract to supply, but who are sourcing the supply from others in areas such as telephony and electricity—was not clearly provided for. Some of the subsequent court decisions seem to be adding to the confusion. The professional trade body dealing with insolvency, R3, believes that this needs to be dealt with, and that up to 2,000 firms a year could be saved if a legal change of this nature could be made, allowing them to be protected and to trade in administration. Jobs would be saved, as well as firms, if we changed the legislation in that way. It would not be a regulatory change getting in the way of good business; it would be a regulatory reform that supported businesses in the difficult circumstances in which they find themselves, and it would allow them to continue. If one part of the Insolvency Act can be amended through the Bill, I see no reason why this even more compelling case for reform should not be included.
The Minister’s predecessor stated last October that the Government had announced that they would consider the case for updating section 233 of the Insolvency Act and the wider issue of termination clauses. I would say that the case is compelling, and it is supported not only by R3, the professional body dealing with insolvency, but by the Federation of Small Businesses, the British Chambers of Commerce, the Association of British Insurers and the British Property Federation. Let us have this much-needed reform, not the specious and unnecessary changes that the Bill provides for elsewhere.
I welcome this Bill, particularly the Government’s commitment to cut the cost of regulations in order to support business growth. I say that as someone who spent 30 years growing up literally on top of small businesses, as that is what my family did. There is so much to commend in the Bill. We have heard from right hon. and hon. Members this evening who have focused on regulation. I think that Ministers should be commended for all their efforts, however, as they have demonstrated their desire to keep Britain open for business by keeping tax, particularly corporation tax, low. That applies to small profits rates, too, which were due to increase under Labour. These welcome steps are in complete contrast to what Labour proposed.
I shall focus my remarks on regulation, even though it has been touched on already. I believe that using fiscal levers and taxation policy alone to stimulate private sector economic growth and to encourage entrepreneurship can go only so far. Lower taxes, for example, must be complemented by a significant reduction in the costs and burdens imposed by regulation. That is why this legislation is not only welcome but urgently needed.
Business men and entrepreneurs, particularly small businesses, do not want to spend their time, often late into the night, filling in forms, ticking boxes and dealing with bureaucracy, regulation and red tape. That takes a disproportionate amount of their time when they could be running their businesses. They want to be able to take risks, grow their businesses and create jobs rather than be swamped in bureaucracy and red tape. I think that the proliferation of red tape over recent years is a damning indictment of the last Government’s record in office and their failure to support businesses. The regulatory framework they left behind has been deeply damaging to the growth of our economy.
The Forum of Private Business has estimated the cost of compliance with regulations at something like £16.8 billion, with the average cost per business totalling around £14,000. These are astonishing figures when we think that the annual cost of compliance is equivalent to the amount spent on Crossrail or 11 times the total Government budget for apprenticeships alone. These are deeply alarming figures. If even a modest amount of those costs could be removed, Britain’s 4.5 million small businesses would be more competitive internationally, able to reduce costs for their customers and to expand to create more jobs and growth domestically.
We have heard much this evening about regulations in the sphere of employment law, with 107 new employment regulations added since 1998. The consequences are clear to anyone who has had any experience of small businesses. I hosted the reception for the FSB earlier this evening; it has stressed the disproportionate impact of these regulations, seriously affecting such businesses.
There is no doubt that businesses large and small will welcome clause 49 and the introduction of sunset and review clauses into regulation. Those measures build on “Sunsetting Regulations: Guidance”, published by the Government in December, which recommended that regulations which impose burdens on businesses be reviewed more frequently—within five years—and should expire within seven years. That is important, because the cost of regulations can spiral, and they can have a disproportionate effect. However, I urge the Government to ensure that those regular reviews of regulations not only take place but lead to changes when the burdens imposed on business are too great. Ministers have an opportunity to focus on what is working and what is not. We have already heard about one in, one out. My preference would be for no regulations in and a lot of regulations out, and the same applies to Europe, but at this stage Ministers need to focus more on what needs to be scrapped in order to free up businesses.
In the brief time available to me, I want to touch on the international dimension of enterprise and regulation. Last month I had the privilege of visiting London Gateway, which is an expanding part of the county of Essex. As an Essex MP, I am proud to represent the entrepreneurial spirit that can be seen there. There is a colossal amount of entrepreneurship in Essex, and London Gateway is a very good example of a selling point for UK plc. In the face of many regulatory hurdles, foreign direct investment in the UK has helped to develop the site into an incredible new port and logistics park which will create a great many jobs and boost our economy, just on the cusp of London. I think that Ministers could learn from some of the challenges that have been met there, and could find ways of bringing more foreign direct investment to the UK and showcasing it, and London, internationally. The selling point would be the removal of many of the regulatory burdens that we have seen in the past, but with which the Government are now dealing.
I urge the Government to press ahead with the Bill, and to embark on a radical programme of deregulation and regulatory reform. That would encourage more businesses like DP World, and even Tata and Glaxo, to follow in their investment footsteps, and to create more jobs and economic growth in this country.
Clause 51 seeks to repeal a number of provisions in the Equality Act 2006. I am puzzled by the clause, because most of the provisions that it seeks to repeal have nothing to do with the regulatory burden on business. As was pointed out by my hon. Friend Sandra Osborne, in repealing the good relations and general duty provisions that currently apply to the Commission for Equality and Human Rights, we will make no difference to business directly, but will change the context and undermine the equalities philosophy which I believe is important for a successful economic recovery. I shall say more about that in a moment.
Elsewhere, through changes in regulations, the Government are directly attacking some of the principles that protect employees and guarantee labour market equality. They are consulting on proposals that have resulted from the red tape challenge: proposals to remove employer responsibility for third-party harassment, to ensure that decisions by employment tribunals will no longer apply to all employees, and to remove the use of the statutory questionnaire. When I asked the Secretary of State about those proposals earlier this evening, he seemed to say categorically that none of them would appear in the Bill. We will hold him to that, because watering down equalities legislation is certainly not a recipe for economic growth. On the contrary, labour market justice and fair access for all to employment opportunities are a prerequisite, not a problem, for economic success. An unequal recovery which fails to make the most of everyone’s talents and take steps that encourage and support employee loyalty, and which therefore fails to stimulate productivity, is no recovery at all.
I am sorry that the Government have missed an opportunity to link—proactively, ambitiously and imaginatively—labour market justice with economic success in an explicit way. The Bill could have included measures to improve employment opportunity and labour market justice. Measures that tackle occupational segregation and introduce the anonymising of application processes have been shown to improve access to the labour market, yet there is no sign of any such provisions. The Government also have a social mobility strategy that they are supposed to be promoting, but that, too, is in no way reflected here, or even mentioned.
The Bill presents an opportunity to create the conditions for an equal, not an unequal, recovery—a recovery that promotes, supports and makes use of the talents and contributions of all. I regret that the Secretary of State has thus far failed to take that opportunity, but he still has time to correct the omission. I say to the Government that if Ministers do not bring forward amendments to create the genuine conditions for economic recovery and equal opportunity in the labour market during the passage of the Bill, we most certainly will.
It is a great honour to be called to speak in this important debate, and I am pleased to follow Kate Green.
First, I want to make two general points. If we were relying merely on passing legislation to promote economic growth, we would have had a lot of economic growth already, because the truth of the matter is that legislation is aplenty. What matters, however, is what that legislation actually does, and this Bill will empower businesses to get on and do what they need to do, which is employ people and be innovative. My first general point, therefore, is that we need legislation that trusts business to get on with the job of generating economic growth.
My second general point is that we must not see this Bill in isolation from other Bills, such as the draft energy Bill, which will pave the way for new market developments, new technologies and new ways of providing energy. We need joined-up government. Indeed, economic policy is all about joined-up government, such as linking what this Bill paves the way for with other important pieces of legislation.
Let me illustrate that by talking about the green investment bank. I serve on the Environmental Audit Committee, and we produced a thorough report on the bank. We made three points, which I shall go through now as they are important both in respect of this Bill and for our future prospects of developing an economy that is both CO2- effective and economically productive.
The Bill must ensure that the green investment bank thinks about small and medium-sized businesses. We must have legislation that salutes SMEs in the technology and energy production sectors and recognises their value. They are the businesses that will come up with the good new ideas that translate into development. That is certainly happening in my constituency, and I expect it to happen in others. This Bill needs to help bring that about. The first point, therefore, is that we must be sure that SMEs can benefit from the green investment bank.
The second point is that it has to be a bank, not a fund. If it were a fund, we would be using the regional development funds and whatever else might be at our disposal. We need a bank that knows what it can do in terms of both attracting other investment and investing itself and levering in additional money. It must have clout in the market. That is essential, because if it is to be a bank, it must look like a bank and feel like a bank, and people must think it is a bank. I acknowledge the constraints imposed by the deficit reduction programme and so on, and I have said several times in the House that we must reduce the deficit, but we must also signal that the green investment bank will be significant—a powerhouse of support for innovation, development and everything else.
It is called a green investment bank and that is what I shall call it, but I accept the need for us to ensure, in the shortest possible time, that it is a real bank and not just a fund. The fund is big, though— £3 billion—and we should bear that in mind.
The third important point about the green investment bank is the quality of its expertise. That will be vital in a bank that is dealing with the sort of technology for which its support will be sought. The Minister must recognise that the green investment bank has to be shaped in such a way that likely investors, borrowers and businesses that approach that bank will feel comfortable with the expertise it has and that, in turn, the bank can deliver that expertise to the firms. If we look at the banking system across the European Union, we can see that where institutions have that expertise—the European Investment Bank is a good example—it works. We have to build those critical elements into the legislation, so that the green investment bank packs a punch in terms of investment, expertise and small businesses.
I think the Bill is not just a lost opportunity but a thinly veiled attack on workers’ rights. It pretends to be about growth, but contains no real growth strategy. In Britain and across Europe, the big political issue is growth versus cuts to get down the deficit and balance the books, but we are seeing that austerity literally is not working. On Sunday, the Greeks will hold another election, but what are they being offered? Cuts in their pensions, their salaries and their jobs—further poverty. On the plus side, why are they not being offered investment in solar forests across Greece, to provide energy for Europe; in railways, to connect up the tourism business; in universal broadband, to connect them to the world; or in a share of research and innovation? Where is the balance? It is not working.
In south Wales, the area I represent as a Swansea MP, we want electrification of the railway to Swansea, a lowering of the bridge tolls and cities working together in city regions—an initiative I am pushing forward locally. We want a fiscal stimulus like the one seen under Brown and Obama, when what could have been a world depression ended up becoming fragile growth. Now, we have zero growth thanks to the Chancellor suddenly announcing that he was going to sack 500,000 public sector workers—Bob’s your uncle, people stopped spending their money, growth came to a standstill and the deficit is £156 billion higher than previously forecast. Austerity simply is not working.
I welcome the green investment bank and the £3 billion fund, but I think what we really need to do is refocus our procurement on green companies and SMEs generally to generate the jobs and production needed to support public services. As I mentioned earlier, in Wales, 70% of procurement is spent through SMEs, 50% of which are based in Wales, whereas in England the figure is 7%. The Government spend 93% of the taxpayers’ money with great big companies—normally international companies that generate jobs abroad and do not pay tax here. It is completely crazy. We should be using our procurement facilities to generate green jobs, in particular in SMEs, but the Government simply are not doing that.
What about the devolution debate—devolving tax powers to Wales and Scotland? I am highly sceptical about that. At a time when, across Europe, we are seeing a monetary union that increasingly requires fiscal and political union to work, we are being urged to devolve borrowing and tax to the regions and nations of the United Kingdom. Obviously, the political trick here is to say to Wales, “You can borrow. You can tax. If you want some more spending, raise your own money from a weaker tax base.” We can see where that is going and I do not think that people will be fooled.
Beecroft’s proposals are the hidden agenda. The Business Secretary says that they are a load of rubbish, but we can see a diluted version of them coming through. It is basically a charter for intimidation and harassment. As I said earlier, if a female employee says no to a boss who asks, “Will you sleep with me?”, the next thing that is going to happen is that she will lose her job. It may be a bit more subtle than that, but that is the sort of pressure that we are seeing through a re-invention of Dickensian Britain and a forthcoming Dickensian workhouse. This is retrograde, unnecessary and completely contrary to where Britain should be going.
Regional pay is another attempt, certainly in Wales, to reduce pay. It is to be reduced by about 20%, at a time when 40% of workers in my constituency are in the public sector. They are seeing their jobs cut, their pensions cut and their pay frozen, and now the Tories in England are saying, “We’ve got a good idea. We’ll cut your pay by 20% and completely take the base out of the local economy.” This is completely ridiculous. It would mean that a GP from Swansea would be paid more if they were in Bristol. We want to attract inward investment from people who want decent schools, decent health services and all the rest. Are they going to come to a place where the Tories have denuded that in the name of regional pay? Aa time when the local authority offers 10 apprenticeships and gets 800 applications, there is no shortage of people wanting to work.
This Bill is a mean-minded, pathetic and unambitious bit of nonsense. Nye Bevan pointed out that, in times of great economic difficulty, there is dynamic struggle between private property, equality and democracy, and ultimately the Tories will attack democracy in order to load the burden of the mistakes of the rich people—the bankers—on to the backs of the poor. What we are seeing in Wales is not only the reduction from 40 to 30 MPs, and not just individuals now not required to register to vote and not just the latest attempt to say to the Welsh Assembly Government, “You will never have a majority Government again, because 30 will be elected by first past the post and 30 by regional list”; this is all part of a carefully choreographed situation where poorer people will have fewer MPs and will vote less, particularly in places such as Wales, in order to keep a Tory Administration nationally. This goes back in time to the orthodox austerity, and making the poor poorer and giving back to the rich on the 50p tax rate. This stinks, and it does nothing for growth. We have a Prime Minister who preaches growth while he is in Europe but practises austerity at home. This is a mean bit of legislation and it is a lost opportunity. At a time when the global spotlight is on Britain with the Olympics, we should be ashamed of ourselves.
Time restraints mean that I will keep my contribution brief, Mr Deputy Speaker, and address only one aspect of this wide-ranging Bill—the proposals relating to whistleblowing. Of course, the Secretary of State did not address them in his opening contribution, although the Labour Front-Bench team have indicated that they will look at these issues in detail in Committee.
The provisions in this Bill will amend the landmark Public Interest Disclosure Act 1998, which was introduced by the previous Government after many years—decades, in fact—of campaigning by those seeking to have whistleblowing legislation in this country. It put the UK at the forefront of corporate governance legislation at the time of its introduction. The Government’s amendment has the effect of introducing a public interest test into that Act, which I believe will weaken the legislation for anybody wishing to rely on it. I understand that the Government say that they are proposing this amendment in this way in order to overcome a legal loophole, which has resulted in part from the case of Parkins v. Sodexho Ltd. However, those who have been campaigning on this issue, such as Public Concern at Work, are extremely concerned that introducing this proposal in this way will weaken the legislation for everybody. There is no doubt that a loophole needs to be addressed in respect of that legal case, but the concern is that the Government’s amendment will not address it and instead will make it more difficult for anybody wanting to rely on the legislation. There is no doubt that after more than a decade of the Act being relied on in this country we need to look at this area again. There is no doubt that we need to improve the legislation and learn the lessons of experiences over the past decade and more.
We need to look at vicarious liability, which cannot be relied on by people trying to use the 2008 Act. Recently, three nurses in Manchester who were concerned that their colleague had lied about their qualifications were unable to rely on the original legislation because it did not deal with vicarious liability.
Other aspects highlighted by recent employment cases also need to be considered. The Government accept that there are difficulties with certain groups using the legislation, such as students on vocational placements, general practitioners and others. There is no doubt that the scope of the Act needs to be widened. Indeed, we need a separate public interest category, as there is in the United States.
Those who have campaigned on whistleblowing are clear that the Bill is a step backwards. They are calling for a full public consultation—there has been no consultation whatever so far—and a thorough review of the law on whistleblowing. I ask the Government to listen to what those campaigners are saying, initiate that review, look again at the proposal in the Bill, think again, and return with proposals that will strengthen whistleblowing in this country rather than weaken it.
This has been an important if somewhat curtailed debate. In the time we have had, 21 hon. Members from all parties made considered and high-quality speeches, with the exception of Lib Dem Back Benchers and Scottish National party Members, who made no speeches, high quality or otherwise.
Since the Secretary of State rose at 5.44 pm to open the debate, 1,368 new companies have been registered in Russia, the country with the largest and fastest-growing number of business start-ups anywhere on earth; 21,394 passenger cars have been manufactured in China; 975 patents have been filed in the US; 338 people have enrolled on engineering degrees in India; and 60,000 iPhones and 20,250 iPads have been manufactured and sold around the world. Any enterprise Bill that the House considers must tackle on behalf of British business that unprecedented level of intense international competition.
That is an urgent task because, as we have heard, we are slipping down the league tables of global competitiveness. As my hon. Friend Mr Umunna said in his excellent opening speech, according to the World Bank’s global survey of doing business, when the Government took office, Britain was fourth in the world in terms of the ease of doing business; it is now seventh. Across the different categories, our competitiveness is slipping alarmingly. On the ease of starting a business, we have slipped from 16th to 19th; on dealing with construction permits, we have slipped from 16th to 22nd; and on registering property, we have slipped from 23rd to 35th. We are now ranked 60th in the world on companies gaining access to electricity, behind the likes of Chile, Belize, Costa Rica, Guatemala and Iraq.
The task is made even more urgent because the Government’s policies have pushed the British economy into reverse and into recession. As my hon. Friend rightly said, when the Government took office, the British economy was growing. Since the spending review, it has shrunk by 0.4%. We are now in a double-dip recession made in Downing street. Fifty businesses are going under each and every single day.
The Chancellor may wish to blame the weather, even though this country has seen weather before. He may wish to blame, as he did at the weekend, high oil prices, even though oil was trading in London this morning at a 17-month low and the price of Brent crude is 25% of its March peak. He may wish to blame the jubilee, or the eurozone, which he may claim is killing Britain’s prospects for growth, but even now Tory MPs are wising up to the fact that he is looking for excuses or alibis. They are questioning the political genius and economic competence of the man who gave them the pasty tax and raised taxes for pensioners while providing tax cuts for multi-millionaires. It is not business that should stop whinging and work harder, as the Foreign Secretary suggests, it is the part-time Chancellor.
The Bill could have addressed such failures. It has been trailed in the media as the flagship piece of legislation to make enterprise, growth and competitiveness this Administration’s principal policy. It is hardly that. Instead it is a mishmash, an ad hoc rag-bag of measures, as my hon. Friend Mr Bailey, the Chair of the Business, Innovation and Skills Committee, and my hon. Friend Austin Mitchell said. It reflects a Government who, after only two years in office, have run out of ideas. There is no strategic thread, no compelling vision and nothing that will provide real help for British enterprise, as my hon. Friend Mr Bain eloquently pointed out in a powerful contribution.
The Bill’s span is wide. For example, clause 50 concerns heritage planning legislation and clause 51 deals with the Equality and Human Rights Commission. Incidentally, my hon. Friends the Members for Ayr, Carrick and Cumnock (Sandra Osborne) and for Stretford and Urmston (Kate Green) made powerful speeches about that clause. I absolutely agree with them, and we will oppose the measure firmly in Committee. There is also clause 56, which deals with copyright. That wide span does not really show an Administration confident in their approach and clear about their aims for the British economy. Instead, it exposes a situation in which Ministers are desperately trailing around Whitehall asking for off-the-shelf proposals to pad out a supposedly flagship Bill. British business deserves better.
Businesses are crying out for a productive partnership with Government. They want to work together on a long-term vision for the British economy in the next few decades and put in place a powerful industrial strategy to allow Britain to thrive. However, there is nothing of substance in the Bill that will allow such a strategy to materialise.
Several hon. Members, such as my hon. Friends the Members for Glasgow North East, for West Bromwich West and for Swansea West (Geraint Davies), mentioned the Bill’s provision for the establishment of the green investment bank. We support the principles of such a bank. Indeed, it was under the previous Labour Government that the decision to establish one was taken. However, this Government’s two-year delay and dither has meant that the UK is slipping ever further behind our global competitors in investment in green growth. We have fallen from third in the world for investment in clean technology when Labour left power to seventh in the world today.
Even though I can see the point that investment rose last year, Pew Research has stated that that was largely because
“investors rushed to initiate projects before policy reforms go into effect that could curtail incentives”— reforms such as the botched feed-in tariff. From a position in which we could have taken a first-mover premium in the new global manufacturing sector, the Government are losing this country our competitive advantage. Earlier this year the chief executive of Vestas, the world’s largest wind turbine maker, said that his company was postponing investment in the UK, stating:
“The most important issue that our customers have is a long-term policy framework that is required to put in these investments, which are huge.”
However, he said that
“we have not had reassurance from the government.”
As we have heard, the situation has been made worse by the fact that the Government continue to cause uncertainty and delay as a result of the Treasury’s refusal to allow the green investment bank to borrow until 2016 at the earliest. The hon. Members for Lancaster and Fleetwood (Eric Ollerenshaw) and for Stroud (Neil Carmichael)—I do not see the latter in his place—raised that issue. A bank that does not borrow cannot be called a bank, as my right hon. Friend John Healey and my hon. Friend Joan Walley said in powerful interventions. Investment and leverage from the private sector now, while the economy is in a double-dip recession, could help us get into recovery and out of this mess. As my hon. Friend Mark Durkan said, there is a risk that the green investment bank will not be as active a driver in economic recovery as it should.
A large number of hon. Members, certainly on the Labour Benches, rightly mentioned their concerns about the proposed changes to employment legislation. My hon. Friend Julie Hilling, for example, brought to bear her considerable experience in the matter. My hon. Friend Mr Anderson said that the proposals were based on bias, “Back to the Future”, opinion, anecdote and prejudice. My hon. Friend Katy Clark mentioned whistleblowing, and we will certainly be raising and looking closely at that in Committee.
Margot James said that in her opinion health and safety legislation is a burden. I do not know whether she commemorates workers’ memorial day every
Mr Ruffley cited two cases from his constituency, in the retail sector of all sectors. He said that the biggest burden facing the retail sector was not the lack of demand, the lack of consumer confidence or the rise in VAT imposed by this Government, but unfair dismissal. The idea that business growth is being held back by burdensome employment regulation is simply absurd.
I would say to Mr Binley—I have a lot of affection for him and know that he has long decades of experience in business—that, as my hon. Friend the Member for Streatham said, only 6% of businesses said that regulation was the main barrier to growth, with nearly half saying that the biggest obstacle to business success was the dire state of the economy.
Does the Opposition spokesman, for whom I have equal affection, recognise that those people would have placed it at the very top of the list if the previous Labour Government had not created so many economic problems that of course other matters came before it? None the less, most people named it as one of the problems.
The hon. Gentleman is a wily old bird and he knows that the economy is in recession not because of the UK employment regime or because there is somehow a need to make it easier to fire workers at will, but because, as my hon. Friend the Member for Great Grimsby said, the Government have choked off demand by cutting spending too fast and raising taxes such as VAT too far. As my hon. Friend the Member for Bolton West pointed out, removing the rights of workers will only have the impact of increasing job insecurity, thereby damaging work force morale, productivity and confidence precisely at the time when we need to see more confidence flowing through the economy.
The Government have repeatedly and pointedly failed to rule out the prospect of Beecroft’s recommendations being brought forward as amendments to the Bill. The Secretary of State was somewhat vague on that matter. After penetrating interventions from my hon. Friend the shadow Secretary of State and my hon. Friend the Member for Stretford and Urmston, the Secretary of State said that as far as he was aware—although it is his Bill—he did not see any prospect of that occurring. I hope that the Minister will make the Government’s position crystal clear on the implementation of the Beecroft recommendations during the Bill’s passage through Parliament. I hope he will confirm that none of Beecroft’s recommendations will be in amendments tabled to the Bill and that he will work with us in Committee to ensure that any such amendments from Back Benchers will be rejected. I know that Richard Fuller wants to table such an amendment and I look forward to working with him—or against him—in Committee.
Hon. Members also raised the proposals on directors’ remuneration in part 6. We have made it clear that although we are generally supportive of what the Government are doing, the proposals do not go nearly far enough. We need greater accountability and transparency, and the recent shareholder spring, which involved many companies, suggests that investors believe that, too.
Reports in the weekend media suggested that the Government will not empower shareholders with an annual binding vote on remuneration for executives, requiring it instead only every three years. Previously, the Secretary of State has rightly stated that an annual binding vote would provide investors with a powerful tool to hold executives to account, particularly as regards failure. He pledged that again today, which is very welcome. We intend to press forward in Committee with amendments to this part of the Bill to ensure that the matter is dealt with comprehensively and fairly and that all the recommendations of the High Pay Commission are implemented, including those that workers sit on remuneration committees.
Parts 3 and 4 will establish the competition and markets authority; the purpose is to improve the speed, quality and robustness of decision making. We Labour Members are keen to ensure that the competition regime in this country is the best in the world, so that innovation and imagination are rewarded; in that respect, I agree with Mr Evennett. When the Government came to power, the UK’s competitive environment was seen as one of the best in the world—third behind only the US and Germany—so it is of concern that on this Government’s watch, the
Global Competition Review has downgraded the status of the Office of Fair Trading, following what it termed the OFT’s “dismal” enforcement on cartels. In Committee, we will scrutinise closely and challenge the Government’s proposals to ensure that our competition regime remains best in class.
The Government had a great opportunity in this Bill to deal with the consequences of their failed economic policies. The Bill was a chance to put in place legislative measures to enhance this country’s economic competitive position, and to set in train policy certainty for investors, which would allow them to invest for the long term. The Bill could have helped our companies to improve their productivity and decarbonise the economy, while allowing British firms to benefit from the green industrial revolution, which is happening now—not in 2016. It could have made a firm statement in law that failures and poor performance at the top of business would not be tolerated or rewarded with excessive pay, and it could have safeguarded consumers from powerful vested interests. The Bill has made some progress on that, but not nearly enough. It is a missed opportunity. It is a rag-bag that exposes the Government’s lack of a compelling vision and fails to help British business to compete in the global economy of today and tomorrow. On that basis, I commend the reasoned amendment to the House.
I have to say that I did not agree with much that the shadow Minister, Mr Wright, said, but I do agree that it has been a good debate, with many reasoned contributions from Members on both sides of the House, which I very much welcome. I will try to address as many of the points made as I can. There will obviously be further opportunities at subsequent stages to discuss detailed points.
Contrary to what the Opposition have argued, the Bill contains important measures that will encourage long-term growth. As my right hon. Friend the Secretary of State explained in opening the debate, part of the Government’s wider strategy is to promote growth, support business and create jobs. The Government inherited a wholly unbalanced economy based very much on consumer debt and a housing bubble. It created six new regulations every working day. Those are not the actions of a business-friendly Government.
I shall deal first with the green investment bank. I am glad that Members support its creation. As my right hon. Friend made clear in his opening speech, the bank’s expertise will break new ground in the financing of green infrastructure projects, while demonstrating to the market that such investments can deliver commercial returns. The Government have made good progress in building the bank, so that it can make investments as soon as state aid approval is received. The establishment of the bank is testimony to the leadership of this Government in rebalancing the economy and putting the green agenda at the heart of that project.
The shadow Secretary of State and the hon. Members for West Bromwich West (Mr Bailey), for Stoke-on-Trent North (Joan Walley), and for Glasgow North East (Mr Bain) raised concerns about the funding, and the borrowing powers, of the bank. The Government have committed to the bank having £3 billion of funding up to 2015. The bank will have borrowing powers thereafter, subject to public sector debt falling—an entirely reasonable proposition. That deferred ability to borrow from 2015 will not affect the success of the green investment bank, as it first needs to focus on consolidating its expertise and developing a credible track record.
UK Green Investments has already made investments in waste infrastructure projects, and is considering major investments in priority sectors such as offshore wind. Private sector investors have responded very positively, and it is already clear that the bank will make a major contribution to the ability and willingness to invest in the green economy.
I turn now to the measures aimed at reforming the employment tribunal system. I welcome the acknowledgement by Mr Umunna on a previous occasion that improvements can be made to the way in which the system operates, but the shadow Secretary of State today seems set against any reform and fails to recognise that other countries, including a social democrat Government in Germany, have made reforms to make their labour markets more flexible. We cannot afford to be complacent. Labour in government recognised the value of a relatively flexible labour market. Our labour market already performs well, but if we want to remain competitive it is imperative that we are aware of what other countries are doing.
As my hon. Friend Mr Ruffley said, we must balance the interests of those who are in work with the interests of those who have no job and no prospects. We have to provide a mechanism to ensure that employers have the confidence to take on new employees.
I am afraid I do not have time. I need to get through the responses.
This Government are determined to support parties to resolve their disputes between themselves, rather than relying on a costly and time-consuming employment tribunal. A tribunal is an admission of failure and everything must be done, where practical, to prevent having to resort to it. The mediation of disputes retains employer flexibility while preserving workers’ rights and dignity, and our measures aim to encourage that further.
There has been much discussion today and in the past weeks about the proposal contained in the report prepared by Adrian Beecroft on compensated no-fault dismissal. I have made my views on the proposal very clear. This is not a measure in the Bill and therefore is not a matter on which I propose to dwell in the limited time available to me. Suffice it to say that the call for evidence has closed and my officials will be considering the responses received. I am clear, however, that we need to take action to improve the way in which businesses, especially small businesses, manage and end their relationships with employees. By addressing the fears that small businesses tell us they have about ending up in an employment tribunal, we can help unlock the growth that we so desperately need.
By extending the qualifying period for unfair dismissal from one to two years, we have already taken action to increase the period that employers have to decide whether a new employee is the right one for the job, but we need to provide a solution where problems occur and where the qualifying period has been exhausted.
The shadow Secretary of State asked whether any more elements of the Beecroft report would be implemented through the Bill. We do not intend to table any further amendments prompted by the recommendations in the Beecroft report.
My hon. Friend the Member for Bury St Edmunds raised the question—the case, as it were—of exemptions from employment regulations for small businesses. I am not sure whether he is in the Chamber. The evidence from Germany is that when the reform was introduced to reduce employment protection for companies of up to 10 employees, it had no impact on the number of people employed in small businesses. It therefore seems that the evidence in favour is highly questionable.
On the measures we are proposing on settlement agreements, the all-party group on micro businesses, in its response to the call for evidence on compensated no-fault dismissal, for which I am extremely grateful, supported the idea that employers should have the option of using
“a new simpler route to end employment relationships”.
The all-party group states that in return for compensation employers should
“be able to terminate a contract with an employee without going through a performance review and dismissal process. … this should be an option that is voluntary but which employers are freely able to propose to employees without fear of being taken to court.”
We agree almost entirely with that sentiment. I appreciate the comments of Julian Smith in the debate today. I say “almost entirely” because there is one important difference: we do not think that this option should be available only to micro-businesses. Therefore, we will table a new clause in Committee to ensure that an offer of settlement cannot be used against an employer, any employer, in an unfair dismissal case, which will give businesses the confidence to talk to their employees about bringing the relationship to a swift end through the use of a settlement agreement.
The shadow Secretary of State raised a concern about trust and confidence in the employment relationship, but he will be aware that many businesses, probably including his former clients—big companies that probably paid him substantial hourly rates—regularly use compromise agreements. We want to ensure that all businesses, including small and medium-sizes businesses, can use those agreements. If there is no agreement, the employee’s rights are still protected. They have to work together to ensure that the employment relationship is maintained.
My hon. Friend Mr Binley raised concerns about SMEs. We will shortly consult on a suite of proposals to help small businesses use settlement agreements to ensure that they have the confidence to deal with employment problems. I hope that that reassures him.
Reference was made to unfair dismissal compensatory award proposals. There has been debate about the power to amend the limit on unfair dismissal compensatory awards. The Labour party wants to make mischief on the issue, but I should point out that it is a matter of common ground that there should be a limit on the amount of the compensatory award. Having proposed removing the limit back in 1998, the then Government backtracked and elected instead to have a large, one-off increase from £12,000 to £50,000 and introduce a formula for future increases. As a result, the limit has increased rapidly in recent years and now stands at £72,300. That is greatly in excess of the median award for unfair dismissal, which is less than £5,000. Realism about potential awards is clearly important for encouraging the settlement of employment disputes and the greater use of settlement agreements.
I want to say a few words about competition. The Government believe that creating a new competition and markets authority will ensure that resources and specialised competition expertise can be deployed to best effect while reducing the burdens on business, and I was pleased that the shadow Secretary of State supported that principle. This matters for the taxpayer and for businesses and consumers at the wrong end of anti-competitive practices. The Government recognise that a great strength of the current regime is the two-phase approach to markets and merger cases and wish to preserve it. We will therefore retain the separation of decision making; the board will have responsibility for the initial investigation and phase-1 decisions, and groups of independent panellists will continue to make final decisions at phase 2. When making those decisions, the groups will be required to act independently of the board, which will ensure that decisions are robust by giving cases a second look and bringing in the use of experienced business people and other outside experts. There will also be scrutiny by the Competition Appeal Tribunal.
The Bill is pro-growth and pro-business. We have listened to small and large businesses across the country, the businesses on which this country’s recovery depends. They have told us that fair and speedy ways of resolving disputes matter to them. We have listened and are delivering the measures that matter to them. A strong and effective competition regime matters for business. Reducing the excessive burden of regulation, much of which was introduced under the previous Administration, and the cost of compliance with regulation matters for business. The Bill will help businesses to grow and succeed. It will boost consumer and business confidence and help the private sector create jobs. It will promote fairness and support our green economy. I commend it to the House.