Second Reading

Part of Small Business, Enterprise and Employment Bill – in the House of Lords at 3:40 pm on 2nd December 2014.

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Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Culture, Media and Sport) 3:40 pm, 2nd December 2014

My Lords, I thank the Minister for introducing the Bill this afternoon, and for going through the main issues with which we will be dealing. I am also very grateful to her for facilitating a meeting this week with the Bill team and the Minister who took the Bill through the other place. Collaboration at this level makes for a much better process, as we have found in other Bills and, indeed, with her three immediate predecessors, all of whom have been highly collegiate. Long may this last.

We are all looking forward to the maiden speech of the noble Baroness, Lady Harding of Winscombe, whose career and interests bear so powerfully on this Bill. I am sure that what she says will be of considerable interest to your Lordships’ House. I note from her CV—one researches these matters—that in February 2013 she was named by “Woman’s Hour” as one of the 100 most powerful women in the United Kingdom. It gets better: last year she was named seventh most influential woman in the same list, which was headed by my noble friend Lady Lawrence. Given that we will probably be ploughing through the Committee stages of this Bill in February 2015, one dares wonder what position she will occupy by then.

As I understand it, the Small Business, Enterprise and Employment Bill has two fundamental purposes: one is to help small businesses grow and succeed; and the other is to ensure that the UK continues to be regarded as a trusted and fair place in which to do business. These are aims that we hold in common with the Government. As the Minister said, this is an extensive Bill. She did not quote it, but it is worth noting that it is in 12 parts, has 157 clauses and 11 schedules. According to the Explanatory Notes the Bill contains provisions on a range of policies spanning the responsibilities of BIS as well as HMT, HMRC, UKEF, the Cabinet Office, DCLG, DfE and the Insolvency Service. BIS speaks for the whole of the Government when it chooses to exercise its legislative powers and we must all quake in the face of such incredible forces. That also means that we have to bring forward reserves ourselves, so I am very pleased to be joined on the Front Bench by my noble friends Lord Young of Norwood, Lord Mitchell, Lady Hayter, Lady Jones and Lord Mendelsohn, who will be joining me in dealing with the detailed scrutiny of the Bill.

I was slightly puzzled that in opening the debate the Minister developed a short riff on the ways in which the Government are helping small businesses, including several issues that are not in the Bill, such as creating a single point of contact for small businesses which seek assistance. We on this side have been calling for that for some time and indeed, if we were to be elected next year, we have plans to bring forward a small business administration. Given that this may already have been set up, I am sure that the noble Lord, Lord Leigh of

Hurley, who is in his place, will be immediately inquiring whether it has the capacity to deal with the sort of inquiries with which he has been pestering BGF and other firms which purport to help small businesses. I look forward to hearing the results of his latest work in this area.

When this Bill was introduced in the other place, I noted that the Secretary of State said that there were five main topics, but they were not quite the same as the ones the Minister quoted when introducing her take on the Bill. Just for the record, the five main topics that came through in the other place were:

“to make changes to the legislation in a way that benefits both employees and employers to ensure that employees are not disadvantaged by unacceptable practices, be they exclusivity clauses in zero-hours contracts or underpayment of the national minimum wage … to ensure that our companies are trusted and transparent … to help our small businesses get access to the finance they need … to support the Government’s regulatory reform agenda … to introduce measures that strengthen the provisions on corporate transparency”.—[ Hansard, Commons, 16/7/14; cols. 906-10.]

These are all sensible objectives, and we will be using the limited time we are being allocated in Committee primarily to scrutinise the draft legislation and, if possible, to improve it.

Our wealth creators—our entrepreneurs and particularly our small businesses—are fundamental to growth in this country and create almost two-thirds of private sector jobs. They are crucial to the success of large firms, but this is, of course, a symbiotic relationship. We on this side of the House are committed to building an environment in which business can flourish, which is why we can support the general purposes and principles of the Bill. But we also think that it can be improved. We believe that the Bill and the Government’s policies more broadly will not resolve the underlying problems which hold back businesses and employment in our economy. Surely, what we really need is a different model of capitalism—one that is more inclusive, more productive, more responsible and much more long term in outlook.

The fact is that our economy is grossly unbalanced by sector and by region. Short-termism is still endemic in business and in government. We still have a dysfunctional finance system and we have a stubborn and increasing trade deficit. The recession continues in many parts of the world, not least with our main trading parties in Europe. China and India may be slowing down, so the outlook is certainly not good. Meanwhile, the use of food banks has soared and many people still struggle. Wages have fallen in real terms and many people cannot get full employment. As a result, training and opportunities are being squeezed. The recovery, although welcome, is slow and patchy. Few people are seeing the benefits that some at the top appear to be harvesting.

Things are not what we would want them to be; nor can they be, as this is a business-as-usual recovery based on a rising housing market, increased personal debt and consumer spending. It is not the export and business investment-led recovery we need, and indeed it is not the recovery that this Government promised. So we look in vain for measures in the Bill that would intensify the pace of reform of the economy to build a better-balanced, sustainable recovery with a wider range of flourishing businesses that pay wages which increase earnings in real terms and that provide jobs of quality and opportunity. As I have indicated, there are many areas of the Bill that we can and will support, but I will not go through them line by line. Instead, I want to pick out three areas where we will be pushing hard for change, and one gap that we would like to see filled.

The first area of concern is the Government’s proposals on late payment of invoices, particularly those of small businesses. According to the Federation of Small Businesses, 51% of the invoices of its members are persistently paid late by large companies. The Bill as currently drafted simply gives the Secretary of State powers to direct companies to publish certain information on their payment practices. Despite the wide extent of this problem, small businesses are often reluctant to report issues of late payment as they rely on the custom of the large businesses they supply for their very existence. We will be seeking to amend the Bill so as to shift the burden away from small businesses going out on a limb to ask for interest payments so that they are paid as a matter of routine.

Secondly, in the employment sections of the Bill, we will try to introduce proper protection for workers on zero-hours contracts and ban the exploitative use of those contracts. Under our plans, workers would receive a fixed-hours contract automatically when they have worked regular hours over a period of time, unless they choose to opt out. We also think that workers should be protected from employers forcing them to be available to work at all hours or cancelling shifts at short notice without compensation. People sometimes go to great expense to turn up at work. They arrange childcare and pay train or bus fares. These things take time to organise and cost serious amounts of money. Therefore, those on zero-hours contracts should be able to seek compensation if, for example, their shift is cancelled at short notice. By ensuring that workers can seek redress, unscrupulous employers would be dissuaded from cancelling work at short notice, which is often the case.

Thirdly, the Minister mentioned pubs. In the Commons, the Government suffered their first defeat on a piece of legislation when a number of Tory and Lib Dem MPs joined the Opposition and voted through a new clause which gives pub tenant licensees the option of going free of tie so that they can buy their beers on the open market whenever they negotiate a new contract. In our view, this is the best way to ensure that large pub companies offer fair terms to their licensees and finally to address the scandal of so many valued community pubs shutting. Our objective in the Lords will be to retain this new clause and to work with the Government to ensure that it does what it is required to do. I am grateful to the Minister for making clear what the Government’s intentions are on this matter and we will work with her to make sure that they come through correctly.

Missing from the Bill at the moment is anything about takeovers—an issue that was trailed by the Secretary of State at Second Reading of the Bill in the Commons but which has yet to appear. We agree with Mr Cable that our economy will benefit if we continue to welcome inward investment and that we should welcome merger and takeover activity as a normal part of market processes. But, unlike him, we think that recent cases like AstraZeneca/Pfizer and Kraft/Cadbury reveal a problem about the enforcement of assurances on jobs and site closures which are often given during merger and takeover negotiations. We think that primary legislation is required here to make these and similar assurances stick, and we will be proposing amendments on this issue, as well as on the question of whether the Secretary of State needs additional powers in regard to the national interest in takeovers and mergers, although there is an argument to say that these are powers that are already available.

This is not a bad Bill and it is certainly better drafted and presented than many others we have seen in your Lordships’ House in recent years. It is a pity that it was not given pre-legislative scrutiny, as that could and would have improved it further. However, it makes some very sensible proposals on late payments, zero-hours contracts, the minimum wage, insolvency and how we can provide more support to parents who use childcare. But this Bill is not going to deliver a more balanced economy, a sustainable economy or even a skills-based economy in which people go to work knowing that they will be able to pay their bills at the end of the working week. It misses out on a whole score of opportunities, and we will hope to improve it considerably before it leaves this House.