Second Reading

Part of Small Business, Enterprise and Employment Bill – in the House of Lords at 6:00 pm on 2nd December 2014.

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Photo of The Earl of Lytton The Earl of Lytton Crossbench 6:00 pm, 2nd December 2014

My Lords, I very much welcome this Bill. As needs must, I declare my interest in local government, particularly in the parish and town council movement. I am also a small business person; my professional practice as a chartered surveyor is a micro-business. The only other interest I ought to declare is that I have one recently graduated, job-seeking son, who is still at home; in that sense I share the comments of the noble Baroness, Lady Byford.

There are many things that I will address in my comments here, albeit briefly; but it is quite probable that I will not return to all of them later in the progress of the Bill. The first one is access to finance. It is my experience that businesses with assets but few ideas get ready access to finance, while those with ideas and no assets do not. Therein lies a disconnect. That is why we have lots of property development and residential investment interest with fewer high-tech start-ups. Development finance for small businesses is therefore still difficult where it ought to be better.

On electronic cheque cashing, my interest derives from what I have discovered in recent months about fraudulent digital evidence used in the courts, about which I have spoken in the past. I simply want confirmation from the Minister that there will be safeguards against the digital alteration of scanned cheques, the paper copies of which often contain many security devices such as UV printing, holograms, chemical reagents and microtext, none of which readily replicated on a scan.

On procurement, the All-Party Parliamentary Group for Excellence in the Built Environment, of which I was privileged to be a vice-chairman, produced a paper on the subject in 2012. The first thing to note is that lowest cost is not necessarily best value for money, even though it may be seen in some circles as best value. In that report we made a lot of recommendations about procurers being better equipped, identifying what they needed and the best way of procuring it, determining whether they were getting what they needed, and allocating sufficient resources to quantify and reduce the risks. Bear in mind that often these were municipalities, trustees or school governors, who did not have the relevant expertise in procuring large-ish—for them—projects.

We made a whole series of recommendations about standards, relating primarily to construction. There was an item about selecting teams and getting the best performance from an integrated performance arrangement, recommending that the teams should be based on a balanced scorecard so that you could look at the bids against specified criteria, of which sustainability would be one. I am glad to see that the Bill refers to prequalification criteria. The object, of course, is not to squeeze out the little man but to produce increased efficiency and better, more durable, reusable, longer whole-life spans for our projects. There are other impediments, such as high insurance standards imposed on potential small business bidders, or perhaps—more appropriate in my case—very high levels of minimum professional indemnity insurance cover. These need to be looked at to make sure that they are reasonable and proportionate.

All I will say about the Pubs Code is that over the years I have seen a number of leases relating to these lettings. Almost without exception they are absolutely appalling. It is not just an issue that might be disposed of as being between a pub-owning company and a tenant, both of whom might be assumed to be consenting and adult parties. It is a mismatch of relative strengths. There is a community interest here as well in a thriving facility, not the shackling of a hapless tenant to somewhere not far short of eternity.

I have a comment to make on company registration. I welcome the proposals for greater transparency in this area, but I draw the Minister’s attention to those mutual and co-operative companies which are registered via the FCA in Canary Wharf. It appears that they can still hide behind the fact that it is prohibitively expensive and awkward to search for and get access to their information, as compared with the relatively free and low-cost access to information from Companies House data held in its various offices in Belfast, Cardiff, Edinburgh and London. I am sure that many of these mutual and co-operative companies are entirely worthy, but the suggestion has been made that some of them may not be or that they may be used for shielding criminal or terrorist activities. In a debate on Ukraine about a year ago, I asked whether the Government could be sure that ill gotten gains from that country were not being invested in UK government bonds. I was told that the information was not available, and I accept that. Perhaps I could also suggest that a lack of political will and the potential for political embarrassment might have been an impediment.

I welcome the removal of exclusivity clauses in zero-hours contracts but I continue to feel that the regulatory impediments to employment require further work, and I will return to that later.

The provisions relating to whistleblowers are welcome. The present proposals, however, are embodied within employment law and I am satisfied that that is really not where they should be. They ought to be independent of the employment environment, of line managers and of first-stage scrutiny within the company. Indeed, the matter complained of may not be an employment issue as such. The organisation Public Concern at Work has sent me a briefing at my request. The noble Lord, Lord Willis, who is a great champion of this cause, is not in his place today, but I know that he takes a great interest in this issue and I am sure that he will come back to it in Committee. The Bill does not deal with gagging clauses, disclosure by legal professionals or protecting a whistleblower from sanction, blacklisting, career destruction and so on. There ought to be some non-discrimination provision, perhaps along the lines of sex or race anti-discrimination laws. There needs to be a per-sector series of industry ombudsmen to protect organisations from false accusations or malicious complaints. It is important that those responsible for bad practices will not for ever continue, safe in the knowledge that few will ever dare snitch on their organisation.

Some things are missing from the Bill. I would like to see a proper dispute resolution service so that businesses—small businesses in particular—can bypass or in some way overcome the far too expensive recourse to normal legal processes though the courts. Even mediation, I fear, is being hijacked, in its commercial sense. We need something locally based, acceptably priced, reasonably quick and conclusive, delivered by people who know what they are talking about and cannot be manipulated through the rules and procedures by a powerful and well funded party against an honest but impecunious one. A nation that allows access to justice to be prejudiced in the way in which I see it fails to hold the candle up to a belief in fair justice and the rule of law. It is also a matter of great economic inefficiency.

I refer again to empty rates. At the moment, this is having seriously negative effects on business premises. HMRC does not appear to be cognisant of the fact that it is producing a significant skew, haemorrhaging people’s incomes and making properties difficult to let or sell, while all the while high empty rates have to be paid. Most billing authorities are unable to remit the charge for financial reasons. That is something that ought to be dealt with here. Then there are planning and development and the upfront compliance costs before you can expect a planning application to be put through—the environmental stuff, the access and design criteria and everything else that goes with it. This is putting the cart before the horse. Of course, fewer and fewer people can do this, although everybody is in the hands of developers.

There are many other things that I would like to mention, but it would be better if I wrote to the Minister. I commend her for introducing a very useful Bill, and I hope that between us we can improve it as it goes through the House.