Neil, thank you for coming to give evidence this afternoon. This is one of the rare occasions when I, as the Minister, get to ask some questions, so there is nothing unusual in this. On labour market enforcement, Sir David Metcalf, head of the Migration Advisory Committee, gave evidence to the Committee earlier today and commented that he hoped that the CBI would buy into the labour market enforcement director mechanism contained in the Bill. He was essentially extolling it and suggesting that the CBI should welcome it. In fairness to you, I want to put his perspective to you so that you can respond.
Neil Carberry: Ever since I was a student in the London School of Economics industrial relations department and Professor Metcalf was there, I have tried to keep him happy. The CBI’s attitude to the labour market section of this Bill is probably a good place to start. We are interested in driving out some of the appalling practices that exist in parts of our labour market. It has always been the view of CBI members that empowering enforcement officers to kick a few doors down and bring some bad guys to justice is the right thing to do. To do that effectively, you need a risk-based, intelligence-led approach. To the extent that any Government of any political colour take that up, the CBI will be supportive.
In a sense, our attitude to the labour market enforcement director is that if that is what is on the cards here, we will support that work. It is important that we ensure that people who are not able to raise their own concerns, because of the situation that they find themselves in, have some method of support from state enforcement. The labour market director will hopefully do that. Our concern is whether that work will topple too far into what we have perhaps seen in the past: tick-box approaches that actually fall more heavily on the compliant than on the non-compliant, who we would all agree need enforcement action.
So your call is for smart enforcement, using intelligence and drawing together all the different strands of information to target more rigorously the non-compliant.
Neil Carberry: I think that is right. My understanding of the role of the director as we have seen it so far is that this individual will work across agencies. It is important that this change does not draw agencies’ attention away from their work. HMRC is still investigating every national minimum wage complaint that it hears and has also started to do some excellent intelligence-based, targeted work in key sectors. The introduction of the director will hopefully improve interaction with other authorities, but will not draw funding and work away from protecting people in areas such as payment of the national minimum wage.
What is the CBI’s current assessment of labour market exploitation and non-payment of the minimum wage? How does your organisation seek to challenge that? In parallel with the Bill’s provisions, what role do you see the CBI playing?
Neil Carberry: Broadly, our view is that compliance with employment law in the United Kingdom is good. Largely, non-compliance is inadvertent and we have excellent systems to allow people to raise their concerns about that. There are parts of the labour market—where, I am glad to say, CBI members tend not to be found—which are more open to abuse, where there are more interlinks with people trafficking, for instance, and which are not easily policed by traditional labour market means because these companies are not traditional companies.
I look forward to serving under your chairmanship, Mr Owen. Mr Carberry, offences are already specified in the Immigration Act 1971 that are applicable to migrants who breach their immigration conditions. Do you believe that clause 8, which creates the new criminal offence of illegal working, is necessary, and do you think that it may have unintended consequences?
Neil Carberry: What we are particularly concerned about is that any criminal offence is genuinely used to go after criminal activity. Employment law offences are typically civil offences. As I have already said, breaches are largely inadvertent, or if they are not inadvertent they are due to lack of understanding on the part of an employer. The right place to police that is through education, the tribunal system, the advice that ACAS offers and so forth. I am not a criminal lawyer. To the extent that the offence that has been created is to be used to go after employers where there is repeated, multi-faceted and exploitative treatment of workers, we are very happy for that offence to exist, so long as the businesses that are brought to justice are engaged in those steps. What worries us particularly is not the existence of the offence but the risk that there may be a general drift of employment law in the United Kingdom from the civil to the criminal, because that would be quite destructive for employee relations in general.
I agree that if employers are employing people illegally, they should be accountable for that. Do you feel that the Bill goes far enough to enable that to be enforced?
Neil Carberry: I think that the critical issue is not the law in this case; it is the will to go after some of the very worst practices in the UK labour market. It is about co-operation between the police and other authorities in getting into some of these beds in sheds places and taking action. One of the lessons we have to learn from the experiment with the Gangmasters Licensing Authority is that the GLA has largely been a box-ticking licensing organisation that has increased costs on the compliant. There is relatively little evidence that the creation of a registration approach has actually done anything to prevent exploitation. From a CBI perspective, we would far rather that the Government had a strong offence, structured in a way that would stack up in the courts, and then used powers of prohibition, for instance, to drive out bad practice. Of course, that is what we had before the GLA was brought into existence—albeit that they were not heavily or effectively used.
Finally, do you believe that the director has the remit and the resources to prevent this from being a box-ticking exercise? Would they have the authority to make the necessary changes?
Neil Carberry: That remains to be seen. The director clearly has to develop an enforcement plan, which has to be approved by the Home Secretary and the Secretary of State for Business, Innovation and Skills. I would hope that that enforcement plan was well grounded in the effective work that some of the agencies are currently doing and would therefore be resourceable from within that. I had discussions last week with the HMRC team who are looking at non-compliance with the minimum wage; they feel that they currently have the resources to continue the good work they are doing.
I want to turn back to the evidence given to us this morning by Professor Sir David Metcalf. When he was discussing the CBI, he said that the regulation of the labour market proposed in the Bill would take away the cowboys and help your sector. He went on to say that it would go a long way towards raising the welfare of British residents. Do you think he has applied a risk-based, intelligent approach to his assessment?
Neil Carberry: I think the proof of the pudding is in the eating when it comes to the director. On the existence of a labour market director to do this work, his assessment could well be the case. What worries us is less what is in the Bill as introduced than some of the discussion in the Government’s consultation paper last week, which seems to suggest a broadening of a licensing approach. I think that would ultimately be a doubling up regulation on the compliant and would draw away from kicking down the doors of the non-compliant. From our perspective, there is every chance that the labour market director’s role could be very beneficial to lawful companies and workers.
You talked about parts of the labour market where abuse happens. I am conscious that many of your members might have had their reputations tarnished by unwitting involvement through supply chains. Can you share your thoughts about the Bill in the context of the most effective way of helping your members to achieve supply chain compliance?
Neil Carberry: Any answer to that question will have to take account of some of the responsibilities that companies will take on under the Modern Slavery Act 2015. I actually had a long discussion last night with some of our members about the challenges of doing that effectively—many of them are currently wrestling with that. Of course, there is a limit to what companies at one end of a supply chain can do and assure themselves of, but there is a duty to do some work, as the Act makes clear.
The most important thing is to ensure that, where companies at the top end of a supply chain suspect that something illegal is happening, they are clear about the route to take to obtain assistance from regulators and enforcers, and also that there are simple routes for enforcers to take towards targeted action. We would see that as one part of the role of the director as set out in the Bill. For instance, we would expect them to look to establish ways in which a major retailor could raise concerns effectively and then feed into an intelligence-led action.
You mentioned a situation in which companies at the top end of a supply chain have reason to believe that things are going wrong further down the supply chain, but the problem faced by many of your members is that it might be impossible to know what happens further down the supply chain. What more could be done to achieve effective enforcement of labour market standards down the supply chain and out of the sight of your members?
Neil Carberry: Clearly, it largely is out of the sight of our members. I will start from the test of what we want, which is something that brings an enforcement officer into the site where things are going wrong as quickly and effectively as possible, with the powers to change the situation. We know that, largely, where we find national minimum wage non-compliance, we tend to find immigration non-compliance.
The first thing is to make sure that, whichever body is resourced to do it, there is a clear thought process about where we believe this is happening in the labour market; within that, then, that there is some intelligence-gathering about where the issues might be. There should then be live discussions with businesses in the sector about what they hear and what they see; then, police and enforcement agencies should have the capacity to intervene. That much more targeted approach, I think, is the only way to protect workers who do not have the capacity to raise concerns about their own treatment, especially if they are being exploited. I would much rather see that intelligence-led, almost police-style action than anything that looks like a process for companies in the sector, because I think that some of these non-compliant organisations would just ignore that.
Neil Carberry: I mentioned HMRC’s rule earlier. I think to do it effectively, it may be necessary to look at resources for other parts of the system. Having said that, one of our biggest challenges at the moment is enforcement agencies talking to each other. A case in point is that if a business moved out of a GLA-regulated sector, the employment agency standards inspectorate would still have prohibition powers. There should be more discussion taking place about, “If this business has had a licence removed by the GLA, what is the case for prohibition more broadly via EASI?”
Good afternoon. Do you think there is a risk of the Bill making it harder for migrant workers to access the labour market because employers are afraid that they will be breaking the law, and don’t understand how it works, so they err on the side of caution?
Neil Carberry: I think the section 8 checks that employers already do are largely embedded in companies’ operation now, so the mere existence of a non-UK passport at hiring is an issue. There is some nervousness, I think, about the fact that the quality of forgery is now very, very high, and I think businesses would welcome more support from UKBF and others on identifying forgeries when they do those checks. Broadly, we have not seen evidence of a chill effect on migrants being able to find work yet, and the performance of the UK labour market over several years now suggests that opportunities are still being created both for UK citizens and migrant workers.
Would the CBI be willing to keep an eye on that? In my constituency, I have already had people coming to me who have been offered jobs and then the employers—and it is large employers—have backed off, saying that they want actual evidence; phoning the hotline is not evidence for them. I wonder whether the reason why I am getting quite a few people coming to me now is that they know that the legislation is going to change; it would be interesting to see if there was an effect once this came in.
Neil Carberry: I think the necessity of assurance for companies in hiring migrants becomes greater as the cost of getting it wrong becomes greater. I have been working on employment relations issues for the CBI for over a decade now, and the process is that every year it becomes more costly to hire migrants and more risky for companies. Particularly for some smaller and medium-sized companies, there is a concern there, and support structures for businesses are quite important.
I would like to ask about the role of the director, in terms of vulnerable workers, and more broadly whether that role could help the Government’s agenda of redressing the balance on equality issues and addressing the gender pay gap, so as to shine a broader light on these employment issues.
Neil Carberry: I refer to my earlier answer. It is really important that we keep the exploitation agenda—there is deeply unsavoury activity taking place in parts of the labour market—separate from the civil employment law agenda. If you look at the gender pay gap, Ruby McGregor-Smith’s Women’s Business Council report concluded that it is a multi-faceted issue that requires a series of actions, primarily from business but also from the education system, to address. We would be more comfortable continuing to do that work in partnership with the Government Equalities Office, Ministers and the new Select Committee on Women and Equalities, than getting too drawn into a debate, as we have already discussed, about beds and sheds and some pretty exploitative practice.
Fantastic. Are you also able to expand on the CBI’s concerns about the apprenticeships levy? It is obviously the Government’s ambition to see apprenticeships grow. Will the levy affect your members, or the immigration skills charge? What is the impact that you see on businesses?
Neil Carberry: Apprenticeship levies are quite complex at the moment because there are two of them. They have become known in the CBI’s employment team as the big levy and the little levy. There is the large apprenticeship funding model levy, which is a deep concern for the CBI.
On the question of the skills charge, although we do not welcome additional costs, we fundamentally disagree with the idea that immigration is used to resolve skills issues and to avoid training, because companies in the UK do extensive amounts of training—more than many other large western European competitors in terms of spending.
Having said that, if there is to be a skills charge, we need to make sure that it is effectively targeted, so that the money raised does go into apprenticeships that are training people towards the levels of skills that people who came in on a visa were helping to resolve the shortage of. More broadly, it is probably preferable to us that these charges exist than that we make changes to the pay bands for tier 2 migration. Additional cost for a visa is one thing, but being unable to get a person you need at any given point because of changes to the pay bands is more of a business problem. For us, in the grand scheme of things, although we do not like it, we would rather have an immigration skills charge than a much higher entry level of pay to bring people in.
In trying to target action against criminals who exploit workers, which is something we can all agree on, do you think the Bill blurs the lines between employment law and criminal activity?
Neil Carberry: I think that is a significant risk, less so around the role of the director than the recent discussion about expanding the role of the Gangmasters Licensing Authority. The role of the GLA so far has largely been an employment process. Since its creation the GLA has spent rather more time telling my members where the commas should be in employment contracts, which is an employment issue, than kicking down doors in parts of the country where doors need to be kicked down.
My sense is that we need to maintain that gap, for exactly the reasons that your colleague raised earlier, which are that employment law is a civil issue; most of its infraction is inadvertent or due to lack of knowledge, so it is really important that people are able to address that—there are routes for people to address that—and it is about the bit of the labour market where workers are not able to secure their rights, which should be at issue in the Bill. The CBI’s test for this Bill, in practice, when it finishes its passage, is to make sure that the actions contained within it are about addressing those issues of exploitation.
Do you think that it should be employers’ or the Government’s responsibility to prevent illegal working, especially given the move away from civil penalties to criminal charges?
Just to come back on that last question, what is your assessment of the level of knowledge among your members, recognising that part of the role of the labour market enforcement strategy, which the director will obviously have a key role in developing, is to focus on advice to the Secretary of State about education and training? What further steps, in practice, should be undertaken around that, and what about the role of the director in that piece?
Neil Carberry: There is an analogy here, slightly oddly, with the process of automatic enrolment in pension schemes. The Pensions Regulator for many years dealt with some very large companies, which had large defined-benefit pension schemes, kind of knew what they were doing and spent a lot of money on compliance. In many of our largest members, immigration compliance is a million pound a year commitment, because of the scale of it and the reputational risks that we have already discussed. We live in a world in which company size is gradually getting smaller, and has been for 20 or 25 years; the majority of firms are small businesses, and the majority of our members at the CBI are small businesses, often with limited HR capacity. The transition that, for instance, the Pensions Regulator had to make to talking to businesses that had never even heard of it and offering support—it is still struggling to get that right now, but progress is being made—is exactly the same transition that we need to make in this space. It really is helping smaller businesses to understand their duties and the support on offer to them that will be critical to making sure that illegal working action is effective.
So I suppose in other words, to draw out another comment in Committee this afternoon, you are suggesting that the focus on that awareness should be at the smaller business end, the SME end, and on the some of the challenges that might reside there. Equally, I am assuming that you would not say that the larger firms themselves have no potential issues, given the supply chain elements touched on previously—who your sub-sub-contractor is, who is on a building site or has been contracted into a particular job—and the need for alertness around those sorts of elements, from a reputational as well as a legal perspective.
Neil Carberry: I agree with that. We talked earlier about the capacity of a firm to know whether it was dealing with partners who are compliant. What I would point to is that in this space we should not look for answers that look easy in Westminster but are actually ineffective on the ground. Experience with, for instance, licensing models—we are concerned about the potential for part of the Bill to create the space for the Secretary of State to dial up or dial down the extent of licensing models—is that licensing itself does not actually give a company any assurance that the licensee is compliant or not. The record of the GLA in taking away licences shows that firms behaving improperly were licensed. It is much, much better to have rigorous enforcement, intelligence-led, and then high-quality advice and support for companies that are taking action under the Modern Slavery Act 2015.
Okay. We are coming to the end, so if there are no further questions I will thank our witness for giving evidence today. If there is any other information that you would like to give to the Committee, please feel free to write in.