BBC Charter

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Thursday 10th March 2016 Lords Chamber

[Baroness Neville-Rolfe]

As I have said, we are looking at the whole process at the moment. Independence is an important issue, and when we set out our plans we will come back with our ideas on how we can best ensure an independent and good future for the BBC. I wanted to respond to the points that were made in the report, because it is as well that people understand that the report’s key proposal on this point will not necessarily be accepted. However, having said that, obviously we remain in listening mode at this stage of the process and we will come back with a White Paper.

Although there has not been much comment on it, it is worth mentioning that last week the Government announced a deal with the BBC to close the iPlayer loophole, which, under current regulation, allows viewers to watch catch-up services on iPlayer without paying for a TV licence. Obviously, this will stop those who are essentially freeloading from not paying the licence fee, and the Government will bring forward secondary legislation on this point as soon as is practicable. This responds to the digital change that we have discussed in many of our different debates.

[Lord Young of Norwood Green]

Of course we welcome the decision on BBC iPlayer, but just as important would be a guarantee that there will be no more top-slicing of the licence fee.

Enterprise Bill [HL]

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Wednesday 25th November 2015 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, I am grateful not only to the noble Lord, Lord Mendelsohn, but to the noble Baroness, Lady Sharp, and the noble Lord, Lord Young, for their comments and to the noble Baroness, Lady Warwick, for taking us back to Committee and the issue about housing associations. I am rather hoping that somebody from the Box will be able to let me answer her question about timing before we finish, but if not, I will write to her separately.

This group of amendments would require the public sector target to apply to high-quality and high-level apprenticeships and would differentiate between new and existing apprenticeships. I have spoken previously during the passage of the Bill about how the Government are committed to ensuring that all apprenticeships are of a high quality, and that is central to our reforms. So there is common ground here.

Having said that, we had a very good discussion in Committee, but, rather like Amendment 52, which the noble Lord, Lord Stoneham, sensibly did not move because of today’s events in the spending review, discussion on quality has, I think, been overtaken to some extent by today’s announcement in the other place by the Chancellor that the Government intend to establish the institute for apprenticeships. That will be central to the discussion of this area, and I hope that this independent new quality body will be welcomed once people understand in detail what is proposed.

It is against that background that I will try to respond to the debate this evening. First, in response to the noble Lord, Lord Mendelsohn, we are committed to an apprenticeship programme that is for all ages and all sectors. All apprenticeships should be quality apprenticeships. As the noble Baroness, Lady Sharp, made clear, all apprenticeships, whether they are level 2 or level 3, offer benefits and obviously should be of appropriate quality. We believe that they are an important step into the labour market and provide very valuable jobs in the economy. For example, recent research shows that adult apprenticeships at level 2 deliver £26 of economic benefit for each £1 of government investment. We must not lose that.

Employers are developing new standards to meet the skills of their sectors. The trailblazer quality statement sets out a range of measures to improve quality, including a minimum duration of one year, and must involve substantial on-the-job and off-the-job training. Training providers are also registered to ensure that they can provide good-quality services, and we are creating more degree apprenticeships.

The current employer-led apprenticeship trailblazer programme has rightly put employers in the driving seat, determining what constitutes quality. However, to deliver a genuinely world-class apprenticeship programme, it is widely agreed that we need a long-term arrangement that will support employers to uphold the high quality of apprenticeship standards and—I think this is an important point—to be able to respond to the changing needs of business, technology and society. We are therefore establishing a new employer-led institute for apprenticeships, as I have just explained. That will set the standards and ensure quality, and we anticipate that it will be active from 2017 onwards.

I would like to respond to the point that the noble Lord, Lord Mendelsohn, made about bureaucracy; as he knows, that is something against which I am as keen a campaigner as he is. That is something that we need to have regard to in this process. However, the good news is that the body will be independent. It will put employers at the heart of ensuring a sustainable governance arrangement to uphold high-quality apprenticeships and respond to the changing needs of business. We intend to introduce legislation to deliver the institute for apprenticeships, and further details will be made available in due course.

I turn to the amendment from the noble Lord, Lord Young. We do not think it necessary for the public sector target to differentiate between new and existing employees. The public sector duty and the apprentices levy will encourage the public sector to identify talent from diverse backgrounds across their organisations. It will help many people, new starts and existing staff, to learn new skills and achieve their potential. Apprenticeships are of course not just for young people entering the world of work. To my mind, there is value to both employer and apprentice when anyone takes up an apprenticeship as they change roles, get promoted or start a new, demanding role within their organisation.

The noble Lord, Lord Mendelsohn, asked about the impact on local authority schemes, which are a good entry route. Our approach to the apprenticeship programme will be not to undermine local authority-supported schemes that help to create entry routes into apprenticeships. Indeed, we believe that such schemes—for example, traineeships and the Prince’s Trust—are also important. With regard to the end-point assessment in local authorities, we do not currently plan this but we welcome input on the role of the new institute from all stakeholders, and I will pick up the noble Lord’s point about bureaucracy.

The noble Baroness, Lady Warwick, asked about the timing of the housing association consultation. We plan to bring forward the consultation by the end of the year.

Finally, in response to the noble Lord, Lord Young, I think that I have already explained and engaged on the question of whether apprenticeships should be new jobs. I think we agree that apprenticeships are paid jobs for people of all ages and are dependent on employers offering opportunities. They offer a substantial way of building a workforce with the skills that people need to succeed, and offer substantial training to ensure that apprentices gain significant new skills. I am conscious that the noble Lord is a great expert on apprenticeships and I look forward to his input.

[Lord Young of Norwood Green]

Frankly, given the large number of what are described as adult apprenticeships, I think that we should distinguish, but I can see that I have not won that particular argument.

I could not help reflecting on the point that the Minister made about the institute and apprenticeship standards. It will guarantee the quality of standard but not the quality of delivery, and that is the challenge—that is where things can sometimes go badly wrong. I am not opposed to the new institute. I merely say to the Minister that if the Government are going to increase the numbers and the volume that they are talking about and they are successful in doing so, the challenge will still be to ensure that every single employer is delivering a quality apprenticeship.

We know we have had experience in the past where that has not been the case. The Government have changed the definition of what constitutes an apprenticeship, the timescales have been altered and so on, but that does not mean that there is no element of risk there. I say that in a constructive way. The Government need to think through very carefully how they are going to ensure that the quality of the training provider and of employer delivery will match what they believe defines a quality apprenticeship. If they do not, they will not attract into apprenticeships the kind of people that we need to attract. We need engineers and people working in construction, and we need more young women going into those areas. To do that, you need to create an environment where people feel that they are entering a quality area of employment.

[Baroness Neville-Rolfe]

I thank the noble Lord, Lord Young, for his constructive comments. He is right to explain that there could be difficulties and that it is important that we ensure quality as well as set quality standards. I apologise to the House that, as it were, an announcement tumbled into our Report stage today, but that is the way of the world. I emphasise that the issue of the institute and how we ensure quality is work in progress, as is the question of the levy. There will of course be further discussions on all this, and appropriate consultation processes are continuing. However, I hope that the provisions in the Bill on apprenticeships, limited though they are, will prove fruitful and helpful. I hope that the noble Lords have found my explanation helpful and, on that basis, will feel able to withdraw their amendment.

Enterprise Bill [HL]

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 2nd November 2015 Grand Committee

[Lord Young of Norwood Green]

The Minister did not respond on public sector contracts, and I would welcome a response. I do not think I am going to be surprised by it, but I would like one.

I do not disagree with the Minister’s point about the difficulty of setting targets for every company, but we should surely be concerned that we never seem to have got a lot further than something like one in four or one in five companies taking on apprenticeships. We never seem to be able to push the needle on the dial much further than that. If we believe, as I know the Government do, that the vast majority of these apprenticeships should be coming from SMEs, it is vital that we make some impact on them. What plans do the Government have? I heard the Minister say that employers are at the heart of this and will determine the skills required. I do not quarrel with that. The Government have introduced new funding arrangements which not every employer is happy with. That is a bit of a worry because they feel that they will have to claim back. I have heard from employer organisations that there are real concerns about that. That is the problem we face if we want to get significant numbers of young people. Although I heard the figures the Minister quoted, I still think that that will be the challenge and that getting them into these small and medium-sized enterprises will be vital.

[Baroness Neville-Rolfe]

We will come on to discuss contracting out, which is the subject of the next amendment. I hope it will enable me to reassure the noble Lord on that point. SMEs also come up later. His points are extremely well made. This is a very important area. There is a lot of cross-government consensus that we need to have a step change in apprenticeships. Germany and Switzerland have classically done a better job. With the levy, the change and the move to proper frameworks and at least a full year for every apprenticeship, we are trying to move into a different place.

The provisions in this Bill do not answer all the questions, but they do some useful things. With the noble Lord’s agreement, I hope we can move on to the next amendment and talk about what we are going to try to do for contracting out.

--- Later in debate ---

[Lord Young of Norwood Green]

I do not know whether the noble Baroness has a copy of the letter that the noble Earl, Lord Courtown, sent to us, but in it he says:

“In addition, the Skills Funding Agency … runs the apprenticeships helpline which was given an expanded remit in the summer, enabling anyone involved in an apprenticeship—not just the apprentice—to raise concerns about any element of how the apprenticeship is being delivered”.

I did not get a response on the concerns expressed in the Ofsted report and in anecdotal accounts. The letter goes on to say:

“The SFA have rigorous checks in place and have embarked on a programme of staff training to ensure that these issues are dealt with effectively”.

I like the promise. I would put against it “CAD”—“check against delivery”. How will it do it, given the vast number of apprenticeships? That is not to dismiss the fact that Ofsted will also do some work on this, but there is a commitment in that letter.

Setting the standards is one thing. Having a defined framework in understandable language is great. The problem we have is those employers that might do that, but fail to deliver. It says in the legislation that they will be punished and fined. I am interested in that because it might help, but I am far more interested in seeing whether the Skills Funding Agency has the ability to monitor apprenticeships to ensure that they are delivering on quality as well as quantity and how it will do it. If the Minister does not have an answer that is okay; I am quite happy to accept it in writing. However, it is a part of the Government’s commitment to raising quality as well as quantity.

[Baroness Neville-Rolfe]

My Lords, I stand by what my noble friend Lord Courtown put in his letter. I will not delay the Committee by repeating it, although people are very welcome to a copy. Obviously, we understand that ensuring quality is an absolutely key part of our reforms. That is what we are saying. The SFA has an important part to play here. As I have said, Ofsted also has a part to play. We will be bringing in the quality control system that was described.

Although some people were concerned about the changes to apprenticeships, we are changing the system and we will have to make sure that the surrounding infrastructure is appropriate and appropriately resourced —we can certainly discuss that further—but that is why I did not repeat the points my noble friend made about the introduction of registers and quality control over training providers.

--- Later in debate ---

[Lord Young of Norwood Green]

My Lords, I support the amendment. To pick up the last point made by the noble Baroness, Lady Sharp, about group training associations, I went round a number of them while I was a junior Minister. The Government ought to encourage them. The noble Baroness is right: although the bigger employers use their supply chains, the benefit of the group training associations is that they bring in a much wider group of small and medium-sized employers. I would welcome hearing what steps the Government are taking to encourage the development of more group training associations.

[Baroness Neville-Rolfe]

Small businesses are of course the cornerstone of our economy, and high-quality training opportunities such as apprenticeships can be key to supporting their growth and success. It is essential that the apprenticeship system works for those employers as well. The majority of existing apprenticeships are in fact with smaller businesses. Significant progress has been made in ensuring that apprenticeships are accessible to them.

Small businesses are directly involved in all phases of the process to develop apprenticeship standards. When new standards are submitted, evidence is required that small businesses have been involved and that they support the development of that standard. I know that from the work that I have done in the electronics sector. A variety of mechanisms is used to engage small business throughout that development—face-to-face consultation events for automotive standards and online consultation for electrotechnical standards. Small firms have been actively involved in the craft trailblazer. We engage with representative organisations that represent smaller businesses. We have even made a small travel fund available, which smaller employers can use to attend meetings to develop standards.

Most important of all, the apprenticeship grant for employers also provides employers with fewer than 50 employees with a £1,500 incentive payment for up to five new apprentices aged 16 to 24. This will continue to be available until 2015 at least.

There is also a wide range of apprenticeship training agencies—ATAs—and GTAs, as the noble Baroness, Lady Sharp, made clear. They employ apprentices and place them with host employers who may be unable to commit to employing an apprentice directly. For employers, this makes it easier to take on an apprentice. Good-quality ATAs will be able to continue to operate once the apprenticeship funding reforms have been introduced. The SFA also runs an apprenticeship helpline.

There are also lots of good examples, including case studies of apprentices and employers, on the SFA’s “Find an apprenticeship” website. I have various publications here which I am happy to share.

We believe that this is the right approach to SME support. We think it would be complex and confusing to require public sector organisations to duplicate the effort and provide additional resource to facilitate small businesses entering into apprenticeship agreements. We are putting small business at the heart of the way we are going forward. For the same reason, we are unconvinced of the merits of involving the Small Business Commissioner, whose main role is to address payment issues, particularly late payments, and to focus on that until we bring about a serious culture change. I hope noble Lords will have found my answer helpful and that the noble Baroness will feel able to withdraw her amendment.

--- Later in debate ---

[Lord Young of Norwood Green]

I support the noble Baroness’s amendment. She is right about the need to increase the number of higher-level apprenticeships. As I understand it, from a briefing I had from SEMTA, part of the problem is getting young people to see that this is not an either/or choice between a vocational and an academic route. People with the highest level of qualification feel that, if they are to progress to a degree, they have to go down the academic route. There are lots of opportunities for them to go down the higher-level apprenticeship route. The apprenticeships are there; we are not getting the take-up. This is another point on which to emphasise the importance of career guidance if we are to solve this problem.

The noble Baroness is right to draw attention to this part of the regulation. It is a useful and necessary emphasis. I referred earlier to the number of engineering and STEM apprenticeships that will be needed over the next five to 10 years. It is estimated to be 830,000. Not all of those will be higher level, but a significant number will.

[Baroness Neville-Rolfe]

My Lords, this amendment seeks to require that a person, when offering a statutory apprenticeship scheme, must stipulate whether it is a higher-level apprenticeship. This is already a non-statutory requirement for the “Find an apprenticeship” service and is covered through an apprenticeship agreement. The amendment would insert a new subsection into new Section A11 of the Apprenticeships, Skills, Children and Learning Act 2009 to provide that a person commits an offence if, in the course of business, they offer a course of training and describe it as an “apprenticeship”, unless the course or training is a “statutory apprenticeship”. I do not believe that that is the right thing to do.

Improving quality is central to our reforms, as we have agreed. Employers are developing new standards to ensure that apprenticeships meet the skills needs of their sectors, in exactly the areas that the noble Baroness, Lady Sharp, spoke about: engineering, STEM and construction. In STEM, for example, apprenticeships have increased by 42% between 2009-10 and 2013-14. The starts at age 19-plus are up 83%. This is a long-term change programme. We all know how long and difficult those are.

The published trailblazer quality statement sets out a range of measures to improve quality, including the requirement for all apprenticeships to demonstrate progression and to involve sustained and substantial training of at least 12 months. The Government are committed to the expansion of higher apprenticeships, with a fivefold increase in higher apprenticeships since 2009-10. To date, there are more than 50 higher apprenticeships available up to degree and master’s level in areas such as life sciences, law and accounting. We need to get the message out that there are these possibilities and that they can create just as good a career as going to university if someone has the appropriate bent for apprenticeships.

In the circumstances—it is getting late—I ask the noble Baroness to withdraw the amendment.

European Union Membership: Science and Technology

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 22nd June 2015 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, our negotiation is all about getting the best deal for the British people and then offering them a clear choice. The right question is not about detailed assessments but about a choice on membership in the key areas, and that is what my right honourable friend the Prime Minister is busy securing for us.

[Lord Young of Norwood Green (Lab)]

My Lords, I hear what the Minister says about EU funding and assessment, but will she comment on the fact that although the science budget was protected from government cuts, five years of ring-fencing have effectively reduced UK science spending by around 15%? Is the Minister concerned about that?

[Baroness Neville-Rolfe]

My Lords, in our manifesto we made a long-term commitment to science capital investment; that is,

“£6.9 billion in the UK’s research infrastructure to 2021”.

Of course, the past five years have been a difficult time, but that is because we have been tackling the financial crisis that, sadly, we inherited. But we want Britain to be the best place in Europe to innovate, to patent new ideas and to grow companies.

Zero-hours Contracts

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Thursday 11th June 2015 Lords Chamber

[Baroness Neville-Rolfe]

I am disturbed to hear that. The provision has certainly come in and will be publicised in the normal way. As part of the work we are now doing, we consulted in February on redress. We will be bringing in a route of redress against employers who ignore the ban, and this will give a further opportunity for people to know about this exclusivity. An issue that I have often discussed on these Benches is how you get information about new legislation out. I take the point in general, but I assure the noble Baroness that the new provisions have come in and we are taking steps to publicise those.

[Lord Young of Norwood Green (Lab)]

My Lords, I reassure the noble Viscount, Lord Ridley, that we are not opposed to zero-hours contracts. However, when someone is on a zero-hours contract for six months or more, surely they deserve an offer of a permanent contract. The Minister talked about flexibility and a fair deal. Is it a fair deal to continue in the same employment without any pension contribution or guarantee of holiday payment? That does not seem like our idea of a fair deal, and it does not seem in accord with the Government’s recent re-espousal of “one nation”.

[Baroness Neville-Rolfe]

My Lords, I think there is a fundamental disagreement between us. We believe in the value of zero-hours contracts. We also believe that we need to look at how they work in practice. There are parts of business where, just because you have worked in some area for 12 weeks, that does not actually mean that what is required by the employer will be the same 12 weeks later. There is a fundamental problem with the proposal put forward by the Labour Party. However, I assure the noble Lord that we continue to look at this with the objective of trying to ensure that it really works well in our flexible economy.

Apprentices

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Wednesday 10th June 2015 Lords Chamber

[Baroness Neville-Rolfe]

I entirely agree with my noble friend.

[Lord Young of Norwood Green (Lab)]

My Lords, while I welcome the Government’s commitment to expanding apprenticeships, including the personal commitment from the Minister, it would help if, instead of referring to 3 million, we recognised that of that 3 million at least 50% are accounted for by the re-skilling of over-25s—not that I deplore that. The real challenge, as the Minister well knows, is to expand the number of apprenticeships in the 16 to 18, and indeed the 16 to 24, age range. What can be done about that when significant numbers of employers still do not participate in apprenticeships? I think it is still less than one in five; that is the statistic.

I therefore have a couple of recommendations. First, does the Minister agree that the Government should consider making apprenticeships a statutory requirement in all public sector contracts? Secondly, will she consider looking at the local enterprise partnerships and local authorities that have the best track record so that best practice can be identified around the country?

[Baroness Neville-Rolfe]

My Lords, that is a subject for a debate. However, I can say that on the public sector side we will be taking steps to have more apprenticeships where procurement contracts are involved. On the point about the local enterprise partnerships, some of them are doing some brilliant stuff on skills and apprenticeships, which we should publicise much more fully.

Insolvency (Protection of Essential Supplies) Order 2015

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 23rd March 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, this order puts into effect a power taken in the Enterprise and Regulatory Reform Act two years ago during its passage through Parliament. I should remind noble Lords that that power was added to the Act following an amendment tabled by the noble Lord, Lord Stevenson of Balmacara. I am sorry that he has been unable to stay to see his baby come through into the statutory instrument.

The order supports the rescue of viable insolvent businesses by amending the Insolvency Act 1986 to safeguard the supply of IT and utility supply during administration and voluntary arrangements where business rescue is viable. It does this in two ways. The first is by extending the list of suppliers of goods and services that under current insolvency law are prevented from demanding payment of pre-insolvency debt as a condition of continuing to supply the business. As well as utility providers, that list will now also include the suppliers of IT goods and services, as well as intermediary providers or the on-sellers of utilities such as landlords.

As we have seen from discussions on the Consumer Rights Bill and the Small Business, Enterprise and Employment Bill, IT is now a universal tool for doing business. By ensuring the continuation of essential supplies such as IT to businesses in administration and voluntary arrangements, we estimate that creditors will benefit by around £50 million each year, and because a distressed business can continue, this also benefits the employees. Secondly, the order amends the law to prevent such suppliers from exercising contractual terms that entitle them to terminate the contract or increase charges for the supply on account of the insolvency. This amendment will ensure the continued supply of the essential service on the same terms as before the insolvency.

I recognise that prohibiting suppliers from exercising contractual rights interferes with contractual freedoms, which is why we have used the time since the power was taken two years ago to ensure that there are adequate safeguards for those suppliers which are affected. During the consultation process a number of energy providers, large and smaller, independent providers, raised concerns about the adequacy of the safeguards. We have listened to these concerns, and the safeguards included in this order strike a balance between the need to secure the supply of essential services and the need to protect the interests of suppliers. These safeguards include a right for the supplier to request a personal guarantee from the insolvency practitioner at any point in the insolvency as a condition of continuing supply. The supplier can also terminate the contract where payment for ongoing supply remains outstanding 28 days after payment is due. In the case of hardship, the supplier will be able to apply to the court for permission to terminate the contract. Suppliers have also said that early engagement with the insolvency practitioner would go a long way in helping them better to manage their supply costs. Consequently, the Government will provide guidance to insolvency practitioners urging them to make early contact with suppliers as to their future energy use.

To sum up, I believe that the benefit this measure brings in rescuing businesses makes intervention in contractual rights justifiable in those sectors where the supplies are truly essential and without which the continuation of a business would be impossible. I therefore commend this order to the Committee and I beg to move.

[Lord Young of Norwood Green (Lab)]

My Lords, I welcome the Minister’s introduction of the order and I can assure her that it was not a lack of interest; I had agreed to deal with this. My timing was a little belated, but I have managed to fulfil my obligation. We welcome the order. I have listened carefully to what the Minister said and it is clear that a balance has been struck between trying to ensure the continuation of businesses and the benefits that that can bring both to the employer and employees, while also ensuring that reasonable safeguards are in place. I also welcome the fact that guidance is to be issued to insolvency practitioners because obviously, in order to make this work, they need to engage as quickly as possible.

I do not have anything further to add because, as the Minister has described it, it is my noble friend Lord Stevenson of Balmacara’s baby, although I am not sure who could be classified as the midwife being called here. In any event, we welcome the successful delivery.

Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 23rd March 2015 Grand Committee

[Lord Young of Norwood Green (Lab)]

My Lords, once again I welcome the Minister’s full and comprehensive report. She mentioned the dreaded Companies Act 2006, in which I was not involved. I forget how many clauses it contains—something like 1,000.

These are sensible proposals which will help companies. I have only one concern. The Minister probably addressed it but there was a rather long list. It is a point about small companies being exempted from annual audits. If they do not have to submit an annual audit, when do they have to submit an audit? The information may be contained in the regulations, in which case I apologise, but that thought has crossed my mind. There was a safeguard for abridged accounts because, as the Minister has advised, they have to be supported by all the shareholders. I hope I did not mishear what she said about the exemption to annual audits but, in any event, it would be useful to have clarification on the record. With that question, I am happy to approve the regulations.

[Baroness Neville-Rolfe]

I thank the noble Lord, Lord Young, for his support for both this instrument and the previous one. We have worked together in these areas and, as he said, these are good changes. As to the question about exemptions, a small company audit is done at the request of shareholders or, as I explained, if it is a financial company. I hope that clarifies the point.

[Lord Young of Norwood Green]

If they do not submit an annual audit, when do they submit an audit? The Minister has said that it is at the request of shareholders, but I am still puzzled.

[Baroness Neville-Rolfe]

I hope this helps. A small company is exempt from audit unless the shareholders request it. If it is a financial company, there is an audit. I am not sure that that helps.

[Lord Young of Norwood Green]

I am not going to pursue the matter further today. Perhaps the Minister can write to me because at some point, small company or not, an audit has to be prepared. The Minister is shaking her head so I have clearly misunderstood.

[Baroness Neville-Rolfe]

There are companies which are exempt from audit because of their size and the simplicity of their affairs. I will write to the noble Lord setting out the circumstances in which companies are exempt from audit. Obviously directors’ duties and so on still apply, but some companies are exempt from audit.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Wednesday 11th March 2015 Lords Chamber

[Lord Young of Norwood Green (Lab)]

My Lords, I intend to be brief. My noble friends Lady Hollis and Lady Drake have given a forensic examination, based on factual analysis, and I do not feel I need to go through it again. I want to address some of the comments made by the noble Lords, Lord Stoneham and Lord Deben, and the noble Baroness, Lady Harding.

On the UK labour market, the first thing we need to understand is that it is probably the most flexible labour market in Europe. Nobody could say that we are like France, Italy or Spain or that we have something that makes it almost impossible for employers to hire people flexibly. I will leave noble Lords with the following thought. On grounds of fairness, are we going to say that a zero-hours contract means zero rights? Just to remind us, under zero-hours contracts there is no sick pay, no holiday, no national insurance contributions and nothing towards a pension—that is a pretty demanding contract as it is, and it is hardly weighted against the employer.

Nobody on this side who has supported these amendments has suggested that we want to do away with zero-hours contracts in their entirety. We accept that, for some people, they are a valid and necessary means of employment, both for the employee and the employer. However, there ought to be some reasonable ground rules. If you are running a business, yes, there will be changes in circumstances; that is undoubtedly right. However, this amendment aims to lay down a principle which it says will be interpreted in regulation and which will not just be dealt with by the spectre of solitary civil servants, who apparently between them have never experienced an hour of work in industry at all. From my brief ministerial career, I know that that does not necessarily apply to all civil servants, so I do not accept the idea that they will work in a total vacuum—that is an unnecessary fear.

Are we really putting forward the basic argument that, if I am being contacted and told by the employer, “I want you to turn up for work”, and I turn up, honouring my side of it, the employer has no responsibility whatever? I listened carefully to the noble Baronesses, Lady Perry and Lady Harding, and there might be other circumstances, but that is a question of taking into account how we phrase the regulations, so we can take those into account. That is not an argument for saying that there should be no control over this situation at all.

The noble and learned Baroness, Lady Butler-Sloss, reinforced the point, which my noble friend Lady Hollis had made, that it is curious that the CBI supports this. That is hardly an organisation that would support something it thought totally inflexible. Surely this is about basic fairness, is it not? If we are enjoying the services of somebody who is working under those conditions, surely it is right that they should have some fairness applied in the way they are summoned to their employment.

Surely we are seeking to encourage reasonable standards of management. I will give another statistic from the Chartered Institute of Personnel and Development: only one in five British managers has any training at all. I point that out to the noble Baroness, Lady Harding, because it is as important as some of the other statistics she quoted. Of course, people will declare that they are satisfied—they need the money and are glad to get into work. However, when we are being served by those people, do we not feel that there should be certain basic rights? This is one of them.

We commend the Government for getting rid of the exclusivity provisions in such contracts, which was clearly unfair. However, because of the way this amendment has been made it ought to attract cross-party support. We are not taking a political stance here, but a stance on responsible and effective management—that is what it is all about—and on giving a reasonable right to the employee. It can be dealt with very effectively in regulations, and I hope that the House will overwhelmingly support it.

[Baroness Neville-Rolfe]

I thank the noble Lord, Lord Young, for his intervention. I am very grateful to the noble Baronesses, Lady Hollis and Lady Drake, for their amendment and for allowing us the opportunity to return to the important provisions on zero-hours contracts in the Bill, and specifically to the matter of compensation for late-notice shift cancellations.

We had a debate in Committee, but I see that the noble Baronesses’ amendment now seeks to apply their proposal much more widely across the workforce. I also listened to the noble and learned Baroness, Lady Butler-Sloss, and the noble Baroness, Lady Perry, both of whom brought the benefit of their own experience of this matter. I have some myself, as I have four children —although the noble Baronesses are right to say that that is not necessarily relevant to the debate. I thank the noble Lords, Lord Butler and Lord Cunningham, and the noble and learned Lord, Lord Lloyd. I was also pleased to hear my noble friend Lord Deben comment on the dilemma of replacing less good employment with no employment.

The noble Lord, Lord Stoneham, rightly reminded us of the need to be careful not to throw the baby out with the bathwater. We in this country have done a lot with our flexible labour market, which has helped us to create 2 million jobs in this Parliament. I was also glad to hear from my noble friend Lady Harding, who came at the matter as a practical business person and thought about customers and the detailed definitional issues that we always get into on these matters.

Perhaps I should remind those who were not in Committee of what we are already doing about zero-hours contracts. Our consultation identified exclusivity clauses as the biggest issue. We have acted, and as a result of Clause 151, no zero-hours worker will be forced to be exclusive to an employer that does not guarantee them any work. There is also new information. The Government have published today our response to the consultation on zero-hours contracts, Banning Exclusivity Clauses: Tackling Avoidance. We have also published draft regulations that illustrate how the Government intend to use this power in the Bill.

The draft regulations propose that those employed on a zero-hours contract will have protection against suffering detriment on the grounds of working for another employer, and will be able to make a complaint to an employment tribunal. If a complaint is upheld, they may receive compensation. I know from our Committee debates that this is something that noble Lords opposite were keen to see, and I hope it will be welcomed.

In addition, the draft regulations propose to widen the ban on exclusivity clauses to all contracts of employment or workers’ contracts where the individual is not guaranteed a certain level of income. I hope that this, too, will be welcomed by the noble Baronesses, and will improve the situation. The regulations will extend the protection and ban exclusivity terms for other vulnerable groups in the labour market, beyond zero-hours contracts alone. People will be able to work more hours and boost their income if they so wish. This is in line with the responses we received.

What is more, the Government are updating the guidance on zero-hours contracts, and we intend to publish this on GOV.UK before the end of the Parliament. This is in addition to any sectors producing their own codes of practice on the responsible use of these contracts, as some noble Lords suggested.

We consider that a business-led approach is the best way to ensure a lasting culture change in the treatment of zero-hours workers, which the whole House wants. I hope that that demonstrates that we are listening to the concerns raised in this House and are acting to protect vulnerable workers—because I take the point that it is the vulnerable workers whom we are concerned about.

Amendment 58ZZC seeks to provide compensation for short-notice shift cancellations—but it proposes that the rights should apply to all workers, not just zero-hours workers. So it is not, as the noble Baroness suggested, a modest amendment, and I am not sure that the CBI supports the proposal. In March 2014 it said that a simple system of compensation might work for some zero-hours contracts. That was before we introduced the changes in this Bill—and the CBI’s comment did not apply to all workers. More recently, it has, I think, come round to the idea of regulating zero-hours contracts, and has said that the Bill’s,

“ban on exclusivity clauses in zero hours contracts … is a proportionate response to tackling examples of poor practice, and strikes the right balance between flexibility for both employers and workers”.

All those in work in the UK will have an employment status, which determines the protections to which they are entitled. Most commonly, individuals are “employees”, “workers” or “self-employed”. As the “worker” category includes all “employees”, this means that this amendment would potentially extend to the vast majority of the labour market. It requires the Secretary of State to make regulations—the wording is “shall”—and requires employers to pay compensation to workers whose shifts are cancelled without notice.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, our penalty measure provides incentives for full and prompt payment of employment tribunal awards and creates sanctions for non-payment. This is supported by our non-legislative work to improve guidance to help individuals understand how to enforce their rights.

In Committee I agreed to consider an amendment to include costs in the relevant amount on which the financial penalty is to be calculated. We have been persuaded by the principle that the penalty should incentivise workers receiving all that they are owed by their employer, and that where a tribunal has decided that costs are to be paid, an employee is entitled to receive them. Our amendments do exactly that.

The amendments also allow the Government to make changes by regulation if, in practice, waiting for costs to be finalised before financial penalties can be issued causes too much delay. These amendments also deal with some other minor and technical issues. For example, they make it clear that penalties which are payable to the Secretary of State are not included, and clarify technical points such as when an award is considered paid in full.

I hope that noble Lords will be reassured that the Government have listened to the concerns raised in Committee and that we are creating the right environment for a worker to be able to receive their full employment tribunal award promptly. I thank noble Lords for the debates we have had on this subject, and I beg to move.

[Lord Young of Norwood Green]

My Lords, I thank the Minister for her contribution. If I may paraphrase, “Never look a gift horse or a gift concession in the mouth”. However, in this case I will make a slight exception. We had a useful meeting with the noble Baroness—who has disappeared out of sight now, but not, I hope, out of hearing—and her civil servants. I was asked by the noble Lord, Lord Low, to make his apologies. As the noble Baroness knows, he has been a frequent participant in this debate, and he regrets that he cannot be here tonight, so I said that I would apologise on his behalf.

In the meeting that we had with the Minister I raised the disparity between two cases. If an award is made for a failure to pay the national minimum wage and the employer does not respond after having been contacted by HMRC, and does not pay the outstanding national minimum wage, an enforcement officer takes action against the employer. In the case of somebody who has struggled, probably for a significant period of time, gone through enforced mediation, and who has been successful at an employment tribunal, if the employer still fails to pay, it is true that they now incur penalties—and the Minister has told us about the improvements made in that area. However, we suggested that the successful claimant ought to have first recourse to those payments—but the Minister rejected that, saying that for a variety of reasons it could not be done.

I then suggested in the discussions we had that if that were the case, why at that point in time—which could be anything between a year and two years —should the cost of enforcement fall on the claimant, who will have been through mediation and an employment tribunal, been successful, and won an award? I suggested that the Government should examine the possibility of enforcement, as they are doing with the national minimum wage. That was what I hoped the Minister would take away.

That has not been the case. I am not expecting a detailed response this evening, but I make a plea that she might take that away, and between now and Third Reading perhaps we can meet to see whether any further progress can be made. However, with those few comments, we are happy to support the amendments.

--- Later in debate ---

[Lord Young of Norwood Green]

My Lords, we have again had a long debate this afternoon about the flexibility of zero-hours contracts and what constitutes fairness in such contracts. The last Division was on an amendment which looked at the question of cancellation; unfortunately, we were not successful on that. Again, in this area there is an unfairness to zero-hours contracts. The House will note that we have not specified the period; we just wished to draw attention to a serious problem.

A number of contributions this evening talked about the need for flexibility in those contracts. As my noble friend Lady Hollis—who I see is in her seat—made clear, we are not opposing the principle of zero-hours contracts, but trying to lay the foundation for what we believe to be fairness in the arrangements. In a situation where regular hours are being worked for a continuous period or even a series of continuous periods of employment, surely that does not constitute the kind of flexible zero-hours contract that workers ought to expect. In those circumstances, we believe that the employer should be bound to offer the employee a fixed-hours contract.

If we look at the statistics behind the number of workers employed on contracts that last for a year or even two years, we find that they are not the kind of thing that we envisaged, or what was described today by noble Lords who talked of the need for a very flexible contract. That is, we believe, the justification for injecting fairness into a contract that in previous circumstances would probably have been a standard contract of employment. I look forward to the Minister’s contribution, and to hearing about the Government’s attitude to the amendment. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord, Lord Young, for tabling the amendment and giving us the opportunity to return to the matter of zero-hours contracts. I know that he genuinely wants the new regime to work, and I am grateful for that.

The amendment relates to a right to request fixed hours. However, it goes beyond zero-hours contracts and would introduce a right for all workers to demand a fixed-hours contract. This means that it would extend the right to the vast majority of the labour market. I have some sympathy with the noble Lord’s intention, but I am afraid there is a clear risk of negative consequences for the individuals affected, with some unscrupulous employers finding relatively simple ways to circumvent the legislation. For example, some employers could be incentivised simply to let people go before the qualifying period. That would impact negatively on the very people the amendment seeks to help.

None the less, I hope that I can reassure the noble Lord that the spirit of his amendment has already been addressed. The amended flexible working regulations, brought in on 30 June last year, give all “employees” the right to make a request to change their pattern of working after 26 weeks’ continuous service. The amendment would go further, by extending this right to all workers, but it is possible that individuals on zero-hours contracts who can prove a requisite qualifying period of 26 weeks may well be considered to be “employees”, and therefore be entitled to this right.

The Government’s approach has been proportionate in ensuring that employees have the right to request a change to their working pattern, while ensuring that businesses retain the flexibility they need to help drive economic growth. This flexibility will sometimes include a legitimate need to hire someone on a casual contract.

By extending the provision to all “workers”, the amendment could end up capturing many contractors and freelancers who may not want or need this right. What is more, many businesses rely on these individuals and other casual labour to provide specific tasks, and do not expect to hire them on a permanent contract at the end of their contract. A right to fixed hours after a certain period would obviously restrict this ability. I believe that the amendment could open a loophole, and might encourage employers simply to let individuals go before the end of the qualifying period. That is clearly not the outcome that any of us wants. I hope that on that basis, the noble Lord will feel able to withdraw his amendment.

[Lord Young of Norwood Green]

My Lords, I listened carefully to the Minister. If the wording of the amendment is not perfect, that does not stop her accepting the principle contained therein: and proposed new subsection (4A) does end with the words,

“to be determined by the Secretary of State”.

Yes, there will be a need for regulations, and I accept the noble Baroness’s point about freelancers and so on; there will be some exclusions. However, I return to the basic principle of fairness. We are talking about people who are not necessarily in a traditional freelance role but who, in a significant number of cases, are employed on a zero-hours contract for a year or even two years. We therefore feel that this is an important enough issue to test the opinion of the House.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Tuesday 3rd March 2015 Lords Chamber

[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord, Lord Young, for his amendments and for allowing us to debate the important subject of apprenticeships, albeit rather late in the evening. I am also grateful to my noble friend Lord Stoneham for adding his wisdom to the debate, expressing concern about the particular provisions we are looking at but making absolutely the right point about the need to move the apprenticeship agenda forward and do ever more.

Starting with Amendment 29, I should, perhaps, remind the House that there is some outstanding work currently under way in this area. The noble Lord mentioned Crossrail as a trailblazer. It is an amazing project in all respects and has recently hired its 400th apprentice. Obviously, there is a huge opportunity to train apprentices on big construction procurement projects of that kind.

The Government have agreed to support apprenticeships growth in the provisions brought forward by city deal partners, linked to their growth sectors in the local economies. For example, 1,500 new high-value manufacturing apprenticeships have been created in the West Midlands and 420 apprenticeships have been created in Greater Cambridge in different priority sectors, from professional and scientific, through to advanced engineering. We are also encouraging employers to take on apprentices by creating the apprenticeship grant for employers and relaxing national insurance contributions for employers who take on apprentices. However, not every procurement is appropriate for delivering apprenticeships. I think the noble Lord acknowledged that. Trying to deliver a policy where it does not properly fit creates bureaucracy. We do not want a situation where suppliers are forced to meet a requirement to create new apprenticeship opportunities every time a new contract is awarded. This would change the very nature of apprenticeships, meaning that they were not linked to the company’s needs. Young people could be let go before their apprenticeship ended, a concern that I have heard from the Local Government Association. Even more important, it could be damaging to the individual apprentice.

We also have to follow legal requirements. For above-EU threshold contracts, a contracting authority must always be able to show that the requirement to provide an apprenticeship is sufficiently linked to the subject matter of the contract. Some contracts will have no links with apprenticeships, so forcing apprenticeships into all of them could even breach these EU rules.

The noble Lord might say that the amendment refers to requiring an “appropriate number” of apprenticeships so this does not apply to every procurement. But how would a contracting authority or Government know what an appropriate number was? A blanket requirement about apprenticeships as proposed in the amendment would not work. However, the Government support the appropriate inclusion of training and apprenticeship criteria in procurement and we believe that such requirements are most likely to be relevant on major construction and infrastructure projects. We need to adopt a thoughtful and considered approach, working with industry. I assure noble Lords that we are actively working to achieve this.

I turn to Amendment 30. I should like to reassure the noble Lord that we support schools and local enterprise partnerships working together with SMEs to deliver more training and apprenticeship opportunities. There are some highly successful examples of this work taking place. Indeed, following a debate we had on an Oral Question that the noble Lord asked, I shared some of those good examples with him. I will not delay the House by repeating those this evening.

I understand that the noble Lord’s intention is to place general duties on local enterprise partnerships and educational institutions such as schools to encourage, develop and promote these apprenticeships. However, I do not believe that moving away from good practice in this area to regulation is the right way ahead. Local enterprise partnerships are flourishing because we are addressing exactly the barriers identified by employers, getting them involved directly, simplifying the system and giving them a free hand so that they can do the right thing. The Government are working with a number of such partnerships as part of the city and local growth deals to drive up business demand for apprenticeships in their localities. This allows local enterprise partnerships to choose the most effective way to promote apprenticeship development.

I share the noble Lord’s concern about the way apprenticeships declined in the first part of the 2000s. As he knows, we are getting back on track and doing many of the right things. My noble friend Lord Stoneham is right to urge us to do more and to make it a priority—which I can confirm that it is. However, I do not believe that legislation of the kind proposed in the amendments is right or sensible. While the noble Lord, Lord Young, knows I share his wish to increase apprenticeships, it is wrong to introduce new bureaucratic regulatory burdens in a small business Bill. I fear that these amendments could be perverse in their effects and I hope that on reflection he will feel able not to press them.

[Lord Young of Norwood Green]

I thank the Minister for her response. Like my noble friend Lord Mendelsohn, I do not want to appear churlish, especially at this time of night, but it was a predictable response and a rerun of the previous analysis. Of course, I do not want to introduce any level of bureaucracy that would act as an impediment to SMEs in bidding for contracts. That would be perverse. However, that does not need to be the case.

I am not suggesting that the words within this amendment are by any means perfect. We do not establish the criteria one would need to apply in introducing this. However, I do not believe that there is a legal barrier. We proved that with the Olympic requirement and the Crossrail requirement. If it was approached in the right way, this could be positive. I listened carefully and tried to think of a scenario where somebody bidding for a significant public procurement contract could actually say, “Well, no, we don’t need any apprenticeships in this circumstance”. I find that hard to believe. It is interesting: when I look at the analysis of the types of apprenticeships that have occurred under the Crossrail experience, they are rich and varied, including finance, accounting and business administration. There is a whole range. It is not just the engineering things. They have been much more imaginative in their approach there, so I am baffled by this idea that somehow there are significant public procurement contracts where no apprenticeships would be merited. Then, on the question of the role of local employment partnerships, of course we want them to flourish and be imaginative and proactive.

My concern is that we still have significant numbers of schools and colleges that are not carrying out their legal requirement to give a full range of career guidance to their pupils and students, and that they have not established the kind of links with business that they should. The idea that it would again be bureaucratic to put a requirement on them to establish these links is not a bad one: it would be a good practice for them. They should also report annually, so that we could see the progress that they are making.

I hope that the Minister will reflect carefully on this brief discussion and see whether she will be able to address these issues when we come back to them on Third Reading. In the circumstances, I beg leave to withdraw the amendment.

Local Enterprise Partnerships

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Wednesday 11th February 2015 Lords Chamber

[Baroness Neville-Rolfe]

As I have said, the composition of a local enterprise partnership is very much a matter for the LEP, provided that it is business led and brings in local democracy with the local authorities. Otherwise, we draw on people who can help with growth and skills, and certainly there are those in the third sector who bring great strength to these areas.

[Lord Young of Norwood Green (Lab)]

My Lords, does the Minister share our concern about the decline in the number of apprenticeships for 16 to 18-year olds, when there are still areas of very high youth unemployment, and apprenticeship demand vastly exceeds supply? What contribution are LEPs making to encourage employers to offer apprenticeships? Can the Minister give examples of the most successful LEPs working with local authorities, small businesses and so on?

[Baroness Neville-Rolfe]

My Lords, as always, the noble Lord asks a very good and detailed question, and I will follow up in writing—but £125 million of the £1 billion growth deal recently announced is addressed to skills capital, and a further £26 million to particular apprenticeships. By bringing business and local authorities together, and by looking at growth and what is needed—skills represent a particularly important constraint—the LEPs can really help to achieve our ambition of having more apprenticeships, and raising the numbers from the 2.1 million that we have had in this Parliament to 3 million in the future.

Protected Disclosures (Extension of Meaning of Worker) Order 2015

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 9th February 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, this order was laid before Parliament on 12 January. It will amend Section 43K of the Employment Rights Act 1996 to bring student nurses and student midwives into the scope of the whistleblowing framework, often referred to as PIDA, the Public Interest Disclosure Act, as this was the Act which introduced protection for whistleblowers. The Government are taking this necessary step to ensure that student nurses and student midwives who witness poor practice can raise a concern without the fear that their future careers will be jeopardised.

The Government are making this change in response to the scandals uncovered at Stafford hospital, where it was found that a culture of bullying and covering up led to unacceptable failures in care. The inquiries that followed this scandal revealed that there were many cases where staff could have spoken up about poor practice but did not feel able to do so. The student nurses at the hospital were also in a position to raise concerns about wrongdoing.

We are aware of at least one example where a trainee nurse tried to raise the alarm about the care of patients in a hospital and, as a result, lost her training position and was unable to complete her course. We cannot tell how many other students in this position have refrained from taking cases to employment tribunals, realising that the cases could be dismissed.

The Government’s call for evidence into the whistleblowing framework in 2013 concluded that student nurses and student midwives are just as likely as qualified professionals to witness poor practice or other wrongdoing in the provision of healthcare services. The Government believe that student nurses and student midwives should be able to report their concerns without the fear of losing their place on an academic course or that their future registration as a nurse or midwife may be threatened.

There is an obvious question about why we are extending the whistleblowing framework only to student nurses and student midwives, rather than to all students in the health sector. I assure the Committee that the Government intend to extend the legislation to all students in the healthcare sector. However, the drafting of that legislation is more complex and will take a bit more time to get right. It will require consultation with all the different professional bodies which register the various professions in the health sector and approve training courses. That will ensure that the legislation takes account of the differences in how students train and become qualified in each profession.

We are already undertaking that work. Of course, it is unfortunately unlikely to be completed within this Parliament, but I am sure that the next Government, whichever colour they may be, will support legislation that creates a culture of openness and transparency within the NHS.

I know that the Nursing and Midwifery Council and Public Concern at Work have worked hard to bring to the fore the issues that student nurses and student midwives face, so that they, too, can safely raise concerns about poor practice. The order is a huge step forward in the campaign for student nurses and student midwives. I hope that the Committee is minded to support the order.

[Lord Young of Norwood Green (Lab)]

I thank the Minister for introducing the order. Of course, we welcome it. In a recent, much more lengthy debate, we raised other aspects of protected disclosure that we will come back to fairly soon at Report. The Minister can breathe a sigh of relief that I do not intend to raise any of those now, because that would be inappropriate. We welcome the order. It is a shame that we could not cover all students. I was going to ask about the timeframe, but the Minister has given it to me. We are where we are. Given the circumstances, we welcome this important step forward. It is a difficult decision for workers in the health service. We can see from all the case examples that have emerged how difficult it is to go down that route, so we definitely welcome this step forward.

[Baroness Neville-Rolfe]

I am grateful to the noble Lord. To reiterate, the Government are committed to supporting the important role of whistleblowers, who can play a crucial role in ensuring that workplaces and work practices, especially in the health service, are safe. I look forward to debating wider matters at Report on the small business Bill, and I commend the order to the Committee.

Insolvency Act 1986 (Amendment) Order 2015

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 9th February 2015 Grand Committee

[Baroness Neville-Rolfe]

That the Grand Committee do consider the Insolvency Act 1986 (Amendment) Order 2015.

Relevant document: 20th Report from the Joint Committee on Statutory Instruments

My Lords, the order raises the level at which creditors can petition for someone’s bankruptcy from £750 to £5,000. Bankruptcy is, and should be, very much a last resort. We have been working to ensure that people can get debt advice at an early stage when they are getting into financial difficulty. The Money Advice Service has been given the task of co-ordinating debt advice provision and an independent review has recently been conducted on that role. We expect to announce the government response to this review shortly.

The Financial Conduct Authority is currently re-authorising debt management firms, which will ensure that a good service is provided to consumers struggling with debt. The national curriculum has made financial literacy statutory for the first time for 11 to 16 year-olds from September 2014—a change which I warmly welcome. The curriculum for mathematics has also been strengthened to give pupils aged from five to 16 the necessary skills that they need to make important financial decisions about mortgages and loan repayments. We have also taken steps to reduce the costs of debt solutions. We have made an order providing an increase to the debt and asset limits for debt relief orders, enabling more people to use this low-cost form of debt relief. Legislation has also been passed to allow debtors to apply directly to an adjudicator for bankruptcy, rather than to the court, to reduce the cost of the bankruptcy process for those in need of debt relief.

Forcing someone into bankruptcy for a relatively small debt is disproportionate. Bankruptcy can have a significant effect on families, and can lead to mental and physical health issues due to stress, not least when it results in the loss of the family home. Bankruptcy also restricts access to credit, can lead to loss of employment in certain professions and prevents a person acting as a company director. We therefore consulted on what the right level should be for a creditor to petition for someone’s bankruptcy. The current figure of £750 was set in 1986. There was strong support for that level to be significantly raised. Debt advice bodies highlighted that a relatively small debt can grow enormously when the costs of bankruptcy are added, such as insolvency practitioner fees and legal costs, which may run into tens of thousands of pounds.

For example, one couple with a £1,350 council tax debt eventually ended up with debts of £80,000 as a result of the process. In another example, a local authority was criticised for obtaining a bankruptcy order for a council tax debt of £1,105 without due regard for the consequences on the debtor. It should be noted that a creditor petitioning for someone’s bankruptcy is unlikely to see much of a return at all when the debt is under £5,000.

Bankruptcy cases may either be dealt with by an official receiver, when the case is straightforward or there are minimal assets, or by an insolvency practitioner, when the case is more complex. However, for both types of case, where the petition debt is below £5,000, the amount returned to creditors is very low. Once any assets of the bankrupt are realised in the bankruptcy, they are distributed in proportion between the different creditors in priority order. However, sadly, in many cases there is no dividend at all. Those returns also do not take account of the court costs and other legal fees which the petitioning creditor will face.

It is important that creditors should have appropriate options to recover a debt owed to them. For debts below £5,000, creditors still have a number of other routes to seek debt repayment, including obtaining a charging order over property or land, an attachment of earnings order if someone is employed or the use of bailiffs.

Responses to the call for evidence suggested a rise of between £1,500 and £10,000, with the highest number of responses favouring a rise to £3,000 or £5,000. In arriving at a limit of £5,000, the Government have attempted to strike a balance between the reasonable needs of creditors and the interests of debtors. I beg to move.

[Lord Young of Norwood Green (Lab)]

I thank the noble Baroness for her helpful introduction to this statutory instrument. It seems to be a sensible move for the reasons that she states. There is no point in forcing people unnecessarily into a bankruptcy procedure. The case that she quoted about local authorities is a worrying one. They seem to have forgotten to apply the common-sense rule and the law of diminishing returns.

I could not help reflecting on a recent Radio 4 programme which dealt with debt and which featured a young woman who had gaily acquired three credit cards, followed by a shop card. I wonder when we are going to remind banks yet again of their responsibility not to lead people into debt, although that is not in any way to say that these individuals do not have a personal responsibility. I was reflecting on the financial advice that we now give people, which is a good thing. We ought to remind them that credit card debt eventually needs to be repaid. The worst-case scenario is that, if they are unable to pay that debt, they will then move into payday loans, and we have been through that.

Therefore, the order strikes us as a sensible way forward. It is far better that people who get into debt and do not have much disposable income should be able to take a variety of routes, including debt relief orders. Other than those comments, we support this statutory instrument.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord for his kind words. I very much agree with him about the need for better information, which is why I said that I welcomed the change to the national curriculum. He is also right that the banks need to be responsible. That is why it is good that we have completely reformed and tightened up financial regulation. However, there is a clear case for this important measure and I commend the order to the Committee.

Companies Act 2006 (Amendment of Part 18) Regulations 2015

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 9th February 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, these regulations propose small changes to legislation that will simplify company law in the area of buying back shares for private companies with employee ownership—a form of mutual in which a meaningful proportion of a company’s shares are owned by the employee. Examples of private companies with direct share ownership include the Arup Group, Mott MacDonald, Unipart, PA Consulting Group and the Childbase Partnership. The new regulations clarify the operation and accounting treatment of share buy-back procedures, which were first introduced in 2013, by addressing minor omissions in the original legislation.

The independent Nuttall review of July 2012 set out the economic and social benefits of employee ownership. The review identified three types of barrier to its growth: lack of awareness, lack of resources and legal barriers. I am pleased to say that all the review recommendations have now been addressed, and most of them implemented. For example, the Government have helped to raise awareness of employee ownership with active support for the UK’s Employee Ownership Day, held each year on 4 July. Last year, there were more than 100 events countrywide to celebrate and promote the benefits of employee ownership. I mention this because I know that noble Lords opposite have shown an interest in communication.

We have also worked with industry to produce model documents and guidance on employee ownership for employees, employers and their business advisers. Most importantly, the Government introduced new tax incentives for companies that wish to adopt indirect employee ownership, when shares are held in trust for the benefit of all employees. We believe that this will be of particular benefit to small and medium-sized enterprises grappling with succession planning, as these incentives make selling your company to your employees via a trust an attractive and viable option. The new tax provisions also introduced more generous allowances for employees of companies with employee benefit trusts that share their profits with employees—for example, the John Lewis Partnership.

Since the review in 2012, we have seen growing awareness of employee ownership. According to the Employee Ownership Association, the trade association for the sector, the number of employee-owned companies nationally is still increasing at an annual rate of 10%. One of the review’s specific recommendations was that legislative changes were needed to simplify procedures for buying back shares in employee-owned companies. Therefore, in 2013 changes were introduced that would improve the operation of internal share markets and support private companies with direct share ownership models.

I make it clear that today we are speaking about changes that allow private companies to buy back their shares more easily. Private companies that wish to encourage their employees to hold shares directly—that is, without the use of a trust—often seek to buy back shares from employees who exit the company to redistribute them to new employees. This allows the company to avoid the risk that, over time, shares earmarked for allocation to employees become predominately owned by former employees, or others outside the company.

Prior to 2013, companies were obliged to comply with a number of company law provisions that regulate this process. The legislation that we passed in 2013 streamlined it. However, our attention was drawn at a very late stage to a couple of small details within the legislation which lacked sufficient clarity. We were unable to make the necessary changes at the time but committed to addressing them in due course. The regulations presented for the Committee’s consideration today address these issues. In addition, we are taking the opportunity to present a further minor amendment to the 2013 legislation, which is also deregulatory.

It was found sufficient to consult informally on these changes. A formal consultation would have been disproportionate to their small scale and likely effect. However, a full post-implementation review of the substantive changes made in the 2013 regulations, as well as the amendments we are proposing today, will be carried out in 2016. This is in accordance with the commitment given in the impact assessment for the 2013 regulations.

I will not repeat the detail set out in the Explanatory Memorandum to the SI but I assure noble Lords that the new regulations ensure that the Government’s intention of improving the operation of internal share markets, started in 2013, can now be fully met. These proposals are purely enabling. They impose no costs to business and familiarisation costs will be minimal. Given the small, technical nature of the changes, it would have been disproportionate to try to explicitly quantify their likely costs and benefits. Nevertheless, the analysis provided in the impact assessment for the 2013 regulations, which also covers some of these amendments, indicated clearly that the policy overall is anticipated to result in a net reduction in the costs to business.

I hope that noble Lords will support these reforms, and I commend the regulations to the Committee.

[Lord Young of Norwood Green (Lab)]

There is a select group of noble Lords present today. We have no reason to oppose these regulations. I am happy to say that the Minister answered a question that I was going to ask, which was whether we have seen an increase in the number of companies. She pointed out that there had been an increase of 10% per year. I do not know what the distribution is in terms of SMEs and large companies. If the noble Baroness has that information, it would be interesting to know the breakdown.

The Minister referred to the internal share markets. I presume that we are not talking about things such as the Royal Mail share sale but that the regulations include companies like the John Lewis Partnership. I can see the need to buy back those shares to prevent a dilution of current employees owning shares in the company. Other than that one question, we are happy to give our assent to this statutory instrument.

[Baroness Neville-Rolfe]

My Lords, as always, we seem to have a good understanding of what will interest noble Lords on some of these regulations, and it is refreshing that we have largely been able to answer the questions which naturally arise when putting through an instrument of this kind. I can confirm that these regulations do not cover the Royal Mail. I do not have with me the breakdown of the figures for smaller and larger companies but I will obviously ensure that I get that to the noble Lord.

I think we can conclude that these regulations meet the requirements of the Act and I commend them to the Committee.

Small Business, Enterprise and Employment Bill

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 26th January 2015 Grand Committee

[Baroness Neville-Rolfe]

My Lords, I thank noble Lords for their amendments. I believe we share the same aim—that of ensuring the best outcomes for individuals who have been through an employment tribunal, and ensuring that they receive their awards. Our research indicates that, without enforcement, only 40% of awards are paid within six months. That is clearly scandalous. Our financial penalty clause is intended to incentivise prompt payment of employment tribunal awards and to prevent employers ignoring judgments by employment tribunals. It applies to all tribunals, awards and settlements conciliated by ACAS. Employers who have not paid the award will receive a warning notice from the enforcement officer. By paying the award in full, promptly, they will avoid a penalty. However, if they do not pay in full, they will be hit with a penalty of 50% of the award. If they continue not to pay, or to pay only part of the award, they can receive further penalties, each of 50% of the unpaid amount, as well as incurring interest on the outstanding award. We consider that encouraging prompt payment in this way is an effective way of dealing with a problem that we agree exists.

Before I return to the amendment, I will respond to the point made by the noble Lord, Lord Young, about employment tribunal fees. It is reasonable to move away from funding being provided largely by the taxpayer towards a more balanced process, whereby the £74 million cost of administering claims to the employment tribunal system are met in part by those who use the system and benefit from it. However, it is important to emphasise that the Government have been very careful to ensure that fee waivers are available for those people of limited means in order that they are not excluded from seeking redress through tribunals. As the noble Lord, Lord Stoneham, has already mentioned, helpfully, the Government—

[Lord Young of Norwood Green]

I hear what the Minister says, but surely there ought to be some concern—as I think the noble Lord, Lord Stoneham, mentioned—about a situation where, in some regions of England, the number of employment tribunals has dropped by 80%? Surely that is not an indication that 80% of claims were vexatious. Does she really not have any concern in this situation that fees are deterring people from bringing what could be completely fair and justifiable cases before an employment tribunal? The evidence we hear from trade unions, which are normally the buffer between the employee and employer, is that that is exactly what is happening.

[Baroness Neville-Rolfe]

My Lords, I am glad that the noble Lord intervened to register his concerns, which to some extent I share. That is why the Government have committed to reviewing the introduction of fees. We are considering the scope and timing of the review, and will bring forward our plans in due course. We need to understand what is going on here, of course, but I was trying to make a general point about trying to improve things. The provisions in the Bill are another example of our efforts to do just that—to ensure that there are fair results and that people who are given awards receive them in due time.

I turn to each of the amendments, acknowledging the spirit of them, but obviously, as is usually my wont, looking to make sure that we do not have any perverse effects. I will start with Amendment 68ZG, which is designed to include costs in the calculation of the money that is considered to be owed for the purposes of the penalty. It is worth noting that “costs” or, sometimes, “preparation time” awards—where people are not paying for attorneys—are made in only a tiny proportion of cases. Costs awards are not related to the compensation for the breach of employment rights—for example, in a case of discrimination—but to the way in which one of the parties has behaved during the tribunal process. A good example would be the deliberate, repeated late disclosure of documents. Indeed, last year only 242 costs orders were made to claimants—in the context of more than 42,000 claims. The Government do not believe that adding costs to the calculation will add a significant additional incentive to pay. But I am sympathetic to the noble Lord’s intention and will consider further whether we need to make a change ahead of Report.

Turning to Amendment 68ZH, we are clear that a penalty regime must incentivise prompt payment in full and not inadvertently reduce the likelihood of individuals gaining their full award. Allowing the penalty to be used to offset the award, as proposed in the amendment, would not, we fear, incentivise prompt payment of the award in full, which is our objective. The point of the penalty is to act as a deterrent and a sanction for non-payment. Conflating money owed to the claimant with a civil penalty would cause confusion and might raise questions about which liability had been met when money was paid. We believe it would be better to keep the civil penalty separate from the money owed to the individual. The clause already encourages an employer to make full and prompt payment to avoid a penalty altogether. As I have explained, the only way in which an employer can avoid a penalty is to pay up in full once they receive a warning notice. This seems to be the most effective approach.

Amendment 68ZJ seeks to introduce a naming scheme. As the noble Lord will be aware, there is already a scheme for the national minimum wage. We are considering naming as part of the Government’s overall approach to increasing the full and prompt payment of tribunal awards. We need to carefully consider the options to ensure that we find the most effective response. I would be happy to update noble Lords on our thinking ahead of Report.

Turning to Amendments 68ZK to 68ZM, I reassure the noble Lord that unpaid awards are already recoverable through the county court, or the sheriff court in Scotland, as they are treated as judgment debts. There is also a fast-track scheme in England and Wales where a court enforcement officer can pursue the money on the claimant’s behalf. Furthermore, interest accrues on those unpaid tribunal awards at 8% per annum. So there is an incentive to pay promptly and in full.

Finally, in response to Amendment 68ZMA, I hope I can provide further reassurance. As I have outlined, there are already a range of mechanisms by which an individual is able to enforce their tribunal award. In addition, under Clause 145, a government-appointed agent will impose penalties for non-payment. The penalty scheme we are introducing through this clause offers an alternative, cost-free way to ensure that the claimant gets the money they are owed. Therefore, the Government do not consider that there is a need to set up a further mechanism at this stage, but we shall continue to monitor the situation following implementation of the new penalty provision.

I hope that my explanations, including about our wider plans, have provided reassurance to the noble Lord and that he will be content to withdraw the amendment.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord, Lord Low, for his comments. I would of course be delighted to host a meeting and go through these important issues—what we are doing, what we are not doing and how to find the best way forward in this important area so that the penalties work and the awards are paid.

[Lord Young of Norwood Green]

My Lords, I thank the Minister for her comprehensive reply. Are we satisfied? No, I do not think we are entirely, although I welcome the suggestion from the noble Lord, Lord Low, of a meeting; that is a useful and practical possible way forward. The research carried out in 2009 by the Ministry of Justice, which administers the system, showed that 49% of those employment tribunal awards—almost half—went unpaid in the first instance before any enforcement action was taken through the county court system. If it were 4% or 9%, we might say, “Okay, it’s not doing too badly”. Each case represents an individual who has fought their way through all those hurdles, got through to the employment tribunal and won an award but, no matter what the penalties are, they do not yet seem to be convincing the majority of employers. It is even worse in Scotland.

We still have real cause for concern. I have raised the fact that we have seen a dramatic decrease in people being prepared to go to a tribunal, and this seems to be adding insult to injury when they actually do go there. Nearly half the employers are able to say, “We can ignore it. We’re not bothered. We’ll see if we can weary the individual to the point where they won’t continue”. I am sure that some will not go through the county court because by that time they will have had enough. That is our concern.

[Baroness Neville-Rolfe]

My Lords, I reiterate that I also feel that the current situation is scandalous—I think that is the word I used—and the question is how we can best find measures that will solve the problem and bring the rate of payment in such areas much closer to what one might expect in other areas of the law. I hope that our meeting might assist with that.

[Lord Young of Norwood Green]

I think that I have made the necessary points, and I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Young of Norwood Green]

My Lords, we suggest that this new clause be inserted into the Bill. In the case of non-compliance, we believe it is justified that,

“any relevant remuneration the worker would have received in respect of holiday pay or other leave pay”,

ought to be included as part of the national minimum wage assessment. I beg to move.

[Baroness Neville-Rolfe]

I thank the noble Lord for his amendment and, indeed, for his succinct introduction, which I do not think I can quite match in responding to the amendment, which introduces a new clause to include holiday and other leave pay within the calculation of the minimum wage.

The Government do not consider that the amendment is necessary. That is because under the Working Time Regulations, a worker is entitled to a week’s pay for each week of leave, and there are already routes of redress if these payments are not made. A worker who believes that they have been underpaid can make a claim to an employment tribunal. This claim has to be submitted via ACAS, which will first offer early conciliation. Where holiday pay has not been paid, workers have a choice as to how they may claim the money they are owed. They can bring an action against their employer under Regulation 30 of the Working Time Regulations or they can bring an action for unlawful deduction of wages under Section 23 of the Employment Rights Act.

Both claims are brought in the employment tribunal. Where the worker is entitled to other leave pay which forms part of his or her wages, he or she will be able to claim any underpayments through an action for unlawful deduction under the Employment Rights Act. In addition, the early conciliation system allows for disputes over pay to be resolved before recourse is made to the tribunal, so without litigation. If a worker believes that he or she has not received the correct holiday pay, he or she can contact ACAS, which I am sure will be very helpful and will offer early conciliation. If that is not successful, a worker can take a claim to an employment tribunal. ACAS offers helpful guidance on holiday pay on its website.

The Government firmly believe that the holiday pay arrangements currently in place are sufficient and there is no evidence to suggest that enforcement in relation to holiday pay should be extended to the National Minimum Wage Act. I did, however, pick up the point from the earlier discussion that perhaps people do not always know what the routes for information and redress are. In writing to noble Lords, as I promised to do on the earlier amendment, I would be happy also to set out the arrangements on holiday pay so that people have a full understanding.

I hope that the noble Lord has found my explanation of the avenues that exist reassuring and will therefore agree to withdraw his amendment.

[Lord Young of Norwood Green]

I have listened carefully to the Minister’s response. We think there is a connection in that employers who fail to pay the minimum wage are often also in this situation, where they do not respect full holiday pay and leave entitlements. We will take into account the response and consider whether to come back to this on Report. In those circumstances, I beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Neville-Rolfe]

I thank the noble Lord, Lord Young, for these amendments and for the debate we have had on this part of the Bill, which went slightly wider than the amendments. I ought to say that Labour did nothing about zero-hours contracts for 13 years. The number of them went up by 75% between 2004 and 2009. What we have done is to carry out a review into these contracts, so that we can deal with any abuse. As a result, we are banning the type of contracts which mean that employees are not allowed to work for any other employer, while still allowing people such as students to benefit from the flexibility that they offer.

We introduced Clause 148 to deal with this mischief and I am glad to hear the noble Lord’s support for it and my noble friend Lord Stoneham’s perceptive analysis. The noble Baroness, Lady Donaghy, rightly tried to improve our English and not talk about zero-hours contracts. It may be that like one of the terms we were struggling with earlier, the term is an Americanism. Wikipedia does not give its origin but I will hunt it down.

At present, an individual subject to exclusivity terms in their zero-hours contract cannot seek work elsewhere, regardless of whether the employer offers only occasional, minimal, or even no hours of work. Exclusivity terms are unfair for the individual who, as a result, is prevented from boosting their income or building on their work experience. Frankly, it is also damaging to the economy because it prevents people from reaching their full employment potential.

As my noble friend Lady Harding made clear at Second Reading, from her own experience of running a supermarket in Yeovil, zero-hours contracts are an important element of a flexible, vibrant labour market, and they work for employers and individuals alike. I even heard the shadow Business Secretary agreeing that sometimes people quite like to use them. However, I think that we also agree that people working under such a contract must get a fair deal.

The ban on exclusivity terms in zero-hours contracts, as set out in the clause, is straightforward. From the moment the clause commences, individuals can simply ignore an exclusivity clause and work for another employer as well if they wish. There is no process, no admin and no need to discuss this with the employer—I am not sure that people understand this—and any attempt by the employer to stop a second or third arrangement would be unenforceable. This is a major change and a reduction in employer flexibility, but one that we believe is right.

Amendment 68ZU seeks to provide a route of redress for zero-hours workers who need to enforce their rights, allowing for regulations to set out the details. The clause already provides for an order-making power that will allow for this.

Amendment 68ZW seeks to make the use of that order-making power mandatory. However, given the fact that routes of redress will be delivered through the order-making power, I am sure that the Committee will agree that in this case the amendment is unnecessary. The Government will have to bring forward regulations; otherwise, the ban on exclusivity terms in zero-hours contracts will have no meaning. For this reason, I do not believe that we need to make this amendment. The regulations that will be possible under the order-making power will also be able to address the issue of redress that is covered in detail in Amendment 68ZAB; that is, that an employment tribunal will have the power to consider claims related to the exclusivity ban, including providing remedies to the individual and issuing penalties to the employer. The Government recently consulted on using the order-making power. We are currently finalising the details with a view to publishing the government response shortly on how we plan to tackle avoidance.

Amendment 68ZZ suggests that the definition of an exclusivity term is too narrow. However, the Government have looked at this and consider the description in new Section 27A(3) of the Employment Rights Act 1996, which will be inserted by Clause 148, to be sufficiently broad. It covers any provision in a zero-hours contract that prohibits working for others, as well as terms that require an individual to seek permission from their employer to do so.

I believe that our approach will deal sensibly and effectively with both avoidance of the ban and routes of redress for individuals on a zero-hours contract who suffer a detriment. I hope that on this basis the noble Lord will agree to withdraw the amendment.

[Lord Young of Norwood Green]

The Minister indicates that the Government have had some consultation and regulations will be published. I wonder if she will give some timescale for those.

[Baroness Neville-Rolfe]

My Lords, we shall be publishing them shortly.

[Lord Young of Norwood Green]

Prior to Report?

[Baroness Neville-Rolfe]

I will take that point away and do my best.

[Lord Young of Norwood Green]

Right. Obviously, as we said earlier, we welcome this measure. We are probing a bit to see whether or not the controls that the Minister referred to and the powers of the Secretary of State are sufficient. We will take into account the points that she made in her response, and we will consider whether we need to return to these issues on Report. In the mean time, I beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Neville-Rolfe]

The noble Baroness makes a good point. In a sense, that is a problem for employers, who could previously have a zero-hours arrangement that was exclusive. As I explained in opening, we have decided that that should not be the case in future. I am sure that the new arrangements will take some thinking about and settling in but, as far as I am concerned, if you are on a zero-hours contract, you can offer your services to—I do not know—two fashion magazines rather than just one. That is an excellent move forward. In any event, many people on zero-hours contracts who benefit so much from them, especially those in the categories that we were talking about, are not looking for universal credit, as the noble Baroness acknowledged.

I have probably taken this as far as I can this evening. I have tried to set out why we are proposing this, and I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Young of Norwood Green]

I was interested when the Minister said that one of our amendments, seeking compensation if shifts were cancelled at short notice, was catered for in the Bill. I had another careful look and I presume that she is referring to new subsection (5)(c) on page 138, which states rather broadly:

“requiring employers to pay compensation to zero hours workers”.

It does not state in what circumstances. I would welcome some clarification. If that is not possible today, it is still an important issue that requires an answer in writing.

[Baroness Neville-Rolfe]

I thank the noble Lord for raising the issue. I was going to deal with it in my response, but decided not to because of the complexities. I can give him some comfort but the best thing is to consider the questions that he has asked and write to him and copy that to other noble Lords, because this is obviously an important issue.

[Lord Young of Norwood Green]

I think the noble Baroness for her response. It has been an interesting debate. I thank my noble friend Lady Hollis for her usual forensic analysis. We will need to consider our response in the light of the Minister’s answers. Although we do not necessarily have an agreement on this, we are seeking to improve the Bill. We are not seeking to abolish flexibility or all zero-hours contracts but we seek to create a fairer scenario for workers employed in those circumstances. With those caveats, I beg leave to withdraw the amendment.

Reports on Payments to Governments Regulations 2014

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Tuesday 25th November 2014 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, I thank you for finding the time to consider these regulations. We tried for an earlier date, but the weight of business in the House meant that that was not possible.

I should first mention that we are introducing the regulations ahead of the next common commencement date in order to allow oil, gas and mining companies to align these reports with the calendar-year approach that they take to gathering information, making the work easier for them and avoiding reporting on a partial-year basis. The directive allows us the flexibility to implement prior to the transposition deadline.

The introduction of the regulations is important for the UK but also for the rest of the world. It is estimated that 1.6 billion people live in countries officially classified as rich in oil, gas or mineral deposits. Greater transparency will provide important information about the payments made: the income that a country gets from the extraction of natural resources. That may seem obvious, but that is not the case in every country around the world. This is a vital step in enabling citizens to hold their governments to account. Payments made to governments by companies active in the extractive industries have the potential dramatically to boost economic growth and to help resource-rich developing countries to pull themselves out of poverty.

The regulations demonstrate the UK’s commitment to transparency. We are taking the lead globally. The UK will be the first EU member state to introduce legislation to fully implement the requirement, although France is well on the way to doing so, Norway already has similar legislation in place, Canada is on track to implement a similar new law this year and we expect the USA to have rules in place next year.

Increased corporate transparency was a key feature of the UK’s presidency of the G8 in 2013. Following the discussions at Lough Erne, the official communique endorsed by our Prime Minister noted that the EU members of the G8 had committed to “quickly implement” the EU’s extractive reporting requirements. The UK is now delivering on that important commitment.

As noble Lords know, much of my career was in business. Transparency also makes good business sense: those who invest in companies must consider a wide range of issues and many investors will welcome additional information to enable them to make sound decisions. Increasing economic stability in countries where long-term investments are made is also good business.

The regulations before us are being considered following the agreement of the EU accounting directive. Chapter 10 of the directive deals with payments to governments by companies in the extractives industry. The UK took an active role in negotiating the detail of the new accounting directive. While recognising the importance of a strong and effective reporting requirement, we also recognised that the burdens imposed on industry by such a requirement needed to be proportionate. Industry and civil society representatives were closely involved throughout the negotiations for the directive. I am pleased to say that this close working relationship has continued as we developed the regulations that we are considering today.

I will now explain some of the detail of the regulations. As I have said, they implement part of the EU accounting directive and many of the requirements are fixed by that directive. Companies must report on payments made to all governments at all levels—national, regional and local—as well as to government agencies and state-owned companies. The report must detail information of the payments made on a project-by- project basis. During negotiations, we ensured that the definition of “project” was one that would reflect the ways in which industry manages and reports on its business activities.

The payments to be reported are listed within the regulations and include production entitlements, royalties, licence fees and payments for infrastructure improvements. The directive does not allow for any exemptions from reporting if a company is within scope. Companies are required only to report payments over the threshold of £86,000. The regulations also make clear, however, that one payment cannot be split to avoid the reporting requirements.

In many countries, payments to governments may not always be in cash; they may be in kind. Such payments are common and an in-kind payment could include improvements to infrastructure by building a new road, or perhaps a hospital. Such payments have to be included and, for the purpose of the report, a value must be attributed to any in-kind payment. To avoid doubt, the basis for the value given must also be set out. The directive requires all large companies and public interest companies active in the extractives sector to prepare reports. The transparency directive applies the same requirements to all companies listed on the main regulated stock markets in the European Union. This will ensure a level playing field, in that foreign listed companies also have to report even if they are not based in the EU. The Financial Conduct Authority, which is responsible, is currently considering rules to implement the requirements of the transparency directive.

Our consultation also considered the areas where the directive offered flexibility. These areas included the date of the first reporting period, the period allowed for the preparation and publication of reports and the reporting format. In line with the UK approach to improving transparency, companies will be required to prepare reports for financial years that begin from 1 January 2015—this January. The first reports will therefore be published in 2016.

The reports do not form part of the accounts but form a separate record of taxes paid directly to each level of government in each country around the world where they operate. The information will be set out project by project, so it will be possible to see the taxes paid directly to an individual country as a result of removing natural resources from the ground. The reports will have to be sent in two months after the deadline for filing company accounts—that is, 11 months after the end of the financial year, or six months for listed companies. This will allow sufficient time to compile the appropriate information without putting extra pressure on business at the time when accounts are due. We also want the reporting format to be as simple as possible. Companies House is working closely with industry on the format of the report. Requiring electronic reporting will facilitate the efficient receipt and sharing of data contained within the reports.

The Companies Act requires companies to report on a wide range of issues. In many cases, Companies House relies on public scrutiny of the register to ensure that company information is up to date. This is the approach that we are taking to achieve compliance for reporting payments to governments. We want to ensure that all companies are able to report in a simple and effective way.

If a company fails to prepare and publish a report or delivers a factually incorrect one, the registrar will write to ask why. There is no automatic penalty imposed as it may be that a company did not actually make relevant payments to governments in the year in question, or they may have been included in a parent’s consolidated report. The company will be given the opportunity to comply with the requirements, but if they fail to do so then the law sets out a penalty regime. The penalty regime for complying with the regulations has been carefully considered. The regime is consistent with that for similar reporting requirements in the Companies Act 2006. Failure to prepare and publish a report could result in either a fine or a prison sentence—so, a criminal penalty.

There is also provision for a review of the regulations. We will report within three years on whether they are efficiently achieving the intended objectives. This report will also enable us to feed into the European Commission’s own review of the directive, which is scheduled to be completed by July 2018.

Industry recognises the importance of reporting payments made to governments. Those who responded to our consultation clearly stated that transparency was an important tool in improving governance as well as fighting against poverty. Many companies already collect this information and make it available on their websites, and they find that investors welcome it. The Reports on Payments to Governments Regulations are an important step in improving global standards in transparency reporting in extractive industries, and I commend them to the Committee.

[Lord Young of Norwood Green (Lab)]

My Lords, I welcome the report from the Minister on what I agree is an interesting and important introduction of new legislation, and I welcome the speed with which the Government have operated.

Most of the questions that I started to write down have been answered by the Minister. I was interested in what the penalties would be, and we got some additional information on that. In the conclusion of her contribution, the Minister referred to a three-year report. I wondered whether any interim information would be published about how companies are beginning to comply.

The other thought that crossed my mind—this is not an attempt to launch an impossible question—is how this legislation, as it seems to me it did when I checked, complies with the UN Ruggie principles. I was hoping that the Bill team were not going to look puzzled; given that these are principles that they ask businesses to enact in relation to human rights and corporate governance, I would have thought that they would have met with them. I ask that as a matter of interest because the Ruggie principles are important.

We are willing to introduce this legislation. The Minister is right that it will make a difference as the sums of money involved around the world are enormous. Hopefully, it will make a difference in giving further information to investors before they make up their mind about the ethical nature of the company that they are about to invest in. Apart from awaiting answers to those questions, I am happy to support this statutory instrument.

Employment Rights Act 1996 (Application of Sections 75G and 75H to Adoptions from Overseas) Regulations 2014

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 17th November 2014 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, with the leave of the Committee, I shall address the six sets of regulations to be considered together.

On 10 November, my noble friend Lord Bourne led the debate on the legal framework that creates a new statutory right to shared parental leave and pay for eligible working parents. This new entitlement will apply to the parents of babies who are due to be born on or after 5 April 2015. It will also apply to parents who adopt on or after that date. To coincide with the introduction of shared parental leave and pay, the Government are changing the statutory adoption regime to give adopters an entitlement to adoption leave and pay that mirrors the arrangements currently enjoyed by birth parents. From 5 April 2015, adoption leave will become a day-one right and the adopter’s pay will be enhanced—that is, increased—in the first six weeks.

We are also making changes that will extend the entitlement to adoption leave and pay to new groups of working parents, including those who are having a baby with the help of a surrogate. This will be achieved through the regulations that we are considering today. So we will have a framework that would give a surrogate parent 90% of their salary in the first six weeks following the birth of their baby, and after that £138.18 a week for the remaining 33 weeks. These changes will give new groups access to the benefits and protections that other parents currently enjoy. This ensures that the law on adoption leave and pay keeps pace with modern family life and the arrangements that would-be parents are already making.

The regulations enable the intended parents in a surrogacy arrangement and those who are adopting a child from outside Great Britain to opt in to the new shared parental leave and pay system if they wish. The entitlement to shared parental leave and pay will arise where the adopter gives up some of their statutory adoption leave and pay to create shared parental leave for them or their partner to take.

One of the key benefits of a shared parental leave system is that it allows the other person to start taking leave while the adopter is still absent from work on adoption leave. This will enable both parents to be at home together with the child—or children—or to take their leave at different times so that one of them is always at home with the child in the first year following adoption.

There are many benefits to shared parental leave and pay, including stronger links to the labour market for parents who intend to share the caring responsibility for their children. Shared parental leave and pay can be good for business as well, as individual employees who want to return to work—say, after six months—or to do a specific project can do so, allowing their partner to care for the child. They can return to shared parental leave when the project finishes.

Unsurprisingly, the Government are keen to enable as many working parents as possible, and their employers, to benefit from the new system. These regulations do this. They extend entitlement to shared parental leave and pay to parents who are adopting from overseas or who are eligible for and intend to apply for a parental order following a surrogacy arrangement. They also put in place the legal framework that will enable these groups of parents to use shared parental leave and pay in practice. They ensure that those who use the new system are not disadvantaged because they choose to exercise their statutory right to leave and pay. For example, an employer may not refuse a pay award or bonus to an employee, or overlook them for promotion, simply because they are taking shared parental leave.

The regulations provide greater flexibility and extend those protections currently accorded to employees who have had children to intended parents in surrogacy arrangements and to those adopting from overseas. They bring the legal framework up to date with the widening accessibility of advances in medical practice and they adapt to broader societal changes. I therefore commend the regulations to the Committee and beg to move.

[Lord Young of Norwood Green (Lab)]

My Lords, I welcome the Minister’s introduction, but we should remind ourselves that, in government, Labour transformed rights for women and families to help the balance between earning a living and caring for a family. Over 13 years, Labour extended paid maternity leave to nine months and the right to take maternity leave up to 12 months. It gave new entitlements to paternity leave and pay to fathers. Indeed, it was also a Labour Government that introduced the right to request flexible working in 2009, which was extended to parents with children up to the age of 16. We introduced a right to request flexible working for people with caring responsibilities for disabled or elderly relatives and for parents with disabled children up to the age of 18. We ought to remind ourselves that it was David Cameron, now the Prime Minister, and the Conservatives, who voted against the introduction of paternity leave, the extension of maternity leave and the right to request flexible working. I welcome the conversion.

We support today’s regulations, which, as the noble Baroness rightly said, are an extension of what we debated last week. It is absolutely right that we take into account the variety of today’s familial arrangements. We support reform of the work-life balance for fairness. Shared parental leave for all families is a step towards levelling the playing field for fathers, which is to be welcomed.

However, we have to recognise that this is a cultural change in a way, both for parents and for employers. I would welcome some comment from the Minister about how we intend to review the introduction of these regulations. I think there was some discussion with the previous regulations about the estimated take-up, which has not been quite as good as we would have wished. Given that this is a cultural change, perhaps that is not surprising, so I would welcome the Minister, in her reply, giving us some indication of how the Government intend to ensure that employers are given advice. As I read through them, my brain started to ache a bit with the complexity of the various arrangements. I am sure that I will not be the only one; a number of employers out there will need to be advised and encouraged to ensure that these arrangements are adopted and have the effect that the Government wish them to have.

[Baroness Neville-Rolfe]

I thank the noble Lord for his comments. I was very pleased to hear about the record of success in this area, first under the previous Government. He mentioned cultural change, and I feel that there has been an acceleration of the effort to create a family-friendly culture under the coalition Government. As noble Lords can imagine, I am very keen, as a mother of four and the grandparent of a child of a working mother, on having very good family-flexible arrangements. The addition of these regulations relating to the important areas of overseas adoption and surrogacy is a great step forward.

The noble Lord asked about review of the regulations. The Government have committed to review the implementation of the regulations by 2018. We need time to allow them to bed in and for the cultural change that he mentioned to gather momentum.

The regulations that we have debated today give more working parents access to shared parental leave and pay. This is a very good thing, and I am delighted that the noble Lord is able to support them. I commend the statutory instruments to the Committee.

[Lord Young of Norwood Green]

What arrangements have we made for encouraging and advising employers and parents about the extent of the new arrangements?

[Baroness Neville-Rolfe]

I know that there is information available on GOV.UK, which is to be publicised through our communications campaign. We are engaging with stakeholders to promote and raise awareness of the new system. We are making material available to those stakeholders for them to use in appropriate formats with their existing customers and clients. From reading the Hansard report of the debate that the noble Lord had with my noble friend Lord Bourne, I notice that there were also comments about trying to engage some of the business bodies, such as the CBI. I have found, having tried to use some of the online material available on family-friendly rights of various kinds, that the websites do a very good job, and that does help. I hope that that meets the point that the noble Lord addressed.

Community Interest Company (Amendment) Regulations 2014

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 21st July 2014 Grand Committee

[Lord Young of Norwood Green (Lab)]

My Lords, I thank the Minister for her introduction and the noble Lord, Lord Hodgson of Astley Abbotts, for his seminar on the variety of different organisations, which certainly educated me. He talked about destroying trust, but even now you regularly get bits of paper through your door, sometimes accompanied by a bag, from organisations purporting to be collecting clothes for charity. It is only when you read more carefully that you realise that there is not a registered charitable number associated with it. Even now the public have to be careful when they are contributing either in cash or kind.

We are not opposed to these changes, but we have some questions, to which I trust the noble Baroness will be able to respond. One justification for this move is to increase the number of CIC start-ups, but does the Minister have any estimate of the increase that will result? What merits are there in the Government’s proposal to remove the individual share cap while retaining the aggregate cap, versus the CIC Association’s proposal of linking the individual dividend cap to profits rather than paid-up share capital? Have I made that clear, or do I need to repeat it? I am looking at those behind you. What merits are there in the Government’s proposal to remove the individual share cap while retaining the aggregate cap, versus the CIC Association’s proposal to link the individual dividend cap to profits rather than paid-up share capital? That is your starter for five.

The Government aim to create more of a market in CIC shares through the removal of the dividend cap. However, the CIC regulator has said that that alone is not enough, and that it must be accompanied by clearer guidance and a campaign to educate stakeholders. What is being done to fulfil that objective? I am glad that the noble Lord, Lord Hodgson, raised the question of the performance-related interest rate, because I confess that I did not quite understand what that meant in practice.

On a final point, as a matter of interest, although the Minister may not have the figures: have there been any situations where a CIC company has failed—due to misconduct, shall we say—in any way? What has the track record of those companies been, now that we have 9,300 of them?

[Baroness Neville-Rolfe]

My Lords, I thank noble Lords for their valuable comments during this debate, and for their kind words on my first day on the Front Bench. These regulations introduce a welcome simplification and are important in enabling and encouraging the growth of CICs and making the model accessible to more social entrepreneurs. In response to the question asked by the noble Lord, Lord Young, we expect there to be an increase of between 10% to 20% within the first two years.

With their community benefit, CICs are an important part of the social enterprise landscape which have widespread support, and these regulations will ensure that CICs remain so. The measure will encourage a wider market for investment in a key and growing model of social enterprise that is accountable and transparent in its operation. I was glad that my noble friend Lord Hodgson of Astley Abbotts joined our debate today and was able to make a valuable contribution given his great expertise in the charitable area.

I will make a number of points. The steps we are taking are cautious, and indeed, as the noble Lord acknowledged, they are intended to preserve the vital asset lock. The change to the dividend cap has been 10 years in the making. As I said in my opening speech, that has been thoroughly consulted on and is supported by the CIC community. On the point on performance-related interest, this recognises the balance between risk and reward. The 20% is a maximum and is based on profit. At present, very few CICs pay performance-related interest at all. However, I will look at the points that he made and will perhaps write to him in the light of that.

I agree with both noble Lords that the public should be properly communicated with on the availability of different types of social enterprise entities. We need to explain the options clearly to citizens—and online options in that area can be very helpful and important. That will also be important in the debate we had previously on the new family-friendly policies. We will certainly consider how we can best make sure that those new arrangements and the whole range of social enterprise entity provisions are made publicly available.

The noble Lord, Lord Young, asked about the failure of CICs. The regulator has had a number of complaints about CICs, but that is a very small proportion in relation to the numbers on the register. All are investigated, and I will write to noble Lords with the exact numbers. On the campaign to educate stakeholders, I understand that not only does the regulator place priority on this matter, but it also works closely with umbrella organisations such as Social Enterprise UK, Social Enterprise Mark and the CIC Association to promote CICs. In my experience, that is often a very good way of ensuring wider dissemination of information in the market. I am grateful for the points raised in this debate and I commend these regulations to the House.

[Lord Young of Norwood Green]

Before the noble Baroness sits down, did she cover the rather complex question I asked in her response?

[Baroness Neville-Rolfe]

Perhaps this is the question that the noble Lord kindly repeated for me, twice. I fear that I still found—

Paternity and Adoption Leave (Amendment) Regulations 2014

Debate between Baroness Neville-Rolfe and Lord Young of Norwood Green

Monday 21st July 2014 Grand Committee

[Lord Young of Norwood Green (Lab)]

My Lords, I, too, welcome the noble Baroness to her new role. I was impressed to hear that she is a mother of four boys—the gender balance is a bit doubtful, but you cannot have everything. I was also reflecting on the fact that over a long period I have been the father of five children. The paternity leave throughout that was unpaid and, when I reflect, I suppose it was a bit short as well. As the noble Baroness rightly said, times have changed. The culture and the attitude of fathers—indeed, both parents—towards their role in parenthood has changed fundamentally.

We welcome and agree with the proposal. It is worth reflecting on the fact that we spend the vast majority of our lives at work. Having the flexibility to be able to look after family, to adopt or to foster is something that we should be encouraging. It is the role of government, whether EU government or at local level, to try to find a structure that works best for such flexibility.

Previously, the focus of legislation has rightly been on mothers. That is absolutely right, but it is nice to see, with the Government’s introduction of shared parental leave, there is a greater emphasis on change. However, there is still an issue of cultural change, which I should like to discuss for a few moments. We have done some research into the impact of some of the changes beyond what it says in the impact assessment. Although we welcome the extension of shared parental leave, there is concern that, in reality, the policy does not make a lot of difference to families. The Government’s impact assessment shows that as few as 2% to 8% of eligible fathers will take part in shared parental leave. Our analysis of additional paternity leave—the precursor to shared parental leave—shows that just 1% of eligible fathers have taken that up. That is fewer than 4,000 fathers across the whole country since 2011.

It is worth looking at how transformative the measure can be. Although we welcome the legislation, especially the day-one rights, and the statutory instrument, there needs to be a cultural shift in respect of how more fathers can be involved in using shared parental leave and how to make it so that they do not feel financially disadvantaged.

If we take the financial disadvantage out of the equation, a significant cultural shift is still required. What plans do the Minister and the Government have to change that culture? It could, for example, include providing information to fathers, mothers, adopters and employers. We very much welcome the instrument, given that it addresses paternity leave issues and equalises the adoption qualification period. With those questions, we commend the instrument.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord for his support and valuable comments. He may be glad to know that I have two granddaughters, so we have managed at last to add a little equal opportunity to the family.

The main concern that the noble Lord raised was that men would not take shared parental leave, not necessarily only because of not being able to afford it but because of culture. The introduction of the new provision offers choice and flexibility to working couples in a way that ought to help bring about a culture change. There will be some early adopters, and they will be copied, so the advantage of the new regulation will be taken up. We recognise that for some couples it will not make financial sense for the father to take off extended time on shared parental leave, but it may well be hugely advantageous for fathers to take a number of short spells of leave—which, of course, we are now making provision for.

It is also worth noting that although men are the main breadwinners in many households, in 28% of households where both the man and the woman work, women are now the higher earner. I appreciated the points that the noble Lord made about the change of culture and his ideas for the dissemination of information, and I will give thought to those as we implement this very important package of measures.

To conclude, the Paternity and Adoption Leave (Amendment) Regulations make important changes to the existing paternity and adoption leave framework, which will pave the way for the smooth implementation of the new system of shared parental leave and pay, and have a significant and positive impact on adopters. I am very glad to be the Minister who is today commending the statutory instrument to the Committee.