Anna Soubry
Main Page: Anna Soubry (The Independent Group for Change - Broxtowe)Enterprise Bill [ Lords ] (Second sitting)
Anna Soubry Excerpts(8 years, 3 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
Hannah Bardell (Livingston) (SNP)
It is a pleasure to serve under your chairwomanship, Ms Buck.
I want to speak briefly to amendment 38 and new clause 16. Small and medium-sized enterprises have a vital role in driving the UK’s economic recovery, and it is a vital task of Government to ensure that finance is available to them to encourage investment and growth.
We welcome the findings of the British Business Bank’s small business finance markets report, which was published this month. It paints an encouraging picture of lending to small businesses in the past year, with an increase in equity finance for smaller businesses—there was growth of 43% in the year to October 2015. Bank lending, which continues to be the main form of finance for smaller businesses, continues to improve too, but obviously there are still significant challenges there.
However, as was mentioned earlier, 56% of smaller businesses are looking to grow their turnover this year. It is essential that suitable finance should be available to support those growth ambitions and that the Government should not rest on their achievements of the past year. By accepting the amendment, which we support, the UK Government would give the small business commissioner the power to champion lending for small businesses and to make constructive recommendations to the Government on how to encourage lending to SMEs.
As for new clause 16, we recognise that new rules were introduced for venture capital trusts, enterprise investment schemes and seed investment schemes by the Chancellor, and that the scheme would be a mechanism for incentivising investment in small enterprises. Again, we support the new clause, and encourage the Government—I hope we can see some cross-party consensus—to bring forward details and guidance about the availability of the scheme. What we are talking about is somewhat of a marketing exercise, but it is a question of getting the information out. All too often—certainly when I worked in the private sector, in the oil industry—the schemes that were available were various. Companies were not aware of what was available. It is important that we market schemes and put them out there, so that as many companies as possible take up opportunities.
The Minister for Small Business, Industry and Enterprise (Anna Soubry)
It is a pleasure to serve under your chairmanship, Ms Buck. I join the hon. Member for Sefton Central in welcoming you to your Committee Chair role for the first time. I am sure that we will all do all we can to make your experience one that you will remember enjoyably.
I will speak to the amendments—and oppose them—beginning with cash retentions. We had an extremely good debate just the other week in Westminster Hall. It was called by the hon. Member for Upper Bann (David Simpson), who rightly brought the matter before the House yet again. It is fair to say that there is absolute cross-party agreement about the need to reform cash retentions in the construction industry. I am very open about it: I think they are outdated and I do not think they are fair. They are particularly unfair to small businesses.
If the Committee will forgive me, let me say that the amendment has come too soon, and the reason is the work we are doing. We have set up a full review, and I am grateful to the Construction Leadership Council. Andrew Wolstenholme, the chief executive of Crossrail, is overseeing a full review of cash retentions in the construction industry. His work will not be completed until some time in March. His review will then come forward with recommendations.
It could be that the trust—an idea that I am familiar with—is the best way to make sure we sort out the problem of cash retentions, but there are other ideas that were debated in Westminster Hall. For example, a better way to do it might be some sort of bond scheme. Many hon. Members will be familiar with that from section 106 agreements in our work in our constituencies. To make sure that roads in housing developments are completed, the developer has to put money into a bond scheme.
There may be merit in what is being proposed, but now is not the time to do it. I think that the hon. Members for Livingston and for Kilmarnock and Loudoun have come to it too soon, because there may be alternatives. It may be that, as a result of Mr Wolstenholme’s review, other things might need to be added to legislation in the future. I think it has come too early, though I have huge sympathy for where it is going in its thrust.
Anna Soubry
Everybody is jumping too quickly. Let us have the review. One of the big mistakes we make in this place, whichever party is in control, is that we often rush into legislation in a knee-jerk way. What is important is that we all agree there are problems that need to be solved. Let us trust Mr Wolstenholme to do a thorough review and come up with recommendations. Those will then go out to public consultation. If legislation is needed, we can draft that, with, it is hoped, cross-party support—that would be marvellous. We can then make sure that we address every single feature of it and get the right result for our construction industry.
Jo Churchill (Bury St Edmunds) (Con)
May I say what a pleasure it is to serve under your first chairpersonship, Ms Buck? I want to say how much I concur with the Minister. I have run a construction firm for over two decades and retention has blighted that industry for that time. If we rush at this and get the wrong solution, we will merely be knotting the ball of wool in a different place. That will not serve any construction firm well, small or large. I welcome the review and look forward to being able to work on a cross-party basis, because we all have builders and we all need builders and small businessmen to work with those large companies, so that the system is not sclerotic but works well.
Anna Soubry
I absolutely agree with my hon. Friend. Only yesterday I met somebody with whom I specifically discussed the problem of the retention scheme and the adverse effect it has on small businesses. I hope that this matter would not necessarily need to be pushed to the vote, if only because we are in agreement. We are all going in the right direction, but now is not the time.
Alan Brown
I hear what the Minister is saying about not rushing in with a knee-jerk solution, but let us not be kidded: this problem has been around for a long time. It is not that this solution came from nowhere recently; it has been mooted before. Is it not the case that when the Bill was in the other place, an amendment was tabled that effectively put a review on a statutory footing in the Bill, which was not passed? Therefore it seems a bit contradictory that we are now having a review. How can we have any comfort that the review is going to come to something? The opposite of a knee-jerk reaction is a Government review that kicks things into the long grass. I am not saying that the Minister wants to kick it into the long grass, but there is always a risk that things get delayed and delayed. We want to do something now, but how can we get a firm commitment that it is going to happen?
Anna Soubry
I know that we do not know each other well, but the hon. Gentleman can be assured that this Minister gives absolutely her word that this matter is not going to be kicked into any long grass. In fact it is very short grass, which has only just grown, because the review will be completed by March and then recommendations will go out to public consultation. If legislation is required as a result of that consultation, I will be happy to be the Minister to take that through.
I do not wish to chide the hon. Gentleman, but he may not realise that there is a statutory adjudication scheme already in place for disputes in relation to the construction retention problem that we know is there. That system does exist. I know that small businesses often do not want to go to the adjudicator because they are fearful of complaining about a big business and souring relations—they fear that future business relations will be damaged—but it must be said that the system does exist. I wanted to put that on the record.
Kevin Brennan (Cardiff West) (Lab)
Until the Minister made that point, I think the whole Committee was with what she was saying about legislating in haste and repenting at leisure, but she then seemed to say not that she was looking forward to legislation in the next Queen’s Speech—which seemed to be the road she was going down—but that she thought what was already in place might well be adequate. Is that what she is telling the Committee?
Kevin Brennan
If not, she must clarify it on the record. That is why we are here. She does not need to look at the clock every five minutes. We need to hear it and have it on the record.
Anna Soubry
Some might say I was being slightly patronised there, Ms Buck, but I am sure that that was not the hon. Gentleman’s intention. There will be a review, which will report in March, from which a series of recommendations will go out for public consultation. I am very keen that we reform the retention system in the construction industry. If anyone wants me to repeat that, I will say it yet again, because I have said it not only in this Committee, but in the Westminster Hall debate last month: it needs reforming and we need to get on with it. I could make the point that some people were in government for 13 years and did not deal with the problem, but that would be churlish of me and I would not do such a thing. Nevertheless, the point I am making is that there is an adjudication system to help those companies that suffer.
I have also conceded that I am told on very good authority that, for reasons that we know and understand, the existing system is not working as we would like it to. In any event, I think it is out of date and unfair and it needs sorting out. I would be delighted to be the Minister who sorts it out once and for all, so that we have a modern, fair system that protects those who need to take care of all the snags and things that come to light after a build has been completed and, at the same time, ensures that the money is there so that they can make good any defects. There is a way to sort it out. It might not be what is proposed in the amendment—there might be a better way to do it—but those are exactly the things that the review will explore.
Amendment 38 specifically says that the new small business commissioner would consider complaints relating to access to finance, not complaints about whether or not small businesses have knowledge about the various schemes. One of my predecessor’s achievements was bring together as many of the Government’s schemes as possible through one portal: the British Business Bank. If someone wants access to finance, they can go to their bank or to their accountant and ask for advice, or they can seek the advice of the Federation of Small Businesses. Equally, they can google it, and one of the results will be the British Business Bank, which gives all the details of all the various schemes, not only those operated by the Government—start-up loans being an extremely good example—but also advice on peer-to-peer lending, the angel schemes, crowdfunding and so on. We are beginning to see a real change in the amount of information available, especially from that one-stop-shop, the British Business Bank, so that small businesses know where to go if they are looking for finance.
The amendment, though, is about small businesses’ complaints about their access to finance. With respect, the Financial Ombudsman Service already deals specifically with such complaints. Were we to extend the role of the small business commissioner, all we would be doing is duplicating an existing system that everyone seems to accept is working well. As I said earlier, we learned from the consultation that the one thing no one wants is the duplication of services.
The Financial Ombudsman Service is working well, and it has respect. Small businesses can go there to make their complaints; Members may well have referred their constituents. We already have exactly the device required. I argue strongly that expanding the remit of the small business commissioner would not be appropriate when it comes to finance, because we already have a very good system. Small businesses are within the remit of the Financial Ombudsman Service if they have a turnover of less than €2 million and fewer than 10 employees. So it is there for the microbusinesses.
The Financial Conduct Authority is currently consulting on whether even more small businesses should be given access to the FOS. The FOS analyses the complaints it receives from microbusinesses and reports on them every year. It also publishes occasional stand-alone reports, such as, in August 2015, “Micro-enterprises and financial services—a review of complaints”, which had the express purpose of highlighting areas of good practice and promoting change where it is needed. Access to finance for businesses is also regularly considered by Select Committees.
With respect, I really believe that the amendment would represent an unnecessary extension of the remit of the small business commissioner. Again, we must make it very clear that the primary function of the small business commissioner is to address the big problem that all small businesses complain about, which is late payment. That is where I want his or her focus and resources to be.
I turn to other matters. I think I have dealt with cash retentions in the construction industry, but I want to deal with the other amendment, which deals with the enterprise investment scheme and the seed enterprise investment scheme. Details are already published, with guidance and information, on gov.uk. We in BIS support and complement this work with promotional activity. Again, with respect, I really do not think the amendment is necessary, because what it wants to achieve is already being done.
I think that is it, unless there is anything else I need to add. I ask for the amendment on cash retentions to be withdrawn because I honestly think we are going to make huge progress very quickly and we are all on the same page. I respectfully suggest that the other amendment is just not needed: we do not need to extend the remit of the small business commissioner in this way, because others are doing the job very well for small businesses.
Bill Esterson
Let us deal with access to finance and the EIS and seed schemes. The Minister needs to read the whole of amendment 38 to consider where it is going. If the word “complaints” were replaced by the word “representations”, it might be easier to follow. The point is for the commissioner to make recommendations to Government about improving access to finance; that is the intention behind the amendment, as I thought I had explained. That is also in the explanatory statement that came with the amendment, but I will not pursue the point by pushing it to a vote.
When the Minister says that late payment is the priority, I understand that. Clearly, one has to start somewhere and that is what the Government want to do. However, as I said in my opening remarks, the second issue—it is a very big second issue—is access to finance. It is really important that we get to grips with that as well. Please understand the importance of the amendment and what it is driving at.
The Minister commented on the schemes and their advertisement on the gov.uk website. I understand that. The point I made earlier was that not enough businesses are finding them. That is why if the small business commissioner has a signposting role, he or she should use it as much as possible. Perhaps the Minister will take that away and consider it.
Anna Soubry
We want the small business commissioner to have his or her own website, and I want there to be portals—the hon. Gentleman understands these things—so somebody can click on something that says “access” and go through to the various information. That is terribly common on so many websites, so I want there to be that sort of access. The hon. Gentleman makes a very good point, and we agree that one-stop shops are the way to get information about a lot of this work out there.
Bill Esterson
I thank my hon. Friend. The Government’s proposed small business commissioner is likely, according to the Government’s own predictions, to help just 500 small businesses a year. The commissioner will serve as a signposting service to mediation services that already exist and have failed to deal with the crippling problem of late payment in the past. In fact, it was the Minister’s colleague, the hon. Member for Huntingdon (Mr Djanogly), who said on Second Reading:
“On capacity, the new £1.1 million SBC website should handle 390,000 disputes from 70,000 businesses, yet the SBC will deal with only 500 complaints a year. That gives rise to the question of what will happen with the rest of the disputes and what the real impact of the proposal will be. Could the site cope with the workload of significant numbers qualifying for assistance? That remains unclear.”—[Official Report, 2 February 2016; Vol. 605, c. 828.]
That is just the website, which the Minister mentioned. The small business commissioner will employ only a handful of staff, and there is nothing in the Bill to say that they will be legal, financial or even business experts.
We have to be honest when we look at the definitions laid out in the clause. The aspiration to support small business is lofty and laudable, but it prompts a question: without the legal clout of the Australian small business commissioner or the wide-ranging agreement with the US Small Business Administration, and without anything like the budget or staff numbers of either of them, how many such companies is the legislation actually likely to help?
Anna Soubry
I will keep this as short as I can, because I do not think that there will be a vote on the clause.
I agree with a large part of what the hon. Gentleman says. The clause defines small businesses that may access the commissioner’s functions as those with a headcount of fewer than 50 people. Financial thresholds may also be applied under secondary legislation—for example, if it transpires that there are businesses with relatively few employees, but high financial worth. They might be excluded from the commissioner’s scope, because our emphasis is small business.
I think Lord Mendelsohn talked about the “asymmetry of power”; the measure is about small businesses, especially very small businesses—the actual definition for small business is 250 employees, but we are taking that down to 50 and fewer, because those businesses simply do not have the sort of power that other, bigger businesses have. We want to redress that and to change the balance.
Perhaps the small business commissioner will not at the moment deliver as we all want them to deliver, but it is a terrifically good beginning to have someone in situ specifically looking after the needs of small businesses, concentrating on the primary role—I will be boring by repeating this—of tackling the problem of late payment, because that is the big issue that troubles the majority of small businesses. The commissioner will be their champion.
I hope to be—I like to think I am—the champion of small businesses, and that is why I was appointed. I do not know whether there has been a small business Minister before and, although I do other things as well—I seem to do everything—the emphasis is on small business. I actually sit in Cabinet because the Prime Minister wanted a Minister with responsibility for small businesses at the Cabinet table—unfortunately, he could not find one, so he got me. No! To be serious, that is why the role was created.
I am so proud that we will have the small business commissioner as the small business champion, especially for late payment. I do not think that there will be any dispute about the clause.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
General advice and information
Bill Esterson
I beg to move amendment 40, in clause 3, page 3, line 10, at end insert—
“(d) tax rates, allowances and thresholds of relevance to small business owners.”
This amendment would extend the general information and advice that may be published by the Commissioner to include tax rates, allowances and thresholds of relevance to small businesses.
Bill Esterson
I thought the Minister might say that. However, we have included it precisely because it does not seem to happen every time. After the introduction of the Groceries Code Adjudicator, both the GCA herself and commentators found that the take-up of her services by suppliers was hampered by the fact that not enough people knew about her and the services she provides. It is a simple issue of communication, or good marketing, but it takes more people than the postholder himself or herself to ensure that an awareness that they exist and an understanding of what they do reaches more than 5 million small businesses.
On a whole host of issues that we will come to later in another new clause, it seems that the Government are going to great lengths not to learn important lessons from the introduction of the Groceries Code Adjudicator. This is a simple one: make sure people know that the office exists and use the local authorities as an ideal vehicle for raising that awareness. Raising awareness is not done straight from the small business commissioner and it is not currently done from the Groceries Code Adjudicator to the many people they are trying to help. That would not be possible, given that, under the small business commissioner, we are talking about reaching more than 5 million companies. By equipping local authorities with the understanding of the post, they need to triage small local businesses into signposting the small business commissioner where appropriate, and in that way we can make light work of spreading the news. The website on its own will not do it. Local authorities will also no doubt appreciate that, not least because it will plug the gap left by so many of the Government’s cuts to councils and to national schemes designed to give advice to small businesses.
Anna Soubry
In resisting the amendments I will put the following arguments. The commissioner will give small businesses general advice and information that would be helpful for their dealings with larger businesses. I have given one such example as portals through websites. Many of us as Members of this place have our own websites, so we are more than familiar with how best to talk to constituents and provide them with information. We know that there are ways to do it that never existed before, but that will be for the commissioner to decide. I respectfully suggest that we do not need to write all this stuff down in legislation. We can allow him or her to use the abilities that they will undoubtedly have to ensure they provide the services and the general advice and information that they believe will best suit small businesses.
The commissioner will also direct to relevant bodies and sources of assistance, as I described. Our consultation showed that there is widespread support for that function, and that small businesses—I think the hon. Gentleman will agree—do not always know about the services available to them. The commissioner will address those information gaps. For example, I have no doubt that some small businesses will contact the small business commissioner with a complaint about a utility company. The small business commissioner will ensure that their complaints go to the right place, such as Ofgem or Ofcom. We all know small businesses that have huge problems accessing superfast broadband or have difficulties with their landline, BT and so on. The commissioner can give them direct access at the click of a mouse or a button to Ofcom. I have already talked about the financial services ombudsman, which is another way of helping small businesses to resolve problems and disputes.
The commissioner will not cover specific issues such as taxation, because such information and advice is already available. Nobody wants duplication. I am confident that good advice is available, so why would we double it up and confuse people further? The commissioner’s information will be sensibly integrated with other sources of business advice—as I said, access to finance is a very good example. The commissioner will decide what advice and information will assist small businesses. It can already include his or her own schemes and remedies.
I agree that awareness of the commissioner is crucial. However, he or she will be best placed to decide how to promote their services. I will absolutely trust whoever is appointed, because part of the skill set I expect them to have is the knowledge of how to get out there and ensure that everybody knows about them.
I recognise that the payday loans market has caused serious problems for consumers, but, with respect, I do not think it should be in the Bill because we took the action that was needed to address it in the previous Parliament. The Financial Conduct Authority’s more stringent regulatory regime is already having an effect on the payday loan market. It found that the volume of payday loans fell by 35% in the first six months of regulation, even before a cost cap was introduced last year.
The commissioner’s power to make recommendations about the information that the Secretary of State gives simply allows for different ways of providing information. The commissioner already has the power to publish and provide information.
New clause 14 is a good example of bad legislation. We do not need legislation to tell people to talk to one another. While the hon. Gentleman was talking about it, I wrote down off the top of my head what local authorities can and should do—many are already doing these things—to support small businesses. They should ensure that they have good, sensible business rates; create the right environment; free businesses from unnecessary regulation and undue checks; support high streets with imaginative parking by, for example, providing access for wheelchairs and buggies; ensure their local plans, core strategies and planning matters are small business-friendly; and support the high streets and all of the wonderful small businesses that we have in our constituencies. Finally—as I said, this is just off the top of my head—they should ask whether planning applications include access to superfast broadband. Good digital technology must be at the heart of their planning decisions and everything they do as local authorities.
I respectfully suggest that that sort of legislation is not needed. Local authorities, with few exceptions, know how best to work with small businesses, but it is not their job to give them advice. It is their job to create the right environment in which they can thrive and grow. That is why I urge everybody to reject the amendments.
Bill Esterson
The Minister talked about constituents contacting us via our websites. I have constituents who contact me via my website, too. I have an electorate of something like 68,000. [Interruption.] That is quite a small electorate, but not all 68,000 contact me via my website.
Anna Soubry
I am sorry; I did not say that they contact me via my website, but I understand how websites work and how they can disseminate information and enable people to access the information they need by way of portals. Obviously, an MP’s website does not have many portals, but we are all familiar with how websites operate in a modern world so that people can get the information that they need. That is all I am saying.
Bill Esterson
We can also measure how many people are looking at a website. I do not have the technical know-how to do that, but some do. I know that 68,000 people do not visit my website or anything similar to that, and 250,000—the borough’s voting population—do not visit Sefton Council’s website, either. I do not think that websites are therefore anywhere near the answer to providing access to the small business commissioner.
The Minister talked about new clause 14, which is not about getting local authorities to work on how they access business, much as I want them to do all the things that she talked about. I do not disagree with that, but that is not what the new clause is about. It is actually about ensuring that local authorities know that the small business commissioner exists and what he or she does so that they can work together to improve life for small businesses. It is a shame that she did not grasp that.
On tax, in my experience most small businesses want to pay tax; they just want to ensure that they pay the right tax. Whether that is true of some rather larger businesses, we can all speculate from time to time. To pay the right tax, however, businesses sometimes do not find that the advice from HMRC is what they need. In the Lords, we heard an example of a business attending a seminar organised by HMRC so that it could get its tax right and when, having followed HMRC’s advice, it approached HMRC to say what it thought it should be doing, HMRC disagreed and said:
“We are not bound by our own advice”.—[Official Report, House of Lords, 26 October 2015; Vol. 765, c. GC137.]
That was something of a shock to the company, which had invested all that time and effort in dealing with its tax affairs in an attempt to pay the right level of tax. That is why it is important that the small business commissioner is involved in helping businesses to understand tax rates and to pay the right tax so that they are not dependent on HMRC, which does not always act as we might reasonably expect. As that was a probing amendment, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Hannah Bardell
Following on from the hon. Gentleman’s comments, we also welcome, as we did on Second Reading, the creation of a small business commissioner, but as we said then and as we believe now, it is important that the commissioner has real power and teeth to arbitrate and to take on issues when they are brought to them, rather than just to give advice. The Federation of Small Businesses has said that it is important that the commissioner is endowed with real powers to assist small business. It is important for the integrity of the office of the commissioner that it is regarded by small businesses as a route by which they can achieve a meaningful outcome. The current suggestion of a commissioner making recommendations or highlighting particular cases is simply not enough if they are to gain a reputation as a small business champion. All too often, such bodies do not have the power to bring companies into line. If we want a fair system across the board, further powers, such as those in the amendment, are important.
Anna Soubry
It is important to refer to our consultation because it represents the voice of small business, and it showed us that small businesses want to understand what options are available through existing dispute resolution services. Small businesses have told us that there are plenty of existing resolution services and that we should not—here comes the word again—“duplicate” them. They need support to navigate the services more easily. The commissioner will provide general advice and information to raise awareness of alternative dispute resolution and direct firms to those approved mediators. Obviously, I am an old lawyer, though, of course, I was a criminal barrister, but one thing that has struck me about the changes that have occurred in the civil side of English law—I cannot speak for the situation up in Scotland—is the widespread use now of mediation, which means that people do not end up in court.
We know the cost of going to court, we know that it can actually be very traumatic. It is not just matrimonial or family matters; a business dispute can still exert a huge pressure, especially for a small business. There is a human as well as a financial cost. So the court system, certainly in England and Wales, has bent over backwards to encourage people to go to mediation, for all the very good reasons that I hope are obvious to everybody.
When we looked at the creation of the small business commissioner and what we were seeking to achieve, I was very keen to understand—I was worried, to be very honest—whether there were enough mediation services available to businesses in the event of a dispute. I was encouraged that there definitely are enough. So it is not the job of the small business commissioner to mediate, because, frankly, there are other people out there who will do the job and are doing the job.
I should say that I have not actually had the honour of meeting Mark Brennan, the Australian small business commissioner; unfortunately I could not attend the meeting, but I spoke to him at length on the phone. I will be very blunt about it: it was one of the best conversations I have ever had in this job. He spoke with all the frankness and robustness that I was hoping for—“This is difficult, you cannot legislate for this, but in tackling late payment, which is what this is all about, what we seek to achieve is to change the culture so that small businesses no longer feel the need to complain about this problem, because it does not happen, because we have changed the culture.” At the moment there are already laws to prevent unfair terms and conditions in contracts, late payment penalties and so on. There is a code of practice and, of course, if someone has already signed up to a contract and somebody has, in effect, breached the contract, they can go to law. So there are lots of protections there, but we want to change the culture so that people are not paid late in the first place.
Mark Brennan impressed on me that it is very difficult to legislate for this; this is why we are doing it in this way. He said, “The real power I have on late payments is that when I am aware of a trend or a practice by a particular business, I pick up the phone and speak directly to the chief executive”. He said that nine times out of 10—I think it was actually more than nine times of out 10, if there is such a thing—the chief executive took the phone call. That is why we need to make sure we have somebody big business respects; there was no messing about, they took the phone call. He said that as soon as he said to the chief executive, “Do you know what your finance team are saying to a whole group of small businesses?”, the chief executive said “What? They’re doing what? This is not how this business works, I had no idea this was going on” and then he or she sorted out the problem.
That is the huge power of the small business commissioner in Australia and that is what I want ours to have. I want them to have the respect of businesses—so they will take the phone call and listen to what is being said—as well as the confidence of small businesses.
John Howell (Henley) (Con)
My right hon. Friend is absolutely right to speak of the power of mediation. I happen to be the chairman of the alternative dispute resolution APPG. We had a meeting only the other evening on this, and I can assure her that she is absolutely right about the number of mediators that are available to deal with late payment disputes and other forms of dispute.
Hannah Bardell
I recognise what the Minister is saying and that there is a range of mediation services. Does she not recognise, however, that in the example she gave where the small business commissioner could phone up the chief executive, it would force the hand and have greater power if he or she were able to say, “If you can’t get this sorted out, we have an overarching power”?
Anna Soubry
We can talk about powers, which will come up later in the Bill, but we are talking about remit. It is not the remit, in my view, of small business commissioners to offer services that are already available. They can point people in the right direction, but Members must be under no illusion about what the commissioner’s role will be. If someone comes to the small business commissioner with a case that is within scope and says, “Will you mediate?” the commissioner will say, “No, I’m not going to mediate. You go off to mediation, but if you’ve got a complaint about bad practice relating to late payment, come back to me. I’ll deal with it.”
The services are there. Let us concentrate on what the commissioner’s role is. The role is to tackle late payment and to change the culture, so that we do not have so many small businesses that are not paid in time or have unfair conditions put on them in terms of when they are paid. That is why I urge hon. Members not to support the amendment. It is not the direction of travel. Mediation services are already out there, and it is the job of the commissioner to direct people to existing services.
Bill Esterson
Well, we will find out in time whether that works. The reason for quoting the Australian example is that both parties have to accept that mediation will have consequences. I think I am right in saying—the Minister will correct me if I am wrong—that if a party refuses to engage in mediation, there may be penalties if matters end up in court. That is an interesting approach.
Anna Soubry
If someone has a legal dispute and therefore issues proceedings, they will be pointed—there is no debate about it—to mediation. If they are a belligerent party and refuse to use mediation, when they come to court and lose, they will take the heavy toll of costs accordingly. At the moment, all the courts point people in the direction of mediation, and it is a very belligerent party that does not go down the mediation route. In fact, it may be almost impossible in the English system for a case to get into a county court or the High Court unless it has gone through mediation or some judge has determined that the case needs to go before it because mediation is not the correct route. In other words, we have a good system that is working.
Bill Esterson
That is interesting, but we come back to the huge problem of late payment that we are still grappling with after all these attempts. The Minister mentioned the number of pieces of legislation that have attempted to help with that.
The Minister has mentioned a number of times, including on this matter, her concern about not duplicating. If we have things that are not working, we need to consider new approaches; that is at the heart of the creation of the small business commissioner. However, it is about making the commissioner as effective as possible. That is why we have looked at mediation in the way we have. The amendment does not make the power compulsory, but it gives the commissioner the opportunity to be one of the services available.
While I do not dispute what Members on both sides of the Committee have said—that plenty of mediation services are available—if the system was working well, businesses would be finding those mediation services and using them. Something is not quite right, because it sounds like that is not happening. The constituents who have come to me have certainly not been taking advantage of such services; they have been suffering in silence when it comes to challenging those who owe them money.
I agree with the Minister; we need to change the culture. I have no doubt about that, but the question is how best to do it. This probing amendment was about doing just that. We absolutely need to raise awareness of the services that exist. If that is not sufficient in time, I hope that she and the Secretary of State—she may by then be the Secretary of State—will decide to give the small business commissioner those additional powers. Perhaps then we will have made further progress in helping to achieve the outcomes we want in reducing the level of late payments. As she quite rightly says, ideally we want it to stop being the problem that it is now. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 ordered to stand part of the Bill.
Clause 4
The SBC complaints scheme
Alan Brown
I echo what has been said. The amendment seems to be a logical extension. Earlier we supported the extension to public bodies, which I thought would strengthen the Bill, and I think this amendment would too. Fellow SMEs should be protected as well. There should not be a loophole. We do not want to get to a stage where there is an argument about what constitutes an SME. All businesses should be treated equally, and this simple amendment would allow that opportunity.
Anna Soubry
This is why we have done it in this way. As we see from the clause, the commissioner will handle complaints by small business suppliers about payment-related issues with larger businesses—that is, any medium-sized or large business. The intention of all this legislation is to help small firms where they suffer from the imbalance in bargaining power. I have referred to the words of the noble Lord Mendelsohn about asymmetry. We know that smaller firms, by virtue of their smallness—especially microbusinesses—are at a disadvantage, especially against medium and larger companies. We believe that that is where the real problem is, and that is what we particularly want the small business commissioner to address.
That is not to say that if a small business is in dispute with another small business, it will not have access to all the sorts of dispute mechanism that we have heard about, but we do not believe that is where the real problem is, or the real imbalance of power. That is why we have specified businesses of fewer than 50 employees. They are disadvantaged by their size against medium and larger companies. We know that such businesses often feel unable to challenge contract terms proposed by larger businesses, as I think we have all agreed and mentioned, because it could breach or damage existing or potential commercial relationships with those companies.
Smaller businesses may not have the time, money or expertise to take a legal challenge, which is another consideration. However, as we know, sometimes it is because they are simply frightened that if they take any form of legal action—even something like mediation—it will completely thwart the future commercial relationship between them. They are in a much weaker position by virtue of their size, so that is where we are putting all the emphasis. Their big problem is medium and larger businesses. That is why I resist the amendment.
Bill Esterson
The Minister rightly makes the point about the imbalance in bargaining power, but I repeat that 70% of trade is with other small businesses and that when a larger firm is behind the problem due to delays elsewhere in the supply chain, there does not seem to be a mechanism for addressing that. Perhaps she can take that away, if she is resisting our attempts to include small businesses: how can we deal with problems in the supply chain that come ultimately from a large or medium-sized business? With those comments, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Bill Esterson
We move to the topic of unfair treatment or unfair contracts and how they are or might be dealt with by the small business commissioner, starting with amendments 48 and 54. The issue is similar to some of the problems faced by consumers that were dealt with in the Consumer Rights Bill—is it an Act now?
Bill Esterson
I look for inspiration, and I am sure that we will get it. [Interruption.]
Bill Esterson
Thank you. Whips always know.
I think that there was an agreement in Committee on that Bill, which is now an Act, that microbusinesses have a lot in common with consumers, and that there is merit in considering them in the same way when they are purchasing goods and services, and certainly those that are not their core business. Examples include a hairdresser, who would buy shampoo or scissors as part of the business, whereas an individual would perhaps buy such things from Boots. When the hairdresser was buying coffee or a kettle for staff, however, it would perhaps be reasonable for them to be treated as a consumer. One-off business-to-business purchases made by a small business, such as somebody who is self-employed, should attract the same protection as would be afforded to consumers.
Anna Soubry
I think I ought to say to the hon. Gentleman, and to hon. and right hon. Opposition Members, that I am actually enjoying this Committee. I do not mean to be rude to previous Committees, but—[Laughter.] Members know what I mean, though. Some important points have been made by the hon. Member for Sefton Central and I want to be clear that I am listening. It is not that my mind is absolutely set and that I will not budge on anything—although I am not making any promises. What I am saying is that we are setting up a new commissioner, and the hon. Gentleman has made a good point that the Government might look at that if it is not working, so I am in listening mode. However, I am not convinced by these amendments.
The hon. Gentleman talks about the rights of the consumer apropos the rights of a small business owner, and there are arguments about that. I am not saying that it is working just because it is there, but there is quite old legislation—that does not mean to say that it is not good, just because of its age—such as the Unfair Contract Terms Act 1977, so we have to set this against pre-existing legislation. The reason that legislation is often not relied on is because, as we have already understood, very small businesses are reluctant, for all the reasons we have identified, to use existing legislation, or indeed to sue for a breach of contract. We all know the reasons—because we have already debated them—but there is existing legislation covering unfair terms and conditions, by way of example. I strongly suggest that the amendments are not necessary.
As we discussed earlier, business groups have said that the commissioner’s role should be to focus on the business of late payment and changing the culture. The commissioner absolutely should not alter the fundamental basis of contract law. It is not the role of the small business commissioner to get involved in contractual negotiations, contractual relations and, indeed, changing the law of contract. That is the role of Government. The Bill provides appropriate protection against identifying complainants to third parties, and the Government are already implementing a package of measures to address late payment to small businesses.
Alan Brown
On the previous point about it being up to the Government to change the law, amendment 54 would allow the commissioner to apply to a court to declare an unfair contract. That would not interfere with Government law. The commissioner would be making an application to a court of law for the court to decide, which is different from interfering with Government law.
Anna Soubry
If the hon. Gentleman will forgive me, amendment 54 is a very bad idea because the commissioner would be able to undermine the fundamental freedom of two businesses to agree commercial transactions on such terms as they see fit. I strongly resist that amendment.
The commissioner will consider a complaint on the basis of what is fair and reasonable in the particular circumstances, but it is absolutely not the role of the commissioner to begin to interfere with a contractual relationship between two parties, any more than it is for the commissioner in any way to undermine or begin to change contract law, for example. Laws are made in this place, not by a commissioner. Otherwise, we would be getting into the very dangerous territory of a quasi-judicial role, and I hope the hon. Gentleman might trust my admittedly very old knowledge of jurisprudence, certainly in the English and Welsh law, to know that that would be a very bad route to go along.
On amendment 57, if a complainant does not want to be identified to the respondent—[Interruption.]
Anna Soubry
I shall now deal with new clause 7, which is really not necessary given the package of legislative and non-legislative measures we have taken to tackle late payment. I shall give some examples.
We plan to make regulations this year to require large companies to report six-monthly on payment practices and policies. That information will be available for public scrutiny. We have strengthened the prompt payment code to enforce a maximum 60-day payment term for all signatories from this year. Public sector buyers are required to have 30-day payment terms in contracts and throughout their supply chains, as we discussed this morning. We have to sharpen that up—we have to be better—but it is there. From 2017, public sector buyers must also publish annually their liability to debt interest payments. Central Government will publish quarterly on liability to debt interest from April 2016, and we will monitor the effectiveness of the measures.
There has been a little jollity—if one can be jolly about the mystery shopper service—but, in all seriousness, I have been absolutely convinced by that service because I have seen the evidence of the work it does. I might not be happy with the name, but it does investigate poor payment performance by public sector bodies and in their supply chains, and it is having an effect and making a difference.
Stakeholders—that dreadful word, but they are important people who have an interest—tell us that they want more public exposure of the payment practices of larger companies, and I agree with them. Bans on certain practices would be easy to sidestep and substitute with others. However, as we all know, publicity—casting a spotlight—is one of the best disinfectants against bad practice. That is the way forward. Were we to go down the sort of legislative route suggested by the new clause, it would become all too easy to sidestep and get around, so we would not make the advances that we need to make. For those reasons, I urge the hon. Gentleman to withdraw the clause or, if he pushes it to a vote, I urge the Committee not to support it.
Bill Esterson
I am still intrigued about the mystery shopper—at some point we may find out.
Bill Esterson
The Minister is making a joke of it. I am intrigued to discover what it is finding and what is happening with its findings. I hope that we might hear that at some point. We do not need to hear today, but I would be very interested. I do agree that mystery shoppers can be very important in improving the quality of service and operation in a number of organisations.
I accept the Minister’s assurances on new clause 7, but, again, when the commissioner has been up and running for a while, it might be good for them to look at some of the payment-terms issues in the new clause and how well things such as the prompt payment code are bedding in—that is, is it as effective as we want it to be? That might be something useful that the commissioner could do in future to make a real difference.
Before the Division, the Minister talked about whether the commissioner should take unfair contract terms to court. She said that a quasi-judicial role would be inappropriate. Take the example of somebody in an imbalanced business relationship being offered a three-month payment term on an invoice, knowing full well that it is unfair and completely wrong, but, given their dependence on that contract and business relationship, feeling they have no choice but to go ahead with it. At a later date—this is what the amendment is getting at—there might be an opportunity for them to get some kind of redress. That would be the sort of issue in which the commissioner might intervene. The amendment suggests the commissioner might recommend to the court that the term was inappropriate, rather than take a quasi-judicial role. Nevertheless, I take the Minister’s points and, as the amendments were intended to be probing, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Anna Soubry
I have to say, of course, that the Bill already protects the complainant from being identified to third parties. A Government amendment was introduced in the other place to ensure that complainants are not identified through freedom of information requests, which is also an important protection. Complaints made anonymously could be covered in the annual report, if they were significant—exactly the point that the hon. Gentleman made about a pattern emerging among complaints, some of which may be anonymous and some not. If the commissioner sees a pattern, that is absolutely something that he or she can pursue. To consider a complaint fully, however, the commissioner will invariably need some detail, notably the name of the complainant.
The commissioner will not, of course, have to name the complainant to the respondent. So someone can go to the commissioner and say, by way of example, “My name is Fred Bloggs”, and then make it clear that they do not want their name to be disclosed: “I am making a complaint about Freda Bloggins Ltd. I do not want my name disclosed to them, but this is the nature of my complaint”.
If the complaint is completely anonymous, that could make the commissioner’s job difficult if not almost impossible, because they can go to Bloggins and Co. and say, “I’ve had a complaint from someone. I haven’t got a clue who it is, but they have emailed me.” That person could be vexatious and there could be an underlying dispute between them, but the commissioner would be almost bound to take up and try to pursue the complaint while not knowing anything about the complainant. That is just plain wrong and could involve a great deal of wasting the commissioner’s time.
There is no difficulty with someone coming forward and then saying, “I want to be anonymous.” That will curtail the commissioner’s ability to investigate, because if they go to Bloggins and Co. and say, “Look, I am told that one of your people who is in charge of contracts has said to someone from another business, ‘I’m going to impose payments of 180 days’ and that is absolutely outrageous and wrong,” it would be difficult for the person receiving the complaint to make full representations. They may say, “I’ve spoken to our representative and he spoke to 10 people that day. We need a bit more detail as to who he is meant to have said this to.” In other words, it is very difficult for them to defend themselves.
We have to ensure that things are done fairly, and it would be quite wrong for someone to be able to make a complaint completely anonymously. The Bill allows someone to make a complaint and then retain their anonymity and, depending on the nature of their complaint, they will be properly advised as to the consequences that might flow. Anonymity will prevent the small business commissioner from making the sort of investigation that he or she may want to make.
Mary Creagh (Wakefield) (Lab)
I apologise to the Committee for arriving late. May I pose an alternative view? During the horsemeat scandal a stream of anonymous tip-offs came in through my email that were helpful in pointing me in the right direction of where to look to see who was putting horsemeat into the human food chain. That enabled me to ask questions in Parliament and of Ministers that revealed that a variety of very large companies had knowingly or unknowingly been accepting it in. Most of those tip-offs came from legitimate suppliers who were looking around and saying, “I don’t understand how X can supply burger meat at this price when for me to do it legitimately it has to cost Y.” Does the Minister agree that it may sometimes be useful for the small business commissioner to know where to look when issues are happening?
Anna Soubry
I do not disagree at all. That is why a flexible approach rather than an overly prescribed legislative approach is what I seek, and I am told that our model reflects the small business commissioner model in Australia. If as the hon. Lady describes the small business commissioner receives a flood of anonymous complaints and—even better—some have substance to them, it is difficult to believe that the commissioner would not grab that and take it forward. However, this is about accepting and understanding the difficulty of anonymity for the person against whom the charge or complaint is made, because they cannot take part in the investigation without some more detail to answer the charge. The small business commissioner must act and be seen to act in a way that is fair to both parties.
That is why the Bill does not prohibit anonymous complaints from being made. In legislation we are making the dangers of anonymity clear and ensuring that it is fair, but not for small businesses alone. We might be biased in favour of small businesses, but when looking at complaints the commissioner must be absolutely fair to both parties.
Bill Esterson
I think the point was well made by my hon. Friend the Member for Wakefield and by the Minister that if a pattern of anonymous complaints emerges, that is absolutely something the commissioner may act on. Having carefully reread amendments 46 and 49, I accept that they might potentially be read in that way—that was the intention—but I am satisfied by what the Minister says and having it on the record is extremely helpful. Amendment 51 deals with confidentiality and I agree that in an individual case it might be difficult for the commissioner to act if complainants did not give information to the commissioner. Granted they might want to give it confidentially, but those are two separate matters and I am satisfied by what the Minister said. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 ordered to stand part of the Bill.
Clause 5
Enquiry into, consideration and determination of complaints
Bill Esterson
All three amendments are drawn from what happens in Australia. The Australian small business commissioner is a great success and we have discussed that in some detail, so it would be as well for the Government to consider what happens in Australia.
Legal powers to demand information relevant to an investigation form a crucial part of what the Australian commissioner does—note that that includes the public as well as the private sector. That is an important reminder that as the office of the small business commissioner in this country develops, the opportunity to continue to learn from the very best practices in the world remains available. The amendments are probing ones designed to allow the Government to do just that. We have discussed such matters previously, so I need say no more. I will wait to hear the Minister’s response.
Anna Soubry
It is really important that the commissioner wins the trust of small and large businesses. We need to ensure that we do not take an overly heavy-handed approach at the outset.
The commissioner will seek to change the culture of payment. The best way to do that is to take an approach that balances disincentives to encourage larger businesses to behave reasonably towards smaller businesses with support for those smaller businesses, so that they may become more savvy contractors. To do that, the commissioner needs to build trust.
The commissioner may publish a report about the inquiry, consideration and determination of a complaint, or any of those aspects. This could include reporting on whether or not a party provided information and should be sufficient to obtain engagement on all sides. In other words, it uses the huge power of naming and shaming. Compelling the production of information—I do not like that as an idea—from the parties or third parties will get us into an awful quasi-judicial situation and bring an adversarial flavour to the process, and it will invite legal argument and therefore delay. That is why I resist that.
The key issue from consultation responses on alternative dispute resolution is the need to raise awareness of what it is and what it can achieve. The commissioner will do that, as we have described. Adverse costs inferences can already be drawn by the courts, as I described in my previous comments, in the event of an unreasonable refusal to participate in mediation. I think we have got the balance right. I am grateful for the probing nature of the amendments, and I hope that what I have said will satisfy the hon. Gentleman. We have made it very clear that if things need to come back in some way after the commission has been set up—if it is not working—we are always here to listen, but we want this person to work for the benefit of small businesses in relation to late payment.