Leaving the EU: State Aid, Public Ownership and Workers’ Rights

Chris Stephens Excerpts

Tuesday 11th December 2018 Westminster Hall

[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to see you in the Chair, Mr Hollobone. As you can hear, I am going to battle through my speech this afternoon. My hon. Friend the Member for Glasgow East (David Linden) has called me a “wee sowl”—all I can say is that interventions will be very much encouraged during my remarks. First, I thank the hon. Member for Crewe and Nantwich (Laura Smith) for securing this debate, which is timely, given the game playing that we have seen over the past couple of days by the Government.

Yesterday I was expecting to address the House on the deal, but we found out that the debate was cancelled. Another reason why the debate is timely is that yesterday I was going to make the argument I made during the EU referendum campaign—to remain and reform. I understand the Lexit argument that the EU can be seen as a capitalist club, but my view was then, and is now, that the answer to neo-liberalism is not to leave for more neo-liberalism and deregulation. I fear that that is happening and very much regret that successive UK Governments, but particularly Conservative ones, have had a disgraceful record on applying for EU social funds. It is worth reflecting on that.

The hon. Member for Barnsley East (Stephanie Peacock), my friend and trade union comrade, made a point about people in lower income brackets—the same ones who would have benefited if former UK Governments had taken a more proactive approach on EU social funds. I am thinking particularly of the one for food poverty. However, the UK Government did not apply, so France and Germany got €450 million from the EU to help with food poverty, and because the UK did not apply it got the same amount of money as Malta, which was €12 million. Like many others who have spoken, I have a concern that we could end up with the UK leaving the EU and signing trade deals that would make the Transatlantic Trade and Investment Partnership look moderate.

The debate is timely also in relation to the current Government’s direction of travel on public sector delivery and the management of the economy. Already, Carillion, which was providing public sector services, has collapsed. I have previously warned here, and in written questions, about issues with Interserve, which looks like being the next Carillion.

We are also in the ludicrous position where the current Government are considering privatising veterans’ services. This must be one of few nations that would even consider that. We know the current Government’s approach to workers’ rights because of—to correct my friends in the Labour party—the “anti-trade union” Act, which is what we should call the Trade Union Act 2016.

The Government, following the passage of the 2016 Act, were forced to consider e-balloting, but almost three years down the line they have done nothing to help with e-balloting for industrial action ballots. That is relevant to the present debate because if the EU referendum had been conducted according to the same rules as a trade union industrial action ballot, it would not have been possible to prosecute Brexit. The result would have failed to comply with the 40% rule that the Government insist on applying to trade unions in industrial action ballots. I shall take a sip of water now, Mr Hollobone —if no one is keen to intervene on me.

As my hon. Friend the Member for Glasgow East has said, over the past few decades Westminster Governments have left key Scottish industries, and industries across the UK, without support. There is now a real fear that we face a Tory Brexit race to the bottom. In decades when Thatcherism, it has been said,

“swept like a wrecking ball through the mines, the steel industry, the car factories, shipbuilding and engineering and oversaw the demise of the communities which had built their livelihoods around them”

it was the Conservative Government who referred to miners as “the enemy within”. It was often felt that the same sentiment was directed towards many working communities. That Government’s attitude to many of those communities can be summed up by the classic Proclaimers song “Letter from America”:

“Bathgate no more

Linwood no more

Methil no more

Irvine no more”.

Let us not forget that the period from 1981 to 1983 was the worst recession since the 1930s, destroying one fifth of the industrial base and doubling unemployment. That was before war was declared on the miners. The Linwood car plant in Renfrewshire closed in 1981 with the loss of 4,800 jobs. Plessey Electronics in Bathgate closed in 1982. Leyland’s lorry factory in Bathgate closed in 1986 with 1,800 jobs lost. Ravenscraig steelworks closed in 1992 with the loss of 1,200 jobs. Various Clyde shipyards wound down or closed, including Scott Lithgow in Greenock in 1988.

[David Linden]

Will my hon. Friend give way?

[Chris Stephens]

I am relieved to find that someone wants to intervene on me.

[David Linden]

I am grateful to that wee sowl my hon. Friend; my question is in 22 parts so he may as well take a seat, to quote “The West Wing”.

In all seriousness, my hon. Friend is rightly listing the communities decimated by the horrific economic policy of the Thatcher Government. Does he understand that there is a clear correlation between many of the communities he named and voting yes to independence in 2014? They realised that the only way they could get fairness in a rejuvenated local economy would be through their own Government having the power to act.

[Chris Stephens]

As someone representing the constituency with the second highest individual number of yes voters in the 2014 referendum, I think my hon. Friend is right. The reason why the issue is important is that European Governments supported their steel industries against cheap imports. They supported their industrial base at a time when the UK did not. There are fears at the moment, with the current Government refusing to match Scottish Government funding for the Tayside deal to support Michelin workers who face job losses. It just goes to show that the “nasty party” tag is still alive and well.

The Scottish Government have had to intervene to help commercial shipbuilding on the Clyde, finding a new buyer for the Ferguson shipyard, and they have also intervened in relation to securing a new owner for the steelworks. For the first time, following a campaign and the amendment of the law, the Scottish Government have secured the power to allow a public-sector bid for a rail franchise in Scotland. It was Westminster that sold off public services, not the European Union, as my hon. Friend the Member for Glasgow East described very well. It is the Scottish Government who are pressing ahead with plans for a national investment bank and public energy company.

Workers’ rights are a passion of mine. I was a trade union activist before I arrived in this place. It was the European Union that forced successive Westminster Governments to improve workers’ rights. The pregnant workers directive of 1992 guaranteed women a minimum of 14 weeks’ maternity leave, and that forced the then Labour Government to go further.

The European Court of Justice made it clear that any discrimination against a woman because of pregnancy or maternity leave is sexism and should be treated as such. It was EU law that provided that parents must be allowed 18 weeks’ unpaid leave from work to look after a child. The equal treatment directive led to UK law banning discrimination on the grounds of age, religion or sexual orientation. Indeed, that directive is helping many women, particularly in the public services, to make equal pay claims. I am grateful for that, and should declare that I am currently an equal pay claimant against my former employer—but I shall move swiftly on.

EU rules adopted in 2008 provide that temporary workers must be treated equally with directly employed staff, which includes the giving of access to the same amenities and collective services. We know from research that 41 of the 65 new health and safety regulations introduced in the UK since 1997 have come from the European Union. The Scottish National party takes the issue of tackling exploitative working practices extremely seriously, and we oppose the “anti-trade union” Act 2016.

My hon. Friend the Member for Glasgow East is campaigning for the UK Government to stop discriminating against young people and ensure they get a real living wage. My hon. Friend the Member for Glasgow South (Stewart Malcolm McDonald) is promoting the Unpaid Trial Work Periods (Prohibition) Bill, and I recommend the well-crafted and beautifully written Workers (Definition and Rights) Bill that seeks to simplify the status of workers in law and eliminate zero-hours contracts. I thank everyone who has contributed to this debate. SNP Members oppose neo-liberalism. We do not see Brexit as a way to enhance neo-liberalism, and if it turns out to be it will be a disaster for this country—it will be a disaster for the United Kingdom.

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[The Minister for Universities, Science, Research and Innovation (Chris Skidmore)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Crewe and Nantwich (Laura Smith) for securing this important debate. There were passionate and learned contributions from the hon. Members for Glasgow East (David Linden) and for Barnsley East (Stephanie Peacock), from my hon. Friend the Member for Henley (John Howell) and the hon. Member for Glasgow South—

[Chris Stephens]

South West.

[Chris Skidmore]

Apologies—the hon. Member for Glasgow South West (Chris Stephens). I was deeply impressed by the hon. Gentleman’s ability to speak through his vocal impairment; he was cutting quite loudly through it by the end of his speech. We also heard from the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) and, last but not least, the hon. Member for Stroud (Dr Drew), whom I thank for his generous congratulations on my fifth day in my new role.

[Chris Skidmore]

I am deeply grateful for those kind words. I am getting stuck into the job by appearing at this debate, but I am here to represent the views of my Department as a replacement Minister. My hon. Friend the Member for Rochester and Strood (Kelly Tolhurst), the Minister for Small Business, Consumers and Corporate Responsibility, sends her profuse apologises that she has been unable to attend. She is representing the Department in the debate on the Accounts and Reports (Amendment) (EU Exit) Regulations 2018 in Committee corridor. I am here in her place to represent the Department’s views.

Let me start with what state aid rules are and why they exist, what is and is not state aid, and when it is allowed. Put simply, state aid is Government support or subsidy of an economic operator that gives it an advantage it could not get on the open market and distorts competition in the single market. The EU has tough rules governing the way subsidies can be given, to stop companies from getting an unfair advantage over their competitors and to ensure that countries with deep pockets do not subsidise their companies to the detriment of companies in other member states. However, where there are good policy justifications for state aid—where the benefit from giving aid outweighs the potential harm of a subsidy—the rules enable aid to be given.

Not all Government spending is aid. In fact, less than 1% of UK Government spending meets the technical definition of state aid. The state aid rules are about supporting fair and open competition, and the UK has long been a vocal proponent of them. The rules exist to stop countries from subsidising their industries unfairly, which would put businesses out of business and workers out of work.

A second misconception is that state aid rules prevent nationalisation. As long as the Government do not pay more than the market price for any assets acquired, the rules do not prevent that. However, the rules oblige the state to act as a normal market investor. That is good, because it prevents public authorities from unfairly distorting markets. State aid rules are neutral on public ownership and on the detail of spending decisions.

State aid rules are also fundamental to any free trade agreement. The political declaration on the framework for the future relationship between the EU and the UK recognises that. Free and fair trade is not possible if one party is able to subsidise without restraint. In a single customs territory that allowed the free trade of goods, as provided for in the draft withdrawal agreement, neither the EU nor the UK would be able to apply tariffs as measures against unfair subsidies by the other party. To ensure fair and open competition, it is absolutely necessary for the same state aid rules to apply consistently within the single customs territory, not to be frozen or disapplied for one bit of it.

I turn to workers’ rights, which have been the predominant topic of discussion. It is important to be clear that we are not making a choice between protecting state aid rules and protecting workers’ rights. As a responsible Government, we will work both to prevent unfair subsidies and to protect the rights of workers. The UK—we had several history lessons through some of the learned contributions to the debate—has a long-standing record of ensuring that workers’ rights are protected. Those include employment and equality rights, and protections for health and safety at work.

The decision to leave the European Union does not change that. This Government have made a firm commitment to protect workers’ rights and to maintain the protections covered in the Equality Acts.

[Chris Stephens]

Can the Minister tell us when the Government plan to publish their proposals in response to the Taylor review?

[Chris Skidmore]

In terms of the Government’s commitment and the commitments I am giving today, I reflect that the Prime Minister said recently in the House that

“we already go further than EU minimum standards, including on annual leave, paid maternity leave, flexible leave, paternity leave and pay, and parental leave, because we know that the first responsibility for protecting those rights sits with…Parliament. As we take back control of our laws, we will not only honour that responsibility, but go further still…by implementing the recommendations of the Taylor review. So we will not just protect workers’ rights: we will enhance them.”—[Official Report, 4 December 2018; Vol. 650, c. 760.]

The Government have been clear that they will take the recommendations of the Taylor review forward.

Draft Textile Products (Amendment) (EU Exit) Regulations 2018

Chris Stephens Excerpts

Monday 19th November 2018 General Committees

[Kelly Tolhurst]

The EU regulations are currently enforced by the individual member states of the European Union, of which we remain one. Our enforcement is currently carried out via trading standards at regional and local level, in conjunction with our National Trading Standards force. That is the system that will be in place if we approve the instrument.

The EU regulation also empowers the European Commission to approve new textile fibre names and to modify technical provisions, such as testing methods. The draft regulations also modify the Textile Products (Labelling and Fibre Composition) Regulations 2012, which set out enforcement provision for the EU regulations in the UK.

The European Union (Withdrawal) Act retains in UK law EU regulation 1007/2011 in its entirety on exit day, but once the UK leaves the EU, the EU regulation will no longer apply to textile products placed or made available on the UK market. To maintain high consumer protection, the draft regulations make essential changes to ensure that requirements to indicate the fibre content of textile products and non-textile parts of animal origin continue to apply after our exit from the EU. The draft regulations also remove provisions that will no longer be relevant, such as requiring a label to be in an official language of the European Union. After exit, the label must be in English.

The draft regulations also transfer the power currently exercised by the European Commission to approve new fibre names, tolerances—the difference between the fibre composition on the product label and the actual composition demonstrated through testing—and testing procedures to a UK Secretary of State. This is necessary because after the UK leaves the EU it will no longer be appropriate for the European Commission to approve new textile fibres for the UK market. Repatriation of the functions will enable the UK to amend its textile labelling requirement to take into account innovation and technical advances in the textiles sector.

[Chris Stephens (Glasgow South West) (SNP)]

My question is similar to that asked by the hon. Member for Harrow West. Will the Minister give us some assurances about what protection there will be against cheap textile copies being imported if the UK leaves the European Union?

[Kelly Tolhurst]

As I outlined, we already have a strong enforcement regime exercised by trading standards at local level. Also, trading standards and the Office for Product Safety and Standards work at the borders making checks on products coming into the marketplace that may not be legal under the regulations. That will continue.

After EU exit, businesses will be able to apply to a UK Secretary of State to have a new fibre name adopted for the UK market, just as they can now apply to the European Commission. Finally, to maintain higher levels of consumer protection, the powers and penalties applicable to breaches of the EU regulation will be retained after EU exit. The regulations make only minor amendments to the UK textile labelling regulation to ensure that there are no references to the EU process: for example, they remove the need for the Secretary of State to have regard to the penalties for breaching the EU regulation in EU member states when carrying out a review of the regulation.

The draft regulations deliver certainty and stability for consumers and business—a key objective for the Government.

Carillion

Chris Stephens Excerpts

Thursday 12th July 2018 Commons Chamber

[Rachel Reeves]

My hon. Friend makes an important point. The people who rely on audit are the shareholders, and also the small businesses that supply the company, the people who work there and the pensioners who have saved for their pensions with that business. But they are not the people who employ the auditor, and they are not the people the auditors are accountable to. The auditor is accountable to the audit committee of the business, and it is often appointed by that committee on the advice of the chief financial officer. So, as my hon. Friend says, the incentives are all wrong.

I am pleased to see that our report has prompted some long-overdue soul searching in parts of the audit profession. While the written reactions of the big four accountancy firms to our report differed, they all seem to recognise that there were issues to be addressed. The Institute of Chartered Accountants in England and Wales has recognised this as a watershed moment, and it is leading a review of the audit profession. I hope that that review will propose some radical solutions. We have now referred the audit market for investigation by the Competition and Markets Authority. The new chair of the CMA, Lord Tyrie, was endorsed in his role by the Business, Energy and Industrial Strategy Committee, and he should now demonstrate the same determination he showed in this place leading the Parliamentary Commission on Banking Standards when he looks at the future of the audit market. I am convinced that we have to find a way of making the audit market more competitive and audits themselves more trusted, and of ending the conflicts of interest that can damage the reputation of some of our economy’s major firms.

Behind the company and its auditors and advisers, there are statutory regulators who should have been expected to step in when the business and the audits were seen to be failing. Carillion’s finance directors and auditors were subject to scrutiny by the Financial Reporting Council. Now that the company has collapsed, two former CFOs are under investigation for the preparation of financial statements, and Carillion’s auditors are subject to further scrutiny. During our inquiry, we heard that the FRC had already taken an interest in the situation at Carillion, and that it had concerns about the quality of previous audits by KPMG. However, the regulator had been far too passive. It accepted extra disclosures being made by KPMG and Carillion the following year without any further follow-up action and, although it found repeat issues with KPMG’s wider audit work across other companies, it seemingly took no firm action there either.

Carillion’s huge pension debt was a matter of concern to its pension trustees and the Pensions Regulator, the other regulator involved, but the regulator’s response, again, was feeble. It threatened to impose a contributions schedule and then left the power unused. It sought to negotiate a payment agreement and then agreed precisely with what the company wanted. It launched action only once the company collapsed and then it was too late. Again and again, the Pensions Regulator barked but did not bite. While plugging the £2.6 billion hole in the pension fund would not have saved the company, it could have reduced the largest ever burden on the Pension Protection Fund, which will see pension holders receive less than they have been promised by their company’s scheme. It is telling that none of Carillion’s directors was in the collapsed scheme.

The Committees found serious concerns about the performance of both regulators, including their powers, remit and leadership. If regulators are not working well, employees, investors, suppliers and customers can have little confidence in the businesses in which they are invested. Statutory regulators need to be doing more. Across the work of the Business, Energy and Industrial Strategy Committee, we rarely find ourselves criticising regulators for being too bold. Instead, we keep hearing timid bodies apologising for letting consumers down. That needs to change, and the change should be led from the top.

[Chris Stephens (Glasgow South West) (SNP)]

The hon. Lady is making an excellent speech so far. Does she agree that one of the Committee’s concern was that the companies that were being taken over all had sick pension schemes and that the Pensions Regulator should have been asking serious questions at that point?

[Rachel Reeves]

The hon. Gentleman, who sits on the Work and Pensions Committee, is absolutely right. When Carillion took over companies such as Mowlem, McAlpine and Eaga, it was taking on businesses, yes, but it was also taking on huge pension deficits, which contributed to the problems. However, the business could have decided to address that pension deficit. It was not that nothing could be done. It could have decided to pay money into the pension fund instead of paying out to shareholders and to directors in the form of bonuses, but it decided to do the exact opposite. It made the wrong choices and prioritised the wrong people. It prioritised itself.

The announcement of the Kingman review into the FRC is a welcome start, but the Government must confirm that they are willing to see radical change, including giving regulators more powers if needed and holding them better to account for not using the powers they already have.

The Government, the audit profession and the regulators need to take urgent action. They owe it to the tens of thousands of people affected by Carillion’s collapse and to the untold number of people who could be affected if this is ever allowed to happen again. There are some clear lessons. In contracts, best value is not the same as the lowest price. Outsourcing is not always better than doing things in-house. Privatisation does not mean that the risk or the cost of failure when things go catastrophically wrong are contracted out.

We would all like to think that this is a case of one horrendously badly run company—Carillion was horrendously badly run—but with Interserve, Capita and Mitie all facing difficulties, we would have to be pretty brave to conclude that this is a one-off. We need to restore integrity to British business and the firms that audit them. Six months on, we have regulators reviewing and reviews of the regulators, but we need firmer action on corporate governance, on breaking up cosy cartels and on toughening up sanctions for misconduct. To secure our public services, for jobs, for small business, for contractors and for pensioners, that action is needed and it is needed now.

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[Chris Stephens (Glasgow South West) (SNP)]

First, I thank the hon. Member for Leeds West (Rachel Reeves) for securing this debate. It was a pleasure to be on the joint inquiry, chaired by the hon. Lady and the right hon. Member for Birkenhead (Frank Field). All I can say, having sat on that inquiry, is that the evidence revealed at every session was a real eye-opener. The report stands as one of the most damning indictments of the total failure of a political ideology that assumes that privatisation and outsourcing are always value for money and better than the public sector. The report does not, to use that Glaswegian phrase, miss and hit the wall. If there is one sentence that sums up the entire fiasco, it is this:

“Carillion’s business model was an unsustainable dash for cash. The mystery is not that it collapsed, but how it kept going for so long.”

I have often wondered what quality in someone’s character enables them to collect the eye-watering salaries and bonuses that typify the worst excesses of the corporate world. I can only come to the conclusion that the answer is shamelessness, because it certainly was not competence or caution with public money. However, as the evidence sessions went on, I was clear that it was not just an organisational failure in one company, but a systematic multi-organisational failure.

The key themes revealed were corporate greed, lack of regulation, the big four auditing companies creaming money from struggling companies and pensions scheme stability sacrificed for dividends to shareholders. It was quite astonishing evidence. I asked Carillion’s chief executive, Keith Cochrane, whether dividends to share- holders were a higher priority than employees in the pension scheme. His answer was that he would not look at it that way. The hon. Member for Leeds West went on to say that if parents had two children and the younger child was getting paid less pocket money than the eldest child, and the youngest child said to the mother, “I think I’m a lower priority,” the mother would not necessarily reply, “That is not the way to look at it, dear.” That was some of the astonishing evidence we got from the company.

It was quite clear that the company was ready to dump the pension fund into the Pension Protection Fund; it was very clear on that. Its business model relied on even more acquisitions, rising debt, expansion into new markets and exploitation of suppliers, with a side order of creative accounting and an out-of-control bonus culture. The company was gambling with public assets and finances, always seeking to eliminate any competitors, squeezing subcontractors and suppliers through delayed payments as a matter of course and ignoring its pensions liabilities. Those tactics are straight out of the Robert Maxwell school of risky business. The only element of risk that was carefully managed was ensuring that bonuses could not be recovered in the event of problems arising with the company. Boardroom lifebelts were well and truly secured on this corporate version of the Titanic, with the auditors signing off on their assurances as the SS Carillion steered full speed ahead to the icebergs.

The practice of illustrious advisory firms telling clients exactly what they want to hear in order to secure future business was a feature of the 2008 crash and has continued despite everything. As the report states:

“Advisory firms are not incentivised to act as a check on recklessly run businesses. A long and lucrative relationship is not secured by unduly rocking the boat.”

The culture of corporate back-scratching and covering for one another has flourished in the absence of any firm regulatory regime. The frustration for those of us with a public sector background is seeing the chickens come home to roost when all along trade unions have been making the case against privatisation, based on well-founded fears of what happens when profit becomes a central feature of public sector delivery. What price public services when those in charge of delivering them operate in an environment of chaos, with contempt for the concept and ethos of public service delivery? The key question is this: how many more wake-up calls do there have to be before people intervene?

Draft Companies (Miscellaneous Reporting) Regulations 2018

Chris Stephens Excerpts

Wednesday 4th July 2018 General Committees

[Catherine West]

Will the Minister give way?

[Chris Stephens (Glasgow South West) (SNP)]

Will the Minister give way?

[Andrew Griffiths]

I will make some progress, if I may. I think I have been quite generous in giving way.

The final part of the regulations relates to reporting by community interest companies. The Companies (Audit, Investigations and Community Enterprise) Act 2004 requires CICs to produce a community interest company report annually, including information about directors’ remuneration. The regulations clarify that small CICs must report on their directors’ remuneration. That obligation was inadvertently removed when associated provisions regarding small companies were repealed in the course of implementing the accounting directive in 2015. That was not part of the corporate governance reform package, but the regulations present a good opportunity to remedy the gap. It is uncontroversial and does not involve any change in policy—indeed, small CICs have continued to file the information.

I hope the Committee will support the regulations.

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[Chris Stephens]

I do not know which of my questions have been put by the shadow Minister, but my key concern is that, as I understand the regulations, the UK Government plan to wait five years before assessing whether further action needs to be taken. If after the first or second year, we have not seen any change in company behaviour on pay ratios, will the Minister monitor, review and consider taking action at that stage? Five years may be too long to wait.

The shadow Minister mentioned Carillion. When I sat on the Carillion joint inquiry, I was astonished to see that bonuses for directors and shareholder dividends were given a far higher priority than the management of the pension fund. The money that Carillion was not putting into the pension fund was a key concern.

That brings me to my next question to the Minster. Many of the companies that will have to comply with the regulations have public sector contracts. If those companies do not comply with the regulations or maintain pay ratios that are a cause for concern, what would that mean for public sector procurement? Those companies are effectively making millions out of taxpayers when they get public sector contracts. Have Ministers discussed what happens if those companies do not change their behaviour?

I also wish to echo the comments on the gender pay gap made by the shadow Minister. That does seem to be growing and is a cause of concern for us all.

Insecure Work and the Gig Economy

Chris Stephens Excerpts

Wednesday 20th June 2018 Westminster Hall

[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to see you in the chair, Mr McCabe. I congratulate the hon. Member for Barnsley East (Stephanie Peacock) on securing this debate and on her private Member’s Bill, of which I am a sponsor. I also want to take the opportunity to commend the work of Better Than Zero, an organisation primarily organised through the Scottish Trades Union Congress youth committee, which continues to expose rogue employers in Scotland.

Mr McCabe, you and I sit on the Select Committee on Work and Pensions. You will know that there are 4,504 full-time equivalent posts chasing social security fraud estimated at £1.2 billion. There are 400 workers from the state who are employed to chase minimum wage compliance. If the minimum wage compliance unit had 4,504 full-time equivalent posts, I just wonder whether there would be 200,000 workers in the United Kingdom not being paid the national minimum wage.

Another piece of legislation, in addition to the hon. Lady’s, is the Workers (Definitions and Rights) Bill. It is in my name, and it proposes a number of key things as solutions for workers in the gig economy. First, it looks at zero-hour contracts. I think they should only be in place where there is a collective agreement with a recognised trade union. That will be the test of whether the claim that people like zero-hour contracts is actually true or not. Mainly people tell us that people like zero-hour contracts, but I have never met anyone who went to a careers adviser at school and said, “I want wan o yon zero-hour contracts.” It just does not happen.

[Alex Sobel (Leeds North West) (Lab/Co-op)]

Has the hon. Gentleman considered alternative contracts such as they have in other countries? In Holland, for instance, they have contracts by agreement, which are fixed-term agreements paid by the hour with a legal route to permanent contracts. Is that something that he would consider in his legislation?

[Steve McCabe (in the Chair)]

Order. Just before the hon. Gentleman replies, I would point out that if people keep taking interventions, some people are going to drop off the end.

[Chris Stephens]

I am not opposed to what the hon. Member for Leeds North West (Alex Sobel) suggests.

I want to deal with the important issue of shift changes. Some of us in the Chamber attended a TUC event earlier this year. It is clear that two things are happening: sometimes shifts are cancelled, which means that people miss out and have to pay for childcare, and sometimes people are told they have to work additional hours. There is a real case for saying that if people turn up at work and are told that they have to work additional hours or that their shift is cancelled, they should be paid double time so that they are compensated for childcare.

We must also look at worker status. I have a very real concern about the Taylor review trying to introduce additional tiers of worker. There should be a single definition of a worker. It is clear that if someone provides their labour to an employer, they are a worker—full stop. Self-employment is also easily defined. It seems clear to me that a window cleaner with 200 customers is self-employed. We really need to address the issue with worker status to help the many people who are told that they are self-employed when, in actual fact, that is bogus.

I want to touch finally on an issue that we have seen with Carillion and in other places, such as a Hilton hotel in Scotland, where a hairdresser absconded with £80,000, leaving four workers without a job, and the hotel said, “Not our responsibility.” We need to deal with that issue, too. Where an employer absconds or goes bust, the principal contractor should be responsible for the wages and the terms and conditions of its workers.

I thank you, Mr McCabe, for calling me to speak, and I thank the hon. Member for Barnsley East for securing the debate.

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[Andrew Griffiths]

I completely understand the hon. Gentleman’s point. That is why we have recognised that those opportunities come with risks, and that some in the workforce need greater protections.

The UK’s flexible, dynamic labour market has allowed the economy to bounce back from Labour’s recession and has delivered record employment; unemployment is at the lowest rates for 40 years. However, we recognise that it has not worked for all. It was for that reason that Matthew Taylor was asked by this Government to examine the current labour market and employment law framework, to help us to understand the opportunities of future working practices as well as to identify areas where the labour market was not working for everyone.

That is why in February the Secretary of State for Business, Energy and Industrial Strategy made a commitment in the industrial strategy to take responsibility for the quality of work, which was the first time ever that a Government focused on quality as well as quantity of work. Our aim is to drive forward the change required to ensure that creating quality of work is given equal priority to the quantity of work that is created.

Our detailed response to the Taylor review was published on 7 February. In that response, we committed to take forward 52 of the 53 recommendations. Our response clearly demonstrates that we are progressing with our commitment to take firm action to protect the most vulnerable, the lowest paid and those who work in a non-traditional way.

For example, we have consulted on state enforcement to ensure that vulnerable workers get their holiday and sick pay; we have asked the Low Pay Commission to consider higher minimum wage rates for workers on zero-hours contracts; we are providing all 1.2 million agency workers with a clear breakdown of who pays them, and of any costs or charges that are deducted from their wages; we are ensuring that all workers get an up-front statement of terms and conditions from day one; we are making it easier for flexible workers to accrue employment rights, by extending the permissible breaks in continuous service; and we are creating a right to request a stable contract for all workers. To progress that work, we have very recently completed four consultations on employment status, agency workers, transparency and enforcement, which are necessary to deliver the change that this Government wish to see.

The hon. Member for Barnsley East asked whether we would give workers the same equal pay rights as other employees. The Government do not support or condone the use of Swedish derogation contracts to circumvent equal pay entitlements. Let me be absolutely clear on that. That is why we have consulted to gather views and evidence on our response. Options include repeal or regulation in relation to the use of the Swedish derogation. Before taking a final decision, it is right that we consider the views coming forward properly in that consultation.

The hon. Member for North West Durham (Laura Pidcock) accused the Government of ruthless whipping. As a former Whip, I take great exception to that. She raised the issue of zero-hours contracts, but the number of people reporting that they are employed on a zero-hours contract is down from 905,000 last year to 901,000. Some 6% of businesses use some form of a zero-hours contract. There are 1.7 million temporary workers in the UK, but 28.4% of them said that they did not want a permanent job.

My hon. Friend the Member for Chichester (Gillian Keegan) made a magnificent speech, and pointed out the challenges and the opportunities of the gig economy. She rightly said that 90% of gig economy workers are satisfied with the jobs they are doing.

The hon. Member for Glasgow South West (Chris Stephens), in his usual determined manner, said that there should be more people enforcing the minimum wage. I am delighted to tell him that the Government have continued to invest heavily in minimum wage enforcement. We have doubled the budget to £26.3 million, up from £13 million last year. As a result, we secured £15.6 million in arrears last year, covering 200,000 workers in this country who had redress thanks to the Government’s support.

[Chris Stephens]

Will the Minister confirm that 25% of the posts at the national minimum wage compliance unit are still lying vacant?

[Andrew Griffiths]

I do not think that is right. I will write to the hon. Gentleman, but I assure him that those figures are wrong.

The hon. Member for Batley and Spen (Tracy Brabin) asked what the Government have done about pregnancy and maternity discrimination—a subject that is dear to my heart and that of the hon. Member for North West Durham. In response to Taylor, we are working to improve the guidance and advice on pregnancy and maternity rights and employers’ obligations. We also committed to review redundancy protection within the next 12 months. The hon. Member for Batley and Spen asked about shared parental leave for self-employed people. As she recognises, it is under review. I cannot commit to that today, but once again she makes that point loud and clear.

The Taylor review considered not only the plight of agency workers, which many hon. Members raised. In his 2018-19 strategy, the director of labour market enforcement published recommendations to support those workers. In response to Matthew Taylor’s recommendations on agency workers, the Government have already committed to take action and improve transparency on pay and on the rate workers will receive on taking up assignments. Quite simply, it is not right that individuals do not receive the advertised rate of pay.

I have mentioned the issue of the Swedish derogation. We are also considering extending the Employment Agency Standards inspectorate’s remit better to protect agency workers from emerging challenges in the labour market. We are looking at whether it should include umbrella companies, about which we all have concerns. I am sure the hon. Member for Barnsley East understands that I cannot pre-empt the results of the Taylor consultation. It is clear that Members on both sides of the House agree that agency workers’ employment rights need special consideration and protection.

The Government are committed to ensuring that the UK is a great place not just to grow a business, but to work. We understand that being employed is not enough if the employee is at risk of being exploited or mistreated by their employer. We have consulted on options for what would be the most radical shake-up of our employment law in decades and we will take the necessary action to protect workers across the United Kingdom.

National Living Wage: Under-25s

Chris Stephens Excerpts

Thursday 3rd May 2018 Commons Chamber

[David Linden (Glasgow East) (SNP)]

I hope that you have made yourself comfortable for my four-hour speech, Madam Deputy Speaker, as I intend to take us up to half past 5. I can see some people panicking. They should not worry—I will not do that.

I am very grateful for the opportunity to raise the UK Government’s disappointing decision to exclude under-25s from the national living wage. Before I do so, however, it is important at the outset to make a clear distinction between the UK Government’s so-called living wage and the real living wage. The fact is that the UK Government’s living wage is a con trick, and at just £7.83 an hour, their con trick living wage falls desperately short of the real living wage, as set by the Living Wage Foundation.

The Living Wage Foundation takes into account the cost of living and other factors and recommends that living wage employers pay a minimum of £8.75 an hour, or, for London, £10.20 an hour—so straightaway we have an issue whereby the Government’s so-called living wage is not actually a living wage. However, the real issue I want to press the Minister on relates to the deliberate and discriminatory decision to exclude under-25s from being paid the national living wage.

[Chris Stephens (Glasgow South West) (SNP)]

Does my hon. Friend not find it ironic that if there were local elections in Scotland today, someone aged 16 could vote in them, yet they would not qualify for the adult rate of the national minimum wage?

[David Linden]

Indeed. My hon. Friend tempts me down the route of talking about taxation without representation. Perhaps we can return to that in the next four hours, but I shall press on with my speech for the time being.

At the moment under UK law, the only safety net that someone under 25 has is the national minimum wage. That means that if they are aged between 21 and 24, they can be paid just £7.30 an hour. Someone aged between 18 and 20 can be paid just £5.90 an hour, and someone aged under 18 can be paid just £4.20 an hour. Even worse, an apprentice can earn as little as just £3.70 an hour. I will return to the issue of apprenticeships later.

The Government and no doubt the Minister will be at great pains to tell us today that the reason wages are lower for under-25s is that they want more jobs to be created. They say that lower wages reduce youth unemployment, but I would argue that the economic evidence does not back that up. When we drill down into the research, we see that only two countries in the European Union have separate minimum rates of pay for over-25s. One, of course, is the United Kingdom, and the other is Greece, where youth unemployment is at 40%.

The Government like to say that the UK has hit record levels of employment and that they are doing good work to tackle youth unemployment. However, I want to convince the Minister today that the UK Government should take a different path and instead follow the lead of the Scottish National party Scottish Government. Our fair work agenda is not just warm words; it is concrete action to lift people out of poverty and into prosperity.

First, the SNP Scottish Government are a living wage employer and pay their staff a real living wage of at least £8.75 per hour. Secondly, we have the Scottish business pledge, which has attracted support from hundreds of companies that have signed up to nine key principles, which include paying a real living wage, not using zero-hour contracts and investing in youth. I want to focus particularly on that third principle of investing in youth.

At 16 years old, I decided to leave high school and begin my working life. I never went to college or university but instead undertook an apprenticeship with Glasgow City Council. Ten years on from completing that apprenticeship, I am immensely proud to have been elected as an MP, providing a voice again for my home community. However, one thing that I am not willing to do is come here and simply pull the ladder up behind me. Pay equality matters to me, not just because I am a young MP and a former apprentice, but because I believe, with every fibre of my being, that work is the best route out of poverty. The Prime Minister has said the same herself. She says that she wants to build a country that works for everyone. I presume that by “everyone”, she means people under the age of 25. That is why the Government must take action urgently to ensure that people are paid the real national living wage, regardless of their age.

The UK’s Equality Act 2010 rightly provides for a number of key protected characteristics. It prohibits discrimination on the grounds of gender, race, sexual orientation or disability. How, therefore, can we be in this ludicrous position in which people under 25 are paid less simply for being a particular age? We would not say that someone should be paid less because that person was a woman; we would not say someone should be paid less because that person was black; we would not say that someone should be paid less because that person was gay; and we certainly would not say that someone should be paid less because that person was disabled. The UK Government, however, operates a system under which employers are actively encouraged to pay under-25s less because they are younger.

[Chris Stephens]

Is it not another economic fact that those under 25 often face the same costs as those over 25—for example, rent or other housing costs, food costs, utility bills and the like?

[David Linden]

My hon. Friend has made a powerful and valid point, which I shall come to later.

I hope very much that when the Minister comes to the Dispatch Box, he will not trot out the usual lines, which fall apart when subjected to any scrutiny. Let me deal with one or two of them now. For example, Ministers tell us that younger workers have less experience and should therefore receive less pay. Unfortunately, younger workers do not get a discount on their shopping, fuel or rent when it comes to paying their bills. One area in which young people do qualify for help is housing benefit, but only after a recent screeching U-turn from the Government on their abhorrent policy of excluding 18 to 21 year-olds.

The discriminatory exclusion of under-25s from the national living wage takes no account of how people actually live. For example, by the time I was 25—which was actually not that long ago—I had already been married for three years. I owned a house, and I was a father. I urge Ministers to look at the actual data rather than rehashing old arguments, and to consider the economic case for including under-25s in the national living wage.

[David Linden]

Absolutely. That is what drives the Scottish National party’s fair work agenda. It is about fairness, and about lifting people out of poverty. I thank my hon. Friend for her powerful intervention.

[Chris Stephens]

The example given by my hon. Friend the Member for Aberdeen North (Kirsty Blackman) was indeed powerful. Is this not another powerful example? If a 17-year-old is working in a fast-food restaurant flipping hamburgers next to someone who is 37 and doing the same job, there is a massive disparity between their wage rates.

[David Linden]

My hon. Friend is absolutely right. What he has said takes us back to the central point that a fair day’s work should result in a fair day’s pay.

If the Minister looks at the data, he will see that 2.5 million young people do not live with their parents. That is 2.5 million young people paying for shopping, rent and utilities. Statistics from the Office for National Statistics show that approximately 20% of mothers are under the age of 25. The discriminatory exclusion from the national living wage means that they must get by on poverty pay.

The current national minimum wage—and we should bear in mind that that legislation was passed in the last century—is not only a clear example of direct age discrimination, but an example of discrimination based on class. It flies in the face of the very concept of social mobility. How can a 22 year-old first-year apprentice on a miserable £3.70 an hour be socially mobile? That is what the law currently allows, as is stated on the UK Government’s website. That is what an employer who is thinking about employing an apprentice is encouraged to do.

A recent report by KPMG showed that one in five people are struggling to escape from low pay. For example, one in four women earns less than the real living wage. Put simply, that means skipping meals, living in debt and using payday loans just to get by. The fact is that there is a solid evidence base out there that makes the case for equal pay for under-25s.

[David Linden]

My hon. Friend makes a powerful point. If an employer pays someone under 25 the real living wage, that sends a message of real encouragement to the employee; there is clearly a productivity point here.

I commend and thank the Young Women’s Trust, which produced an excellent report last year entitled “Paid Less, Worth Less?” I have placed a copy of the report in the Library of the House this afternoon, and its testimonies make pretty stark reading. I will share just one today. It comes from Katie, a 19-year-old from Newcastle:

“I was a customer service apprentice in a small shop—only me, another apprentice and my manager worked there.

I had to do a lot—serve customers on the till, clean the store, display the products, update the online store, pack and post online orders and more.

I was paid £2.73 per hour, which went up to £3.30. I got paid on a Friday at the end of the month. The next week I was skint.

I remember one day I had 40p for dinner, so I got one doughnut from M&S.

My manager noticed and offered to buy me a McDonalds.

I felt so stupid.

A quarter of my monthly income was spent on bus fare getting to and from work. It was a struggle.”

It is sometimes easier for us in this House to focus on statistics rather than people, but Katie’s story succinctly and eloquently outlines the pay inequality that still exists in the UK in 2018.

Katie is not the only one. Only last week, following an oral question from me in this House, the Chancellor wrote to inform me that there are approximately 22,000 apprentices in the UK being paid just £3.70 an hour. Surely no self-respecting Minister thinks £3.70 is a decent hourly rate; I do not think any of us would be happy to turn up here and get paid just £3.70 an hour.

There are also particular sectors in the employment market where deliberate wage depression is a major issue and could have a major impact on the sustainability of business, particularly when free movement of people is restricted post Brexit. These sectors include retail and hospitality, which are often largely staffed by young people.

I would hope that the Minister would distance himself from the comments made by the Secretary of State for Digital, Culture, Media & Sport who back in January 2016 said younger workers would not get a pay rise because they are “not as productive” as older workers. It would take a particularly brave Minister to repeat that, especially on an election day.

Finally, the Minister might be worried about how businesses would react to under-25s being included in the national living wage. However, let me assure him that there is clear polling evidence from YouGov, on a sample of some 4,000 HR managers; they think that young people should be paid the same as older people for work. Some 79%—that is four in five—of employers think there should be equal pay regardless of age, as do 77% of small and medium-sized organisations. Some 80% of employers also said that young people make a bigger, or the same, contribution as older workers, and that on the whole younger workers came with a fresh perspective and injected some energy.

Most employers when asked said they would not cut back on hiring young people if the national living wage was extended to under-25s. Indeed, the New Policy Institute found in a report commissioned by Unison on the topic that, historically, raising wages for people under the age of 21 in the UK has not harmed their employment outcomes. So the evidence is clear and so is my message to the Government today.

[Chris Stephens]

Does my hon. Friend agree that the policy is a false economy, too, because if those under 25 were given the real national minimum wage rate, that would boost the economy as it would boost the spending power of those aged under 25?

[David Linden]

My hon. Friend is right: giving under-25s that spending power would boost the economy and could help kick-start the economy.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Griffiths)]

It is a great honour and privilege to respond to this debate, and I congratulate the hon. Member for Glasgow East (David Linden) on securing it. I am pleased to be able to contribute to it as the Minister responsible for the national minimum wage and for the national living wage, of which the Government are hugely proud. There have been age-specific minimum wage rates in one form or another since the national minimum wage was introduced by the Labour Government in 1999, and lower pay rates have always been in place for younger workers because the priority for them is to secure work and gain experience. A higher minimum wage for young people could adversely affect employment levels for that group by dissuading employers from taking on less experienced workers.

It was remarkable that, in the 17 or so minutes for which the hon. Gentleman spoke on this issue, he failed to mention the facts—the actual unemployment rates among young people—even once, so let me bring them to his attention. Unemployment is higher among young workers than among older workers. Specifically, between December last year and February 2018, unemployment among those aged 25 and over was at a record low of 3%, yet among 18 to 24-year-olds the unemployment rate was 10.3%, and more than one in four 16 and 17-year-olds are unemployed. The hon. Gentleman says that we should focus on individuals rather than on statistics, but those statistics clearly show the impact that his policy would have on those young people’s ability to get into work.

[Chris Stephens]

The Minister highlights the UK Government’s appalling record on youth employment. Can he explain to me—we have asked this question repeatedly—why the Conservative Government took the decision to introduce an additional age tier to the national minimum wage rates, and why the age of 25 was picked?

[Andrew Griffiths]

The Government have always listened to the expert advice. In particular, we listen to the Low Pay Commission, which is made up of employers, academics and experts in the field and trade union representatives and is specifically devoted to protecting the rights of workers, including young workers. It is the commission that says that this policy is right and that sets the lower rates after considering all the facts.

--- Later in debate ---

[Andrew Griffiths]

I recognise the hon. Gentleman’s point, but it would be even more difficult for Katie were she not to have a job. That opportunity, that experience, that foot in the labour market is hugely important. The hon. Gentleman would deny Katie the opportunity to get vital work experience and make her way in the jobs market.

We are rightly more cautious about young people when setting the pay floor, and a lower minimum wage for younger workers is in keeping with international comparators. The hon. Gentleman referred to two countries, but let me clarify something and educate him a bit. Just under two thirds of OECD countries that have a statutory minimum wage have special rates for young people. Minimum wages are adjusted for young workers in France, Ireland, Belgium and Luxembourg, among many others. He may want to look into that.

Pricing young people out of the labour market by setting their minimum wage too high would be detrimental to the workers whom the policy was intended to benefit. That said, the Government set only the minimum pay threshold, and I commend businesses that choose to pay their younger workers higher rates of pay, and in some cases pay them the higher national living wage. Indeed, in April last year, 88% of 16 and 17-year-olds, 90% of 18 to 20-year-olds and 92% of 21 to 24-year-olds were paid above their age-applicable minimum wage. Those are the facts, whether the hon. Gentleman likes them or not. As a matter of fact, 86% of 21 to 24-year-olds were paid at or above £7.50 an hour, which was the national living wage for the over-25s.

[Chris Stephens]

The Minister is doing his best to do a pantomime villain routine, but he seems to be confusing himself. Will he clarify whether he is suggesting that under-25s are better off working in the public sector? Will he confirm that in his Department the under-25s get the same rates of pay as the over-25s?

[Andrew Griffiths]

I will confirm to the hon. Gentleman that not once in this debate has the Scottish National party mentioned the impact that such a change would have on businesses.

Draft National Minimum Wage (Amendment) Regulations 2018

Chris Stephens Excerpts

Wednesday 21st March 2018 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Griffiths)]

I beg to move,

That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2018.

It is a pleasure to serve under your chairmanship, Mrs Moon. The Government are committed to building an economy that works for everyone. Through the national minimum wage and the national living wage, we continue to ensure that the lowest-paid in our society are fairly rewarded for their contribution to the economy. Raising the minimum wage is one way that our industrial strategy creates an economy that boosts productivity throughout the UK, and provides good jobs that increase people’s earning power.

This morning’s employment figures are a testament to the success of that policy. We have a record employment rate of 75.3%, and our unemployment rate of 4.3% is the joint lowest in more than 40 years. The Government are increasing the tax-free personal allowance to £12,500 by 2020, both to ensure that workers keep even more of their income, and to take more of the lowest-paid out of paying tax altogether. Between 2016 and 2017, thanks to the Government’s introduction of the national living wage, the lowest-paid 5% of full-time workers saw the biggest increase in pay.

I am proud to introduce the latest set of inflation-busting increases to the national living wage and the national minimum wage, which will give more than 2 million low-paid workers a well-deserved pay rise next month. I am particularly pleased to announce that the biggest increases in the national minimum wage rates—the largest for more than a decade—are for younger workers.

The regulations increase all national minimum wage hourly rates, including those for workers who are entitled to the national living wage. The national living wage rate for people aged 25 and over will increase by 33p to £7.83, and the rate is on course to reach 60% of median earnings by 2020. The increase means that a full-time worker in receipt of the national living wage will receive an annual pay rise of more than £600.

The rate for 21 to 24-year-olds will also increase by 33p, which means that people in that age group will be entitled to a minimum rate of £7.38—an annual increase of 4.7%. The annual earnings of a full-time worker in that age group will also increase by £600 a year.

People aged between 18 and 20 years old will be entitled to a minimum of £5.90 per hour, which is an annual increase of 5.4%. People aged 16 or 17 years old will be entitled to a minimum of £4.20 per hour, which is an annual increase of 3.7%. Apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, will be entitled to £3.70, which is the largest annual increase of all the hourly rates—5.7%. We estimate that more than 2 million workers will get a pay rise. Finally, the accommodation offset will increase from £6.40 to £7 per day.

I place on record my gratitude for the work of the independent Low Pay Commission. It brings together businesses and workers to form a consensus on the rates, and advises the Government accordingly. It is asked to recommend the highest possible increase in the national minimum wage, without damaging the employment prospects of low-paid workers by setting it too high, and to recommend a national living wage rate that will ensure that it reaches that 60% of median earnings by 2020, subject to economic growth being sustained. It has carried out extensive research, consultation and analysis, which have informed the rates recommendations in its 2017 report. It recommended each of the increases that I have announced.

We recognise, though, that as the minimum wage rises, so does the risk of non-compliance. The Government will ensure that every worker in the UK who is entitled to the national minimum wage or national living wage receives it.

[Chris Stephens (Glasgow South West) (SNP)]

The Minister knows from my written parliamentary questions that 25% of posts in the national minimum wage compliance unit at Her Majesty’s Revenue and Customs are vacant. Can he tell us whether those posts will be filled by HMRC?

[Andrew Griffiths]

The hon. Gentleman raised that issue just a few days ago—in a Westminster Hall debate, I think. He will know that the Government have doubled their investment in enforcement of the national minimum wage. There is, of course, always a turnover of staff, but we intend to have the compliance enforcement unit up to its full potential as soon as possible. We are actively taking steps to tackle non-compliance, sending a clear message to employers that minimum wage abuses will not go unpunished. We have invested £25.3 million in that this year—almost double what was invested in 2015. The Government have also invested £1.5 million in an awareness campaign to highlight the rights and responsibilities of workers and employers.

We have seen a jobs miracle in this country. More than 400,000 more people are in work than were a year ago, showing that the labour market remains a key strength of the UK economy, and proving that the UK can accommodate a higher minimum wage. The economy has grown continuously for more than four years, and UK businesses have created a record number of jobs. I pay tribute to the workers and employers who made that happen.

According to the Resolution Foundation, the national minimum wage and the introduction of the national living wage have contributed to the elimination of extreme low pay. The Government estimate that more than 2 million workers will directly benefit from the uprating of the national minimum wage and the national living wage next month. Raising the minimum wage is just one part of the “good work” agenda that underpins our vision for a more productive and motivated workforce. Between April 2015 and April 2017, the wages of the lowest-paid have been increasing fastest, thanks to the national living wage, with the wages of those in the fifth percentile of the earnings distribution growing by almost 7% above inflation. That is faster than at any other point in the earnings distribution.

The Prime Minister committed that this would be a Government that worked for everyone. It is right that the lowest-paid workers in our society are fairly remunerated for their contribution to the economy. I commend the regulations to the House.

--- Later in debate ---

[Chris Stephens]

It is a pleasure, Mrs Moon, to see you in the Chair.

I associate myself with many of the shadow Minister’s remarks, and while I do not plan to oppose the recommendations, I have questions to ask and points to make.

I thank the Minister for confirming that there will be an increase in staff at the national minimum wage unit. That is important, because the latest National Audit Office report demonstrates that 208,000 people are not being paid their proper wages. That is a massive challenge, so I hope that the Minister will give us more of a timetable for what is happening.

The Low Pay Commission makes recommendations based on parameters set by the Government. It was not the commission that decided to set different minimum wage rates for different ages. Can the Minister provide a justification—as the Government failed to do when we discussed the matter last year—for applying the national living wage only to people of 25 and over? The age of 25 seems to have been plucked out of the air with no justification. Many people younger than 25 have the same commitments and the same bills to pay. Are the Government looking to review the difference in national minimum wage rates depending on age?

My only concern about the wage rates that we are agreeing today is that the wage gap between the youngest and oldest workers seems to be increasing. Is the Minister looking specifically at that? Does he believe, as I do, that we should narrow that gap, not widen it?

Unpaid Trial Work Periods (Prohibition) Bill

Chris Stephens Excerpts

2nd reading: House of Commons
Friday 16th March 2018 Commons Chamber

[Stewart Malcolm McDonald]

The hon. Gentleman makes a very important point and we are better informed for it. There cannot be a Member of the House who did not celebrate National Apprenticeship Week. On the back of that, if nothing else, this matter certainly merits Parliament’s attention this afternoon.

[Chris Stephens (Glasgow South West) (SNP)]

I thank my hon. Friend and constituency neighbour for giving way and, obviously, congratulate him on bringing forward this Bill. He organised a drop-in this week. We heard from Maxine Clifford, a Glaswegian, who is regularly put on unpaid trial shifts of at least 10 hours a day. That is one of the principal reasons why we need this Bill to go through this afternoon.

--- Later in debate ---

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call Chris Stephens.

[Chris Stephens]

I, too, have made my views clear, Madam Deputy Speaker.

Hospitality Sector: Tipping

Chris Stephens Excerpts

Wednesday 7th March 2018 Westminster Hall

[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate the hon. Member for Bristol North West (Darren Jones) on securing the debate.

The hon. Gentleman clearly highlighted a lack of basic protection in the workplace for those in the hospitality sector. Certainly, the only individuals providing that basic protection are in the trade union movement or organisations such as Better Than Zero, which operates in Scotland and is organised by the Scottish Trades Union Congress youth committee. It stands up against harassment in the workplace—there have been many complaints about workplace harassment in the hospitality sector—unpaid work trials and last-minute shift changes, and it exposes poor employment practices. Tipping practices in the hospitality sector are among those poor practices.

However, I have a wider concern: national minimum wage compliance, and those in the hospitality sector who try to use tips towards paying the national minimum wage rather than, as should be the case, tips being received over and above the national minimum wage. But what chance do workers have when the latest available figures show that 25% of the posts in the national minimum wage compliance unit are lying vacant? There are 399 members of staff in the unit and 83 vacancies, so although according to the National Audit Office 208,000 workers are being underpaid—not paid the statutory minimum wage—25% of the posts in the compliance unit lie vacant.

[Catherine West]

Has the hon. Gentleman made an estimate of the amount of taxation that is missing as a result of the failure to check on who is being paid the adequate amount and therefore the amount that is missing from the Exchequer?

[Chris Stephens]

I have not, but it seems to me that if 208,000 workers are not being paid the national minimum wage and 56,000 workers are in accruals, who have been owed the national minimum wage, and if we compare those figures with the 4,504 full-time equivalents chasing Department for Work and Pensions social security fraud, we see that more resources should be put into ensuring that the national minimum wage is complied with. I think that the Minister is anxious to intervene.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Griffiths)]

Let me enlighten the hon. Gentleman. The Government have actually doubled the amount of money that we are putting into enforcement of the national minimum wage. We have increased that to £25 million, and in the last 12 months we have helped to secure £1.2 million of wages owed to people who had been unfairly treated by their employers.

[Chris Stephens]

I thank the Minister for that clarification. However, the facts speak for themselves. Written answers from the Government only a few months ago have told me that the national minimum wage compliance unit has no plans to fill the current vacant posts. I am happy to provide the House of Commons Library with that answer.

The Minister says that there has been increased investment, but the 208,000 workers who are still waiting to be paid the national minimum wage may have a different view, so let me ask him what representations he is making to Her Majesty’s Revenue and Customs to enforce the national minimum wage appropriately in the hospitality sector and what representations he is making to ensure that HMRC is fully staffed and equipped for enforcement of the national minimum wage in that sector. The Low Pay Commission estimates that 1.9 million workers in the UK are currently on or just above national minimum wage rates. That figure is expected to increase, by the year 2020, to 3.4 million workers earning the national minimum wage or just above it, so we need strong action from the Government to enforce the national minimum wage.

On the issue of tipping and gratuities itself, as the hon. Members for Bristol North West and for Hornsey and Wood Green (Catherine West) have outlined, the Government need to get a grip on what credit card payments mean for the workforce—what that means for the worker in practice needs to be made clear to consumers and others. In my view, it is certainly a breach of consumer protection regulations if consumers are being told that tips from credit card payments are going to staff when they are not. I think that the hon. Member for Hornsey and Wood Green has identified such a practice, and I hope that it will be brought to the attention of the House of Commons Commission. It concerns me; I think that if there are facilities in this place where that is happening, hon. Members have a duty and responsibility to ensure that the House of Commons Commission is aware of those allegations and they are fully investigated.

Will the Minister advise us of the steps that he is taking to tighten the regulations in relation to customer credit card payments? I ask because it seems to me that that is a device to ensure that money is not going into workers’ pockets and that the so-called tips are actually an admin fee, as the hon. Member for Bristol North West outlined.

[Thangam Debbonaire]

The hon. Gentleman is making a very clear case. Does he agree that this issue is particularly pressing and urgent, given that nowadays so many people and, in particular, young people do not carry cash? If they are simply using chip and PIN or contactless, which an awful lot of people do, there is no alternative—and people do want to tip someone who has given good service.

[Chris Stephens]

I absolutely agree. As technology moves on in relation to payment methods, it is a matter of urgency that these practices are addressed and real action is taken. This can be interpreted not just as a consumer protection issue, but as an issue for the workers. The employer is in breach of the Employment Rights Act 1996 if there is evidence of tips not going to them.

I thank the hon. Member for Bristol North West for securing the debate. He gave some shocking examples of events in the city of Bristol. I fear that the practice is operating not only in the city of Bristol but elsewhere in the UK, because we have a Government who like to deregulate things.

Finally, can the Minister tell us what the outcomes were of the long consultation? I think that the hon. Member for Bristol North West said that it was three years ago. It seems to be buried somewhere. Can we see what the outcomes of that consultation were?

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[Andrew Griffiths]

I point out to the hon. Lady that for many people who are employed on them, zero-hours contracts are exactly what they want. I recognise that is not the case for everybody, but all the consultations show that for many people zero-hours contracts provide the flexibility that they are looking for. That is not to say there may not be an argument for some sort of enhancement or bonus for those workers’ flexibility. That is why, following Matthew Taylor’s report, we asked the Low Pay Commission to look at whether those on zero-hours contracts who have to offer such flexibility should receive an enhancement on their wages as a repayment for it.

[Chris Stephens]

The Minister is, rather suspiciously, discussing much of the content of the Workers (Definition and Rights) Bill, such as shift changes and zero-hours contracts. He has promised me a meeting, but I do not yet have an invitation to see him to discuss these matters. When should I expect to receive an invitation?

[Andrew Griffiths]

I am sure that, as we speak, an invitation is winging its way through the ether to set that up. It is always a delight to talk to the hon. Gentleman, and I am keen to talk to him about his Bill. Perhaps this is the perfect point for me to address some of the issues that he raised in his thoughtful speech, particularly the enforcement of the national minimum wage laws.

The Government have doubled our investment in enforcement of the national minimum wage to £25.3 million a year. That means we have recruited an additional workforce, and around 400 people now work on the enforcement of the national minimum wage. Recruiting additional tax staff takes time, and new vacancies appear. We are committed to continuing the high level of staffing to support those who are being denied the national minimum wage or the national living wage that they are owed. I am delighted to say that last year we assisted 98,000 people in recovering the payments they were owed —up from 58,000 in the previous year—and I am sure the hon. Gentleman will welcome that.

[Chris Stephens]

I did say in my contribution that the minimum wage compliance unit hired 399 people. The Minister has just said that it hired 400, so I am glad that one person has been taken on. Seriously, though, does the Minister not share this concern, which many of us have? The National Audit Office says that 208,000 people are not being paid the minimum wage, but if it was not for the investment that he says the Government are making, that number could have been a lot higher—400,000 or 500,000 people.

[Andrew Griffiths]

I absolutely agree. I take that as the hon. Gentleman welcoming the doubling of the investment in the enforcement of the national minimum wage.

I know that everybody is keen to hear my response, but before I go on I will deal with one further point that the hon. Member for Ellesmere Port and Neston made, which was about unpaid interns. I absolutely agree that people being employed to do work under the auspices of unpaid internships is—let me be very clear—illegal. That is why in the past couple of months HMRC has written to firms that are advertising unpaid internships, reminding them of their obligations. This is no way to avoid paying the national minimum wage. If we find that firms are doing it, they will be prosecuted for non-payment of the national minimum wage.

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[Andrew Griffiths]

As the hon. Lady will know, at the end of last year Unite the union, of which she has said she is a member, worked alongside the Association of Licensed Multiple Retailers to produce a new code of practice. That was a joint collaboration, and I pay tribute to both the industry and Unite the union for working in such a proactive way to develop a voluntary code of conduct. I also recognise that a voluntary code of conduct works only if everybody sticks to it. As we have heard, there are still companies that are not sticking to it.

The agreement between the unions and the ALMR about the principles that underpin good tipping practices is clear, and it provides great guidelines for how to distribute tips fairly among all workers, not just those at the front of house. We must remember that those working in the kitchen or cleaning tables are just as much a part of the service experience as those waiting on tables and interacting directly with diners, so I understand the need for the tronc system where tips are spread more widely among staff in some circumstances.

Since 2015, we have seen another change, which is that employers are noticing. Poor employers who misuse tips now face tough scrutiny—not only in Westminster, but under the harsh media spotlight. I am encouraged that newspapers raise the issue on a regular basis and highlight the points made by the hon. Member for Bristol North West.

Hon. Members asked when the Government would formally respond to the consultation on tipping. I have listened to the calls for further action from the Government; many would like to see an outright ban on employers making deductions from tips or levying table charges. It is an extremely serious issue, and the Government reserve the right to take action or to legislate if necessary. The evidence that we have heard clearly indicates that the Government need to look at it very closely and to take action if necessary.

Let me be clear: we are not ruling out legislating to solve the problem. Workers should be treated fairly, and I am clear that it is unfair for employers to pocket a huge proportion of the tips earned by staff. Furthermore, employers who play fair are disadvantaged compared with unscrupulous employers. It is a competitive market. We have heard the figures for how much unscrupulous restauranteurs and people in the industry can make as a result of that kind of scheme, which provides them with an unfair advantage in the marketplace among their competitors who are doing the right thing. I am very mindful of that, so we will remedy the situation if the industry does not act on the abuses that are sometimes reported.

Naturally, all options for Government action carry costs and benefits. It is important to get it right so any action is targeted and benefits the workers, while burdens on legitimate, well-meaning businesses are minimised. Employers should not be out of pocket, and I entirely accept that they may need to retain a small proportion of tips to cover the administrative cost of processing them, as I said earlier.

There are many examples of good employers who act entirely fairly about their staff’s tips and who recognise that treating workers fairly is part of running a productive and happy workplace. Ultimately, it is up to employers to make a compelling offer if they want to attract and retain the best staff.

I thank the hon. Member for Bristol North West for securing the debate and for the collaborative way in which he has raised these issues. I look forward to working with him on them in the weeks to come. It is right to call out abuses of tipping and the exploitation of workers in the hospitality sector, and more widely.

It is the responsibility of all employers to pay their staff fairly, and at least to pay them the national minimum wage. Hon. Members should be clear that if that is not happening, the Government will act if necessary. Our policy is that employers should not make unfair and unreasonable deductions from tips. We reserve the right to introduce further sanctions against employers who fail to comply with that basic principle of fairness.

[Chris Stephens]

On a point of order, Sir Roger. I wanted to wait until the Minister had finished, so I apologise to the hon. Member for Bristol North West (Darren Jones). Some allegations were made in relation to hospitality establishments in this place. Could you remind us of what action you or other hon. Members can take to raise that with the Commission?

[Sir Roger Gale (in the Chair)]

That is not a point of order for the Chair. The Minister has wound up his speech, but I think he indicated during his remarks that he would address that issue.

Carillion: TUPE

Chris Stephens Excerpts

Wednesday 21st February 2018 Westminster Hall

[Stephen Kerr (Stirling) (Con)]

It is a pleasure to be called to speak in this debate. I intend to be brief. I congratulate the hon. Member for Wolverhampton South West (Eleanor Smith) on securing this important debate. As a member of the Business, Energy and Industrial Strategy Committee, which is conducting an inquiry into the collapse of Carillion, I assure her and other Members present that a thorough investigation is ongoing. I am sure that Members are aware of the proceedings of that Committee.

As has been said, Carillion’s collapse was a complete commercial disaster, and one that could have been prevented with proper corporate governance. It is right that we focus our attention on the people most directly affected by the failure of Carillion—namely, the employees. It is not their fault that there was a failure of leadership and culture at the top of that business. They are made to suffer the consequences of a situation not of their making.

I recognise that this debate is not about the business model—we could talk about that endlessly—or the business strategy, how the business was run in terms of the standards adopted, or the culture of the business. In other circumstances we would review all of those carefully, to learn what must be learned from such a catastrophe. The decision making of the most senior executives has been mentioned. Having spent 30 years of my life in business before coming to this House, I can honestly say that I have never met such a sorry bunch of directors as the Carillion directors we had before us.

[Chris Stephens (Glasgow South West) (SNP)]

The hon. Gentleman and I are on the joint inquiry into Carillion. Will he say something about how the pension scheme was managed? Does he agree that dividend payments appeared to be a higher priority than funding the pension scheme for Carillion workers?

[Stephen Kerr]

Although that is not directly relevant to the debate, I agree with the hon. Gentleman. When we look at the facts, we see that there is no doubt that when the board faced choices about how to use money that, frankly, it did not have, it chose to pay dividends rather than to make payments into the pension fund. Those things need to be scrutinised, and lessons must be learned.

This debate is about the employees: decent, hard-working men and women—and their families—who brought their very best to work and did their very best for a company that many felt great fealty to and enjoyed working for. I know that, because just a few days ago a constituent approached me in the street and, in introducing himself, told me that he was a Carillion employee—in fact, he had been a manager. He spoke highly of the people he worked with and of the business he had spent some time at, which, as I have said, he felt some loyalty to. Graciously, he wanted me, as a member of the Select Committee looking into the failure of Carillion, to know that he and his colleagues—former Carillion employees—appreciated the thorough manner in which the Committee was conducting its inquiry. He said, “I know it won’t change anything, but it is right that the directors should be openly held to account. It’s about getting some form of justice, really, isn’t it?” That is what has brought me to my feet today. I needed to come to the debate to stand up and ask the Minister for some form of justice for the Carillion workers.

I congratulate the Government on the actions they have taken on the failure of Carillion, because they have managed to deal with the failure of the business. They could have been tempted to bail out the failing company by putting large sums of public money into it, but thankfully they resisted that temptation. They could have stood back and done nothing at all, but that would have been an abrogation of responsibility. In fact, the Government acted pragmatically, given the circumstances.

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[Chris Stephens (Glasgow South West) (SNP)]

It is a pleasure to see you in the Chair, Ms McDonagh. I congratulate my Unison comrade, the hon. Member for Wolverhampton South West (Eleanor Smith), on securing this debate. As a member of the inquiry into these matters, along with the hon. Member for Stirling (Stephen Kerr), I assure everyone that there will be pertinent questions tomorrow to the auditors and the Pensions Regulator. Clearly there are significant and very real questions for them as to how the company collapsed.

If a politician advocates the outsourcing model of public service delivery—for many reasons I do not subscribe to that theory—they have a duty and a responsibility to protect the workers who deliver those public services using that model. We have heard many examples in the speeches so far about the duty and responsibility that the Government should have in protecting the workers’ terms and conditions, wages and so forth. I gently say to the Minister that there is an immediate solution that he could take up now. He could agree to the provisions that can be found in the Workers (Definition and Rights) Bill, an excellent piece of legislation sponsored by me, which foresees the possibility of a company collapsing. Indeed, it was lodged and printed the day before Carillion collapsed.

A general point applies not only to Carillion, but to all sectors of the economy where there is a contractor relationship with a principal employer and where that contractor absconds, as happened in one case I am aware of. A hairdresser with a business in a Hilton hotel in Scotland absconded—to Portugal, I understand—leaving the workers there with unpaid wages and in search of answers. In the case of Carillion, where the public sector contracted Carillion to do work, the contractor should pick up the employment and wages of the workers. That can be found in clause 3 of my proposed piece of legislation, which is of course available in all good Vote Offices on the estate.

Such issues come up too often, which is why I propose legislation. Companies go bust or abscond, and leave workers exposed with nothing. We need to address that issue, so I hope the Government will take that up. I am sure the Minister will respond to that.

There should be a voluntary TUPE arrangement. Certainly in Scotland workers have been transferred to other companies to complete contracts. The hon. Member for Cardiff Central (Jo Stevens) raised the issue of why contracts were issued after profit warnings were announced. The Scottish Government did not agree any contracts with Carillion after the first profit warning in July 2017. The UK Government awarded £2 billion of contracts after that profit warning was issued, including for HS2 and for Ministry of Defence bases. The second profit warning was on 29 September and yet the Government appear to have contracted work worth £62 million after that. Then there was a third profit warning on 17 November and the Education and Skills Funding Agency awarded a £12 million school building contract to Carillion. Will the Government tell us why? After the first profit warning, alarm bells should have sounded in Whitehall about why the company had secured such work.

There is a real issue with the pension scheme. As someone who has negotiated TUPE transfers, I am aware of the provisions under TUPE. New contractors like to wriggle out of putting in as much money as the public sector did —usually to 6%—and a lot lower than what the public sector put in. Has the Minister looked specifically at occupational pension scheme provision? That will be a real issue for this Parliament to deal with. When we see the Pensions Regulator asleep at the wheel—in this case fast asleep at the wheel—occupational pensions will be a real issue. The Work and Pensions Committee looked at the issue this morning. Will the Minister make a statement today on what occupational pension scheme provision will be given to workers who have transferred?

I again congratulate the hon. Member for Wolverhampton South West on securing this debate. I hope the Government will listen to all hon. Members who have spoken today. I look forward to the Minister’s offer of a meeting with me to discuss my legislation.

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[Andrew Griffiths]

I can honestly tell the hon. Lady that the rapid response team are exactly that. They give a report to the taskforce, which she asked about and I will come to. The rapid response team are working alongside the special managers. When people are made redundant, the team have all the details of the people involved and are proactively doing that. In addition, they are going into Carillion offices and, without causing concern, proactively advising people about opportunities and jobs that are available, and helping those people to prepare should they be made redundant.

In addition, the team are offering help with job searches, help to identify transferrable skills and training to update skills. This is a Rolls-Royce service. I can say hand on heart that the rapid response team are really excellent. If the hon. Lady has specific examples, I would be delighted to take those up on her behalf and to ensure that if somebody has been missed, we get in touch with them as quickly as possible.

Finally, I would like to set out the support that we are giving to those businesses affected by Carillion. We recognise that while the mass and the attention is on Carillion, the impact in the supply chain is huge. As hon. Members, we will probably all have people working in the supply chain in some way. As the hon. Member for Wolverhampton South West mentioned, we have set up a taskforce; I think it was set up three days after Carillion went into liquidation. The taskforce includes representatives of small business and the TUC. She referred to a letter from Frances O’Grady; Frances sits on the taskforce, which meets at least weekly. We have the Federation of Small Businesses, the Department for Work and Pensions, the Cabinet Office, the Local Government Association and the Construction Industry Training Board. We are working across Government to address the challenges and to come up with solutions that will support affected businesses.

The Business Secretary and I are in regular contact with the construction industry and all of the relevant trade bodies. I meet them weekly to properly understand and respond to their concerns. Following the Business Secretary’s meetings in the aftermath of Carillion’s insolvency, when we called in the banks to ensure that they were providing the necessary support and help to the supply chain, the banks made nearly £1 billion available. That was from lenders such as HSBC, Lloyds, the Royal Bank of Scotland and Santander in the form of loans, credit facilities and further financial support, to ensure that the contractors in the supply chain that are affected get the help and support that they need.

For those companies that may have lost money as a result of Carillion’s collapse, the most important thing is their ability to continue earning. While they may have lost sums as a result of Carillion’s collapse, by standing behind Carillion we have allowed certainty for those businesses. I assure the House that while there have been some concerns about the payment terms of up to 126 days that we saw with Carillion, the special manager has entered into an agreement that he will pay contractors still providing services to the Carillion network in 30 days. That will go a long way towards helping those businesses—small businesses, in particular—that are struggling for cash flow. Her Majesty’s Revenue and Customs is also helping businesses with its Time to Pay scheme.

The hon. Member for Ellesmere Port and Neston (Justin Madders) mentioned apprenticeships, which we have covered. The hon. Member for Glasgow South West (Chris Stephens) made a number of points, but most importantly referred to two things. He referred first to the contracts awarded to Carillion after the profit warnings. The first thing to understand is that issuing a profit warning does not mean that a business is on the verge of imminent collapse; if that were so, we would have seen the collapse of Tesco and of Marks and Spencer. It is exactly that: a profit warning to the City and to investors to say that the profits that the company is about to issue will not be as large as expected.

In relation to the award of contracts after those profit warnings, Carillion announced that it had won eight public sector contracts after its first profit warning in July last year. Three of those, for facilities management, were for defence establishments. They were actually awarded before the profit warning, but Carillion chose to make its announcements some weeks later.

Two of the remaining five contracts were awarded by HS2 Ltd to a joint venture including Eiffage, a major French construction firm, and Kier, as well as Carillion. The three companies bid together as a consortium, and as a result all shared responsibility for completing the work. After the profit warning, we asked each partner’s board for written assurances that if one partner failed, the others had a contractual obligation to pick up the work. Those assurances were given. Since the announcement of Carillion’s liquidation, Eiffage and Kier have confirmed that the contracts will continue uninterrupted and that the former Carillion employees working on those contracts have been offered jobs with those new partners.

Following the announcement of the profit warning, a further assurance came from external due diligence commissioned by HS2 Ltd. That revealed that at the time of the award in July last year, Carillion had the financial capacity to continue with its part of the contract. HS2 Ltd let the two contracts to the joint venture because it was confident that the joint venture arrangements were robust. That has proved to be the case.

The remaining three contracts were with Network Rail. They were not new contracts, but variations of contracts let some three years earlier, in 2014. Two were for electrification work. In a similar construct to the HS2 network, they were lets to joint ventures between Carillion and the electrification specialist, SPL Powerlines.

[Chris Stephens]

Some of the information that the Minister has given will be helpful for tomorrow’s Select Committee inquiry, and I thank him for that. When a company that is applying for a Government contract issues a profit warning, what checks do the Government put in place and what checks is a public body expected to put in place to ensure that that company is solvent? We now know that after the first profit warning, the alarm bells should have been louder than they were.

[Siobhain McDonagh (in the Chair)]

Order. I wish to point out that the debate will finish at 4.16 pm and I hope to give Eleanor Smith, as the mover of the motion, a couple of minutes to sum up at the end.