Draft Insolvency (Amendment) (EU Exit) Regulations 2018
Kelly Tolhurst Excerpts(5 years, 3 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
I beg to move,
That the Committee has considered the draft Insolvency (Amendment) (EU Exit) Regulations 2018.
It is a pleasure to serve under your chairmanship, Mr Gray. The regulations, which were laid before the House on 19 November 2018, address issues in UK insolvency law that will arise in the event that we leave the European Union without a deal. Cross-border insolvency is an area in which, as legal and insolvency professionals in the private sector have rightly and firmly pointed out, the EU system is greatly beneficial. If we are to ensure the best outcomes for all parties involved, it is important that insolvencies are dealt with as expediently as possible. The sooner a business in distress is dealt with, the more likely it is that it can be saved. When that is not possible, the simpler and clearer the insolvency process is, the more likely it is that the assets will be realised efficiently and money returned to creditors.
EU law achieves that goal by providing a framework for mutual cross-border co-operation on insolvency matters through the EU insolvency regulation. That is based on main proceedings in a single member state, eliminating the need to start proceedings in other member states where there may be assets to deal with. It is in the interests of both the UK and the EU to retain that system, and the Government have been clear, with the support of the UK insolvency sector, that we wish to continue it. However, it would be irresponsible of us to not plan for all possible outcomes, including leaving the EU without a deal. We have laid this instrument before the House to ensure that the UK’s insolvency regime continues to function effectively after exit day even if we leave the EU without a deal.
As I have already suggested, the EU insolvency regulation ensures that member states automatically recognise an insolvency order made in an EU country. That helps the insolvency practitioner dealing with the case to recover assets as quickly as possible and return as much money as possible to creditors. However, EU law also contains a provision to ensure co-operation between all the different parties in an insolvency, including insolvency practitioners and courts in different member states where necessary. It ensures that individual member states’ own laws are respected. For those protections to operate, they must apply to everyone. Unfortunately, once we leave the EU, that will not be the case in the UK.
As we leave the EU, the European Union (Withdrawal) Act 2018 will retain a version of the EU regulation in UK law, but the safeguards that the regulation provides will no longer operate correctly: as the UK will no longer be a member state, the remaining member states will no longer be bound to recognise our insolvency proceedings or co-operate with us. While office holders in insolvency cases originating from EU member states could make use of the UK’s retained EU insolvency regulation to lay claim to assets here, they would not necessarily be bound by the EU regulation rules when dealing with those assets in EU states, nor would they be bound by EU rules to recognise the claims of UK creditors.
Senior members of the insolvency professional sector have argued that reciprocity is an essential part of continuing with this legislation. Without a deal, it is vital that we do not continue indefinitely to apply EU rules that could override our own laws and prevent us from dealing effectively with insolvencies in the UK. To reflect that, the instrument repeals the majority of the EU insolvency regulation, keeping only the small part necessary to make sure we do not lose any existing rights to open insolvency proceedings in the UK. We are retaining the categories of proceedings under the EU insolvency regulation to assist the acceptance of UK insolvencies in EU countries in future, continuing with concepts and language that the courts in the EU will recognise.
The instrument continues to apply the current EU laws to existing cases in which main insolvency proceedings are already open on exit day, but as a safeguard for those existing cases, since we cannot assume that the EU member states will continue to apply the same rules where the UK is concerned, the courts may disapply the EU rules where they lead to a different outcome than would have been the case before we left, and where that prejudices creditors or others with an interest in an insolvency. In such cases, the court will be allowed instead to apply the powers in the UK’s Cross-Border Insolvency Regulations 2006 or to make some other appropriate order to resolve the situation.
That brings me to the concerns raised by the Joint Committee on Statutory Instruments. It has suggested that these saving provisions lack clarity, are defectively drafted and make unexpected use of the powers in the European Union (Withdrawal) Act 2018. Officials have worked closely with the JCSI to explain why it is necessary that the courts have a broad power, rather than something narrower. Detailed examples were provided to the JCSI to demonstrate some of the many different situations in which the power might be needed. In its report, the JCSI commented that those examples were helpful, and it expressed its gratitude.
These situations can be complex. For example, suppose that the main insolvency proceedings are opened against a company before exit day in another EU member state. They will be governed by the EU insolvency regulation. One of the requirements of that regulation is that an insolvency practitioner who is dealing with the case must inform EU creditors as soon as the insolvency proceedings are commenced. The regulation also says that the notice should provide the creditors with details of how to make a claim. That is important as there can be time limits on making claims in insolvency. However, after exit day the requirement to provide notice of the insolvency will no longer apply to UK creditors, because the requirement is limited to those creditors in member states and the UK will no longer be an EU member state after exit day. In consequence, UK creditors may not find out about the existence of an insolvency proceeding in time to make valid claims, and if nothing is done their claims may be rejected. At the same time, the insolvency practitioner would be permitted—under the retained version of the EU insolvency regulation that the withdrawal Act will include in our UK law—to seize any of the company’s assets here in the UK to repay creditors who have made valid claims. That is clearly unacceptable.
Under the proposed amendment in these regulations, the court can consider that the interests of UK creditors are being materially prejudiced, and make an appropriate order as it sees fit. For example, it could freeze the company’s UK bank account until the office-holder accepts the UK creditors’ claims. I think we can all agree that that would be a fair and just outcome.
Further examples were included within the JCSI’s published report. The provisions provide the court with the necessary discretion to deal with scenarios such as that, and other unexpected outcomes from the interaction of UK insolvency law following exit with the domestic law of the remaining EU member states. As the UK cannot exercise any control over those other states’ laws, a broader power for the courts to step in is both necessary and appropriate. This does not create a new power that the courts would be unfamiliar with. Insolvency law already contains similar provisions and powers for the courts in other cases where broad discretion is necessary. The power safeguards individuals and businesses who have an interest in an insolvency. It is the best way to ensure that, where they could be treated less favourably after EU exit than before we left, the courts will be able to step in.
The instrument also amends the Employment Rights Act 1996 and the Pension Schemes Act 1993, which set out protections for employees following the insolvency of their employer. The protections remain unchanged and the effect of the instrument in this area is to ensure that the current financial support given to UK-based employees when their employer in the EU becomes insolvent will continue after exit day.
In the absence of a Northern Ireland Executive, the instrument updates and makes similar changes to the law on insolvency and employment rights in Northern Ireland, on behalf of the Northern Ireland Government. That includes updating Northern Ireland employment legislation in this area, where there had been no opportunity to mirror a previous amendment made to British law in 2017. I commend the regulations to the Committee.
Kelly Tolhurst
I thank the hon. Member for Sefton Central for his comments and contribution to the debate. We remain optimistic about reaching a deal of mutual benefit to the UK and the EU, but it is important to maintain our regulatory and legislative framework for dealing with insolvency should we leave without a deal. That is why we introduced this instrument.
The Department has consulted with the profession and spoken to some of the groups to try to ensure that that the statutory instrument will work as well as possible. Obviously, we have consulted R3, which the hon. Gentleman mentioned. As I outlined, we are very much focused on delivering a deal.
The hon. Gentleman is quite right that the statutory instrument relates entirely to things happening in the UK, but does not enable us to have any influence on or dictate to EU member states how they treat UK orders in the event of no deal.
Kelly Tolhurst
I see the hon. Gentleman understands that point.
As the hon. Gentleman will know, in what we have laid out as our future economic relationship in a deal, our focus is on ensuring that we are able to deal with mutual recognition and reciprocal status going forward if a deal is to be had. We recognise, with the profession, that if we can come to an agreement in this area in a deal situation, that would be in everyone’s best interest. With a deal, we would continue our civil judicial co-operation, including on cross-border insolvency. That is in the best interests of both the UK and the EU, as he outlined. However, it is not possible for us to unilaterally continue with the co-operation on cross-border insolvencies; we can achieve the benefits that both sides currently enjoy only through a mutual recognition agreement with the EU. The declaration on the future relationship was clear that it would include wide-ranging agreements on trade, including trade in professional and business services and the framework necessary to support that.
We will continue in those endeavours, but this SI is intended to ensure that, in a no-deal situation, UK law provides clarity for the profession and that we are able to operate on day one. After that date, it would be down to us to bring any further changes to our insolvency regulations that are not in the scope of the draft regulation to the House, as we see fit. After leaving, there may be things that come up that we might need to change, but that would be done in the course of standard business.
Regarding the hon. Gentleman’s concerns about the Pension Protection Fund, I assure the Committee that the Prime Minister and the Government have been clear that we will not row back on workers’ rights through the withdrawal Act. Employees living and working in the UK for a company registered here or in the EU will continue to receive redundancy-related payments from the national insurance fund where their insolvent employer cannot make them, as they do now. The draft regulations ensure that the law in this area is clear and can operate correctly when we are no longer an EU member state. One of the limitations is that within this SI we cannot guarantee for workers in EU states, how EU member states will deal with the employees working in those states. What we can do, as laid out in this SI, is to ensure that people working in the UK, be it for EU companies operating in the UK or UK companies, will still have those protections as they are now for UK workers.
On the hon. Gentleman’s questions about the impact assessment, we have been in this situation many times over recent months and I know it is a particular concern for him. However, for this particular SI we have assessed the direct cost of to business in terms of the costs of insolvency and have estimated that the direct cost would be £2.7 million, due to the extra costs that may arise when practitioners need to open cases in EU member states, which they do not currently have to do under EU regulations.
Nick Smith
I do not know whether this is the case, but if there is a no-deal Brexit, will EU-based employers pay the levy into the Pension Protection Fund?
Kelly Tolhurst
EU member states will be operating under the current EU regulations as they stand, according to how they have implemented those rules in their own states. We currently submit to the levy here, so workers in the UK, whatever their nationality, will still be entitled to all of the same protections and benefits that exist today. With regard to how individual member states implement the EU regulation, we cannot guarantee how they will interpret a UK no-deal situation. We hope EU member states will treat all UK workers in the same way as we will treat people working in the UK, but that is something we cannot dictate. Does that give some clarity?
Nick Smith
No, the Minister did not absolutely clear up the matter for me. Will she check whether EU-based employers will continue to pay the levy into the pension protection fund on behalf of UK employees should we leave without agreement?
Kelly Tolhurst
I apologise if I was not clear. Perhaps I was trying to explain the matter in a more complicated way. Yes, they will all pay the PPF levy. I was simply trying to highlight that we here can expressly say we are making sure that all people working in the UK, no matter what their nationality, will be afforded all protections. What we do not have any control over is future changes that might occur in other member states and in EU regulations in a no-deal situation. At that point we will be regarded as a third country, but under the current regulations they will still pay into the fund.
The changes proposed in the draft regulation go some way to protecting the UK insolvency market in the event of a no deal. They ensure that citizens, businesses and the insolvency profession will not be disadvantaged by unilaterally retaining EU rules when reciprocal and necessary safeguards would not be guaranteed by the EU. The proposed changes provide certainty and clarity regarding cross-border insolvency cases with the EU following exit.
The regulations also ensure that protections for UK employees of insolvent employers are maintained after the UK exits the EU: something we all agree is vital. The instrument is essential to repeal the majority of EU insolvency regulations from UK law and to retain the status quo for employment rights in the UK. I hope I have been able to answer all the questions and I commend the regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Insolvency (Amendment) (EU Exit) Regulations 2018.
Supporting New Parents in Work
Kelly Tolhurst Excerpts(5 years, 3 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
Through the industrial strategy the Government are working to transform our economy to ensure that everyone, no matter what their background, can enter into the labour market and progress at work.
In the “Good Work Plan” we set out an ambition that all work should be fair and decent. Pregnancy and maternity discrimination has absolutely no place in that ambition. It is unlawful.
In our response to the Women and Equalities Committee inquiry into pregnancy and maternity discrimination, we made a commitment to review the position in relation to redundancy following the suggestion that we could further strengthen existing protections. We have completed that review.
Tomorrow, we are publishing a consultation document proposing legislative changes to strengthen the existing protection against redundancy by extending it into a period of return to work after maternity leave or other types of parental leave. It currently applies to women on maternity leave. By doing so we will further help to tackle discrimination and support new parents in work.
The consultation also covers other steps we are taking to change the culture which can exist around pregnant women and new mothers in the workplace.
Copies of the consultation will be placed in the Libraries of both Houses.
[HCWS1277]
Draft Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2018
Kelly Tolhurst Excerpts(5 years, 3 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
I beg to move,
That the Committee has considered the draft Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2018.
It is a pleasure to serve under your chairmanship, Sir David. This instrument, laid before the House on 4 December 2018, is part of our EU exit contingency planning; it will not be needed should the UK conclude the withdrawal agreement with the EU. Several laws allow for collective redress when infringements of consumer protection laws take place. The first is the consumer protection co-operation regulation, known as the CPC regulation. The reciprocal arrangements set out in that EU law require enforcers to act on requests from their counterparts in other EU member states. They are required to investigate and, if necessary, take action to end infringements of EU consumer law when the collective interests of consumers in other member states are harmed.
The second of those laws is the injunctions directive. The reciprocal arrangements in that EU directive allow enforcers to take action in the courts of other member states to stop the relevant infringements. In the UK, part 8 of the Enterprise Act 2002 implements the injunctions directive, as well as providing the UK’s enforcement mechanism for the CPC regulation. It enables certain UK and EU enforcers to apply for enforcement orders to stop the infringements in question when listed EU consumer laws are being breached—these are known as Community infringements—and the collective interests of consumers are being harmed. Finally, UK enforcers are given the necessary investigatory powers through schedule 5 to the Consumer Rights Act 2015.
In the absence of a deal, after the UK’s exit from the EU, the CPC regulation and the injunctions directive will no longer apply to the UK as we will cease to be an EU member state. In consequence, UK consumer enforcers such as the Competition and Markets Authority will no longer be part of the reciprocal cross-border enforcement arrangements. This instrument therefore revokes the CPC regulation, which would otherwise continue to apply in UK law. Doing so prevents a situation in which UK enforcers would be required to assist their EU counterparts, while EU enforcers would not be under the same obligation. This instrument also amends the Enterprise Act so that EU enforcers cannot apply for enforcement orders in UK courts, preventing a situation whereby EU enforcers would remain able to bring legal proceedings in UK courts under the injunctions directive, while UK enforcers would lose their equivalent right to bring proceedings in the EU.
This instrument does not prevent UK enforcers from co-operating with their EU counterparts: UK public bodies will remain able to share information they hold in their capacity as enforcers under part 8 of the Enterprise Act to assist their counterparts abroad. However, we recognise that cross-border enforcement co-operation to protect consumers would become more limited in a no-deal situation. The instrument also ensures that UK enforcers retain the powers they now have within the UK, and can continue to investigate and address infringements of UK consumer law—including retained EU consumer law—after exit day. Those laws are set out in the new schedule 13 to the Enterprise Act to certify this instrument.
These changes are a necessary use of the powers of the European Union (Withdrawal) Act 2018, and I commend the instrument to the Committee.
Kelly Tolhurst
I thank the hon. Lady for her contribution. As a responsible Government, we continue to prepare proportionately for all scenarios, including the scenario that we leave the EU without a deal. That is what this statutory instrument ensures: it revokes provision in the CPC regulation and the injunctions directive that will not be reciprocated by the EU in a no-deal situation.
I recognise the hon. Lady’s concern about the particular issue that she has raised. It is not in the scope of these regulations, but, as she knows, I am more than happy to communicate with her outside this statutory instrument Committee. Importantly, the instrument ensures that, after EU exit, UK enforcers retain powers to continue protecting UK consumers in the case of infringement of UK consumer law. That includes EU-derived consumer law.
Patricia Gibson
What does the Minister think will be the effect on the UK’s influence in European markets, for example? After Brexit, does she think that the UK’s influence on consumer protection will increase or decrease?
Kelly Tolhurst
The statutory instrument before us talks about UK enforcement, and that, through our UK enforcement agencies, which are already registered under EU law, will be retained under UK law. As always, this Government and our enforcement agencies are committed to the protection of consumers in this country and will do whatever they can, in the event of no deal, to ensure that the relationships with our European neighbours will be maintained as far as possible, but obviously a lot of that will rest with the EU and how it wants to deal with us after EU exit.
Mr Baron
The additional point, in answer to the SNP, is surely that we will have control over our own laws more and therefore can even enhance consumer protection within these shores—rather than following on the tails of the EU—and no doubt there will be many areas in which we do that.
Kelly Tolhurst
I thank my hon. Friend for his comment; he is quite right. There are examples of where UK consumer law is superior to EU law in some elements, and this Government are committed to doing that. We will be able to maintain and, obviously, change our laws. Any EU provider selling into the UK market—whatever the product or services—will still have to comply with UK law and therefore be subject to UK enforcement agencies.
Question put and agreed to.
FTSE 100 Company Pay Ratios
Kelly Tolhurst Excerpts(5 years, 3 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing today’s important debate. She has a strong, long-standing record of campaigning on behalf of low-paid workers in the economy. I highlight the constructive way in which she approaches working across the House on some of these issues; I know that she secured an Adjournment debate on whole-company pay policy last July.
Executive salaries and pay ratios are undeniably high. Currently, the ratio of the pay of the average FTSE 100 chief executive officer to that of the average UK employee is around 160:1, based on the mean. The median average is 145:1, but it is important to set current levels of pay in a longer-term context. The data shows that executive pay more than quadrupled from the late 1990s to the early 2010s. Pay ratios increased over that period from 47:1 in 1998 to 132:1 in 2010. However, that has stabilised in the last five to seven years, albeit with minor fluctuations from year to year.
The High Pay Centre, which campaigns against high levels of executive pay, acknowledged in its most recent report that UK executive median pay peaked at £4.2 million in 2013, and is around £3.9 million for the latest reported year. That puts the UK on a par with Germany and only slightly above other major EU countries on executive pay levels, despite our quoted companies generally being much larger. In the US, CEO pay is much higher. Median CEO pay for Standard & Poor’s 500 companies in 2017 was around £9.3 million, giving the US a pay ratio of 399:1.
That sets the context, but it is certainly not grounds for complacency. Shareholders and people in wider society have increasingly been questioning how such wide differentials can be justified, both in terms of individual performance and in relation to company pay policy as a whole. The Government share those concerns.
We do not believe that it is the job of the Government to set company pay levels or impose arbitrary caps. However, it is our position that there must be transparency and accountability in executive pay, and that shareholders must have the information and the powers to challenge unjustified pay in the boardroom. That is why we legislated in 2013 to require listed companies to secure binding shareholder approval for their executive remuneration policies at least once every three years, and to disclose every year the total single figure that each director is paid.
It is also why we are continuing to take steps to force companies to disclose and explain how executive pay is matched by performance, and how it relates to wider employee pay. In particular, we recently introduced a new requirement for companies to disclose and explain every year the ratio of their CEO pay to the average pay of their employees. I am pleased that the hon. Member for Mitcham and Morden welcomed the legislation, which came into effect at the beginning of this year, meaning that companies will have to report their ratios when they publish annual reports next year.
Pay ratio reporting will, for the first time, show systematically and clearly how pay at the top of quoted companies relates to pay across the rest of the company. Companies will have to report each year the ratio of the CEO’s pay to both the median and the quartile employee pay at the company. The hon. Lady expressed concerns that the pay ratio was being calculated only in relation to the median; in fact, we require pay ratios to be published for the first quartile, the median and the upper quartile. We thought hard about whether to use the median or the mean, and finally decided on the median as a more robust figure. In part, that was a response to the TUC, which argued strongly that we should use the median. In most cases, we use the median because the result is the bigger ratio.
Shareholders, employees and others will get a clear and consistent picture from year to year of how CEO pay relates to pay across the whole company. Companies will need to explain the reasons for any change from previous years, and any pay ratio trend over time. They will also need to explain whether any change is due to a change in the company’s employment model—for example, if the reason was the outsourcing or offshoring of low-paid workers. Critically, the company will have to explain whether, and if so why, it thinks that the ratio is consistent with the pay, reward and progression policies of the company’s UK employees as a whole.
Those pay ratio explanations will be watched closely by investors, who are strongly behind the new pay ratio reporting, as well as by employees and wider society. Any company that puts forward weak or misleading explanations can expect to face significant shareholder and public criticism. As the Financial Times wrote in 2017 when we announced the plans,
“a single-figure ratio will attract attention. And that will help investors curb companies’ attempts to inflate chief executive pay—and the pay gap”.
Pay ratio reporting is part of a wider package of reforms aimed at making a real change to the level of engagement between boardrooms and employees. That package includes an important new provision in the UK corporate governance code for remuneration committees to consider workforce pay alongside executive pay, and to engage with the workforce to explain how executive pay aligns with wider company policy. It is too early to tell what the impact of the new reforms will be. The Government expect companies to respond positively and creatively to the new requirements, recognising that no one size will fit all and that there will be a variety of approaches.
We are already seeing some encouraging progress, on a voluntary basis, this year. For example, Marks & Spencer has agreed that the chair of its business involvement group, which represents the interests of the company’s 81,000 staff, will be invited to attend two boardroom meetings and at least one remuneration committee meeting each year. We must also remember that pay ratios are determined by average pay in the workforce, as well as by pay at the top, so ratios will fall where average pay increases faster than executive pay. In that respect, the Government are taking steps to boost the wages of working people through our industrial strategy to deliver better-paid jobs across the country, our £37 billion productivity investment fund and our increase in R&D investment to 2.4% of GDP by 2027.
We have taken concrete action for low-paid workers by introducing the national living wage, which is on track to hit its target of 60% of median earnings by 2020. Its introduction marked a pay rise for more than a million workers across the UK and has helped to deliver the fastest wage growth for the lowest-paid in 20 years. In April, we will increase it again to £8.21 by an inflation-busting 4.9%—an increase in earnings of more than £690 a year for a full-time worker, and a total pay rise of more than £2,750 a year since we first brought it in. Up to 2.4 million workers are estimated to benefit.
Real progress is being made for hard-working people. As a working-class Conservative MP—as a Tory—when I speak about hard-working families and hard-working people, I find that I am accused of referring to higher earners. As somebody who undertook many of the jobs outlined in this debate before I came to Parliament, I actually find it offensive that when I talk about hard-working people, I am accused of not referring to hard-working people separated across our economy.
Kirsty Blackman
I appreciate the Minister’s honesty. The problem is that when the middle-rate income tax threshold goes up, there are Conservatives who make the case that it will improve life for hard-working families, but very few people in the jobs we are talking about are making £43,000 a year. Maybe the Minister needs to tackle the issue with some of her colleagues.
Kelly Tolhurst
I thank the hon. Lady for clarifying her point, but I have to say that it is this Government who have increased the threshold year on year. As a working-class Conservative MP, I am proud to say that I am standing up for hard-working people—and when I talk about hard-working people, I mean people who go out every day to earn a living, no matter what sector they are in or what job they are doing.
The Government have responded to the challenging world of work with plans for the biggest upgrade of workers’ rights in 20 years. In December we published the good work plan, which sets out how we will implement the recommendations of the Taylor review. The plan commits us to introducing a right to request a more predictable and stable contract for all workers and to bringing forward proposals for a single workers’ rights enforcement body in early 2019.
Laura Pidcock
The right to request a contract is often signalled as some kind of big victory, but have not workers always had that right? This is nothing new.
Kelly Tolhurst
We will be making the options for employees clearer. For example, we have already laid statutory instruments to ensure that on their first day, employees are able to get a written statement of their rights. It is about making sure that workers are able to know what rights they have, and that they know that they can ask for that ability.
The Government have also laid legislation that will repeal the so-called Swedish derogation and guarantee agency workers their right to equal pay. After April 2020, agency workers will no longer be able to opt out of their right to equal pay after 12 weeks in the same assignment. In short, we are shining a light on pay at the top and taking action to improve the pay and employment rights of ordinary workers.
I want to touch on a few points made by the hon. Member for Mitcham and Morden. She rightly raised the issue of diversity on boards and gender balance, which the Government are very concerned about. We have started to see results from work on the gender pay gap: we are now at 17.9%, the lowest figure on record. We are working to improve gender diversity on boards, and we have made great progress. The next target and challenge is black and minority ethnic representation—not just on boards, but in the pipeline and among executives in general. That is one of the policy areas in my portfolio, and I take a lot of interest in it.
The hon. Lady asked whether it is right that those in large companies—I think she was referring to companies that are private, but not necessarily listed—are taking large salaries but have not signed up their employees to the living wage. I quite agree that that is not a satisfactory situation, but what is massively important is the highlighting of the issue by the media and wider public, and the transparency that we have enabled so that those companies are held under a tougher spotlight. Customers and suppliers out there who know that information about those companies will need to decide whether they want to deal with them. Things are moving, and it helps that the issue is on the agenda more widely and that more people are aware of what the big bosses are being paid.
The hon. Lady also raised long-term incentive schemes. The data show that long-term incentive schemes linked to valuation and share prices have increased over time, which has contributed to the rise in CEO pay. I absolutely accept her point, but one of the reasons for bringing in pay ratios and specifying in our rules that companies must give an illustration of the breakdown of executive pay is to enable shareholders to take a view. It will also provide real information about how that narrative relates to wider pay structures across organisations. We are hoping that the reforms will give shareholders the tools and powers to hold boards to account, and that they will exercise that right further as the legislation and the changes work their way through.
The hon. Member for North West Durham (Laura Pidcock) raised the issue of pay caps and suggested a 20:1 pay ratio. As I have outlined, the Government do not feel that it is our responsibility, or that we are in a position, to limit what companies can pay their employees. Our role is to ensure that shareholders and stakeholders have the tools to make judgments and hold boards and remuneration committees to account. We believe that the reforms that we have made over time are going some way towards achieving that.
Laura Pidcock
For information, my point about the 20:1 ratio was about the public sector.
Kelly Tolhurst
I thank the hon. Lady for that clarification. However, I point out that a pay ratio of 20:1 could extend to foreign companies bidding for Government contracts, which would raise state aid and World Trade Organisation issues. There are issues with some of the policies and the refining that she may want to clarify further.
I thank again the hon. Member for Mitcham and Morden, who has taken the opportunity to bring this debate about company pay ratios to Westminster Hall. They are an important means of shedding light on pay distribution within companies and how that is changing over time. Their publication will spur companies and their remuneration committees to give greater thought and show more sensitivity to how pay in the boardroom aligns with employee pay. Along with other reforms implemented by the Government, they will ensure that the UK remains a world leader in corporate governance and an excellent place in which to work, invest and do business.
I have had many conversations with the hon. Lady, and I thank her for the way in which she approaches these matters. As I said yesterday in the Business, Energy and Industrial Strategy Committee, these issues will always be under review and we will always be looking at what can be done to improve transparency and clarity so that the spotlight can be shone on organisations. I look forward to working with the hon. Lady constructively on the number of issues that I know she is interested in in this area over the coming months.
Siobhain McDonagh
Can I ask for your clarification, Chair? Do I have a minute, or two, because we have not reached the time limit?
Crown Post Offices: Franchising
Kelly Tolhurst Excerpts(5 years, 4 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
It is a pleasure to serve under your chairmanship, Sir Graham. I congratulate the hon. Member for Wigan (Lisa Nandy) on securing this important debate. Although I am one of only a few Tories in the room, I thank all hon. Members for their contributions. I recognise their passion as well as the importance that post offices represent to MPs.
As a constituency MP, I understand the valuable role of the post office for me and for my constituents. Post offices play a vital role at the heart of our communities and are an essential part of our villages, towns and cities, so the future direction of the Post Office is important not only to the Government, but to all our constituencies.
The festive season has just passed, when the dedication of Post Office staff across the country was shown. They come out in force to help our constituents and deliver the parcels and letters destined for our loved ones. I thank the Post Office and Royal Mail staff for the efforts they have put in over recent months. It is estimated that more than 60 million customers visited post office branches in the run-up to Christmas, and I want to mention one small rural post office in Herefordshire that opened its doors this year to host Christmas dinner for those who would otherwise have been alone. That highlights the social value of post offices, not only within our high streets, but beyond.
To repeat what I indicated in November’s debate on post office franchising, this Government value and recognise the economic and social importance of post offices to people, communities and businesses across the UK. That is why we made a commitment in our manifesto to safeguard the post office network and support the provision of rural services.
Ian Murray
On the manifesto commitment to protect post offices, is it still Conservative party policy to make the post office the front office of Government?
Kelly Tolhurst
What is definitely Government policy is to make sure that we have a network of post offices that offer a wide range of services to our constituents, and that that is sustainable into the future. Franchising is not a closure programme. It is a way to secure better sustainability for the future of our post offices, and it is a good thing that Post Office is working with high street retailers to recognise that.
The performance of the Post Office over the past decade shows that the network is at its most stable in a generation. Between 2010 and 2018 we provided nearly £2 billion to maintain and invest in the national network of at least 11,500 post offices.
Jim McMahon
I thank the Minister for her comprehensive response so far, but it would be good to get confirmation that this will move on, because we cannot keep having these debates every few months. Does she realise that the outreach service counts each and every stop that a mobile post office makes as a branch? A single vehicle travelling to a village for half a day each week or every two weeks would class each stop as a branch, which is where the figure of 11,500 branches comes from.
Kelly Tolhurst
I recognise some of the concerns about mobile branches that the hon. Gentleman raises. I can assure him that I am moving on to it, and obviously I have had the opportunity to listen to hon. Members this afternoon. I am sure hon. Members will agree that we do not want to go back to the days when we saw over 7,000 post offices shut, as was unfortunately the case under the previous Labour Government.
The post offices meet and exceed all the Government’s accessibility targets at the national level. Government investment in the network enabled the modernisation of more than 7,500 branches, adding more than 200,000 opening hours per week and establishing the Post Office as the largest Sunday trading network.
The Post Office’s agreement with high street banks enables personal and business banking in all branches, providing vital access to cash and banking services to consumers, businesses and local economies as bank branches continue to close. It is right to say that the agreement held with the Post Office and banks benefits our communities, which, as the Minister responsible I have made very clear to Post Office Ltd, to my colleagues in the Treasury and to the financial institutions that I have spoken to. The Post Office is providing a vital service to our constituents, and it should be remunerated for that—in doing so, hopefully that will ensure that our postmasters are also remunerated correctly for the service they provide to our constituents.
Gill Furniss
The Minister talks about banking services, and I would like to bring her back to a point made earlier. When post offices supply ATMs—clearly when banks close down, ATMs often just disappear from the high street or village—the rental is so much that they lose a significant amount of money. Does the Minister want to put that right in order to incentivise keeping ATMs in post offices so that they are available to all our communities?
Kelly Tolhurst
The hon. Lady is absolutely right to say the loss of banks and access to cash has been a concern for our constituents and high streets. To individual MPs who represent a constituency where they feel that their post office is in a position to add an ATM—it is not always possible—as the Government representative I will always feed in specific issues that relate to individual constituencies or branches where we can improve services. I put that offer out there. Give me the details and I will always follow it up.
Gill Furniss
The Minister has been given the details today—they will be in Hansard. Postmasters see that they are subsidising the ATM, which just seems wrong to me. I ask the Minister to go back and review that, and to look at finding some way that she can compensate sub-postmasters for that service.
Kelly Tolhurst
I have heard what the hon. Lady has said today, and I will go away and look it. Every post office operates differently throughout the country. There is not a standard rule for all branches, but I will continue to look at the issues that have been highlighted. I care as much about our post office network as any hon. Member does, and that is not just because I am the Minister in post.
The Post Office’s financial performance has improved significantly, and consequently the Government funding required to sustain the network has drastically decreased and is set to decrease even further in upcoming years. It is the first time in 16 years that the Post Office has made a profit. There was a time back in the early 2000s when the Post Office had a deficit of more than £1 billion. Things have changed, and we are ensuring that we get value for money for the taxpayer while ensuring that we sustain the network.
Marion Fellows
The Minister is talking eloquently about the profits that the Post Office is making, but the people who run smaller post offices—the sub-postmasters —tell me that they cannot live on the new contract. When they have to hand back keys to local post offices, does she think it is right that the Post Office is making profit at the expense of these hard-working individuals?
Kelly Tolhurst
I understand why the hon. Lady has raised concerns about sub-postmasters, and she is absolutely right to do so. Whoever has my role in Government—whichever colour of Government—has a duty to defend the Post Office but also to hold it to account. Since being in post I have challenged the Post Office and will continue to do so. Yes, it is commercially independent and operates within terms. We represent the taxpayer, who is the shareholder and owner of the post offices. It is right that we hold the Post Office to account for decisions and that we exert influence where we can.
Changing consumer behaviour has been a serious challenge for post office and small retailers, including many postmasters, which is why in the autumn Budget we made decisions on business rates to ensure that we helped not only some of our sub-postmasters, but small retail more generally.
There is widespread misunderstanding that franchising is a closure programme that will lead to redundancies and the deterioration of services for consumers, but that is not the case. I appreciate that proposed changes to the delivery of post office services can cause concern in some affected communities, but post office branches are not closing—they are being franchised either on site or by relocating them to other high street locations.
Franchising has been common practice since 1635, when King Charles I issued a proclamation allowing the public to use Royal Mail. The model has endured to this day, and the vast majority—11,300 of our 11,500 post offices—are run successfully as a franchise or on an agency basis with retailers, whether large or small. Delivering post office services as part of a wider retail offer is a proven model that brings benefits to the community.
The hon. Member for Wigan raised concerns about the post office in her constituency, which is included in the 40 that will be taken over by WHSmith. Subject to consultation, WHSmith will take over the running of Wigan’s central post office. Let me be clear that the community in Wigan like other communities across the UK is not losing its post office. It will be relocated to a nearby WHSmith branch, and the services will be more accessible for customers.
Lisa Nandy
I am grateful to the Minister for trying to address some of our concerns, but the community is not being consulted on whether the post office is moved into WHSmith. A consultation is explicitly ruled out in the documents that I have been sent. Although she says that this is technically not a closure, to our community it is. The post office has stood on that site for 134 years. Some of the staff have worked there for decades and offer the sort of service that will not be possible in WHSmith. When she has finished winding up—I appreciate that she needs time to respond to our concerns—will she consider meeting with a group of us to talk this through and consider what we can do to address some of those very strong concerns, which are not being heard at the moment?
Kelly Tolhurst
It is right that Post Office Ltd is holding consultations. I apologise; the hon. Lady said earlier that she had been chucked out of the store and that language of intimidation was used. That is quite an accusation to make, and I would recommend that, if that happens to any Member, they should make Ministers aware so we are able to—
Kelly Tolhurst
Absolutely, but that has not been done prior to today. We will take those things forward. I have met other Members about other issues in their constituencies.
It is right that the Post Office is commercially independent, because that enables us, as the major shareholder, to hold it to account at a ministerial level, and I am always happy to do that. I assure the hon. Lady that the proposed changes would add six hours a week to the Wigan branch’s opening times. She is correct—this goes back to an earlier point—that the ATM will not transfer over to the new site, so I understand her concerns about her constituents relating to that service, which would change in that situation.
Jim McMahon
Post offices are not the same from one street to the next; branches provide very different services. If these are not closures but relocations, is the Minister saying that the services provided by the post offices today will be entirely transferred across to WHSmith, and that there will be no loss of service?
Kelly Tolhurst
The programme of franchising is moving Crown postal services. Our objective is to ensure that, when the post offices are moved, they deliver better services and that constituents have better access to them. Part of the franchising programme is about ensuring we have a post office network for today, which suits the modern retail environment and consumers’ changing habits.
Rachael Maskell
Will the Minister follow up the question of my hon. Friend the Member for Wigan (Lisa Nandy) and meet a group of us? I am seriously concerned about the reduced access—not necessarily to the building but to the high street in front of the post office—and the impact on my high street and the local economy. Will she meet us to discuss those detailed issues?
Kelly Tolhurst
As I have said—I thought I was quite clear—I am always willing to meet Members who have issues relating to post offices in their constituencies. I said that earlier. I reiterate that I will listen, hold Post Office Ltd to account and take those things forward. That does not necessarily mean that I will agree with some hon. Members’ positions, and they will not always be achievable, but I will make Members’ cases on their behalf.
The UK visa and immigration biometric enrolment services for the Home Office were available to a mix of 99 directly managed and WHSmith branches nationwide. However, as was mentioned earlier, the Home Office recently awarded that contract to Sopra Steria, which now runs the service in new locations. On the Post Office being in a position to deliver services for our constituents, I will always ensure that we work together to strengthen the services and add value to the services that the Post Office will deliver for the Government.
WHSmith has been operating post offices since 2006 and has proven to be a reliable and dependable presence on the high street. There are some misplaced concerns about the Post Office’s contingency plan should WHSmith go into administration. The latest financial results show that the company’s high street businesses recorded their third-highest profit in more than 15 years despite the well-documented challenges on the UK high street. The Post Office is not complacent; it regularly meets with all franchisees to ensure they are delivering on the terms of their agreements. That is an ongoing process.
I am concerned that we are running out of time, Sir Graham, and I think the hon. Member for Wigan may want to wind up—or I can carry on. Post Office staff at franchise branches will have the opportunity to transfer to new franchises under TUPE employment protection, which means that they will benefit from the same terms. Alternatively, staff can leave with compensation, and there may be opportunities available elsewhere in the network. WHSmith’s post offices are currently performing well, and I have every confidence that the recent deal will help to secure Post Office services on a sustainable, profitable basis in communities across our country.
I hear the concerns about the consultation process, and I have said that I will take them forward with the Post Office. As the Minister, I will not call on Post Office Ltd to stop the franchising process, but I will work with it to ensure that it delivers its business in the best way possible and benefits our communities.
We need a sustainable network. It is not correct that the Post Office owns all the Crown branches—the buildings are not all freehold and some are leasehold. It is right that the taxpayer holds the Post Office to account and, as the Minister, I will do everything in my power to harness opportunities and to increase services in the post offices. There will be many opportunities and, as the high street changes—I am also the Minister with responsibility for the retail sector—I will continue to work with the Post Office to ensure that we are delivering for our communities and that we increase the services that post offices provide.
Draft Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) regulations 2018
Kelly Tolhurst Excerpts(5 years, 4 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
I beg to move,
That the Committee has considered the draft Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2018.
It is a pleasure to serve under your chairmanship, Mr Davies. Since the UK’s 2016 referendum decision to leave the EU, the Department for Business, Energy and Industrial Strategy has undertaken a significant amount of work on the withdrawal negotiations in preparation for a range of potential negotiation outcomes. The best outcome is for the UK to leave with a good deal and we have put forward a serious and credible proposal for the future relationship. Although we remain confident of an agreement, in the meantime we must and will continue to work on preparing for a no deal.
The regulations aim to address the failure of retained EU law to operate effectively, as well as other deficiencies in the field of audit arising from the withdrawal of the United Kingdom from the European Union. They do not implement any new policy.
Although the fundamental elements of the current statutory audit legislation will remain the same after exit, the legislation still needs to be amended to ensure that it will work effectively once the UK has left the EU. That is because UK law on the regulatory oversight of the audit profession is compliant with the EU audit directive and the EU audit regulation.
The audit directive sets out the requirements on the statutory audit of most incorporated businesses, as well as a framework of standards for audit work and independence. It also sets out the responsibilities of the competent authorities for statutory audit in member states.
Meanwhile, the audit regulation sets additional requirements on the statutory audit of businesses defined as public-interest entities, which are banks, building societies, insurers and businesses with securities traded on regulated markets. The regulation forms part of retained EU law under the European Union (Withdrawal) Act 2018 and will therefore continue to apply in the UK after the UK exits from the EU. Our aim is to ensure that the framework for regulatory oversight of the audit profession in the UK works effectively following our withdrawal from the EU. The statutory instrument will help to facilitate that.
Under the audit directive, powers are provided to the European Commission to grant equivalence to third countries for their audit regulatory framework and adequacy to third countries’ competent authorities for their framework on audit regulatory co-operation. The instrument transfers those powers to the Secretary of State and provides powers to set out the criteria and procedure for assessment.
In future, equivalence or adequacy status decisions will be granted by regulations. Regulations could also be used in the months immediately following the UK’s departure to set out a framework for future assessment of equivalence and adequacy by the Financial Reporting Council. Following the UK’s exit from the EU, European economic area states would be treated like other third countries and, therefore, would be granted equivalence and adequacy status by the FRC.
The instrument extends the powers granted to the UK competent authority, the Financial Reporting Council. Certain powers that have been granted to the FRC by the Secretary of State will need to apply more broadly to reflect the UK’s exit.
The instrument extends the FRC’s ability to enter into mutual recognition agreements to recognise audit qualifications to allow such agreements to be made with EEA states and Gibraltar. It also extends the FRC’s ability to register third country auditors to include the registration of EEA auditors and Gibraltarian auditors.
The instrument transfers the European Commission’s power for the adoption of international auditing standards to the FRC. As the FRC already sets UK standards in line with international standards, we anticipate no immediate change.
The instrument provides certain transitional arrangements for auditors affected and their client businesses. To ensure companies and investors remain confident in UK markets, these will apply until the end of 2020. During that period we will continue to recognise EEA audit qualifications, EEA firm registrations and approvals, EEA audit regulatory frameworks as equivalent and EEA competent authorities as adequate. These transitional arrangements will mean that there will be no cliff edge for EEA companies that list securities on the UK market. It will also allow the FRC the time to put in place the procedures necessary to determine the full equivalence of EEA states, as well as the adequacy of their competent authorities.
The Government have carried out a de minimis impact assessment of the regulations, as the overall costs to business were expected to be small. This confirmed that the impact on business would be minimal, with only a limited sector being affected by most of the substantial changes. This is because the amount of cross-border business affected by this instrument is small. The most significant effects are for EEA businesses that are listed on UK markets, whose auditors will have to register with the FRC, and for UK businesses that only trade securities in the EEA, as these auditors will be subject to less regulation than before.
Recent statements by the Republic of Ireland Government have suggested that some individual UK auditor practices across the border may be affected by the UK’s exit. However, the numbers are small and officials are already in discussion with officials in the Republic of Ireland about them. These regulations maintain access to the UK for the Republic of Ireland auditors for the transitional period. During this period, we hope to agree a mutual recognition agreement with the Republic of Ireland, which will enable continued long-term access for both sides. The Government have worked closely with business and regulatory bodies, to ensure that the instrument before you now achieves continuity wherever possible, while addressing the deficiencies arising from the UK’s withdrawal from the EU.
In conclusion, these regulations aim to provide continuity for businesses operating in the audit sector wherever possible, while addressing deficiencies arising from the UK’s withdrawal from the EU. In the unlikely event that the UK leaves the EU without an agreement, the measures contained in the regulations will be crucial in ensuring that the audit regulatory framework in the UK works effectively. I therefore commend the draft regulations to the Committee.
Kelly Tolhurst
I will try to answer as many of the questions that have been put by hon. Members as I can. The hon. Member for Sefton Central referred to the people behind me as thinking that I was not speaking the truth. I want to clarify my point: as a member of this Government, I am committed to getting to a position where the UK has a deal with the European Union. However, any responsible Government, as we are, would be preparing for a no-deal scenario. The regulations before us will put us in a position where UK business confidence remains. We have confidence in the UK markets and are acting responsibly to ensure that in the event of no deal, we are in a situation where the law works correctly.
I would like to go back to the point made by my right hon. Friend the Member for Welwyn Hatfield. Should a deal be agreed, we might not see many changes. We are in this particular agreement, which is retained EU law, so EU laws are being introduced in the UK. It sets out how we will deal with certain audit provisions. Whether there is a deal or not, further changes will come through, because we will take decisions on how to work things and lay out further guidance on how we will assess qualifications and how we will assess the competency of authorities in the future. Fundamentally, this applies whether there is a deal or not, but obviously it focuses on a no-deal scenario.
As the hon. Member for Sefton Central will know, the transitional agreement is under this SI. For example, up to 2020, under the SI, there is confidence that we will be accepting the relevant professional qualifications and competent authorities within EEA states for the transitional period, so as not to be at a cliff edge.
The hon. Gentleman asked whether the FRC is confident that it will be able to establish mutual agreements, and whether it is in a position to do so. Currently it carries out—fundamentally speaking—oversight with respect to the regulation as it stands. I am therefore confident that it will be in a position to deal with further work that is necessary in the event of no deal—and in a situation where there is a deal, although we are talking about a no-deal scenario at the moment.
I want to touch on a question from my hon. Friend the Member for Amber Valley about recognition of qualifications, and authorisations. Under the SI—and the FRC is agreed—in the case of businesses whose financial years fall after 29 March there will be a requirement for auditors to register prior to the audit being signed. Effectively, there could be up to an extra year for auditors to do that, after 29 March. That is exactly so that it can be managed. There may be benefits for some auditors, because there is potential for them to say, as a selling point, they have done it ahead of time. Obviously that will not be before 29 March, and they will have until the time when they need to sign the audit to register. I hope that that gives my hon. Friend some confidence.
Nigel Mills
I think I understand what the Minister is trying to say, but just to confirm it, let us say a firm had the year end of 28 February 2019 and had to submit audited financial statements to a listing authority by some such time as the end of April or early May, and we had a no-deal Brexit. The auditors could not register for that before 29 March; but would they have to register before they could submit those accounts—so that they would have to do it very quickly in early April—or would they be grandfathered, in the event of no deal?
Kelly Tolhurst
My hon. Friend has outlined a situation where the company’s end of year would fall before the withdrawal date. As things stand the new registry would be only for instances where the financial year started after 29 March. It depends on where the years fall. In the case he gave, effectively, the auditors would not have to do it.
As to the number of companies affected, there are currently 291 EEA companies registered on the UK markets, and approximately 240 UK companies that have registered securities on EEA markets. The regulations affect a small number of organisations and in some cases a few other European countries. We are talking about a small number of companies. To give the Committee an idea of the scale, there are 1,000 listed companies in the UK. We have 3.8 million companies registered in the UK, 98.5% of which are small businesses, 20,000 large businesses and 35,000 medium-sized businesses, so the direct impact will affect a small number of companies and audit firms that are registered within the EEA.
On the point about the Secretary of State taking those powers regarding approval of adequacy and competence that have lain with the European Commission under the EU regulation, there would be full parliamentary scrutiny, as there is, with the Secretary of State having that power. As the hon. Member for Sefton Central knows, all Secretaries of State face full parliamentary scrutiny, and I would argue that our Secretary of State having those powers represents far more scrutiny than the European Commission under the current position. It is a positive move for the Secretary of State to have those powers, and it is right that they are held at parliamentary level rather than being delegated, at this particular time, to an arm’s-length body such as the FRC.
Regarding what the hon. Gentleman says about my confidence in the FRC and its ability, this particular regulation deals with a no-deal scenario, but as he and the Committee know, Sir John Kingman’s report into the FRC was published at the end of last year. We also have the work that has been done in the audit market regarding competitions. Whether we have a no-deal or a deal scenario, those pieces of work on what we do in this area to ensure that our markets are working effectively and that our public bodies are acting effectively will be ongoing. If there were to be any changes in the future, this SI would be taken into account. That is what Governments do. In a no-deal situation we would be in a position to change whatever we might want to in this area. I do have confidence in the FRC and in how we would manage that, and that the FRC would be in a position to deliver what is required in both a no-deal and a deal situation.
Regarding bilateral agreements, the hon. Gentleman mentioned the position with Ireland and asked whether we had had those discussions with other European states. Currently, 200 of the around 240 companies affected operate in the Irish market, so Ireland is the main EU member state that we will need to work more closely with in the future. Our officials are in discussions with our European neighbours all the time across a number of topics in this area, and more of that will go on as we head toward European Union exit date and after 29 March, whether or not we are in a deal situation and working toward a future relationship. We are committed to ensuring that we are able to deliver those agreements with our neighbours in the future.
It is paramount that, as the UK exits the EU, we maintain the integrity of the UK system for audit regulatory oversight. These regulations will help to facilitate that by ensuring that oversight of the audit profession continues to work effectively following our withdrawal from the EU. The regulations do not introduce a change in policy. As I explained, the fundamental elements of the current statutory audit legislation will remain the same after exit. The regulations before the Committee make only the amendments that are necessary to ensure that audit legislation remains operable in the UK following our withdrawal from the EU. The measures in these regulations will ensure that, and mean that the UK system for regulatory oversight will remain coherent and understandable for the businesses that rely on it. I therefore commend the regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2018.
Oral Answers to Questions
Kelly Tolhurst Excerpts(5 years, 4 months ago)
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Toby Perkins (Chesterfield) (Lab)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
We will be undertaking a statutory review of the effectiveness of the pubs code and the Pubs Code Adjudicator. I welcome the recent publication by the adjudicator of arbitration decisions, which will increase transparency in relation to how the code is working in practice.
Toby Perkins
At a recent meeting of the all-party parliamentary group on pubs, we heard from many tenants who had attempted to avail themselves of the “market rent only” option under the pubs code, but whose attempts had been frustrated. Will the review to which the Minister has referred involve a full and open consultation to which members of the public will be able to contribute, and which we will all be able to read afterwards?
Kelly Tolhurst
I recognise the hon. Gentleman’s commitment to this issue. We are currently working out how we will carry out the review, and, under statutory regulation, we need to do that until the end of March. Of course we understand some of the concerns that have been raised by people who have been affected; we will take account of their views, and I will ensure that those views are heard.
Dr Sarah Wollaston (Totnes) (Con)
As the Minister will know, in the case of tenanted pubs the rent is partly set according to the volume of beer sold. However, there is a long-standing grievance about a discrepancy between the amount of drinkable beer in a cask and the volume of the cask itself. Will the Minister meet me—and some of my constituents, who are deeply concerned about the issue—to discuss the “72 pints” campaign?
Kelly Tolhurst
We recognise that a number of issues affect the pubs community. The Government have taken some important measures relating to beer duty and business rates to help pubs, but I should be happy to meet the hon. Lady and her constituents to discuss the position.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
Between April and September 2018, 33 pubs a week closed and were either demolished or converted to homes or offices. The pub industry is in free fall, and communities are suffering as they see their vital community hubs diminished. What strategy, if any, have the Government to secure a long-term sustainable future for the industry?
Kelly Tolhurst
The Government have taken action to secure the future of pubs. We have frozen beer duty, with the result that a regular pint of beer is 2p cheaper than it would have been if we had increased the duty in line with inflation. We have offered the business rate discount to retail properties, and we estimate that 75% of pubs will be eligible for it. That has cut pubs’ bills by a third for two years. We recognise the importance of pubs to our local communities, and we are taking action. For instance, as I have said, we will be reviewing the pubs code and the success of the Pubs Code Adjudicator.
Danielle Rowley (Midlothian) (Lab)
Kevin Hollinrake (Thirsk and Malton) (Con)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
It is right that the FRC refers any concerns it has relating to the insolvency case to the ICAEW, which is a recognised professional body that regulates insolvency practitioners. In this case, I understand that the ICAEW has considered the issues put forward and is investigating a number of matters. I will happily meet my hon. Friend to discuss this issue again, as I already have. It is right that we investigate any concerns that British businesses have about the regulations.
Mr Clive Betts (Sheffield South East) (Lab)
Peter Aldous (Waveney) (Con)
Kelly Tolhurst
We continue to work closely with the Treasury and the Ministry of Housing, Communities and Local Government to ensure that the needs of high street retailers are understood. In the 2018 Budget we announced a reduction in business rates worth £900 million over two years for small businesses. The digital services tax, a 2% tax on revenues specific to digital businesses, will ensure that they pay tax reflecting the value that they derive from UK users. We have also established the Retail Sector Council, which has now decided on its future work programme, as part of which business costs and taxation are one topic being considered.
Laura Pidcock (North West Durham) (Lab)
New research from the TUC shows that household debt is at its highest ever level, with average debt per household now at over £15,000. It is blatantly obvious that the cause is years of austerity and wage stagnation. Millions of workers are now reliant on borrowing, making up for low wages by increasing their debt—not for holiday or luxuries, but through using credit cards for everyday essential such as nappies and food. That is so stressful. Will the Minister please explain what the Government are doing to address this crisis, and why Conservative Members refuse to join the Labour party in advocating a real minimum wage of at least £10 an hour and a return to serious collective bargaining for workers in the UK?
Will Quince (Colchester) (Con)
Kelly Tolhurst
I am delighted to join my hon. Friend in welcoming this recent measure, which has benefited small businesses so well. We have cut corporation tax to 19%. As a result of cuts made by this Government since 2017 through the small business rate relief, over 655,000 small businesses—the occupiers of a third of all business properties—pay no rates at all.
John Spellar (Warley) (Lab)
Marion Fellows (Motherwell and Wishaw) (SNP)
The Association of Accounting Technicians’ recent survey found that 73% of MPs agreed with its recommended changes to the prompt payment code, which are making the code compulsory, ensuring that larger businesses pay in 30 days and implementing a penalty regime. Will the Minister introduce those changes in legislation, to help the many small businesses that will benefit?
Kelly Tolhurst
I thank the hon. Lady for her question. As she will know, we launched the call for evidence in October, and it finished in November. We are reviewing the evidence presented. In October we made announcements to underpin, secure and make better the prompt payment code. The small business commissioner has delivered £2 million of collections for small businesses over the first year in his position. We will continue to work to ensure that small businesses get the payments they need when they should.
Maggie Throup (Erewash) (Con)
Prior to Royal Assent for phase 2b of High Speed 2, will my hon. Friend consider establishing a cross-departmental taskforce with the Department for Transport, to provide businesses that are being forced to relocate with the necessary advice and support, including financial support?
Business, Energy and Industrial Strategy
Kelly Tolhurst Excerpts(5 years, 4 months ago)
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Kelly Tolhurst
We have also assessed—working with the CMA, obviously—that the CMA might have to deal with between 15 and 30 extra merger cases over a year.
[Official Report, Third Delegated Legislation Committee, 5 December 2018; c. 9.]
Letter of correction from the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst):
An error has been identified in the response I gave to the Committee:
The correct response should have been:
Kelly Tolhurst
We have also assessed—working with the CMA, obviously—that the CMA might have to deal with between 30 and 50 extra merger cases over a year.
Draft Postal and Parcel Services (Amendment Etc.) (EU Exit) Regulations 2018
Kelly Tolhurst Excerpts(5 years, 4 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
I beg to move,
That the Committee has considered the draft Postal and Parcel Services (Amendment etc.) (EU Exit) Regulations 2018.
It is a pleasure to serve under your chairmanship, Mr Rosindell. The draft regulations were laid before the House on 29 October. The Government are confident that an agreement on the EU exit will be achieved, but we must be prepared for all outcomes. If the UK left the EU without an agreement in place, the instrument would provide legal clarity and consistency for the regulator and postal operators.
The draft regulations are being introduced, under powers in section 8 of the European Union (Withdrawal) Act 2018, to correct deficiencies in the statute book associated with exiting the EU. They will make minor amendments by removing obligations that would no longer apply if no agreement were reached with the EU.
The regulations make no changes to the operation of postal and parcel services beyond those necessary to ensure the regime is fully functional on exit day. They will not change the six-days-a-week or “one price goes anywhere” universal postal service that continues to be relied upon by consumers and businesses throughout the UK. I will explain what the specific legal amendments are and why they are necessary if no agreement is reached with the EU.
The regulations make four sets of changes. First, they will amend the Postal Services Act 2000 and the Postal Services Act 2011 to remove or replace references to EU obligations that will no longer apply once the UK has left the EU. They will also remove provisions that impose duties to notify the European Commission. Secondly, they will remove from statute the Postal Services Regulations 1999, which implemented article 22 of the postal services directive. That directive requires member states to designate a national regulatory authority, or NRA, for the postal sector. Thirdly, they will revoke the European Commission decision of 10 August 2010, which established the European Regulators Group for Postal Services, or ERGP. Finally, they will revoke EU regulation 2018/644 on cross-border parcel delivery services.
The 2000 and 2011 Acts set out the minimum requirements of the UK’s universal postal service. The amendments made by the regulations to primary legislation governing postal services will not affect the UK’s universal postal service. The regulations will ensure that any remaining obligations under retained EU law are maintained in the 2011 Act and will remove redundant provisions. They will also remove obligations of the EU postal services directive, such as sharing information with the European Commission, because the UK will no longer be subject to the directive’s provisions or to the authority of the European Commission after we leave the EU.
The 1999 regulations designate Ofcom and the Secretary of State as the UK’s national regulatory authorities for postal services, which is a requirement of the postal services directive. The duties and functions of Ofcom and the Secretary of State relating to postal services are set out in the 2000 and 2011 Acts, so there is no longer a requirement to designate them the national regulatory authority under separate regulations for the purposes of the postal services directive. The 1999 regulations will become redundant when the UK leaves the EU and will be revoked in full by the draft regulations.
The European Commission decision of 2010 established the ERGP. Ofcom—the UK’s NRA—is a member. The group consists of member states’ NRAs, provides advice to the European Commission and aims to facilitate consultation, co-ordination and co-operation between NRAs of member states on postal services. As well as members, the group also consists of permanent and ad hoc observers.
The UK will not be entitled to participate formally as a member of the group after we leave the European Union, because membership is restricted to the NRAs of member states. The draft regulations will therefore revoke the EU’s decision, which contains a list of members, one of them being the UK.
The withdrawal from the ERGP was an issue of interest to the House of Commons sifting Committee when the draft instrument was first presented. The House requested further information on the effect of the UK’s non-participation in the group, and possible alternatives for future arrangements.
The ERGP does not make binding rules or take decisions, but occupies an advisory role and facilitates the sharing of best practice. Ofcom intends to seek permanent observer status after the UK has exited the EU, in the way that other NRAs of European economic area states, such as Switzerland, and EU candidate countries currently participate. Although observer status would remove Ofcom’s right to vote, the likely impact of that would be minimal, as this is more of a co-operative forum in nature. If granted observer status, Ofcom could still engage in strategic discussions, negotiations and the sharing of best practice after we exited the EU.
The aim of the EU regulation, which came into force in May, is to increase regulatory oversight and price transparency of cross-border parcel delivery services within the EU. The draft regulations will fully revoke the EU regulation, which requires regular submission to the European Commission of information on cross-border parcel delivery providers, with the aim of publishing tariff information on all member states’ cross-border parcel operators. That duty will no longer apply after the UK leaves the EU.
The principal information-gathering powers are provided for in the UK’s domestic legislation under the 2011 Act. Ofcom already draws on that as part of its regulatory monitoring of the postal sector. Ofcom is also able to carry out comparative overviews of the quality and price of postal services, with a view to publication in the interests of users of those services, following the receipt of information from the operators.
Similarly, the EU’s regulatory obligation on traders to provide consumers with certain information relating to their services is contained in the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. For those reasons, the EU parcel delivery regulation will become redundant and will be revoked by the draft regulations.
The draft regulations will ensure that postal and parcel services can continue to operate effectively after the United Kingdom’s withdrawal from the European Union, and I therefore commend them to the Committee.
Kelly Tolhurst
I thank the hon. Lady for her kind comments. I will try to answer her questions and give her some more information about what has been done.
Regarding co-operation, as the SI highlights we will not be able to continue as a member of the ERGP after we leave, but Ofcom has made it clear that we will be trying to obtain permanent observer status. I touched on this briefly in my opening speech, but I can reassure her that that group votes only twice a year, so the voting element is minimal. It is an advisory board, working together and consulting, and there are a number of countries with observer status in the group. Obviously, obtaining that status is a decision that will have to be taken at a later stage, but I do not see any reason for it not happening.
As the hon. Lady will know, we are already a member of the Universal Postal Union, which is a UN body that operates worldwide and is able to co-operate internationally. The potential impact of the measure will cross over to the impact with respect to cross-border issues. As she will know, we are in consultation with Royal Mail and other delivery operators regarding customs arrangements and requirements that will be necessary. That work is being undertaken by Her Majesty’s Treasury and Her Majesty’s Revenue and Customs, and that information is already being tested in the White Paper.
Regarding impact assessments, we believe that this SI has a very minimal impact. It is under the £5 million mark, so a full impact assessment has been judged not to be required. We are continuing to work with delivery operators and the Royal Mail as we move through the process, towards exit day, either with or without a deal, to make sure that we continue to address what needs to be addressed. We have assessed that neither the regulator nor the Department for Business, Energy and Industrial Strategy would require further funding to be able to operate under a no-deal scenario in relation to this SI.
To put it on record and to put the hon. Lady’s mind at rest regarding cross-border parcel delivery, we have a duty to co-operate with other countries with respect to the postal service and parcels. We will become a third country, but we expect that to operate in the same way with the European Union. We will retain European standards, which are widely shared. We have a great postal service here in the UK, and it has become more efficient in the past eight years.
Nick Smith (Blaenau Gwent) (Lab)
Does the Minister know whether Royal Mail anticipates that any customs changes that come about due to a Brexit in which we crash out will have any practical impact?
Kelly Tolhurst
I thank the hon. Gentleman for his question. We are continuing to work with Royal Mail and HMRC on the customs arrangements that will be put in place. That is a live issue, which continues to be consulted on. I cannot give him full details, because that is a piece of ongoing work.
Nick Smith
I thank the Minister for that response. Will she update us on the analysis she does with Royal Mail on the possible financial impact of the draft regulations in the event that we crash out?
Kelly Tolhurst
If there was to be a direct financial impact that was less than minimal, of course we would provide an update. As things stand, we have assessed that there will be a very minimal cost, but we continue to work on those customs arrangements. Let us be frank: in a no-deal situation, we will be dealing with customs for our postal and parcel services in some way, shape or form, so that will have to be monitored right up to our leaving date while we wait for our direction to be confirmed. That is as far as I can go on that point, I am afraid.
The draft regulations will be made under the powers conferred by section 8 of the withdrawal Act. Those powers will provide legal clarity in respect of postal and parcel services legislation after the UK’s exit from the EU by removing inconsistencies and inappropriate references from the statute book. I have addressed the concerns of the Commons sifting Committee about the effects of the UK’s non-participation in the ERGP as a result of our leaving the EU. The draft regulations do not represent a policy change in the operation of postal services; they preserve as far as possible the rights, responsibilities and protections offered by the existing system. I therefore hope the Committee will approve them.
Question put and agreed to.
Rural Post Offices
Kelly Tolhurst Excerpts(5 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
I congratulate my hon. Friend the Member for St Ives (Derek Thomas) on securing this important debate. He has been a passionate advocate for post office services in his constituency. We have spoken at great length about the post office network and have another meeting booked in for the new year. As he outlined, he has also met Lord Gardiner to discuss this topic. One of the best things about my role is being responsible for postal services—I know how important the post office is to all our communities, not just rural areas, so this is an important part of my responsibilities. For centuries, post offices have been the centre of social life in our communities, towns and villages. That is especially true in rural areas, which is why our 2017 manifesto committed to safeguarding the post office network and supporting rural services.
Between 2010 and 2018, this Government provided nearly £2 billion to maintain and invest in a national network of at least 11,500 post offices. The Post Office currently meets and exceeds all the Government accessibility targets at national level. Government investment has enabled the modernisation of more than 7,500 branches, added more than 200,000 opening hours a week and established the Post Office as the largest network trading on Sunday.
The Post Office’s agreement with the high street banks has enabled personal and business banking in all branches, supporting consumers, businesses and local economies facing bank branch closures, particularly in rural areas. The Post Office’s financial performance has improved significantly and, consequently, the Government funding required to sustain the network has drastically decreased and is set to decrease even further in coming years.
I encourage the House to look objectively at those facts, which clearly show that the network is as stable today as it has been in decades. We must remember that the post office network declined by 38% under the last Labour Government, with more than 7,000 branch closures.
Serving rural communities is at the heart of the Post Office’s social purpose. There are more than 6,100 post offices in rural areas, with nearly all the population in such areas living within three miles of a branch. Last year, Citizens Advice found that seven out of 10 rural consumers buy essential items at post offices and that almost 3 million rural shoppers visit a post office on a weekly basis. That is 31%, compared with 21% of people living in cities. Illustrating how important the post office is to such areas is the fact that almost half of rural post offices have community status. The post office is the last shop in some villages.
Rural branches, whether main branches, local branches or traditional branches, can offer the same products and services as urban branches of the same category. The Post Office recognises the unique challenge of running a community branch and supports such postmasters differently from the rest of the network. They receive fixed remuneration, as well as variable remuneration to reflect their special situation.
In addition, the Post Office delivered almost £10 million of investment via the community fund between 2014 and 2018, which enabled community branches to invest in their associated retail business. The Post Office has now launched a smaller community branch development scheme, which will benefit an anticipated 700 branches. Let me be clear that this Government and Post Office Ltd will continue to support rural post offices.
My hon. Friend will be interested to hear that network modernisation has led to the creation of 450 additional opening hours in his constituency, delivering greater convenience to consumers. However, I am aware that there have been a number of service issues in St Ives, and it is fair to say those issues have not been sorted as quickly as the Post Office would have liked. I fully appreciate how frustrating it is for a local community when post office services are interrupted.
In rural areas such as the St Ives constituency, when the shop in which the post office is based closes, there may be few other commercial premises from which services can be offered to consumers. In such instances, the Post Office explores how an outreach service run by a nearby postmaster can ensure the continuity of services for the community, such as via a mobile van.
For example, in my hon. Friend’s constituency the St Keverne postmaster will be extending the mobile visit timetable to provide services at—excuse my pronunciations if they are not correct—Heamoor, Gulval, Carbis Bay, Leedstown, Praa Sands and Crowntown over the coming months. Outreach and mobile services are highly valued by the communities they serve, as they offer all the same services as a bricks-and-mortar branch.
Derek Thomas
I thank the Minister for listing those places—she was not far off. Does she accept that it was the work that we have been doing as a local community to put pressure on the Post Office, and to bring this issue to the Minister and other Ministers, that finally got the Post Office even to consider that mobile service, which at the moment is not in place? Some of those villages have not had post office services for more than a year.
Kelly Tolhurst
I thank my hon. Friend for his point. He is right in what he says and I recognise that. I was going to come on to this later, but I will respond directly to his point now. The Government are the sole shareholder in the Post Office. It is right that we work with the Post Office, challenging it where necessary, and with constituency MPs and the community to make sure that we can deliver the right services for the community. As I always do when speaking about post offices at the Dispatch Box, let me say that we are committed to working with MPs and their communities, and we will continue to do so in order to maintain the branch network we have and to try to serve communities as best we can.
Outreach and mobile services are highly valued by the communities they serve, as they offer all the same services as bricks-and-mortar branches. They have been successful in taking key services such as everyday banking to customers, giving them vital access to cash in areas where there are no bank branches nearby. The Post Office directly contributes towards the costs of those outreach services, in conjunction with the postmaster running them, whose parent branch benefits from the transactional income accrued from the visits to outlying communities.
My hon. Friend raised important points about the specific challenge of running a post office in communities where seasonal trade and variation plays a significant role. I know that the Post Office listens to the community and the postmasters in St Ives by taking a more flexible approach to opening hours requirements across the year. That will allow branches to be more sustainable through the leaner, off-peak seasons, when their post office and associated shop has fewer customers. As he said, the issue was taken up by Lord Gardiner in his meeting with Paula Vennells, the Post Office’s chief executive officer, on 4 December. I understand that there will be a follow-up meeting with her in the constituency in the New Year to discuss this and other matters further. I am confident that this ongoing, frank and sustained engagement is the right way to proceed, so that the issues can be understood and a solution be provided for the benefit of postmasters, businesses and residents of St Ives.
Finally, I would like to take this opportunity to clarify some misconceptions about the Post Office’s franchising programme, particularly the assumption that franchising means closures and the downgrading of services. Those criticisms are misplaced. Post Office branches are not closing, but are being franchised, either on-site or by relocating to other high street locations. Franchising is nothing new; almost 98% of post offices across the UK are successfully operated by independent businesses and retail partners. Moving the directly managed Crown offices to retail partners has been instrumental in reducing losses in that part of the network.
My hon. Friend raised an important point on postmasters’ remuneration, especially for everyday banking services. As these services have developed and increased, I know the Post Office is looking at ways to better recognise the effort required of its postmasters for banking transactions. In fact, the Post Office has recently notified postmasters that their rates for banking deposits have been increased this year. I understand that the Post Office has now entered negotiations with banks on the next banking service agreement. The Post Office has reassured me that it will do all it can to ensure that postmasters are better remunerated for the vital services that they offer. I should add that the Post Office is picking up vital services in areas that banks have left. It is right that the Post Office does its best to make sure the banks accept the responsibilities involved and the work that post offices are doing on behalf of those communities and, we hope, properly remunerate them.
My hon. Friend also raised an important point about postmasters who cannot exit the business because of the absence of alternative operators to take over their branch. Although that is an operational matter, I assure him that the Post Office is taking it very seriously. As of November 2017, there were more than 450 branches of that type across the network. To help the remaining postmasters, the Post Office has extended the network transformation resignation timeframe to March 2020. That means that all parties can continue to work together to ensure that no communities are left without the invaluable post office services that they rely on. The postmasters affected will continue to receive both fixed and variable remuneration throughout that period. Where solutions are found, the postmasters concerned can leave while still qualifying for their leaver’s compensation.
My hon. Friend raised some particular issues relating to his constituents. I am not aware of some of the detail of those cases, but we are meeting in the new year, so I look forward to discussing those points and seeing how we can move forward.
I reassure my hon. Friend that all post offices across the network, including rural branches, are of the utmost importance to the Government. We recognise their value and importance, and we will continue to honour our manifesto commitments so that post offices can thrive and remain at the heart of our rural and urban communities. I thank my hon. Friend again for making his points, and for his hard work in support of access to post office services for his constituents. I assure him that I will continue to work with him and the Post Office to make sure that the constituents of St Ives receive the post office service that they deserve.
Mr Deputy Speaker (Sir Lindsay Hoyle)
I am sure the House would like to wish all postal workers the best for Christmas and the new year, and to thank them for getting the parliamentary mail through.
Question put and agreed to.