Lord Deben
Main Page: Lord Deben (Conservative - Life peer)Small Business, Enterprise and Employment Bill
Lord Deben Excerpts
Lord Stevenson of Balmacara
In some sense this group of amendments is the continuation of the earlier debate, but it now focuses on the reports that may come from whatever system is set up for these small business appeals champions—although here they are sometimes called the “Independent Complaints Commissioner”. I am not sure where that fits into it; perhaps there is another whole area of bureaucracy that I have not yet managed to uncover.
The Bill is very helpful in setting out the duties and functions of the review process. The overall objective is to encourage the regulator to improve and to simplify the appeals and complaints processes that businesses should follow if they wish to challenge or appeal a regulatory decision. The requirements are quite onerous: annually, each reviewer—obviously we still do not know how many there will be—has to review the effectiveness of the relevant regulator’s procedures and prepare a report about his or her findings, which may include an assessment about whether those are accessible and fair, as well as recommendations for improvement. Those recommendations can go either to the Minister of the Crown—which might be relevant and appropriate, given that that most of the time that person will be making the appointment, and that would certainly have to be the case, presumably, if legislation was to follow—or they can go to the regulator themselves if it is just a simple matter of a change of procedures. It would be helpful if the Minister could give us a bit more detail on that.
On the narrower question of whether a report has to go to the Minister of the Crown simply because it involves changes in the law, this does not give quite enough depth or sketch in some of the things that will come. The reviewer may not be in a position to give a formal recommendation that there has to be a change in the law—they may say, simply, “This is something which I’ve picked up, which I think is important for small businesses, and I refer it to the Minister for appropriate action”. The appropriate action may well not necessarily be legal; it may be some form of instruction to the regulator, or that some regulatory bodies need to work closer together, or some other things. I am not trying to be difficult—the way it is expressed is just a bit narrow. If the Minister can perhaps find the words to explain that in a more rounded context, that might be helpful as we go forward.
I am moving Amendment 33D, but in this group we also have Amendments 33E, 33F and 33L. The point raised in Amendment 33E, which is minor but important, is the suggestion that the review should also reflect on any discriminatory practices that exist. We are aware—more anecdotally than evidence based, although it is still important—that there are concerns about some issues to do with diversity in other areas, which are in the law and legally applied to individuals, but we are talking about small businesses, for which there may therefore be concerns. This might be a good point to try to think harder about making sure that the way this is framed also includes the question about discrimination and wider issues to do with that area of work.
Amendment 33F suggests that there may be issues where an individual company may feel that the regulations that have been imposed are not only against them but mean that they are being discriminated against. Therefore, again, it would be helpful if consideration was given, perhaps in the regulations, to making a broader pass through this, including recommendations for mitigating steps that might be taken, if an assessment by a reviewer concludes that discrimination has taken place.
On Amendment 33L, Clause 20 places a duty on the independent complaints commissioner or small business champion to produce an annual report on his investigations under the scheme as regards the FSA regulators, which are specifically carved out in one part of the Bill—although, obviously, that is because they already carry out many of the functions that the reviewer in the Bill would carry out. However, for completeness, and to make sure that there is no gap between them, might it not be sensible just to include within the Bill a very clear inclusion paragraph that would make sure that they also have to look at unfair and discriminatory practices under the scheme? I beg to move.
Lord Deben (Con)
My Lords, I rise to warn the Committee—and I hope that the Minister will accept this warning—of the danger of the enactment of good-heartedness for the sake of it. There is a phrase in the amendment that symbolises that. The amendment that we are discussing with the first one contains the expression,
“protecting individuals from unfair treatment and promoting a fair and more equal society”.
I am all in favour of a fair and more equal society, but I cannot think of anything that is more likely to make people feel that all this stuff is yet again a whole collection of persiflage rather than the serious matter we are talking about. This is not about small businesses; it is not what small businesses are about. It is a perfectly reasonable statement but not something that we should be putting into the Bill. I am surprised that it is in the amendment.
That enables me to say what I really wanted to say, which is that I think this is a good and necessary Bill. However, we have to remember that we also have a commitment to reducing red tape and reducing the appearance of red tape. I want to make a point about the appearance of red tape. Very often people think that something is restrictive or difficult because there is an awful lot of it. I have always believed that we ought to have a law saying that we cannot introduce any new laws unless we take away at least the same number of lines from the present laws, so as not to make people feel that they are overwhelmed by what is before them.
This seemed to me to be a reasonable moment, before the Minister rises, to say to the noble Lord opposite that there is a responsibility in setting down amendments so as not to give the impression that we are prepared to load people with a whole lot of things that may be politically correct, nice things to say, or something that might be added to a speech, but which, frankly, make people feel that the Government are constantly after them with all sorts of nebulous thoughts and ideas to which we can all sign up, but which ought to be left to people to decide for themselves as to their purpose. They should not be written down in this way.
Baroness Neville-Rolfe
I thank noble Lords for the amendments and for the opportunity to debate the role of the champion and how it helps business.
We know that small businesses suffer disproportionately from regulatory burdens and find appeals systems, in particular, hard to understand. I thank my noble friend Lord Deben for his intervention, which I could not have put better myself. The point about reducing red tape and the appearance of red tape particularly applies to appeals, when people need to understand where they can go and to have proper processes at a regulator if and when things go wrong. I feel that very strongly.
Looking at the amendments in turn, Amendments 33D and 33E relate to the champion’s assessment of the regulators’ appeal processes and procedures. We certainly do not want the champions to ignore the core role and function of a regulator when making an assessment of the regulator’s complaints and appeals. However, we will make it clear in guidance that the champions should consider this in their assessment of appeals processes. Clearly, those processes need to be shaped by the sort of cases at stake. Cases considered by the Pensions Regulator will be very different from those before the Environment Agency or the Security Industry Authority. There are a number of factors that champions will need to consider in reviewing appeals processes. As well as the protections that the regulator has been established to secure, these will include the types of cases being considered, the profiles of the businesses which are applying and the typical timescale. We aim to identify the relevant considerations in guidance. Putting only one of them in the Bill would give it undue weight. I hope that the noble Lord will accept that, and feel able to withdraw the amendment.
Amendments 33F and 33L relate to reporting—both by the champion and the independent complaints commissioner—on discrimination against a business that has challenged a regulator. Of course, the independent complaints commissioner is the equivalent of the champion for financial services regulation. It has a different name and different framework to fit in with the regulations that establish these bodies and the statutes relating to them, as I think the noble Lord acknowledged.
The Government fully agree that such discrimination is unacceptable. We do not want to deter complaints. However, Amendment 33F requires that the champions should provide an assessment of individual cases and provide redress on those cases if they find that discrimination has occurred. While understanding the objective, we do not want to create a separate route of appeal, which is what the amendment seems to do. It also conflicts with Clause 17(5), which explicitly prevents champions making any recommendation in relation to individual cases. By giving the champion vires over individual cases, Amendment 33F would negate that.
None the less, this whole issue is certainly one to which the champions should be alive. I am happy to commit that our guidance to champions under Clause 19 will require them to consider any examples of discrimination against those who challenge regulators’ decisions, and to make recommendations where they find it. That is an important horizontal issue for them to look at. The Government therefore oppose this amendment, although we support the sentiment behind it.
Amendment 33L makes similar, though less extensive, requirements in respect of the financial regulators’ independent complaints commissioner. The amendment requires an assessment of any unfair and discriminatory practices in the commissioner’s annual report. The clause already requires the report to include information concerning general trends emerging from investigations, which can and should include the issues of unfair and discriminatory behaviour where there has been a complaint. We believe that does enough and do not want to create a new industry of challenge and confusion.
I hope that the noble Lord has been reassured by my response and by what we plan in terms of guidance and will agree to withdraw the amendment.
Viscount Eccles (Con)
My Lords, there is one amendment to Clause 21 in this group. If the Committee will allow me, I will raise a rather general point about Clause 21. This impact report is a very big exercise, which is made quite complicated because it is selective; that is to say, it is supposed to concentrate only on regulations that have been introduced and withdrawn during the period. I am not looking for an answer on the general approach today, but perhaps my noble friend will be kind enough to write to the Committee about this clause.
This business impact target will be very expensive to carry out. I would particularly like to know how many people, over what period of time, will be engaged upon writing this annual report. Quite apart from that, its conclusions will be disputed, which will give rise to a lot more toing and froing. I wonder what will be achieved and what will be done as a result of this report that would not be done on a case-by-case basis anyway. That is to say, circumstances would arise as regards a particular regulation or the withdrawal of it, which would cause people to think that something must be done. Indeed, we have been discussing quite a complicated and comprehensive system for being able to raise such problems and deal with them. Therefore, before the next stage I would be most grateful to understand in more detail than I do what the real benefit is of Clause 21.
Lord Deben
My Lords, having been critical of what I am afraid I referred to as persiflage in an earlier amendment, I draw my noble friend’s attention to the importance of this set of amendments. They are not here, as I understand it, to lay extra burdens on anybody or to make generalised statements about good will and family life. In fact, they are designed very purposely to ask the Government to be very clear about this issue.
I say to my noble friend that it is important for the Government to be very clear about this position, because there are a number of other areas in which the Government have not been clear and where we are now in some difficulty. Of course I would not be out of order were I to speak to the question of caste at any length, but there is no doubt that there are a series of issues where lack of clarity has led people to be concerned as to where the Government stand. I am not concerned about that, because I am quite sure that the Government stand in the right place—you could not expect me to sit on this side of the Room if I did not think that. However, there are those who are not entirely sure, and this would be a good opportunity to give them the assurance that they need, not only for the high-minded view that the noble Baroness, Lady Thornton, put forward and which she is perfectly right to raise, on the standing within the international community, but also for a rather boring local reason. That is that one of the problems of red tape, as I said, is the perception of it, and one of the other problems is the misunderstanding, and not knowing where it is.
I do not like the term “deregulation” much, as it presupposes that the answer in all questions is not to have regulation, while in my view we have to try to look for good regulation. That is what Governments of all parties mean, when they are sensible, whatever they say outside. One of the ways we can have good regulation is, first of all, to have clear regulation—people know where they are. That is why I am so keen on not having too much of it, not because I do not want regulation, but simply because the more you have of it, the less people are clear and the less they know what they should be doing. In this particular case, clarity seems crucially important.
Although this is clearly a probing amendment that is meant to try to make sure that the Government say what they think and, if it is necessary to put that in the Bill or change one of the clauses in such a way as to make that explanation certain, I am sure that the Government will find a way to do that. I wanted to emphasise that this seems to be a totally different kind of discussion from the one that I rather light-heartedly drew attention to earlier on—I apologise to the noble Lord, Lord Stevenson, if he felt that I had been unfair about what he said. However, on this occasion it is important that there should be absolute clarity.
Baroness Neville-Rolfe
My Lords, I am grateful to the noble Baroness for her amendments relating to the scope of the champion policy and the links to the growth duty and indeed, for making an appearance in the Committee to talk about the EHRC in particular.
If the noble Baroness will bear with me, I shall take the amendments in turn. Perhaps I should start by commenting on the question from my noble friend Lord Eccles about the purpose of the business impact target. Clause 21, to which he refers, establishes a framework for transparent regulatory reporting. This framework builds on, it is fair to say, the world-leading success of the Government’s one-in, one-out and one-in, two-out approaches to regulatory management, which have saved business a lot of money—£2.2 billion a year.
The Government have significantly improved the regulatory environment for business, but the job is not done. Many businesses in this country, as we have heard in the Committee, believe that complying with regulations is still the single greatest challenge to running their business. There remains an ongoing need for future Governments to ensure that the regulatory system is as streamlined and efficient as possible and, as my noble friend Lord Deben said, really clear.
Clause 21 is designed to achieve that objective. It places a duty on the Secretary of State to publish and lay before Parliament a business impact target within 12 months of the commencement of a new Parliament. The setting of deregulatory targets is already well established. The previous Administration set a reduction target for administrative burdens; this Government have pioneered other systems. Examples demonstrate the value of such an approach and the Bill’s proposals are in a sense a natural progression of the established practice, which is important.
Amendments 33H and 33J would, in different ways, restrict the list of regulators to which the small business appeals champion provisions can apply. The Bill already provides that the list of regulators covered by appeals champions should be set out in regulations. As I have already said, these will be subject to an affirmative resolution. We have already issued a consultation document—I repeat that for the benefit of the noble Baroness, Lady Thornton—and that consultation paper is on the government website. The consultation ended last Friday, but we are happy, of course, to take account of representations received in debates in the House alongside the consultation. We will publish a summary of the consultation and the Government’s response in due course. Our response will become the basis of the regulations that we lay before Parliament and which will bring regulators into scope.
The one area where the clauses mention specific regulators is in respect of the financial services regulators. That is because these regulators already have an extensive statutory framework for engaging with business stakeholders and we feel that creating a champion would risk creating confusion and duplication.
On Amendment 33H, if one accepts the general thrust of this policy on the need for someone to make sure that regulators’ appeals processes are business friendly, why would one not want it to apply, for example, to care homes that felt unfairly treated and wanted to challenge rulings by the Care Quality Commission? What about businesses challenging the Insolvency Service?
Moreover, the amendment also proposes to exclude the Equality and Human Rights Commission. I can reassure the noble Baroness that it is already the Government’s position that the EHRC should not be in scope. Consequently, it was not included in the consultation to which I referred or in the list of regulators to be covered. The Government recognise the possibility that applying the growth duty to the EHRC might have inadvertently triggered a review of the “A” status of the EHRC. They have therefore decided not to do so. The Business Secretary has written to the EHRC to confirm this decision. We have no desire to threaten the status of the EHRC, and will take all necessary action to ensure that we do not. I hope that that clarity also reassures my noble friend Lord Deben.
Nevertheless, we do not think it would be appropriate to start excluding certain regulators within the Bill. The Bill, as drafted, rightly leaves this for secondary legislation. This is because regulators may change over time and it is important that there is flexibility to amend the list accordingly.
Lord Deben
My noble friend said earlier on that this would not apply to the financial regulators. Some of us think that this Government have the most amazing ability to think in two different ways: they deregulate on everything else but overregulate in the financial areas. I declare an interest, which is in my entry in the register of interests. I do not quite understand why, if these things are so good for all the other areas, they are no good in the financial service area. My noble friend said that she thought it might be duplicative, but I cannot think of any rights that people have under the present regulations which parallel this. There are small businesses involved—again, I declare my interest—so I do not quite understand her answer to that, although I must thank her very much for her clear answer on the equalities organisation.
Baroness Neville-Rolfe
I thank my noble friend for his intervention because it gives me the opportunity to explain that Clause 20 introduces equivalent provisions for financial services. It is because of the plethora of existing legislation on financial services that we have to do it in a slightly different way in that area. I am sure that we will come on to scrutinise that clause in due course. Even for the financial regulators, I understand that the exclusion is not in the Bill. We are simply trying to achieve exactly the same effect but have had to do it in a different way.
Lord Mendelsohn
My Lords, in moving Amendment 33BE I will also speak to Amendment 33BF. For veteran observers of BIS matters, this debate will be quite familiar. These issues were raised during the course of the Consumer Rights Bill and the Government’s approach steered us towards considering this matter under the rubric of this Bill. This debate cuts to the heart of the level of commitment behind creating a framework that truly supports the backbone of our private sector in this country, and whether government are really willing to appreciate and tackle the market dynamics that favour bigger businesses over smaller businesses, as other countries have done successfully in stimulating small business. Indeed, small businesses are already treated as consumers in many parts of the European Union and many of the regulatory areas in our own country.
I will briefly set out the context and drivers behind the amendments. The argument is pretty straightforward. Small businesses, especially micro-businesses, have very little bargaining power because they are not making large-scale purchases. These companies do not have any more time or specialist knowledge than individual consumers. They do not have specialist procurement functions, procedures or external support, or even in-house accounting and legal expertise. We believe in extending protections to micro-businesses in the sale of goods and services.
My noble friend Lady Hayter meticulously spelled out these issues when she said that,
“we might expect a small hairdresser to know what they are doing when they are purchasing shampoo or hair-dryers, but they are not in any stronger position than any other individual consumer when they are getting a window cleaner in or buying a type of floor cleaner or purchasing electricity. Similarly, a small café that happens to offer wi-fi to its customers may be as vulnerable as the rest of us to poor service or being fobbed off by a wi-fi supplier. Similarly, small landlords may let out perhaps only one or two properties but some of those landlords will be classed as business and will not be able to enforce their rights when they are dealing with utility suppliers, or indeed the Post Office or anyone else, that they may deal with as a business”.—[Official Report, 13/10/14; col. GC 2.]
The Government have had some historical objections to such measures. First, they argued that small and micro-businesses are already protected under the Sale of Goods Act and the Supply of Goods and Services Act. That is why they directed us to this Bill, as opposed to the Consumer Rights Bill. That was reasonable and I agree with the point that these protections exist and are essential. However, they are not enough. The core problem for small businesses is that, in general, the level of protection afforded to business customers is significantly lower, reflecting a view that businesses ought to be in a position to look after themselves. A culture of caveat emptor, or buyer beware, is typically considered sufficient protection for business customers, other than in extreme circumstances. Moreover, very small-scale businesses are excluded from a range of commercial opportunities and proportionately penalised and treated as cash cows by a range of suppliers.
Secondly, the Government objected that it is an unnecessary and unusual intervention, but the truth is that it already exists. A number of regulators already treat micro-businesses as consumers. The Legal Services Ombudsman and the Financial Ombudsman Service both treat micro-businesses as consumers for their complaint handling. Ofcom extends consumer protection to micro-businesses and requires providers to apply an alternative dispute resolution scheme for dealing with unresolved complaints from domestic and small business customers. The Communications Act 2003 specifies that small businesses should be classified with domestic customers, as long as they do not employ more than 10 people or trade in the telecom sector. The Federation of Small Businesses has reminded us that small businesses also count as consumers in breaches of competition law; the FSB can act as a super-complainant in such cases. Small businesses will also be covered under Clause 80 as regards redress under competition law, where the opt-out provisions will cover small businesses; the Federation of Small Businesses can be party to that. What we are asking is therefore not that unusual. In fact, it is usual for this provision to be made to ensure the proper functioning of markets.
Thirdly, an objection has been made that business does not support it—even that the Federation of Small Businesses does not support it. This is both true and untrue. It is true that some big businesses do not want it. The Government have previously quoted consultations from the CBI. I can only say that, in my experience, some are good and some are bad: some react positively to deliver as if small businesses were protected as consumers, and others—this is really the main part of my experience—use the difference to provide inferior and costly service to the smallest commercial entities.
What is true is that the Federation of Small Businesses wants this measure. I know that this has been a matter of contention before, so I checked before speaking today. I think that last time there was a misreading of a report whose purpose was to inform the federation’s recommendations as being the recommendations themselves. When it comes to negotiating business contracts, the Federation of Small Businesses has identified four areas that add up to real detriment for those businesses. It talks about a “lack of expertise” in purchasing policy, high opportunity costs of time spent making purchasing decisions, low benefits, and little bargaining power. The Federation of Small Businesses firmly supports this recommendation.
Finally, the argument is made that there is no evidence that the measure helps, and that it could be bad in terms of how small businesses are treated by big businesses. I am bound to say that, while I am fairly new at this, it has not gone unnoticed that this has not seemed to stop government before. Indeed, I would even go so far as to say that some of the consultations on the Bill may well confirm the thrust of this argument, and the way in which the evidence is gathered can be quite narrow and sometimes give the appearance that our final evidential base is unlikely not to have unintended consequences as a result.
In my view, the argument about whether the Government can measure the impact of treating small or micro-businesses as consumers seems to be a minor objection. It is very easy to model an answer and I am sure that the department’s officials have grasped that or have used the time between this and the previous debate to get this right. I hear the argument about changing the legal framework for 4.7 million businesses without a full and complete understanding of the impact, but that is a rather false construct. I strongly reject the argument that we should avoid doing this because larger businesses will act with retributive force, or that they should be allowed to maintain a power imbalance because they do not like meeting proper business standards. I think that we also had that debate within the context of payments and access to finance. I also reject the argument that there is any meaningful and real business opposition. Would they suggest it? No. Do they really have any meaningful objections? I believe that they do not.
I hope that the Minister will be the bearer of some good news on this. There were some very encouraging statements in the other place and by Ministers on these matters. In fact, the Government’s response to the report by the Federation of Small Businesses into the consumer issues facing smaller firms and sole traders was also encouraging. I hope that the Minister has come here today with some additional measures strengthening the rights of these businesses, or even perhaps with the remarkable news that she will support our amendments. If my optimism is to be dashed, I hope that the Minister could place on the record—given all that has gone before—a reasonable exposition of the work the department has done to review the evidence in this area and create an evidence base, and say whether the Government categorically rule out amending the law in the future. If they do not do so, why not support the power to ensure that this can be done quickly and efficiently now?
If there is still a chink of light, given that this distinction is already made in statute law, regulator policy and other EU jurisdictions, would the Government be amenable to discussing how the Bill could clarify what is already a clear fragmentation in law and a mixed message to small businesses? I beg to move.
Lord Deben
My Lords, I ask my noble friend to take very seriously the issues which are raised here. I look at it in a rather different way from the noble Lord, Lord Mendelsohn—that is, from the point of view of a small business itself. As my declaration of interest shows, I chair a number of small businesses. I have been recategorising them while reading through the amendments, so I also chair a medium-sized business. On the basis of this discussion, I am hoping that it will become a large business. I look forward to that. I do quite a bit of mentoring of people starting businesses. It is very hard for them to start a business. However, we know that innovation comes more from small businesses than anywhere else and that the bigger a business becomes, the less innovation there is. It is a crucial part of improving employment and the economy. We have to recognise that.
How do people start small businesses? Very often, they do not start it as a small business but as a person or customer. You begin something and realise that you have a kind of business, and then you try to make it into a business. It is a much more haphazard operation than those who have never started a business sometimes think. I hope that the civil servants present will not mind my saying it but one of the problems with all this is that nobody who writes this stuff has ever run a business or understands how a business is run. Having done the job as a Minister, I recognise that I was pretty unusual because I came from the business community. Most Ministers had not done that. We have here a Minister who is very well equipped, because she has played a major part in what can only be called a megabusiness, in the circumstances.
Lord Deben
My Lords, we should be very grateful to the noble Lord, Lord Cromwell, for raising this question. It is only part of the question, if I may put it that way, because there is a real issue which the previous speaker was absolutely right to raise. We have to think this through and I am not sure that it has been thought through. What is the nature of a property which was rented originally, or, indeed, owned originally, as a house, and then a business is started within it under the terms of the Bill? I put it like that because it was pretty clear in the past what you had to do: you were running a business, so you had to report it to somebody and somebody told you whether you could or could not run a business in those circumstances. That is, bluntly, more or less what happened.
We also know that a very large number of people run businesses, do not report them to anybody and nobody cares too much. As long as they do not make too much noise or other nuisance, everybody is perfectly happy. However, that is an unacceptable position because some people manage to run a business in those circumstances but others do not and that is not right. We want to encourage people to start a business in these circumstances because it is the natural way to do so. We do not want interfering local authority personnel to arrive and say, “You can’t do that in your garage. You have got to move to our extremely nice and very expensive industrial estate”.
Two tax elements are involved here. I do not think that the noble Lord, Lord Cromwell, mentioned the other one. I am very interested to know what happens about VAT. If a house is said to be a business premises as a result of this measure, there is also the question of whether, if you sell it on, you retain your right to sell on your principal residence, because it could be your principal residence as well as your business. How would that interact with selling a business premises where you have received rent? Then there is another question about how you have structured the business and which part of it is used as a business. The Committee can see immediately that there is a series of complications here. I dare to say to my noble friend that I am not quite sure that people have actually thought this through.
I want to do precisely what the Bill is intended to do, which is to say that you cannot prevent people running a business from their own homes. That is not an acceptable way for either a landlord or local authorities to operate. I know some areas where local authorities have operated absolutely appallingly in what they insisted on. They made it very difficult for people. This is not just in small circumstances. There was a really bad example in my constituency when I was a Member of Parliament in which a local authority said that it was unacceptable for a marquee to be put up in a very large house with a very large amount of ground around it because it was being used as an exemplar of marquees. They could have a marquee if they wanted one for a party—as long as they did not have too many parties—but to have a marquee as an exemplar of marquees, because the business was for marquee renting, was unacceptable without planning permission, which the local authority would not give.
People get themselves into terrible situations. We need to be quite sure where we are going with this particular change. However, I think that the amendment in the name of the noble Lord, Lord Cromwell, is not acceptable for all the reasons that have been given: it is not complete enough and it opens the gates to misuse of the Bill, which none of us wants. We have to ensure that the person lives in the house; that is obvious. This is one of those really difficult situations because it is like the question of the elephant: you can describe what you mean by this, but to write it down in a satisfactory way is quite difficult. Clearly, if a house is largely used for a business and a flat is effectively attached to it then that is different from the house being used as a house in which some of the rooms are used for the business. Some of the rooms may sometimes be used by the business. All those things make it extremely difficult.
I do not want my noble friend to think that the only answer to this is not to do it; that would be a great disappointment and I am sure that she will not think that. We want to do it, but I am not sure that this little bit has been as thought through as it will have to be. The noble Lord, Lord Cromwell, has rightly brought it to our attention and I hope that my noble friend will accept that we need to know more about this before we can be entirely happy with it.
Baroness Neville-Rolfe
My Lords, I welcome the noble Lord, Lord Cromwell, to the Committee and thank him for joining our discussion, and for putting us right on the history of the Cromwell family. More seriously, he has brought his practical experience of enterprise and of the subject. I thank him for his support for the Bill, and I think he supports Clause 35 as well. This has been a good debate. It is excellent when Back-Benchers raise these sorts of concerns with amendments of this kind.
For completeness, I should add the wider action that we have taken on business rates. In the 2014 Autumn Statement, the Chancellor announced further help for business rates, bringing the total support for 2015-16 to £1.4 billion. That included some very significant measures targeted specifically at smaller businesses, such as the doubling of small business rate relief for a further year and the £1,500 discount for smaller shops, pubs and restaurants. We have also, of course, given councils powers to grant discounts entirely as they see fit. When they do so, we automatically meet 50% of the costs. Those powers can be used to support small businesses to encourage growth.
It was also good to have the support of my noble friend Lord Stoneham. As usual, he made perceptive points about the drafting and rightly drew attention to the requirement for owner-occupation.
It is always good to have the noble Earl, Lord Lytton, joining the debate, in view of his knowledge of the subject. I note what he says about empty property rates and the services provided to business rate payers. Of course, the current system on empty property rates was introduced by the last Labour Government. We recognise that the empty property rate can be burdensome, especially at times of economic difficulty, but the need to balance changes to the system owing to fiscal consolidation has meant that we have left things as they are.
I turn to the amendment and the issue at hand. The purpose of the proposal is to exclude home-based businesses from paying business rates altogether. I agree that this is an important issue, and we have to provide sensible and clear rules on home working so that they support growth and businesses know where they stand. However, we believe that the amendment is unnecessary, as we hope that we have indeed already achieved the desired outcome through some sensible and clear rules. We have ensured that, in the majority of circumstances, home-based businesses will not attract business rates—the noble Baroness will be glad to hear that. We provided that clarity through guidance published by the Valuation Office Agency last summer. The guidance clearly sets out the circumstances in which the Government do not expect businesses to pay business rates. That guidance is available on the GOV.UK website.
As a result, in the majority of circumstances home-based businesses will not attract business rates, but there are some exceptions in the interests of fairness. For example, a dentist’s surgery on the ground floor of a domestic house continues to attract business rates. Indeed, that example serves to illustrate why we favoured guidance over legislating on this matter in this Bill. Guidance allows sensible decisions to be made reflecting the circumstances on the ground in each case. Attempting to legislate to cover all situations could, I fear, increase uncertainty over home working and allow some substantial businesses to avoid business rates. I hope that noble Lords agree that is not what we wish to achieve, and that clear guidance is the best approach in this situation.
My noble friend Lord Deben raised questions about tax, so I shall comment on VAT in particular. A home-based business, as I am sure he will know, should remain liable for VAT in the same way as other businesses, subject to the same thresholds.
Lord Deben
I was referring not to that issue, but to the issue of clearing up the connection between business rates and home businesses. Unless we do that, there could be circumstances in which the home became liable to business rates and then it could be seen as a business property. I want to make sure that, if such a business was sold, the owner could maintain the right to sell his own property without VAT—
Lord Deben
Yes, the capital gains tax element becomes very serious in that regard. I know that my noble friend will tell me that, happily, it is all here, but I am just not sure that everybody will understand that. I want to make sure that the guidance makes it clear that people are protected.
Baroness Neville-Rolfe
I understand what my noble friend says. He is talking about untoward effects, which we are not in the business of creating if we can possibly avoid it. The sensible thing would be for me to take away that point on VAT and capital gains tax. I am always rather careful about saying things about capital gains tax, as it is a complex subject. So we will write on that issue and copy the letter to anyone else who is interested in that point.
I finish on another positive point by reminding noble Lords that, in his Autumn Statement, the Chancellor announced that the Government would conduct a review of the future structure of business rates. The review will report before the Budget in 2016, and the Government will publish its terms of reference. I would encourage interested parties, including noble Lords with expertise in this area, to engage with this review, because it is an important opportunity.
I hope that the noble Lord has found my explanation somewhat reassuring and, on this basis, will withdraw his amendment.
Baroness Hayter of Kentish Town
My Lords, the amendment is in my name and that of my noble friend Lord Stevenson. I shall speak also to Amendment 35C in this group. Clause 36 empowers the Competition and Markets Authority to make and publish recommendations about the impact of any proposed legislation on competition. That is clearly to be welcomed. The CMA, after all, exists to promote competition in the interests of consumers and therefore, should laws be proposed that could be detrimental to consumers, we should know about it in advance.
Indeed, the Government recognise that regulation, procurement and other activities can affect markets and therefore envisage the CMA playing a key role in challenging the Government where they are creating barriers to competition. However, there is one problem with the clause. That arises from our failure, when the CMA was created, to persuade the Government to establish a CMA consumer panel analogous to those for the Legal Services Board, Ofcom and the Financial Conduct Authority, or some such similar mechanism, to ensure that real insight from consumer advocates and from the consumer perspective was built into the CMA’s judgment on such matters.
It is a matter of regret that we failed in that, given that the CMA’s primary duty under Section 25(3) of the Enterprise and Regulatory Reform Act 2013, which set it up, is to,
“seek to promote competition … for the benefit of consumers”.
It therefore seems essential that the voice of consumers be embedded in the CMA’s view as to whether draft legislation will be to the benefit or detriment of consumers with regard to competition.
Hence, Amendment 35B requires the CMA to undertake its consideration of draft legislation in consultation with consumer advocacy groups. Amendment 35C takes the Government’s new clause one stage further by requiring the CMA to undertake a similar exercise not simply when legislation is proposed but to carry out an annual health check on the state of competition and consumer protection in key markets, including by listening to consumers, consumer advocates and small businesses.
Without consumers at the heart of the Government’s drive to increase competition and tackle the cost of living crisis, any plans or measures are likely to be ineffective. Big business and special interests can always get the ear of Ministers, civil servants and regulators, and big businesses can and do—as we heard earlier from the noble Lord, Lord Deben—take advantage of market weaknesses.
We see this in the failure to pass on reductions in fuel prices and in the banks’ failure to work in clients’ interests. We see it in the bus market, where bus fares have risen by 25%—five times faster than wages. Big bus companies have cut crucial routes that people rely on to maximise their own profits. Indeed, the failure in competition within the bus market costs the taxpayer £305 million a year. We see it in myriad other markets where the consumer is unable to shop around—the monopolies and oligopolies, referred to by the noble Lord, Lord Deben, in the earlier group. Indeed, if ever there was a failing market, it is where energy companies have not passed on reductions in wholesale costs to consumers. We have to have a mechanism for action to force such companies to cut their prices when wholesale costs fall, or where phone calls simply cannot get through to the right person, again as described earlier by the noble Lord, Lord Deben. We have to have a mechanism for an annual review of vital markets to identify those where consumers are being taken for a ride.
For years consumers and their representatives knew that energy price cuts were not being passed on to users, but there seemed to be no mechanism for making the Government take action. Labour wants consumer groups, such as Which? and Citizens Advice, to work with the CMA and sector regulators to draw up an annual competition audit or health check of Britain’s economy, which will lead to a programme of action for regulators and the Government. We need this analysis to identify broken markets, so that Ministers and departments can respond accordingly.
Amendment 35C would ensure that the consumers are at the table when priorities for action are decided. Consumers and their advocates should not have to shout from outside. They should be given a direct say in how to tackle abuses or concentrations of power which undermine competition. Without this amendment, decisions as to whether markets are working in the interests of the public will be taken solely by regulators. These sadly have failed to protect small businesses in the banking sector when the mis-selling of interest rate swaps undermined some 40,000 small businesses. They failed retail clients when banks were selling PPI and endowment mortgages. Regulators have failed to ensure that users got a fair deal from the big six energy firms.
In all of those cases, consumers and their representatives were well aware of the serious problems with markets not working competitively, but they were denied a proper hearing. So our approach is to embed the consumer interest into decision-making, so that decisions about priorities for improving competition are taken in the public interest, in the interest of consumers and in the interests of small businesses, and with policymakers having to confront problems rather than leaving them to drag on. The proposed annual competition health check, led jointly by consumers and the competition authorities, would ensure that regulators and politicians act where markets are not working in the public interest. Crucially, it will include consumer organisations and small business representatives, rather than just being done by the CMA. I beg to move.
Lord Deben
I did not intend to speak on this but the noble Baroness has referred to me so often. I had better explain to her that I think that this is nonsense. It is nonsense from beginning to end because it misunderstands how business works and what the Government should do. The last thing we want is the establishment of a collection of people who professionalise the representation of consumers. Any of us who have ever had to deal with the double standards which some of them put forward about their own businesses and the way that they are never quite sure whether they are representing the consumer or some business operation which they have, which is part of the way in which they support themselves, recognise that this is not sensible. What is sensible is to have a proper organisation whose job is to ensure proper competition.
The Government ought to be concerned about having proper competition. I would be strongly opposed to the idea that the only people concerned with proper competition are the consumers. Government and the competition authorities should both be committed to ensuring competition. Decent companies, of course, can be very much in favour of competition until they see that there is an advantage if they are monopolistic. I do not blame them for that: it seems to me perfectly simple that everybody would like to have a nice, comfortable life in which they do not have to compete with anyone else. You therefore need a balance in society where you constantly refresh the market; you constantly make the market work. However, the idea that you do that by way of consumer representatives misses the point; we have to make government do it. That is what the Government are there for; it is not what Which? is there for. Which? is there precisely to be outside the system and to shout. Government is supposed to run the system so that there is proper competition. I do not want government to be excused from that.
Therefore, I do not agree with these amendments. I hope that the Minister will recommit the Government to ensuring proper competition. They should ensure, too, that the Competition Commission has the powers, the resources and the intent to achieve the best level of competition possible. We should also begin to have a bit more of the philosophical background to this, which is essential if we are to win the battle. If we cannot have competition as we ought to have it, frankly, the argument for the free society is difficult to maintain. If that is important, let us make it the purpose of government and the Competition Commission, and not say that it has to be run on a sort of old-fashioned, tripartite basis, which is to allow the Government to get off the hook. They should be on that hook firmly for promoting competition.
Lord Whitty (Lab)
My Lords, I apologise to the Committee for having joined your Lordships so late that you seemed to have made good progress without my help and I shall try to focus on this amendment. I do so partly because I was going mildly to support my noble friend but also because the noble Lord, Lord Deben, has provoked me to say how much I disagree with what he has just said, including going into the wider philosophical and ideological areas right at the end, because a free society requires representation of people’s views as well as mechanisms, legislation and regulations and so on.
At various stages, the Government have recognised that consumer organisations of one sort or another are important in ensuring that competition is delivered. I am very happy to see that this clause gives the CMA the ability to comment on draft legislation, which is absolutely right, but, in doing so, it has to pay attention to its prime objective, which is not to create competition full stop but to create competition in the interests of consumers. Since in various contexts successive Governments have recognised that there needs to be some focus on that consumer input, it is important that we have some requirement on the CMA at least to consult such organisations when it is making an assessment of future legislation.
For example, many of us, including the noble Lord, Lord Deben, sat through lengthy proceedings on the previous Energy Bill, which sets up a whole new system of energy regulation and government interventions, with state and consumer subsidy of various bits of the energy system. It does not look entirely like a free market; I think that the noble Lord, Lord Lawson, at one point referred to it as Gosplan. It is not quite that, but it is a whole range of things to ensure delivery and availability of energy ultimately in the interests of the consumer, but it will change the nature of our whole energy system.
Lord Deben
There is a fundamental difference between saying that the CMA should consult with a range of bodies, which is what the noble Lord says, and the way in which the noble Baroness presented it, which suggested that it was a kind of duo or tripartite, or some sort of system where they do all this together as part of the same thing. There is a difference between saying that the CMA has a responsibility, which it carries out by, of course, taking into account the views of all these people, and saying, on the other hand, that it is a kind of function where they are part of the actual operation. Doing that second—and that is the point I was trying to make—removes the fundamental responsibility of both Government and the CMA to do this job properly.
Lord Whitty
My Lords, we have limited time as we are in Committee so I will only take a moment. It is certainly true that, at the end of the day, this report will be the CMA’s report and all it says is “in consultation” with these bodies. My noble friend and I both argued that the internal proceedings of the CMA should reflect a different structure of relationship with consumer bodies. That is now past. However, we are now saying—as I understand my noble friend’s amendment—that the CMA has a responsibility for producing this report, but it should do so clearly and explicitly and in the Bill, in consultation with the bodies that represent consumers and which the Government have recognised as so doing.