Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017

Lord Prior of Brampton Excerpts

Thursday 9th March 2017 Grand Committee

Moved by

[Lord Prior of Brampton]

That the Grand Committee do consider the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017.

Motion agreed.

Reporting on Payment Practices and Performance Regulations 2017

Lord Prior of Brampton Excerpts

Thursday 9th March 2017 Grand Committee

Moved by

[Lord Prior of Brampton]

That the Grand Committee do consider the Reporting on Payment Practices and Performance Regulations 2017.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, the purpose of these regulations is to implement a requirement on large businesses to report on their practices and performance in paying suppliers. The first instrument on payment practices applies the requirement to large companies, while the second applies the requirement to large limited liability partnerships.

Late payment can be a significant issue for businesses, especially smaller suppliers. It is estimated that small and medium-sized businesses are owed £26 billion in late payments. This Government have several measures in place to tackle late payment. As well as the reporting requirement, which I will talk about in more detail, the Government are also currently recruiting the small business commissioner, which noble Lords discussed in this House in the last Session.

Alongside other measures, there is also the Government’s support for the Prompt Payment Code, which is an industry-led code of conduct. The code sets standards for payment practice, and the Government are committed to signing up strategic suppliers to the code. Small and medium-sized businesses often lack information about the larger businesses they supply. They have no choice but to take it on faith that they will be paid in line with the agreed terms and conditions. There are sometimes calls in the House for more prescriptive measures to support suppliers. However, in response to the 2013 discussion paper on options for tackling late payment, businesses said that they did not want to see government constraining their freedom of contract. Instead, the reporting requirement focuses on transparency.

We are not therefore banning business practices, or unduly interfering in customer- supplier relationships, but we want suppliers to have the information they need to make good business decisions, and to encourage a culture change in payment practices. When we consider new obligations such as these, we have to be careful to balance the burden on large business with the benefit to small business. That is why we have taken longer to implement this requirement than we estimated at the time of the debates on the Small Business, Enterprise and Employment Act 2015. This is the legislation enabling us to make the regulations before us today. We have taken time to ensure the requirement works in practice for large businesses, so that we can be confident that the resulting data will be robust and helpful for small businesses.

In our recently published impact assessment, we estimated the annual net cost to business at £17.7 million. That sounds like a large number—indeed, it is—but it has to be considered against the potential benefits to businesses that a reduction in late payment could bring. Even a small reduction in late payment could have a significant impact, especially for small suppliers, and especially for those for whom cash flow is of the essence. We have continued to engage with stakeholders following the public consultation on the policy. My officials have had an ongoing dialogue with stakeholders across different sectors on a wide variety of topics related to the reporting requirement. They have been listening to businesses, representative bodies and other stakeholders to make sure we get the balance right between the burden on large business and the benefits to small businesses. This has also included independent research commissioned to provide additional evidence for the impact assessment and user research to inform the development of the web service.

I now turn to the detail of the regulations. They implement an obligation on large businesses to publish information about a number of metrics relating to their payment practices. Businesses will need to report on these metrics for their first financial year, starting once the regulations come into force on 6 April 2017. Each reporting business will need to publish information twice each financial year. To ensure the information is up to date and relevant, it must be published within 30 days of the end of the reporting period. The metrics include three types of information. They require businesses to publish statistics about their payment performance, including the average time taken to pay and the percentage of invoices paid in 30 days or fewer, between 31 and 60 days, and later than 60 days. They require businesses to give narrative statements about the business’s standard payment terms and dispute resolution processes. They also require businesses to state whether the business’s payment practices and policies provide for supply-chain finance, e-invoicing and deductions for being on a supplier’s list.

These metrics were the subject of the 2014-15 consultation. We received diverse feedback about certain points and have sought to find a balance between the needs of small and large business. Specifically, we cannot require businesses to report on all pay-to-stay practices. The House was notified of this in a Written Ministerial Statement in December 2016. The metrics of interest owed and paid are not included in these regulations, but we will learn from the public sector’s introduction of a similar metric of interest owed from later this month.

The regulations require businesses to report on any deductions from payments to suppliers as a charge to remain on a supplier’s list. A broader metric to cover more types of pay-to-stay practices will be kept under review. Businesses will be required to publish their reports on a government web service and, as soon as the business publishes it, the information will be available to suppliers. The web service is being developed with input from users of the service and will be available from April 2017. To ensure that it is accurate, the information published must be approved by a named director. This will help late payment become a reputational issue. The public nature of the reporting will motivate businesses to comply. However, it is a criminal offence if a business fails to publish a report, or publishes false or misleading information.

On conviction, the business, directors or, in the case of false statement, the individual will be liable for a fine. The reporting requirement will increase transparency, making it easier for suppliers to find information about large businesses’ payment practices and performance. The improved transparency will help suppliers make better-informed business decisions and encourage large purchasers to make prompt payment. The public nature of the data will highlight good payment practice, while also shining a light on poor practice that is potentially damaging and unfair to suppliers. This measure is an important step towards a change in business culture to one where late payment is considered a reputational issue and prompt payment is valued by all sizes of business. I commend these regulations to the Committee.

[Lord Foster of Bath (LD)]

My Lords, I begin by saying how welcome these proposals are, as developed from the Small Business, Enterprise and Employment Act 2015. The duty to report, as the Minister said, is one in a package of measures that begins to address a problem that has existed for far too long around late payment to small businesses. As the Minister said, we have 5.5 million small businesses in this country and it is estimated that, between them, they are owed over £26 billion. The impact this has on them is incalculable. It has been estimated by a number of people that implementation of these measures—and further measures, which I will touch on in a second—could prevent the death of about 50,000 businesses per year.

The other measures that I welcome include the Prompt Payment Code, to which we have already heard reference, and there are further measures that I hope will be adopted, which are referred to within the corporate governance Green Paper. Reference is made, for example, to one board member having responsibility for representing the views of small businesses within the supply chain. I welcome, too, the increased transparency about payment in other regards, as also referred to in that Green Paper, but that is probably not directly relevant to today’s debate.

Having said that I support these proposals, I will confine my remarks to asking a few short questions. First, in reference to the duty to report, it remains unclear who is responsible for verifying the statistics contained in the report. The Minister has said—and it is clearly explained in the Explanatory Memorandum—that the figures must be approved by a named director of the company. However, as I suspect the Minister might accept, that looks rather like the company is marking its own homework. Will the Minister explain what opportunities there would be for people concerned about the statistics to draw attention to that, and to whom would they do so? Given that failure to report is a criminal offence, it is not at all clear whether failure to report accurately would be deemed a criminal offence and what the penalties would be. Again, I would be grateful for clarification on that matter.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab)]

My Lords, I will follow closely the words of the noble Lord, Lord Foster. Like him, we accept that these are good regulations. They stem from a Bill that we spent a lot of time on in 2015, talking about small businesses and their problems. It is good to see the output in terms of large companies and large limited liability partnerships, and to see the detail. I support that.

Like the noble Lord, Lord Foster, I have a number of questions, which I am sure the Minister will be able to respond to. Where the noble Lord finished is where I would like to start. There is no mention in either set of regulations about the role of the Small Business Commissioner, and I find that very surprising. From the reports that are circulating about the appointment of the Small Business Commissioner, it is clear that the department sees that as being one of a package of measures that will implement the small business Bill. However, there seems to be no mention of it and no role for the commissioner in the regulations. Perhaps the Minister has an explanation for that.

Having said that, the second question that comes to mind is: what is the role of the Small Business Commissioner? The Minister was not in post when we discussed this in 2015, but I think he will have been briefed about the general feeling there was in Committee and on Report that the move to introduce the Small Business Commissioner—it was a major change by the Government, who had previously set their mind against it—was a good thing, but that the powers were lamentable given the case that had been made by the Federation of Small Businesses in particular, which, after all, might be expected to know a bit about the problems that small businesses face.

It is brave of the department to bring the chair of the FSB on to the appointments panel—that is a good sign. However, as far as I can understand from the press comments he has made, he is still worried that even though he is on the panel, the post is not going to be sufficiently empowered or resourced to do the job it has to. He does not think that it begins to tackle the problem referred to by the noble Lord, Lord Foster, of 50,000 small businesses going broke each year because they cannot get the money they are owed out of the larger companies. There is also the question of whether or not the will is there in the department to try to help shape the culture, rather than simply shine a light on current practices.

The Explanatory Memorandum to both instruments before us gives a little context about where all this has come from. The noble Lord, Lord Foster, mentioned one of those issues, the Prompt Payment Code, which has been heavily trailed by the Government and used as their only fig-leaf when we talked about this in Committee and on Report. However, it has proved to be a completely hopeless way of trying to achieve culture change. At the time that the Prompt Payment Code was being lauded, we had examples within this very House of major companies that were not even signed up to it, and many of those that had signed up had operating practices that would have made it impossible to stay in the code, and yet there was no apparent sanction as it is a voluntary organisation. The pay-to-stay scandal and the unilateral changing of payment arrangements from 30 days to 60 days to 90 days and all sorts of other things were going on in companies that should have been adhering to much higher standards. That is a clear example that the process does not work in practice. At least we now have a transparency arrangement, and I like a lot of the things that are included.

Delays always happen but I suspect that there is a bit of a story behind the way in which this has come out and around the engagement with both the major and the smaller companies in trying to find a way to make this work. Extraordinarily, but rightly in my view, the department has decided that the only way to get this to work in practice is to run its own website. It cannot rely on companies coming forward with material because it feels that that would be too difficult to interpret. Again, that is brave. I cannot say any more than that—I think it is terrific and I am sure that it is the right thing to do. Perhaps it opens up a new, aggressive policy chapter in BEIS, and it is actually going to do things that help businesses instead of just standing back and watching as they go under. However, I may be making the point a little too strongly.

The third thing I have to say is a compliment, which I rarely pay to BEIS and its officials because they are always in default on this. However, they have at last hit a common commencement date for these arrangements, and I am so pleased by that. However, it is extraordinary, is it not, and perhaps shines a different light on this area, when you discover that, uniquely, these are time-limited regulations, which is something I have never seen before. It is not so much a sunset clause but a total eclipse. We have the situation where these will come into force on 6 April 2017, which is great, and will then close on 6 April 2024 unless they are extended. There are substantial consultation arrangements around that, but it does not exactly send the message to small businesses that the Government are here to help and are on their side. The regulations are, at the very best, a pale imitation of where they want to get to, and are time-limited and will be withdrawn unless some future act of consultation comes through.

We welcome these instruments in so far as they go—it is exactly what the Government said they would do. They are late, but at least they are here. They will start very quickly and will be accompanied by an as yet unknown, but potentially powerful, person to take up some of the issues that are left undealt with here. With that, we support the instruments as they appear before us.

[Lord Prior of Brampton]

I thank both noble Lords for their broad support for the general thrust of this statutory instrument.

Potentially misleading or inaccurate information is a criminal offence punishable with a fine. Who is responsible for verifying the data? Our view is that the public nature of the data will ensure their accuracy. Businesses can raise their concerns directly with BEIS or the Small Business Commissioner. The whole thrust of this instrument is culture change. It is the reputational damage that firms will suffer, rather than the prospect of a criminal conviction, that will have the biggest impact on changing behaviour.

In terms of the scope and the companies caught by this, the definition of a large business for the purpose of having to make the disclosures is two of the following three: an annual turnover of £36 million; a balance sheet total of £18 million—I assume that that means net assets; and 250 employees. The noble Lord asked about a subsidiary of an overseas company—it could be a subsidiary of a domestic company, for that matter. As I understand it, this applies to companies or LLPs that are incorporated in this country. So I do not think that a small company over here that is a subsidiary in the US is captured by the instrument, but I will double-check that.

The noble Lord said that payment terms in the US were more typically 120 days rather than net monthly or 30 days but I am not sure that that is necessarily right. Also, we should be clear that in some big contracting industries, where there is delayed payment and that is negotiated upfront by suppliers, that is entirely legitimate. In their disclosures, big companies are perfectly entitled to say in their narrative that in their industry, a different payment schedule is typical. Where you have a long-term contract, which requires a different kind of financing, again, that can be disclosed and explained, and it will be perfectly legitimate. We are not saying that a longer period is necessarily worse than a short one; it very much depends on the industry. What is important is the transparency and a narrative around it.

Both noble Lords spoke about the appointment of the Small Business Commissioner. I understand that we will be appointing that individual during 2017. We launched the recruitment campaign on 12 February, with the intention of appointing later on in the year.

[Lord Foster of Bath]

Since it has been made public that the commissioner will start work in October this year, I hope that it will be some time in the course of this year, or there will be a difficulty.

[Lord Prior of Brampton]

I just wanted to reassure the noble Lord that the process has started. As it started in February, that appointment will follow in due course.

I thank noble Lords for their contribution to the debate. The importance of transparency is clear. One economic reason that makes this statutory instrument so important is that for many small, particularly growing, companies, cash flow, rather than profit, is critical. Delayed payment terms can seriously undermine the ability of small companies to grow. I think that all parties in the Committee are apprised of that.

[Lord Stevenson of Balmacara]

It is true that the terms are important, but both the noble Lord, Lord Foster, and I were at pains to make the point that it is the reliance on the contract with a large company that causes the difficulty. It is difficult for individual small companies to challenge the payment terms they are first offered—particularly if, once they are in contract with the large company, it decides unilaterally to change them—because they need the business. The Minister said that he has worked in business before, and I have run small businesses. When you are waiting for that cheque to come and it does not and you cannot pay yourself, you cannot rip up the contract because you are so dependent on it. It is that defect—for which no powers are being given explicitly to the Small Business Commissioner—that lies at the heart of where we disagree with the Government’s approach. I am sure that this issue will be addressed, because the figures are now so open and clear that it has to be sorted: £26 billion is a stonkingly large figure. If we could sort that out and speed it up—although the Explanatory Memorandum does not go into this—a 0.25% reduction of the costs of organising small businesses raises something like £22 million. A small calculation of what that cash flow change would be changes the dynamics of the whole arrangement.

[Lord Prior of Brampton]

The noble Lord makes a very good point. There is a big distinction between overdue payments where you are supplying on, say, net monthly terms and not receiving the money—and sometimes having to wait for months for it—and the situation where you knowingly enter into a contract where the terms are 60 days or 90 days. I do not know what the breakdown of the £26 billion is—how much of that is overdue against the agreed terms and how much is just longer than 30 days. When I go back to the department I might just get an analysis of that £26 billion and share it with noble Lords. On that basis, I hope that we can all agree to go forward with this statutory instrument.

Motion agreed.

Shale Gas

Lord Prior of Brampton Excerpts

Tuesday 7th March 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, I too thank the noble Lord, Lord Truscott, for tabling the debate this evening. It has been a really well-informed debate, even if the noble Lord did not necessarily receive the support he was hoping for. It was so well informed that I find that everything that I was going to say in my speech has already been said by noble Lords, so I will just run through the main issues that have been raised.

First, I do not think I agreed with a single thing that the noble Lord, Lord Truscott, said in his speech, with one exception, when he said that Poland was an example of where fracking has not worked—the shale was too tight and the gas would not flow—and that therefore you should not count your chickens. Of course he is right about that: we should not count our chickens about the prospects for shale gas, because we have not done the exploration work to know whether or not we can count the chickens. Until we do the work, we are never going to know what we have, so I could agree with him in that respect.

My noble friend Lord MacGregor, who chaired the Select Committee looking at fracking, said that the committee was unanimous that the benefits of fracking exceeded the risk, and his criticism of the Government was not that progress was too fast but that it was too slow. He drew attention to the fact that in the US, the cost of production now has come down, from probably over $50 per barrel of oil equivalent when they started, to $25. It is now taking 20 days to drill a well. The success in the US has been phenomenal, which is something to be celebrated—it has been transformational. It has transformed the American economy and geopolitics. It has of course been hugely resented by many producers in the Middle East and in Russia, as my noble friend Lord Ridley pointed out, because the price has come down. Economies such as the Russian one have suffered hugely as a result.

The noble Lord, Lord Young, referred to the fact that we have some of the toughest safety regulations in the world—probably the toughest. He referred to the fact that we have 50 years of experience in onshore and offshore oil and gas exploration and to the irresponsible scare stories, which are not just limited to us in the UK but are also there in the US. Much of the US production would have come more quickly without those scare stories. It is worth pointing out that in 2000, there were 26,000 fracked wells in the US, accounting for 7% of US total natural gas production. By 2015, the number of wells had grown to 300,000, equating to 67% of total natural gas output in the US. It shows what can be done. What they have done in the US is an extraordinary achievement.

The noble Lord, Lord Young, also mentioned the huge economic benefits to employment and wealth that have been created by fracking gas. It is not just the direct employment consequences—it is the impact on the economy as a whole. My noble friend Lord Ridley—in a point picked up later on by the noble Lord, Lord Mair—said that there was no evidence of any groundwater contamination in the US, and that it had cut greenhouse gases. He went on to say that fracked gas and the LNG that comes from it are vital feedstocks for the chemical industry. This point was also raised by the noble Lord, Lord Polak. It is an absurd situation where we are now bringing LNG from the US into Grangemouth to be used as a feedstock there, or, indeed, piped over to Teesside to be used as a feedstock in Teesside. Not only is the carbon footprint much larger, but, of course, it is much less economic for the chemical industry in this country. There is a risk, of course, that the USA now, instead of shipping LNG, will convert that gas in the US into other products, therefore undercutting our chemical industry in the UK.

The noble Lord, Lord Mair, referred to the work done by the Royal Society and the Royal Academy, which sounded pretty conclusive. They found that fracking was unlikely to contaminate groundwater, and that the earth tremors were minimal, so long as there was proper regulation and monitoring and the well operations were properly managed. He said that scare stories and mistruths abound, and he is absolutely right in that regard. The noble Lord, Lord Smith, not only chaired the task force on shale gas but was, at the same time, chairman of the Environment Agency. Again, his conclusion was a very clear one—that, on balance, shale gas was a good thing for the UK.

On the point made by the noble Lord, Lord Hodgson, about the shale wealth fund, he was slightly putting the cart before the horse when he referred to the Norwegian sovereign wealth fund being £850 billion. We have not yet got any gas out of the ground over here. It would be a lovely problem to have. As he knows, the Government are consulting about forming a sovereign wealth fund equivalent, which would be funded by 10% of tax revenues; that is still being consulted upon.

Of course, I do not want to minimise the points made by the noble Baroness, Lady Featherstone, and the noble Lord, Lord Grantchester. There are, of course, environmental issues. It would be foolish to pretend that they should not be taken into consideration. However, gas is the cleanest fossil fuel when combusted, producing half the carbon emissions of coal and it is expected to have a carbon footprint comparable to that of LNG. Shale gas could, therefore, act as an effective lower carbon bridge technology while we develop renewables, improve energy efficiency and move towards a lower carbon economy.

The Infrastructure Act 2015 inserted safeguards for licensing onshore hydraulic fracturing into the Petroleum Act 1998. These include the assessment of environmental impacts, groundwater monitoring and community benefits, and the guarantee that the associated hydraulic fracturing will not take place within “protected groundwater source areas” and “other protected areas”.

We have banned fracking within 1,200 metres of the surface, in national parks, the Broads, areas of outstanding natural beauty, World Heritage Sites, and areas that are most vulnerable to groundwater pollution. We are confident that these measures will protect our most valuable areas for the future.

In conclusion, the potential benefits of fracking in the UK are enormous. We have seen how transformational they have been in the US. If we have the right regulatory system around it, and take the right measures of protection for our environment, then this is something that this Government are wholly in favour of.

Opel-Vauxhall: Sale to PSA Group

Lord Prior of Brampton Excerpts

Monday 6th March 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, I beg leave to repeat as a Statement an Answer to an Urgent Question given by my right honourable friend in another place:

“This morning the boards of General Motors and PSA Group announced plans for PSA to acquire GM’s Vauxhall-Opel operations. The proposed deal is expected to be completed by the end of this year.

The Prime Minister and I have been engaged in discussions with both GM and PSA, and with the French and German Governments, to ensure that the terms of the agreement can give confidence to Vauxhall’s UK workforce now and for the future. Vauxhall is an iconic, important and successful British car manufacturer. Vauxhall cars have been made in Britain for 113 years, and we are determined that that should continue to be the case for many years to come.

The car plants at Ellesmere Port and Luton have a proud record of being among the most efficient in Europe, with workforces that are skilled, committed and flexible. Both PSA and GM have confirmed to the Prime Minister and me a number of important commitments, including that the company will honour its agreements with the Vauxhall workforce; that Vauxhall pensioners will be in at least as good a position as they are today; that the treatment of the UK division will be equal to that of other countries in the Vauxhall-Opel group; that the identity of Vauxhall will continue to be distinct and prominent; that the strategy of the new company will be one of building on existing strengths and commitments, not on plant closures, taking opportunities to increase sales around the world; and that the company will work with me and the rest of the automotive sector to ensure that it can participate in a substantial programme of research and investment for innovation in areas such as electric vehicles and battery technology, which is part of our industrial strategy.

This morning I had a further conversation with my French counterpart, the industry Minister, and the Minister of State spoke again to his German counterpart to agree a consistent approach. I speak frequently with Len McCluskey, the general secretary of the largest trade union in Vauxhall and I have kept, and will keep, colleagues with particular constituency interests up to date at all times.

It is in everyone’s interests that Vauxhall can look forward to a successful future. A generation ago, the car industry was one that epitomised our economic woes. Today that industry is a beacon of success. Companies invest in Britain because our automotive sector has a high-quality workforce and world-class efficiency, and is part of one of the most exciting places for innovation and research in new technology anywhere in the world. The future of the motor industry is bright in Britain, and we will be active at all times in doing everything we can to make it brighter still”.

My Lords, that concludes the Statement.

[Lord Mendelsohn (Lab)]

I am obliged to the Minister for repeating the Statement from the Business Secretary. GM has shown great resilience over the years with the Opel and Vauxhall brands, and reported a loss of $257 million from its European operations in 2016. That is the 16th consecutive loss-making year for GM in Europe, bringing losses on the continent since 2000 to more than $15 billion.

GM chairman and chief executive Mary Barra said that the business would have broken even in 2016 had it not been for the UK’s vote to leave the European Union, which caused a sharp drop in the value of sterling. We should congratulate the excellent workers in the UK who have done a great job to turn around GM’s performance, but unfortunately they will gain little credit for it. The factories at Ellesmere Port and Luton employ about 4,500 people, and a supply chain of at least another 7,000. We hope that this transaction provides them with a secure future, restores growth to these brands and creates a long-term and growing future for Ellesmere Port and Luton.

I would be grateful if the Minister told us a little more about the nature of the assurances the Government received from the PSA group during their discussions. What specifically have they learned about safeguarding the plants? What have they learned about the PSA group’s plans to invest to upgrade capability to meet the specifications and scale of the facilities they have been committed to over recent times? What assurances have they received about the development of the Vauxhall brand and its sales in overseas markets beyond the EU? What assurances have they received about investment to retool the plants in the UK to develop other brands? Does the PSA group remain committed to the current Astra model in Ellesmere Port up to 2020-21 and the production of a new model there, and will Luton be able to fulfil its plans deep into the 2020s?

Secondly, I would be grateful if the Minister addressed the problem of the scale of the UK supply chain. Speaking after the announcement, the chairman of the PSA’s management board, Carlos Tavares said that tough terms for leaving the EU could be an opportunity for Vauxhall and PSA to develop a supplier base in the UK to give the whole operation a “pound cost structure”. Not only do they harbour concerns about the general state of the UK parts ecosystem; it is clear—and Vauxhall sales are 80% EU—that their consideration of how we handle not just the negotiation of withdrawal, the single market and the customs union but the industrial strategy will play a very important part.

This is a wider concern. In evidence to a Select Committee in the other place, Colin Lawther, Nissan’s senior vice-president of manufacturing supply chain, denied that the Government had agreed to any deal or received any particular assurances. He said that Nissan and the automotive industry had made a “strong request” for government support for £100 million to £140 million of investment for a supply development fund to “repower the supply base” and build an indigenous, high-tech car components sector in the UK. Nissan, too, is looking to increase content from British suppliers and says that this opportunity alone is worth £2 billion.

The future of PSA’s investment in Vauxhall and other parts of the car industry is about the importance of developing the supply chain, in addition to the measures the Government are already implementing. It is clear that the Government’s current approach is inadequate, so I would be grateful if the Minister assured us that a meaningful new strategy to develop the UK supply chain is under way.

[Lord Prior of Brampton]

I thank the noble Lord for those questions. To pick them up in turn, Carlos Tavares, the chief executive of PSA, has given assurances that he is keen to see this business develop and grow. He made the point that since becoming chief executive of PSA, he has not closed a single plant.

Regarding future models, post the Astra at Ellesmere Port, clearly, we will have to compete with other factories within the PSA group, as would have been the case had it remained part of General Motors. We are all very confident that we have the competitiveness and effective abilities, and the quality and brand at Ellesmere Port and Luton, to compete on a fair basis with any plant in Europe. PSA is absolutely committed to the Astra brand. There will be no need for a new model post 2020-21 for Ellesmere Port, and the Navara will continue to be produced at the Luton factory for longer still.

The noble Lord is absolutely right about the supply chain: it was an issue with Nissan as well as PSA. Carlos Tavares made the point that there are opportunities and risks on leaving the European Union. One of the opportunities will be to make the new models in the UK more of a sterling player, as the noble Lord put it. That means having a higher proportion of sterling-sourced components going into the Astra or indeed into any new model. We are committed to working with the automotive sector to try to boost the supply chain in the UK to ensure that more sterling-based components go into these cars.

[Lord Foster of Bath (LD)]

My Lords, Vauxhall is our longest surviving car maker and has some of the most efficient plants in Europe. Like others, we commend the workforce for having achieved that.

I want to pursue one issue with the Minister. He will be aware that some 75% of the Astra’s components come from continental Europe, and that the supply chain stretches right across the free market and the customs union. Components travel across borders without any difficulty whatever. However, surely the imposition of a hard Brexit, which the Government are pursuing, could lead to tariffs, quotas and the end of the free movement of components across borders. That would place our plants at a real disadvantage.

In a climate in which we know that Nissan is now unsure about its long-term commitment to the UK, BMW is thinking of making the quintessentially British Mini in Germany, and we can get no long-term guarantees from the new owners of Vauxhall, should not the Government acknowledge that the unnecessary pursuit of a hard Brexit is putting the revival of our British car industry in jeopardy?

[Lord Prior of Brampton]

It is worth making the point that this transaction between General Motors and PSA is as a result not of Brexit but of a longer-term strategy on the part of GM, and, of course, GM is becoming a shareholder in PSA. This is not a Brexit-related issue. The noble Lord is laughing but this transaction has not come about because of Brexit.

The noble Lord says that the Government are pursuing a hard Brexit. We must get the terminology right. The Government are not pursuing a hard Brexit. The Prime Minister has made it absolutely clear that we are trying to negotiate a free trade agreement with the European Union that is as friction free as possible. That is the Government’s objective. Carlos Tavares, the chief executive of PSA, has said that there are opportunities whether it is a soft Brexit or a hard Brexit.

The noble Lord’s point about the supply chain is important. Given that it is so integrated across Europe, if there are tariffs or non-tariff barriers and more inspections, conformities and the like, that will disrupt the supply chain. That is why we are keen to negotiate a relationship that is as friction free as possible.

[The Lord Bishop of Chester]

My Lords, the Ellesmere Port plant is in my diocese and its closure at any time would be a disaster for that area on the banks of the Mersey. I recognise that that is not in immediate prospect, but can the Minister say more about the strategy to make the long-term loss-making Vauxhall-Opel group more profitable? If GM could not do it, how does Peugeot Citroën plan to do it?

[Lord Prior of Brampton]

The right reverend Prelate makes an interesting point, which the noble Lord, Lord Mendelsohn, made earlier—that Opel-Vauxhall has made a loss every year for the past 15 years. But that rate of loss has come down, and the new chief executive of GM embarked on a turnaround plan for both Opel and Vauxhall, which was beginning to work. The projection given by Carlos Tavares—I may get the years wrong—is that he is expecting an operating profit of 2% next year, with a target operating profit of 5% within five years from the combined business of Vauxhall and Opel in Europe. So that is his plan. He went out of his way to say that, since he became chief executive of PSA, not a single plant within PSA has closed. There are grounds for cautious optimism.

Economic Growth (Regulatory Functions) Order 2017

Lord Prior of Brampton Excerpts

Tuesday 28th February 2017 Grand Committee

Moved by

[Lord Prior of Brampton]

That the Grand Committee do consider the Economic Growth (Regulatory Functions) Order 2017.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, in moving the Economic Growth (Regulatory Functions) Order 2017, I shall speak to the Business Impact Target (Relevant Regulators) Regulations 2017 and the Growth Duty Statutory Guidance 2017. The purpose of these statutory instruments is to support regulatory bodies in the UK to create a healthier business environment by making regulation more proportionate, transparent and accountable. The Government are committed to making sure that regulation supports growth and are doing all that they can to unlock productivity in the UK.

Better regulation is central to the Government’s desire to make the UK the best place in the world to start and grow a business and is a key part of our commitment to drive economic growth and boost productivity. During the previous Parliament, the Government made significant progress through programmes such as one in, two out and the Red Tape Challenge, which were instrumental in delivering savings of £10 billion to businesses over the lifetime of the Parliament. These programmes encouraged a cultural shift in government departments towards more proportionate and smarter regulation.

This approach was formalised through the Small Business, Enterprise and Employment Act 2015, which provides a transparent framework for assessing, managing and reporting on new regulatory impacts to business, known as the business impact target. Through the Enterprise Act, we extended the ambition of the target by expanding it so that it can include the activities of a wider range of regulators beyond those acting on behalf of UK Ministers. This will support us achieving a further £10 billion of deregulatory benefit for UK businesses in this Parliament.

Alongside the business impact target, the Government also introduced a duty through the Deregulation Act for regulators to have regard to the desirability of promoting economic growth. This is known as the growth duty, which will help to ensure that regulatory bodies contribute towards creating a healthier business environment by making regulation more proportionate, transparent and accountable. Together, the business impact target and growth duty will support a positive shift in the way regulation is delivered.

It is sometimes easy to caricature all regulation as negative. The Government recognise that proportionate and well-targeted regulation is important and provides vital protections. It can help markets work better, enables new business models and start-ups to compete and protects consumers. The Government have been clear in the industrial strategy that regulatory frameworks need to support business investment rather than distort markets. This does not mean deregulation at any cost. We have to avoid, for example, the combination of light-touch regulation and emphasis on short-term financial gain that contributed to the financial and banking crisis.

Better regulation recognises that regulation can impose costs on business. It can divert attention from more productive uses, such as growing into new markets, innovation and training. It also recognises that regulation can favour more established incumbent operators in a market. For example, it is estimated to cost small business 10 times more per employee, on average, to comply with regulations than it costs a large business. The Government’s better regulation system therefore seeks to minimise these burdens by ensuring that the likely impacts of regulation are fully assessed and by providing an incentive to reduce costs on business where possible. Indeed, there are numerous examples of good, proportionate regulation that is good for business and society as a whole.

Under the previous Government, we conducted a series of sector reviews into regulator enforcement practice. Reforms delivered as a result are now saving business millions of pounds, encouraging companies to grow, speeding up multibillion-pound investments and reducing burdens, all without weakening protections. These reforms have been welcomed by businesses and trade bodies across the country. These savings are being made by removing assessment and reporting requirements from more than a quarter of a million businesses where there was no scope for them to deliver the energy savings that the requirements were in place to deliver. This allows the regulator to focus on working with those businesses where real energy savings can be made.

However, there is still more to do. The regulations before the Committee today will be an important step towards creating a healthier business environment by making regulation more proportionate, transparent and accountable. The result will be to take another significant step forward to ensuring that regulation supports growth and that Britain is the best place in the world to start and grow a business.

I turn to the detail of the regulations. The Business Impact Target (Relevant Regulators) Regulations 2017 specify the individual regulators that will be brought within scope of the business impact target. The regulators listed within the scope of these regulations will be required to assess the economic impact on business of changes to their regulatory policies and practices that come into force, or cease to have effect, during the course of the Parliament. The assessments must be verified by the Regulatory Policy Committee and the savings or burdens imposed on business incorporated into the Government’s annual report outlining their performance against the target.

The rationale for this is clear. Businesses consistently tell the Government that the actions of regulators are as important as the content of legislation in determining their experience of regulation. So the costs to business of their regulatory activities should be actively assessed and transparently reported. These regulations deliver that. Where impacts are imposed on business by changes in regulatory activity, these should be transparent. In addition, business should have confidence in the estimates that the Government have made of that impact.

The changes do not in any way undermine the core purpose of regulators, which provide vital protections and help ensure that markets function effectively. Regulation has important economic, social and environmental goals. Regulation for those reasons should be proportionate and at the minimum cost to business necessary to achieve the outcome required. Including further regulators in the business impact target will help regulators to make the move to smarter regulation that delivers outcomes with the minimum overhead. This will be good for British business and will contribute to a more consistent regulatory process.

The Government consulted on the proposed list of regulators to be brought within scope of the business impact target from 11 February to 17 March 2016. We received responses from a range of stakeholders, including business, regulators, trade associations and other organisations. The majority of respondents were supportive of the proposal to bring the regulators specified in the consultation within the scope of the business impact target, with one respondent stating that the BIT would result in regulators,

“having to design their services, policies and procedures in a way that suits the needs of business”.

No further regulators were suggested to be brought within scope, while a handful of regulators questioned their own inclusion. We have reviewed these queries and are satisfied that it is appropriate to bring the regulators listed in this instrument within scope of the target. We have also paid close attention to issues raised around proportionality. The Government have been working collaboratively with a wide range of regulators to design a process for implementation that minimises burdens on regulators.

I turn to the growth duty regulations and guidance. The Deregulation Act 2015 introduced a legislative requirement for persons exercising a regulatory function to have regard to the desirability of promoting economic growth. The Economic Growth (Regulatory Functions) Order 2017 sets out the specific regulatory functions to which this duty applies. Alongside this instrument, the Growth Duty Statutory Guidance 2017 has been produced to assist regulators in fulfilling their new responsibilities, at both a strategic and operational level.

Proportionate delivery of regulation plays an important role in supporting competitive markets and improving social and environmental outcomes. Regulatory enforcement that is not proportionate and risk-based imposes unnecessary costs on business, creates uncertainty and undermines investment. The way in which regulation is enforced can have significant effects on businesses’ ability and willingness to invest and grow.

Although there is already a great deal of good, proportionate and effective regulation, there is evidence to suggest that some regulators fail to take sufficient account of the economic consequences of their actions and place unnecessary burdens on business in the exercise of their regulatory functions. To address this, the then Chancellor announced in the 2012 Autumn Statement several measures designed to create a healthier business environment by making regulation more proportionate, transparent and accountable. Although many regulators consider the impact of their actions on economic growth, there are those that do not. Indeed, some regulators think that they are unable to take account of growth as they do not have a statutory requirement to do so or their statutory objectives do not refer to growth.

Requiring regulators to have regard to economic growth in this way will address the uncertainty of regulators that feel that they cannot have regard for economic growth and will put the obligation on a statutory footing, thereby complementing regulators’ other legal obligations. This duty will help regulators to carry out their functions in a way that is conducive to economic growth and will ensure that regulatory action is taken only when it is needed and that any action that is taken is proportionate. The growth duty will therefore encourage regulators to develop more mature and productive relationships with the sectors and businesses that they regulate, driving up the accountability of regulators to the business community. This will help to deliver our aspirations for greater productivity and growth in our economy.

Public consultations on the growth duty were held in 2014 and 2015. A further consultation was held alongside the consultation on the scope of the business impact target, and responses were received from a broad cross-section of stakeholders. The majority of responses to the consultation on the growth duty agreed that regulators should have regard to economic growth and should be accountable for whether they have properly considered business growth in their decision-making.

There were a small number of objections to the inclusion of particular regulators in scope, in the main based on arguments related to the amount of regulatory activity undertaken or the fact that the organisation did not have any regulatory functions. Having considered these responses, the Government are satisfied that it is appropriate to bring the regulators listed in the instrument within scope of the growth duty. We also received a number of responses on the draft guidance, with the vast majority commenting positively on its content.

The business impact target and growth duty play a central role in the Government’s agenda to improve UK regulation. They support a positive shift in the way that regulation is delivered through reducing the regulatory burdens that hold businesses back and prevent them from getting on with business. The measures are an important step towards creating a healthier business environment by making regulation more proportionate, transparent and accountable and I commend them to the Committee.

[Lord Mendelsohn (Lab)]

My Lords, as I arrived this morning, I thought that the House of Lords had taken to Oscar fever and that the red carpet had given way for the red of the House of Lords. I saw the Annunciator, and it read, “One Order, Six Regulations and one Statutory Guidance” as the business of the day. It reminded me of “Four Weddings and a Funeral”. I see that we have not had quite the same box-office draw.

I thank the Minister for his introductory comments. There is a lot that we all agree on as to the eventual targets that we want to reach and the sort of improvements that can be made. In many ways, we agree on motherhood and apple pie being good things. Our concern that the wrong measures were adopted in the primary legislation to achieve them are reinforced by some of the weaknesses in the statutory instruments, the consultation processes before them and the conclusions drawn, and it is on those things that I raise a few issues and questions.

Part of this relates to the overall policy context, which is the attempt to have a target of £10 billion of reductions. Central Government are unable to do it on their own, so they now look to regulators to take up some of the heft in this colossal task. Without some detailed sense of what can be achieved—to which I shall come later—it is misguided to believe that the solution can be what we have now, which is essentially a cultural response: if we have a new culture, a new way of working, things will improve. I am a huge sceptic about the creation of culture as a strong driver in making these things move. I believe strongly that we have to build able business cultures, but I find frequently that the Government’s response is to provide measures that will impact the culture.

--- Later in debate ---

I have no intention to challenge any of the instruments before us, but, like the noble Lord, Lord Mendelsohn, I have some concerns about the number of bodies that have been included, about the impact assessment and about whether the absolutely admirable aims that the Government have in mind really will be achieved by these measures.

[Lord Prior of Brampton]

My Lords, I cut my speech down, but I rather wish that I had not—I could still be talking. The noble Lord, Lord Mendelsohn, has raised too many issues and I cannot answer them all. I got to 38 questions and I stopped counting—I had forgotten what the first one was. I will have to write to the noble Lord on a number of the points that he raised.

While it is still fresh in my mind, I will just deal with the Northern Lighthouse Board—the noble Lord, Lord Foster, gave me warning about it during the vote. The Northern Lighthouse Board and the Commissioners of Irish Lights provide advice to ports about navigational safety matters. Because that advice can affect the business of port operators and their customers, it is right that the bodies should have regard to growth in making regulatory decisions. In a sense, that illustrates another issue that he raised about whether we had gone through all these regulators carefully, talked to them and found out what impact they might have. I hope that that answers that question.

The noble Lord, Lord Mendelsohn, started off positively. He said that he agreed with our objectives and goals, but then he went on to qualify that by referring to them both as motherhood and apple pie. Nevertheless, I think that the noble Lord, Lord Foster, also agrees. Who can possibly argue with the objectives of reducing regulation and achieving economic growth? The noble Lord, Lord Mendelsohn, also quoted—I wish that I had written it down, but he spoke too quickly—Warren Buffett. I will give him back another quote from Warren Buffett, if I can. It is much shorter and more succinct: you get what you incent for. For me, in business, that is a pretty profound statement.

I would like to apply that, if I can, to regulation. The noble Lord was sceptical about culture. I am less sceptical about it. I think that the culture that exists within individual firms can be hugely powerful. I will give an illustration that quite neatly contrasts culture with regulation or law. RBS and HBOS had been in banking for 200 years in Edinburgh. They were absolutely conservative, traditional Scottish banks. In the space of 10 years, their culture completely changed. I do not know whether the noble Lord has read the reports, particularly into HBOS, by the Treasury Select Committee of the House of Commons. The culture in those two banks was deeply shocking. To some extent, it was set by the deregulation that his Government brought into the City after 2001, when Gordon Brown was Chancellor of the Exchequer, and subsequently. It may go back earlier to the deregulation of the City in the 1980s. Nevertheless, the culture within those two banks effectively destroyed them.

Culture is hugely important and very powerful. For example, there are laws about smoking now but there is also a culture around it: you feel bad about lighting up a cigarette in a car or in a building, irrespective of the law. When I was at the Care Quality Commission, we found that the leading indicator—

[Lord Mendelsohn]

We agree on culture and the capacity to destroy culture. The point that the noble Lord made, which I thought was very interesting, was about incentives. I am not clear about how this creates incentives as opposed to duties, which then have a numeric capacity to meddle and to change. Can he give me some idea?

[Lord Prior of Brampton]

May I finish off on a regulator that is not covered by BEIS, but is important none the less—the Care Quality Commission? We found there that the leading indicators of performance, whether you measure it in terms of patient safety, hitting waiting time targets or patient satisfaction, were around staff engagement, such as whether doctors and nurses enjoyed working in the hospital. A junior doctors survey done by the GMC was probably the single most predictive of all the indicators. Culture is hugely important.

The noble Lord referred to a duty to communicate, which plays into the point about culture. Putting that obligation to communicate on to regulators is important. In a sense, what we are trying to do by having a duty to promote growth is to change the culture and outlook of regulators. As the noble Lord, Lord Foster, said, they are not there to hit the target but miss the point —how often does that lead to unintended consequences? For example, we hit the waiting time target in an A&E department but the patient died. That is the kind of absurdity we can get into when targets become—

[Lord Foster of Bath]

I think that we are all singing from the same hymn sheet in our speeches, but the documents before us say something rather different. They talk of the sums of money that it is anticipated will be achieved by this. I entirely accept that the Northern Lighthouse Board is there to provide safety. Clearly, if it switched off the lights in all its lighthouses, ships would crash, the economy would be in difficulty and so on. Presumably, it could spend a lot of money and put up more lights and sirens and have more people sailing around rocky outcrops warning people to stay away, and there may be some more savings in that. That is all common sense. But the way in which it has been enumerated is about having a target but missing the cultural point that the Minister is rightly talking about. The papers do not talk about the culture.

[Lord Prior of Brampton]

One way to change the culture is to change the message. We are not setting specific targets for regulators. The purpose is to increase transparency, which I will talk about a little. I qualify it as “intelligent transparency”. If we can put people in the position of making intelligent decisions and provide them with useful information, in my book that is the best form of regulation.

We are all agreed on the objectives and outcomes that we want from this. I see the exercise as trying to get a cultural shift in the behaviour of regulators. Both noble Lords have given examples of the road to hell being paved with good intentions. The last thing that we want is to encourage bad behaviour by pursuing regulation to the letter and achieving the opposite of what we want to. On one level, we are in violent agreement and, on another, we are clearly not. However, some important points have been raised and I would like to reflect on them and write to noble Lords on those issues.

To conclude, I would like to read out a few notes, just to get them on the record and perhaps explain a little better what I have just said. The importance of extending the scope of the business impact target is clear. Businesses consistently tell the Government that the actions of regulators are as important as the content of legislation in determining their experience of regulation. That has to be true. It is the way we interpret laws and decide whether they are helpful or not. For example, in giving up broadband at home I want to get through to BT to cancel my existing contract. Can I get through to BT? Can I hell. No one will answer the phone. It is about customer service. Funnily enough, having spoken briefly to the Intellectual Property Office yesterday, I think that it has a client-friendly attitude, which is the kind of attitude that we want from regulators.

The rationale for applying the growth duty is also clear. While there is already a great deal of good, proportionate and effective regulation, evidence suggests that some regulators fail to take sufficient account of the economic consequence of their actions and place unnecessary burdens on businesses. I think that the noble Lord wanted some examples of regulators that fall into that trap. We will certainly write to him on that.

Some regulators consider the impact of their actions on economic growth. It cannot be wrong to do that. If we said that regulators should not take into account economic growth, we would be shot at, quite rightly, from all sides. Many regulators think that they are unable to take account of growth because they do not have a statutory requirement to do so. That tells you something about the psychology of some regulators, frankly. They have to be told that economic growth matters. You would not think that you would need to be told that. We need to write to the noble Lord on that point. The new duty will help to bring all regulators up to the same high standard.

The growth duty will help regulators to carry out their functions in a way that is conducive to economic growth and will ensure that regulatory action is taken only when needed and that any action that is taken is proportionate. Again, the key words are “accountable”, “transparent” and “proportionate”. It will encourage regulators to develop more mature and productive relationships with the sectors and businesses that they regulate, driving up the accountability of regulators to the business community.

I conclude by saying that it is very easy to knock the regulators. Few people will stand up for regulators. But in some of the Brexit debates that we have had, when you look at the performance of the British regulators—for example, the EMA, the MHRA, the CAA or in the nuclear world—they are universally respected throughout Europe. Our regulators are highly respected and in the main they do an outstanding job. All we are trying to do in this legislation is to tilt the culture a little further towards practicality, transparency, productivity and growth.

Motion agreed.

Business Impact Target (Relevant Regulators) Regulations 2017

Lord Prior of Brampton Excerpts

Tuesday 28th February 2017 Grand Committee

Moved by

[Lord Prior of Brampton]

That the Grand Committee do consider the Business Impact Target (Relevant Regulators) Regulations 2017.

Motion agreed.

Growth Duty Statutory Guidance

Lord Prior of Brampton Excerpts

Tuesday 28th February 2017 Grand Committee

Moved by

[Lord Prior of Brampton]

That the Grand Committee do consider the Growth Duty Statutory Guidance.

Motion agreed.

Deregulation Act 2015, the Small Business, Enterprise and Employment Act 2015 and the Insolvency (Amendment) Act (Northern Ireland) 2016 (Consequential Amendments and Transitional Provisions) Regulations 2017

Lord Prior of Brampton Excerpts

Tuesday 28th February 2017 Grand Committee

Moved by

[Lord Prior of Brampton]

That the Grand Committee do consider the Deregulation Act 2015, the Small Business, Enterprise and Employment Act 2015 and the Insolvency (Amendment) Act (Northern Ireland) 2016 (Consequential Amendments and Transitional Provisions) Regulations 2017.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, in 2015 the Government introduced a series of reforms to modernise and streamline the insolvency process. The regulations we are debating make consequential amendments to the relevant special insolvency procedures for financial sector firms to take account of the reforms.

I will begin with a brief outline of the reforms to general insolvency law. The Deregulation Act 2015 separated out the authorisation of insolvency practitioners for personal and corporate insolvency. This reduces the cost of training for applicants who wish to specialise. The Small Business, Enterprise and Employment Act 2015 introduced a series of changes to streamline the insolvency process. This included an amendment to allow liquidators to exercise powers without court permission and an extension to the maximum term for an administration. In addition, the Insolvency (Amendment) Act (Northern Ireland) 2016 made similar reforms to insolvency legislation in Northern Ireland.

The purpose of these reforms was to reduce unnecessary regulation and therefore costs, improve public confidence in insolvency legislation, and make it clearer, more consistent, and modern. The Government carried out extensive consultations before bringing forward these reforms to the insolvency regime, which had the broad support of industry. The regulations make consequential amendments to the existing modified insolvency regimes for the financial sector. Modified insolvency regimes for the financial sector exist because general insolvency procedure is not always suitable for failed financial institutions. These modified insolvency regimes apply general insolvency law with modifications designed to address the special nature of some financial institutions—for example, the bank insolvency procedure. Because these special insolvency procedures for the financial sector are built on general insolvency law, they now need to be amended to reflect the reforms. The regulations are therefore important to ensure that the benefits of the reforms to general insolvency law are extended to the financial sector. They will also ensure that the modified insolvency regimes for the financial sector are compatible with general insolvency law. The proposed consequential amendments follow discussions with the regulatory authorities and the banking liaison panel.

In conclusion, the amendments are important to modernise and streamline modified insolvency regimes for the financial sector following the Government’s reforms to general insolvency. I beg to move.

[Lord Mendelsohn (Lab)]

My Lords, I thank the Minister for that explanation. We accept this as it is an effective codification of what was agreed during the passage of the legislation. The only questions that we wish to address relating to the provisions regard the Government’s evolving policy on insolvency. Other issues have of course emerged in the light of experience about how this process can be done more efficiently. There are consultations on moratoriums and other sorts of things in future that we are now looking at, and of course there will be adjustments when the next wave takes place, when there will be issues around pensions and other things.

Particularly on moratoriums and other sorts of reforms where there are consultations to improve the process, we would be grateful to have some indication of the Government’s thinking on whether they would bring this forward with the financial services industry and the companies that are covered. Would the provision that the Government are bringing forward encompass those along with all the other companies, or do they wish to have a separate procedure for financial companies?

[Lord Prior of Brampton]

I thank the noble Lord, Lord Mendelsohn, for his comments and his general support. I wonder if I could write to him to answer the question that he asked. On that basis, I commend the regulations to the Committee.

Motion agreed.

Police Intellectual Property Crime Unit

Lord Prior of Brampton Excerpts

Tuesday 28th February 2017 Lords Chamber

[Lord Clement-Jones]

To ask Her Majesty’s Government whether they have committed to continue funding the Police Intellectual Property Crime Unit.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, the Government recognise the important role that intellectual property plays in protecting and supporting investment and creativity of all kinds. The Police Intellectual Property Crime Unit plays a vital role in disrupting the activities of those engaged in intellectual property crime. There is no question about the Government’s continuing commitment to the unit. The Government are in the process of discussing how the PIPCU should be funded in future. We shall make a statement in due course.

[Lord Clement-Jones (LD)]

My Lords, “In due course”? We are one month from the beginning of the financial year of this internationally renowned and hugely successful unit in the fight against intellectual property crime and it is still waiting to hear whether it will continue to be funded and to what extent. This is a cause of huge concern to specialist police officers as well as to the wider creative sector and other industries. This is a disgrace. Does it not demonstrate that the Government are not taking intellectual property protection and enforcement seriously?

[Lord Prior of Brampton]

My Lords, I reiterate what I said in my Answer to the Question: we are fully committed to funding PIPCU. As the noble Lord knows, when PIPCU was set up in 2013, the intention was that the Government would fund it for a short period of time and that subsequently it would be funded by the rights holders as the insurance industry organised itself. This is not the case, so we are having to look at alternative means of supporting the unit. However, as I have said, those who work in PIPCU need have no concerns about whether the Government are fully committed to it.

[Lord Harris of Haringey (Lab)]

My Lords, I declare my interests in both policing and trading standards. Could the Minister tell us how many prosecutions this highly successful PIPCU has carried out in the past year and what proportion of those prosecutions was directed at the producers and wholesalers of fake goods, as opposed—simply and more easily—to those caught trading in counterfeit goods?

--- Later in debate ---

[Lord Prior of Brampton]

My Lords, I cannot give him the figure offhand. The figure of 57 rings a bell with me, but I shall have to check the number and write to the noble Lord. I can tell him that between March 2014 and December 2016, PIPCU shut down 11,000 websites selling counterfeit goods and 1,300 websites infringing copyright—so it has been extremely active. But I shall write to him on that point.

[Lord Foulkes of Cumnock (Lab)]

Yesterday the Minister showed that he has deep concern for disadvantaged people. Surely he can be more sympathetic to the Liberal Democrats about their loss of intellectual property.

[Lord Prior of Brampton]

My Lords, it is very hard to lose what you never had.

[Noble Lords]

Oh!

[Lord Stevenson of Balmacara (Lab)]

Returning to the main subject, as I am sure the noble Lord is aware, the police intellectual property office is also responsible for the National Fraud Intelligence Bureau—also widely regarded as being a terrific service which we would be sad to lose if there were funding problems. I visited it as part of my secondment with the Metropolitan Police—a scheme that I recommend to all Members of the House as giving an insight into the way the police operate. However, this goes back to the Question from the noble Lord, Lord Clement-Jones. Without certainty as to funding, there will be very damaging implications for crime. This crime needs to be stopped at source and this is the main unit to do so.

[Lord Prior of Brampton]

The noble Lord makes a good point. Of course, certainty is very important, but I draw the House’s attention to the fact that the US Chamber of Commerce rates our IP enforcement as number one in the world, as does the Taylor Wessing global IP index. We are doing a great job, so let us not beat ourselves up too much about this. We need to resolve this uncertainty about funding but we are doing an excellent job.

[Lord Sharkey (LD)]

My Lords, in the second quarter of 2016, 51 million pieces of film and TV content were accessed illegally according to the IPO. The Government have said that they believe that this illegal activity is covered by existing laws. If that is the case, why are there so few successful prosecutions for illegal access?

[Lord Prior of Brampton]

My Lords, I think this issue was debated during consideration of the Digital Economy Bill, and I understand that the noble Lord and others wanted to see it addressed in that Bill. Our feeling is that existing laws are sufficient and that, in any event, this matter could be addressed outside the Bill. I believe that we are putting out a call for evidence on it from users to absolutely nail this point, but I am a little hazy about this area, so I will write to the noble Lord, if I can, after today.

[Lord Clement-Jones]

My Lords, rising above the considerable intellectual property of the noble Lord, Lord Foulkes, perhaps I may come back to the Minister on the question of commitment. He says that he is committed but that could mean £1 or the full budget asked for by PIPCU. Is he committing to a level of funding no lower than the previous level? Is that what he is really saying?

[Lord Prior of Brampton]

My Lords, I think that since PIPCU was set up we have spent about £5.6 million on supporting the unit, which I believe has 20 full-time policemen, detectives and others. We are certainly committed to that sort of level of funding for PIPCU.

Industrial Strategy: Engagement

Lord Prior of Brampton Excerpts

Monday 27th February 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, we have published a Green Paper that invites people and organisations across the country to contribute to our industrial strategy. The Government are also committed to strengthening the worker voice in the boardroom. The Green Paper on corporate governance reform explores a range of options, and the Government will publish their response in due course after analysing responses they have received.

[Baroness Prosser (Lab)]

I thank the Minister for that response. The 10 pillars of the industrial strategy cover the processes required to establish the structure against which the strategy’s progress will be measured. There is, however, no mention of the human interaction needed to successfully implement those processes. There is a well-established link between employee engagement and productivity, which in this country lags behind that of France, Germany and the United States. What is the Government’s plan to ensure that companies have in place appropriate training for all levels of management, so that inclusion and employee voice are present, and the effective delivery of the industrial strategy can be measured? I note that the noble Lord mentioned workers on boards—a policy that we support, but which does not deal with employee voice at all levels of a company.

[Lord Prior of Brampton]

My Lords, the noble Baroness is absolutely right. The link between employee engagement and performance, however you measure it, whether in productivity or quality, is proven, so engagement is extremely important. However, I do not believe that just having someone on the board of a company is necessarily the right way of getting that engagement, as the noble Baroness mentioned. Engagement is much deeper than that. It is predominantly the responsibility of individual companies to tackle this. You can see the resulting performance when they get it right.

[Lord Broers (CB)]

My Lords, I have just come from a meeting of the Institution of Engineering and Technology at which it launched its report Skills and Demand in Industry. The one thing it pointed out to everybody was that only 9% of technology and engineering staff are women, yet 15% of them graduate from our engineering schools and in my own university of Cambridge the figure is over 20%. What are the Government doing to ensure that more women become engineers in industry and participate in it, especially through the apprentice route?

[Lord Prior of Brampton]

It is interesting that only 15% of women graduate in this subject. In the case of medicine, for example, the figure is now well over 50% and is nearly 60%. It is a very good question. Interestingly, I went to Rolls-Royce last week and met a number of apprentices there, some of whom are doing degree-level apprenticeships. That may be one way of increasing the number of women going into this area. It has been a problem for many years and we are only in the foothills of cracking it.

[Lord Foster of Bath (LD)]

My Lords, does the Minister agree that share ownership can provide the motivation to help employees and managers deliver for their companies and, of course, deliver the industrial strategy? If he does, what more can the Government do to promote such share ownership?

[Lord Prior of Brampton]

Share ownership can be a part of this but engagement of people in their workplace goes much deeper and is much more of a day-to-day issue than share ownership or board directors and the like. John Lewis and the mutuals have demonstrated the value of mutuality and ownership, so this does have a part to play. However, it is only part of a much bigger picture.

[Lord Forsyth of Drumlean (Con)]

My Lords, I declare my interest as chairman of a public company. Will my noble friend look at the widespread practice among fund managers and large shareholders of contracting out their responsibilities for corporate governance to outside organisations, and encourage them to engage directly with companies involved in the matters which concern the Government, such as executive pay and other matters?

[Lord Prior of Brampton]

The noble Lord may have seen the letter that BlackRock sent round to all FTSE 100 companies in which it talked very strongly about the need for long-term sustainable improvements when considering remuneration. I was pretty staggered to see that between 1998 and 2015 the average take-home pay of a FTSE 100 chief executive has gone up from £1 million to over £4 million. In 1998, that represented 47 times the average salary of an employee, now it is over 128 times. Remuneration is a very serious issue and if we want to live in a fair society, we need to address it.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, will the Minister have a look at a Private Member’s Bill that was introduced here twice previously by the now deceased Lord Gavron, who was very prescient in seeing the difficulties arising from the growth in the salary gap between CEOs and their employees? That Bill was supported by noble Lords all around the House. It would be well worth the Minister’s while to look at it. He mentioned that he does not want the Government to interfere in the deals between employers and employees in the private sector. However, the Government have responsibility in a very substantial part of the country’s employment—namely, in the public service. What are the strategy and targets for improving productivity in the public service?

[Lord Prior of Brampton]

The noble Lord makes a very good point. Industrial relations, employee engagement—call it what you will—is much better by and large in the private sector than in the public sector. We are not good employers, if we are honest. Like me, a number of noble Lords in this House were staggered that the junior doctors, for example, were forced into taking strike action. These people are vocationally committed, yet somehow we created an environment in the public sector which is far from satisfactory.

[Lord Foulkes of Cumnock (Lab)]

My Lords, will the Minister, on behalf of the Government, have a word with the Speaker, the Senior Deputy Speaker and the Clerk of the Parliaments and ask them to consider how the employees of this place might be involved more in decisions regarding its running?

[Lord Prior of Brampton]

My Lords, a number of our leading companies have very innovative ways of engaging people in their business—for example, Google and other companies like it have installed table tennis tables. I wonder whether the noble Lord, Lord Fowler, might consider making way for a table tennis table in this place.

[Lord Howell of Guildford (Con)]

My Lords, does my noble friend concede that turning earners into owners and expanding employee share ownership in various forms can, in certain circumstances, be immensely beneficial and a great promotion for industrial competitiveness and effectiveness? Will he bear in mind particularly the case of the National Freight Corporation where a major share ownership by all employees had an enormous effect in improving productivity? It was a project carried forward with great vigour by no less a person than the noble Lord, Lord Fowler—now the Lord Speaker of this House—and me, as successive Secretaries of State for Transport in the 1980s.

[Lord Prior of Brampton]

I agree with my noble friend that employee ownership can be very beneficial—the mutual is another model that can be beneficial—but it does not guarantee success. There are many other aspects of corporate life that are very important. The Co-operative Bank is an example of an organisation that has not been a conspicuous success in recent years. It can be very important but it is not the whole answer.