National Minimum Wage (Workplace Internships) Bill

Margot James Excerpts

Friday 4th November 2016 Commons Chamber

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

We have had a good debate, full of insight and good humour and I warmly congratulate my hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) on all the work he has done examining the issue of unpaid internships and introducing his Bill today. Indeed, so rich was the debate that it is impossible to do justice to all the excellent contributions. My only disappointment was that my hon. Friend the Member for North East Somerset (Mr Rees-Mogg) tantalised with his presence but confined his remarks to a few pertinent points, rather than giving us the benefit of the full panoply of his views on the matter. That was left to my hon. Friends the Members for Shipley (Philip Davies) and for Bury North (Mr Nuttall), who did not disappoint, and neither did my hon. Friends the Members for Louth and Horncastle (Victoria Atkins) and for North Devon (Peter Heaton-Jones). We have also heard some very good points from the hon. Member for Sheffield, Brightside and Hillsborough (Gill Furniss).

Those of us who have worked with my hon. Friend the Member for Elmet and Rothwell know that he is a tireless campaigner for interns’ rights. He made a personal pledge to act on unpaid internships and this Bill represents only the most recent stage in his impressive campaign to secure fairness of opportunity and equity of consideration for all entrants to the labour market regardless of their personal means or social background.

The principle lying behind and driving my hon. Friend’s efforts is the idea that work can be a powerful engine for social mobility, and the Prime Minister, who talks about her vision of a truly meritocratic Britain and building an economy that works for everybody, is very much of the same mind.

I want to take a little time to talk about the Government review set up by the Prime Minister at the beginning of last month. It will be headed by the chief executive of the Royal Society of Arts, Matthew Taylor, and is to look specifically at developments in modern working practices. I also want to speak about the national minimum wage and the living wage, and a little bit about Government enforcement through HMRC. I also want to address the provisions set out in the Bill.

First, let me make a few remarks about internships in the broader context and share a few points from my constituency experience. I have changed the names of the people I shall mention. The first of them is Susan. She was educated at a well-known public school. Her father was chairman of a public company and a donor to one of our two major political parties. He effected an introduction to the party chairman which resulted in a six-month unpaid internship for Susan at the party’s headquarters, and from the contacts she made there she was able to secure a second unpaid internship for a Member of Parliament.

[Christian Matheson (City of Chester) (Lab)]

And then a safe seat.

[Margot James]

The hon. Gentleman takes my example a little too far, but one can only imagine such an outcome as being highly likely.

Now, let me introduce Jack. Jack’s father works for a landscape-gardening company and just about makes average earnings, and his wife works part-time as a carer. As a family, they are just about getting by and they think Jack will get on fine because he is a bright boy. But Jack is already disadvantaged by some of the choices he made at GCSE which ruled out the sort of A-levels the Russell Group universities favour. He has no contacts in London and his family cannot afford to support him through an unpaid internship. Unlike Susan I think Jack would probably be one of the 40% of young people my hon. Friend the Member for Elmet and Rothwell indicates would reject an internship if offered on an unpaid basis. Those case studies illustrate to me that my hon. Friend is really on to something in challenging the concept of unpaid internships under the conditions set out in his Bill.

However, we believe that good, worthwhile, genuine internships certainly have a part to play, alongside other routes such as work experience, apprenticeships, work placements and work shadowing, all of which we have heard a great deal about in our debate. I believe we all recognise that young people learning about the workplace, developing skills and getting training can produce networking opportunities in and of themselves. Employers can also benefit from fresh thinking and from finding potentially great new permanent employees to join their team in future.

There are many different types of internship. The Gateways to the Professions Collaborative Forum, for example, represents about 60 professional bodies. We have heard about the excellent programme of paid internships that is run from the Speaker’s quarters in this House. In the attempt to define high-quality apprenticeships as an arrangement whereby individuals work and can gain some compensation, there is also the prospect that they will develop professional skills and an understanding of a profession. Those are all good experiences and we would not want obstacles to their fulfilment to be created unnecessarily from any unintended consequences of legislation.

There are many excellent resources, such as the Government-backed graduate talent pool, which is an initiative designed to help new and recent graduates to gain real work experience across Government. It advertises quality internships with a range of desirable employers in numerous competitive sectors. Most significantly, 100% of the vacancies advertised through the graduate talent pool are for paid positions. A 2011 survey of more than 500 people registered with the pool found that over 60% of respondents were motivated to join in order to improve their long-term prospects and gain general work experience, and it showed that over 80% of interns would recommend the experience and scheme to others.

Another example is the popular RateMyPlacement website, which I heard my hon. Friend the Member for Shipley mention—I think in relation to some experience he offered to a young person from his constituency. Graduates and interns can share their experiences of placements anonymously on the site and often find specific guidance on such things as interviews and general careers advice.

There is an increasing wealth of information out there, for employers as much as anyone else, about what well-managed, high-quality internships look like. However, we all know that not all the internships we are debating today are good quality and properly managed, and I think we all, across the House, aspire to improve our system such that there ends up being just good-quality, preferably paid—and certainly compensated—internships in future.

Let me turn to the point that several hon. Members have made: that workers do have rights. Workers have a contract with their employer under which they perform work to agreement and both parties must get something of value from the arrangements. The contract does not have to be written and the value provided to the person performing the work might initially be the opportunity to gain experience or the promise of future work. Other factors to consider are whether a person has the right to send someone else to do the work and whether the person is better viewed as working for the employer rather than being engaged by an independent contractor.

A genuine worker has a “day one” right to be at least paid the appropriate national minimum wage or the national living wage if he or she is over 25. When a court looks at a person’s employment status, it will always consider the reality of their working arrangements and not just how those are described. Simply labelling someone as an intern is not enough to exempt them from the rights associated with being a worker.



However, there is no universally agreed or accepted definition of the term “intern”, despite many attempts to define it today. I sensed considerable sympathy for the view expressed by my hon. Friend the Member for Bury North that it was perhaps a glorified Americanism used to describe what is effectively work experience. We must acknowledge that there are bad examples of work experience and internships, but let me make it absolutely clear that the Government believe that all people in the UK are entitled to fair wages for fair work.

[Philip Davies]

If we complicate this too much, is there not a danger that employers trying to avoid having someone classified as a worker would simply get people in to do menial things such as making the tea, rather than doing a proper job? Most people who do work experience really appreciate being able to muck in and do something worth while. It would be a strange state of affairs if employers were deterred from offering meaningful work experience lest they fall foul of the legislation.

--- Later in debate ---

[Margot James]

I thank my hon. Friend for his apposite intervention. I agree that it would be most deleterious if employers were to downgrade the work experience that they offered, to get round the law. I must point out, however, that the alternative might be that employers would start to compensate the person undergoing the work experience if they were doing genuine work that added value to the firm or organisation in question.

I take the point that my hon. Friend the Member for Shipley made earlier that, in the early stages of work experience, the candidate is often not in a position to add value to an organisation, given that they are learning on the job. Indeed, he told the House that he had been such a candidate in his younger days, working for the best local newspaper in the country—namely, the Stourbridge News. He talked about his experience as a budding court reporter, although he was modest enough to say that his material often required a degree of rewriting before it made it into the newspaper. That underlines his point that it takes a while for interns and people on work experience to be able to add value. I hope that, at the end of his work experience week, his employers took him to one of the town’s many wonderful hostelries for a few pints on a Friday evening.

The Bill seeks to extend the provisions of the national minimum wage to cover individuals who are engaged in workplace internships. It is extremely well intentioned, but I am concerned that it could have unintended consequences that might even undermine existing employment laws and protections. Legally, the Bill is unnecessary because, as my hon. Friend the Member for Bury North and others have said, interns are already eligible for the national minimum wage if they meet the definition of “worker”. It does not matter what the employer calls the arrangement or whether the individual has agreed not to be paid. Only the reality of the employment arrangement matters, and if an intern is a worker, they are entitled to be paid.

We have heard observations about the difficulty of defining the term “intern” in relation to various categories of unpaid work experience. The term is loosely used to apply to a wide range of formal and informal arrangements where there is an expectation of an individual receiving some kind of practical experience. A worker is someone who has a contract with their employer under which they personally perform work. For such a contract to be valid, both parties must be getting something of value from the arrangement. That could pose a problem for interns working for free if they are not getting paid but are getting something of value from the arrangement. Whether they are is not always clear cut. In most cases, however, the answer is likely to be yes. The value may be in the form of training, experience or a job in the company or organisation to which they are lending their labour.

For that reason, we feel that interns are afforded sufficient protections by existing employment laws and that a tribunal would find that an intern who was genuinely a worker would qualify for the national minimum wage. Indeed, tribunal decisions involving interns have reached that conclusion, including the case of Keri Hudson mentioned by my hon. Friend. HMRC has also identified arrears in a several cases that started out as complaints from interns. We heard some interesting remarks from my hon. Friend the Member for Louth and Horncastle (Victoria Atkins) about the days when she was a prosecution barrister for HMRC. As she will know, HMRC follows up every complaint it receives.

I recognise that some people, interns in particular, will be worried about employment prospects if they make a complaint, but I want to make everybody aware that anyone who contacts the ACAS helpline will be treated with strict confidentiality. Anyone whose complaint is referred to HMRC directly will also be treated with absolute confidence. People can choose how much information about themselves to disclose. It is even possible for someone to raise a complaint to be followed up by HMRC without even disclosing their identity. Safeguards are in place, and I urge all MPs to make employers, employees and interns in their constituency aware of their rights and the ease with which they can raise complaints without jeopardising their employment prospects.

[Alec Shelbrooke]

What advice could my hon. Friend give to someone who is the only employee in a business?

[Margot James]

My hon. Friend points to a good exception to what I have been saying. If someone is the only employee in a business, it would be a microbusiness. I would imagine that most people who become an employer’s only employee are family or friends. I accept that such a case could exist and what I said would not apply in those circumstances, but I am sure that my hon. Friend will agree that such circumstances are exceptional. I can accept that there will be circumstances in which people will fear being exposed even if their confidentiality is maintained, so I accept my hon. Friend’s wider point.

If the Bill does proceed to Committee, I ask my hon. Friend to assure the House that it will not have a negative impact on the excellent support offered to disadvantaged young people by organisations and groups such as the Social Mobility Foundation. Short-term work placements, which may go beyond the 28 days mentioned earlier, offer risky and ultimately untenable situations for employers, establishing legal obligations towards participants that none of the parties involved either intended or wished for. I fear that my hon. Friend could not offer that guarantee, as indeed the Government could not were they to introduce something with the broad definition contained in the Bill.

We have heard that unpaid internships are disproportionately filled by people from affluent backgrounds, and I do not dismiss that concern in any way. Indeed, the examples I gave the House earlier about Susan and Jack underline that if we seek to legislate too readily and expand the scope of existing protections too freely, we may end up legislating some existing opportunities out of existence, because employers will not want the risk or nuisance of offering them and putting themselves into an exposed position that their conduct does not really deserve. If there are fewer internship placements as a result of the Bill, will we really have addressed the social mobility problem that lies behind it? I do not think so, and I sense that a number of my colleagues, not least my hon. Friend the Member for Shipley, would agree with me.

A better approach will be to take the opportunity afforded to us by the recently announced Taylor review to look carefully at modern employment practices and to gather evidence to see how we might best direct our efforts to improve fairness of opportunities and consideration for all entrants to the labour market, regardless of their background and whether they have the means to support themselves through unpaid work of any description. As a result of the Bill, I intend to ask Matthew Taylor to look at these questions with respect to interns, and I hope to persuade my hon. Friend the Member for Elmet and Rothwell to lend his considerable experience and credibility to any discussions he may be invited to have by Mr Taylor and the panel members who will assist him in this valuable work, the fruits of which I look forward to seeing.

As the Prime Minister has said on numerous occasions, the Government firmly believe in creating an economy that works for all. We support enterprise but not at the expense of employment rights, wages or job security when job security is desired. Where interns are genuinely workers, they are entitled to all the same rights and protections as any other worker, including, importantly, being eligible for the national minimum wage if they are under 25 and the national living wage if they are over 25.

I take my hon. Friend’s point that, even though the law is clear on that matter, it is governing a great range of grey areas in terms of the nature of the work that people who are starting out on their careers are performing and whether or not they are work shadowing, gaining work experience or undertaking an internship, paid or otherwise. Those are not just grey areas; I would go so far as to call them a minefield for employers.

I wish to protect the vast majority of employers who have a good disposition. I have been one myself, and I know that several contributors to this debate are former business managers who employed people. Indeed, we are all employers in this House, are we not—even your good self, Madam Deputy Speaker? I hope that I may compliment you by saying that, knowing some of your staff as I do, I know that you are an exemplary employer. Those standards go for the vast majority of Members across this House, and the vast majority of employers outside it are very good employers. Unfortunately, a minority are not, and we have heard some scandalous examples today of employers who are using the internships system to get free labour.

Appalling situations have been cited by a number of colleagues from across the House. Those examples are most regrettable and they underline the need that my hon. Friend has identified for us to act in this area, which is what I hope the Matthew Taylor inquiry will do. It will examine this minefield and clarify the conditions, so that we can ensure that interns, and employers’ good intentions, are protected and that all young people can get good experience without their employers falling foul of the law.

Living Wage

Margot James Excerpts

Thursday 3rd November 2016 Commons Chamber

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

I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing this important debate. I also welcome the hon. Member for Birmingham, Erdington (Jack Dromey) to his shadow ministerial position; this is the first time that we have faced each other across the Dispatch Box.

I congratulate everyone involved in the Living Wage Foundation on all that they have done to promote the concept of a living wage and to motivate more companies to pay it. As the Minister for small business, I was pleased to see that research carried out by the Universities of Middlesex and Liverpool about the adoption of the living wage by SMEs showed that 70% of respondents said that becoming a living wage employer had had a positive effect on their brand and corporate image.

I am proud to be part of a Government who have introduced the first national living wage, so let me take some time to acknowledge the magnitude of this change for workers. New earnings data released last week by the Office for National Statistics shows that 1.5 million workers will have seen a pay rise this April. The introduction of the national living wage meant that a full-time, low-paid worker working 35 hours a week would be earning about £900 more this year than last year, and even more workers will benefit as we make our way towards 2020.

As my hon. Friend the Member for Sutton and Cheam (Paul Scully) set out, new data have confirmed that wages have continued to grow by more than inflation. That is even more the case for the lowest paid, for whom the gains are by far the largest this year. I listened carefully to what hon. Members said about certain companies, but the overall impact of the new living wage has seen gross weekly pay for the lowest paid growing by 8.6% between 2015 and 2016. That is significantly higher than the growth at the median, which was just 3.2%. Despite what we heard this afternoon, wages rose well over twice as much for the low paid as they did for those on average or higher pay. The national living wage is now the highest minimum wage that the country has ever seen—not just in cash terms, but when inflation is taken into account.

[Siobhain McDonagh]

The Minister refers to the lowest-paid people gaining an increase of 8.2%, but that does not compare well with the top FTSE 100 chief executives, whose pay increase was 10%. My fear is not just for the lowest paid, but for the group of people just above them, who are finding that the introduction of the living wage is stripping out all the other benefits, leading to an overall reduction in their pay.

[Margot James]

I shall be dealing later with some of the points that the hon. Lady made in her speech about other benefits, and the overall impact on wages and take-home pay, but she should bear in mind that 8.2% is not very dissimilar to 10%. That does not mean that I am defending what many people have described as excessive pay rates at the top end. Indeed, the Prime Minister has asked my Department to produce a discussion paper on corporate governance. She has made it clear that she expects some of that top-end remuneration to come under the microscope, especially when it does not seem to reflect improved corporate performance.

I have listened carefully to representations about the level at which Governments should set the national living wage and the way in which overall pay should be managed. Higher pay needs to be affordable for employers, because if they cannot afford to pay it they will not hire workers and, worse still, may even lay workers off. The Low Pay Commission is led by an expert panel and is absolutely independent of the Government. We will continue to take its expert and independent advice, which will help us to set the national living wage. The commission will make its recommendations after careful consideration of the state of the economy to ensure that we can afford to make the living wage as high as possible without costing jobs. It will gather extensive evidence across the economy from workers, their representatives and employers, and will then reach an independent view.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

As the Minister will know, the merchant marine service has been one of the most difficult areas of employment when it comes to enforcement of the national minimum wage. When will we have the updated guidance on the application of the minimum wage to seafarers that we were promised?

[Margot James]

I will ask Her Majesty’s Revenue and Customs, which is the enforcement body for the minimum wage, what stage its investigation has reached. As one of my hon. Friends pointed out earlier, HMRC investigates every single complaint for underpayment, but it also mounts sector-based inquiries into such matters as the circumstances of seamen.

Let me now deal with some of the overall issues raised by the hon. Member for Mitcham and Morden. I share some of the concerns that have been expressed today. We know that employers are responding to the national living wage in a range of ways, depending on the markets in which they operate and the current state of their businesses. The extent to which they may be able to absorb the extra costs from profits, pass them on in the form of increased prices, increase the productivity of their staff or reduce other costs will vary between and within sectors. We think it essential for employers to ensure that their reward packages are competitive, and that they reward staff for their work in order to retain and develop workers who are fundamental to their success.

Ultimately, however, although we can set the minimum wage, it is for employers to decide how to manage those increases in their costs. Any changes in contracts must be agreed with workers, and must be in line with the law at the very least. Any instances of unfair dismissal that might result are, of course, a serious matter, and would be dealt with through employment tribunals, but employees could always contact the Advisory, Conciliation and Arbitration Service for guidance at the same time.

It is worth noting that changes in pay structures in the retail sector can reflect long-term changes to introduce greater consistency, perhaps the sort of changes that we have heard about this afternoon. Some may be coincident with, but not a consequence of, the introduction of the national living wage, and I do not accept that they are in any sense loopholes. The Government will continue to set a minimum hourly wage, and remuneration over and above that rate is a contractual matter between the employer and the employee.

[Joan Ryan]

Will the Minister give way?

[Margot James]

I will give way one last time. I am aware that many other Members wish to speak.

[Joan Ryan]

I thank the hon. Lady for giving way. She talks about going to ACAS or a tribunal in a way that makes that sound extremely easy. However, companies only have to have a 90-day consultation, and when that is finished they can take the measures they wish to take that lower wages by reducing overtime and bonus payments, despite the fact that they are implementing the Government’s national living wage. Surely this is a loophole and the Government should act; otherwise, what is the point of any of the Government’s measures?

[Margot James]

I do not see these matters as loopholes because there is no proof of a connection between the introduction of the national living wage and some of the cases we have heard about this afternoon.

I object to the automatic assumption that the changes that Marks & Spencer has made to its contracts and conditions are exploitative or a direct result of the national minimum wage. The hon. Member for Mitcham and Morden stated that Marks & Spencer had scrapped its pension scheme. It has not done so; like a host of other firms—the vast majority of private sector firms—it has moved from a defined benefit scheme to a defined contribution scheme. Indeed, the hon. Lady herself pointed out that the John Lewis Partnership had moved in such a direction several years ago, and it is not surprising when we consider what has happened to some of our large corporations’ defined benefit schemes in recent years. In August alone the deficit of those schemes increased by a massive £100 billion—and that was just in one month.

These pension schemes have to be sustainable; otherwise, we are going to see a calamity unfold over the next decade. Marks & Spencer has, along with the vast majority of other corporations, taken the entirely reasonable decision to move over, after consulting their employees at length and after putting in place a compensation programme to cover a three-year transitional period.

I took the precaution of talking to Marks & Spencer representatives to find out about the wider impact of some of these changes on employees of one of our most famous high street stores. I found that a rather different picture emerged from what we have heard from some Members in this debate. The company has put in place a Marks & Spencer living wage of £8.50 as a minimum for all store staff from April next year, and all those staff will receive a pay rise for every hour worked, and longer serving employees, who I agree have had to give up premium rates for Sunday and bank holiday working, will at least receive a lump sum in compensation. The conclusion is that approximately 90% of M&S employees will receive higher pay as a result of all the changes, which staff are free to accept or reject. M&S has also undertaken a very lengthy consultation covering all its store staff.

[Siobhain McDonagh]

Will the Minister give way?

[Margot James]

I will; I did say I would not give way again, but it is the hon. Lady’s debate.

[Siobhain McDonagh]

As I have always done, I am specifically referring to those long-standing loyal members of staff who have worked at Marks & Spencer since before 2002—they have worked for at least 14 years for the store. Thousands of those members of staff are going to lose thousands of pounds each year. There is a two-year lump sum to be had. They have no choice; the 90-day consultation has taken place. If they reject their new contract, they will be sacked for another substantial reason. Does the Minister, on behalf of the Government, believe that that is a fair way to treat thousands of long-standing loyal staff who have gone into work at weekends and on bank holidays to keep the company they love going?

[Margot James]

I do not accept that that is a fair representation of what Marks & Spencer is doing at the moment, for many reasons. I note that the hon. Lady said that if staff did not accept the terms, they would be sacked for another reason. That would be illegal and I do not believe that Marks & Spencer would go down that road. I think it has been much—

[Siobhain McDonagh]

On a point of order, Mr Deputy Speaker. What the Minister has just said is legally and factually incorrect. The law states that if a company has a 90-day consultation with its staff about changes to terms and conditions, it can then issue a new contract. If a member of staff refuses to sign that contract, they can be sacked for another substantial reason.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

That is not a matter for the Chair, but the hon. Lady has put it on record for people to see.

[Margot James]

I think I will move on—[Interruption.] I do not accept what the hon. Lady has said. The 90-day consultation period ended with Marks & Spencer still having a few people not agreeing to the contract, and those people are still employed by Marks & Spencer. Also, 99% of employees have accepted the contracts. The other point that I would contest in what the hon. Lady accuses Marks & Spencer of doing—[Interruption.] I make no apology for trying to set the record straight. Hon. Members are free to speak in this House without fear or favour, and I make no apology for trying to set the record straight when I feel that a company, or perhaps an individual, in the outside world has been maligned unfairly. I make no apology whatever for that.

I shall conclude my remarks, because time is marching on. The national living wage has brought immense benefits to the workforce in this country and I am absolutely delighted that, for the first time in many years, wages have risen more than twice as much for the low paid as they have for those on average or higher pay around the country. That is to the credit of companies and workers alike, and for that reason among many others, I am delighted to support the whole notion of the national living wage.

Trade Union Industrial Action: Electronic Balloting

Margot James Excerpts

Thursday 3rd November 2016 Written Statements

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

Section 4 of the Trade Union Act 2016 specifies that the Government should make provision for an independent review to consider the delivery of secure methods of electronic balloting of trade union members.

The Government are committed to the independent review and I am pleased to announce today that Sir Ken Knight CBE, the former Chief Fire and Rescue Adviser for England, will chair the review.

I am publishing the terms of reference in parallel. The review will start shortly and the final report presented to Parliament no later than December 2017.

[HCWS234]

Business, Energy and Industrial Strategy

Margot James Excerpts

Thursday 3rd November 2016 Ministerial Corrections

The following is an extract from the response to the hon. Member for South Thanet (Craig Mackinlay) during the debate on small shops regulation on 2 November 2016.

[Margot James]

My hon. Friend said that there was a great deal of disquiet among small retailers in his constituency about the programme to make tax digital. I have heard such disquiet in my meetings with the Federation of Small Businesses and discussed it with the Financial Secretary to the Treasury. There are some signs of progress. There is no chance of the programme being rowed back or changed radically, but the Treasury is consulting on changing the threshold and removing unincorporated businesses entirely. It is also consulting on delaying its introduction for one year for businesses of a certain size, and there is even the possibility of some financial support for very small businesses. So, the Treasury is listening. I think the consultation deadline is fast approaching, so I urge my hon. Friend to make haste in contributing his views on behalf of his local retailers. — [Official Report, 2 November 2016, Vol. 616, c. 390WH.]

An error has been identified in the response I gave to my hon. Friend the Member for South Thanet (Craig Mackinlay).

The correct response should have been:

[Margot James]

My hon. Friend said that there was a great deal of disquiet among small retailers in his constituency about the programme to make tax digital. I have heard such disquiet in my meetings with the Federation of Small Businesses and discussed it with the Financial Secretary to the Treasury. There are some signs of progress. There is no chance of the programme being rowed back or changed radically, but the Treasury is consulting on changing the threshold and removing some unincorporated businesses entirely. It is also consulting on delaying its introduction for one year for businesses of a certain size, and there is even the possibility of some financial support for very small businesses. So, the Treasury is listening. I think the consultation deadline is fast approaching, so I urge my hon. Friend to make haste in contributing his views on behalf of his local retailers.

Small Shops Regulation

Margot James Excerpts

Wednesday 2nd November 2016 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate my hon. Friend the Member for South Thanet (Craig Mackinlay) on securing this debate on small shops regulation. He has brought his detailed knowledge of and passion for retailers in his constituency to the attention of the House, and they are fortunate to have such a champion.

As someone with a business background, I am acutely aware of the impact of regulation, which not only imposes costs on businesses but often diverts resources from more productive activity. As we heard from my hon. Friend, small shops play a unique role in the fabric of British social and economic life; he cited several statistics from the “Local Shop Report” organised by the Association of Convenience Stores that really explain the benefit shops bring to our high streets. Small shops are the lifeblood of any community.

I agree with my hon. Friend that it is easier to regulate than to deregulate. I am finding that in my new role, and I might add that I am constantly vigilant against that instinct. We are recognised as a world leader in deregulation. Over the last Parliament we delivered savings to business worth more than £10 billion through what was then the one in, two out initiative. That made a real practical difference for small shopkeepers through, for example, reduced audit requirements and the simplification of health and safety requirements.

We are committed to delivering a further £10 billion of savings in this Parliament through deregulation. For the first time, that target will include changes in national regulators’ policies, as well as laws. For instance, we are working with the Financial Conduct Authority to review the way we combat money laundering. I hope that that will deliver more effective controls on criminals and simpler financial services for small businesses, including retailers. We are making good progress against our new target, and have made almost £900 million-worth of net savings through the measures already implemented since the last election.

Deregulation is of course only one part of easing the burden on shopkeepers. We are trying to create one of the most internationally competitive tax systems, which is why we have complemented the national living wage with radical tax reforms to boost the take-home pay of the lowest-income workers. But, of course, we need to help employers to put all this into action, so we are cutting taxes and employer national insurance by increasing the employment allowance and reducing corporation tax. The increase in the employer allowance from £2,000 to £3,000 will benefit up to half a million employers and mean that a business, such as a small retailer, will be able to employ up to four people full time on the new national living wage without paying national insurance contributions.

As well as earning a proper wage now, it is vital that people save for their retirement. My hon. Friend mentioned the issues relating to auto-enrolment. So far, more than 6.7 million people have been automatically enrolled into a workplace pension by more than 250,000 employers. We understand that small employers may find complying with automatic enrolment challenging, which is why the Department for Work and Pensions and the Pensions Regulator are working to make automatic enrolment as straightforward as possible for them. For example, as part of that work, the Pensions Regulator has launched an interactive step by step guide on its website—I think my hon. Friend mentioned it.

[Mr Andrew Smith]

Will the Minister respond to the very sensible proposal made by the hon. Member for South Thanet (Craig Mackinlay) about software that will help small shops to cope with auto-enrolment?

[Margot James]

I thought that was a good idea. I am obviously not a DWP Minister, but I shall write to the Minister responsible, mentioning the idea proposed by my hon. Friend the Member for South Thanet. It seems like one of those simple steps that the Government could take to facilitate an improvement.

My hon. Friend spoke about insolvency. Of course, sometimes, no matter how hard people try, businesses unfortunately fail. That can be very difficult to live with, particularly when a small business fails as a result of the ripple effect from an insolvency further up the supply chain. The law already allows for retention clauses to be enforced in the event that a customer to whom goods have been supplied fails and those goods can be recovered. My hon. Friend suggested that any money subsequently recovered from the “head client” by an insolvency practitioner should be shared down the supply chain to particular suppliers. It is, though, a basic principle of insolvency law that unsecured creditors should be treated equally.

There is a narrow range of exceptions to that principle, but any extension to those exceptions could prejudice the interests of other creditors in an insolvency, who may also be small businesses. The regime has to balance the interests of many different stakeholders, including lenders, employees and suppliers. Returns to creditors can be improved by ensuring that the insolvency process is as efficient and cost-effective as possible. To that end, I am pleased to say that a new set of insolvency rules for England and Wales will come into force next April, which will further reduce the costs of insolvency by removing some of the unnecessary regulations and driving the increased use of technology.

On the business environment and tax, I reassure my hon. Friend that the Government are committed to creating one of the most internationally competitive tax systems for small businesses. Earlier this year, Her Majesty’s Treasury made the Office of Tax Simplification permanent. The OTS will advise the Treasury on how to further simplify the tax system. This year has seen the biggest ever cut in business rates in England, worth £6.7 billion. Some 600,000 of the smallest businesses, many of which are retailers, will not have to pay business rates again. Although there have been fluctuations in the annual investment allowance, it is now at its highest ever permanent level. We have announced that we will cut the rate of corporation tax to 17% by the end of the Parliament.

My hon. Friend said that there was a great deal of disquiet among small retailers in his constituency about the programme to make tax digital. I have heard such disquiet in my meetings with the Federation of Small Businesses and discussed it with the Financial Secretary to the Treasury. There are some signs of progress. There is no chance of the programme being rowed back or changed radically, but the Treasury is consulting on changing the threshold and removing unincorporated businesses entirely. It is also consulting on delaying its introduction for one year for businesses of a certain size, and there is even the possibility of some financial support for very small businesses. So the Treasury is listening. I think the consultation deadline is fast approaching, so I urge my hon. Friend to make haste in contributing his views on behalf of his local retailers.[Official Report, 3 November 2016, Vol. 616, c. 1-2MC.]

As we have heard, the trade in illicit tobacco robs small shops of the income they deserve, in addition to causing a tax loss for Government. In 2015-16 we lost £2.4 billion-worth of revenue because of that illicit trade, so I thank my hon. Friend for his work to counter it. In March last year, the Government published a refreshed strategy called “Tackling illicit tobacco: From leaf to light”, which outlines how we will continue to target, catch and punish those involved in the illicit tobacco trade. By joining up all interested parties throughout the Government and leading the way in the international fight against illicit tobacco, more than 3.5 billion illicit cigarettes and more than 599 tonnes of hand-rolling tobacco have been seized in the past two years alone.

In conclusion, I thank all the right hon. and hon. Members present for their excellent contributions to the debate. Small shops remain a crucial part of our local and regional economies, creating jobs and injecting billions of pounds into our economy. I am passionate about supporting the sector—indeed, I am chairing a round-table of retailers this afternoon—and want to see it flourish. I thank my hon. Friend the Member for South Thanet again for securing this important debate.

Question put and agreed to.

BHS

Margot James Excerpts

Thursday 20th October 2016 Commons Chamber

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

I warmly congratulate the right hon. Member for Birkenhead (Frank Field) on securing this afternoon’s very important debate. I thank him, the hon. Member for Hartlepool (Mr Wright) and both Select Committees for their invaluable work in exposing the governance and decision-making issues that have contributed to terrible consequences for so many people formerly of BHS.

Reading the report made me painfully aware of the responsibilities of directors. Under section 172 of the Companies Act 2006, directors must have regard to the long-term consequences for their company of their decision making, and they must consider the interests of employees and customers, and the impact on the community. BHS should have been making plans to mark its 90th anniversary in 2018, instead of which all its stores have now closed, and its employees—some, like Mrs Patel, are mentioned in the report—who had spent most of their working lives building the value of BHS have seen their careers end in redundancy and uncertainty, rather than the secure retirement to which they had been looking forward and had a right to expect.

[Richard Graham]

I simply want to say that it is wonderful to see the Minister in the Chamber today. She is absolutely not scurrying away from anything—I have never seen her scurry away from anything in her life. Does she agree that on a day when we are debating a Back-Bench motion arising from a report by entirely cross-party Committees, the members of which worked incredibly well together, it is really disappointing to hear the SNP spokesman acting like an agitated Humpty-Dumpty talking about monetary policy?

[Margot James]

I thank my hon. Friend for his intervention and for his work. Disappointed I may be, but not surprised. My thoughts—and, I know, those of Members of all parties—are with the ex-BHS workers, pensioners and their families.

We have heard about two owners of BHS: Philip Green, who bought the company for £200 million in 2000—it was profitable in the early years—and Dominic Chappell, who even Sir Philip in his ITV interview last week admitted had no retail experience, and was categorically the wrong buyer and the result of a horrid decision. In his powerful speech, my hon. Friend the Member for Bedford (Richard Fuller) laid bare the consequences of the decision to sell to Dominic Chappell.

A key theme in the report is the sharp contrast between the impact of BHS’s demise on workers and pensioners, and the payments received by senior executives in BHS and RAL and their advisers. The report also highlighted serious weaknesses, as has this debate, in the corporate governance of the companies concerned. The Government are very concerned about these issues.

The Prime Minister has already made it clear that we will review corporate governance, including further reforms on executive pay, as part of work to build an economy that works fairly for everybody, not just the privileged few, about whom we have heard so much this afternoon. Strong and transparent corporate governance is vital to provide trust in business and to foster good decision making by companies. The Government intend to consult later this autumn on options to strengthen the existing framework.

The hon. Member for Hartlepool made some salient points about the gap in governance between a public and a large private company. His Select Committee’s inquiry into corporate governance will provide an opportunity—

[Hannah Bardell (Livingston) (SNP)]

On a point of order, Madam Deputy Speaker. I thank you for indulging me and hope you will excuse my possible ignorance of the parliamentary process, but I am somewhat confused by the Minister’s responding halfway through the debate, before all Members have had the opportunity to bring forward the concerns of their constituents.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

The hon. Lady has herself made clear in asking that question that she has not served for very long in this House, so no one would expect her to have a perfect knowledge of procedure. However, this is a Backbench Business Committee debate, so the Minister and the spokesmen for the two main Opposition parties can choose at what point they wish to enter the debate. The spokesman for the Scottish National party has already entered the debate, and the Minister has come into the debate now. The spokesman for the official Opposition will come in at a later stage. It is entirely up to them and to the occupant of the Chair as to when that happens. I want to ensure that there is enough time for the Minister to take on the points that have been made and those that will be made later in the debate.

[Margot James]

I was just coming on to welcome the inquiry into corporate governance announced by the Business, Energy and Industrial Strategy Committee, which I am sure will add to the evidence that we need to take sound decisions on how to strengthen our corporate governance framework for big private companies as well as for public companies.

On the vexed issue of BHS pensions, the fate of the pension scheme and the circumstances leading up to the current problem are of key interest to many, and especially to the ex-BHS employees and its pensioners. Sir Philip has recently been quoted as saying how sad and sorry he is for all the hardship and sadness caused to the people who worked there and the pensioners. He has said, too, that he is in a “very strong dialogue” with the Pensions Regulator to find a solution for the BHS pension deficit. In common with my hon. Friend the Member for Gloucester (Richard Graham), I urge Sir Philip to sort it out quickly so that the workers and pensioners can have greater certainty about their future pensions. Surely they deserve that much.

Alongside any discussions about a potential settlement, the Pensions Regulator has continued to investigate the handling of the BHS schemes. That has involved reviewing almost 100,000 documents, and it remains on course to reach a conclusion soon. As part of that, the regulator is considering whether it can use statutory anti-avoidance powers against a number of parties, and it expects to reach a conclusion in the coming weeks. Nevertheless, I recognise that the BHS case has generated much interest in the regulator’s role and powers and in whether they are sufficient.

[Melanie Onn (Great Grimsby) (Lab)]

Is the Minister aware of any formal proposal that Sir Philip has put forward to the Pensions Regulator?

[Margot James]

I am not aware of the specifics, but I thank the hon. Lady for raising that important point. I assure the House that neither the Government nor the regulator is complacent when it comes to the regulation of schemes or the powers needed to tackle and deter this sort of misbehaviour.

[Ian Blackford]

Will the Minister give way on that point?

[Margot James]

No, I am going to continue.

If we need to bring forward further legislation in light of all the evidence, including that emerging from the BHS investigation, we will do so. In the meantime, we must allow the independent regulator the time it needs to prepare any case and to follow the statutory process wherever it goes.

[Jim McMahon (Oldham West and Royton) (Lab)]

Will the Minister give way?

[Margot James]

I will, but, mindful of the fact that many Back-Bench Members want to enter the debate, only for one last time.

[Jim McMahon]

I appreciate that. A great deal has been made of the need to wait for the regulator to come to a conclusion, but this is also about leadership. Will the Government show some leadership and clearly put on the table the view that the actions of Philip Green are not acceptable in a fair society, and condemn him on that basis?

[Margot James]

I sympathise with the strength of the hon. Gentleman’s feeling, but certain legal aspects may or may not arise in future, so I must be a little guarded in what I say. I hope that he will forgive me for that.

I assure the House that investigations of the conduct of BHS directors and the management of the pension schemes are well under way. The accelerated Insolvency Service investigation of the activity of former BHS directors is ongoing. It is one of the biggest investigations ever undertaken by the agency, and the Government have made additional resources available to support what we regard as vital work. If evidence is uncovered that indicates that the standards of any of the directors’ conduct fell below what was to be expected, action will be taken. The Financial Reporting Council has announced an investigation of the audit by PricewaterhouseCoopers of BHS’s accounts for the year ending 30 August 2014, and the Serious Fraud Office is continuing to review material and liaise closely with the Pensions Regulator and the Insolvency Service to identify any information that gives rise to a reasonable suspicion of serious or complex fraud.

I understand that Members and the public are keen to see the outcome of the investigations, as indeed are the Government, but it is vital for the investigating bodies to be given time to examine, consider and compile the significant body of evidence. These are very complicated inquiries, given the number of investigations involved and the complexity of the documentation that is being received. I assure the House that, should the evidence support it in the end, there will be enforcement, and action of a tougher nature will be taken.

That is all that I propose to say this afternoon. I look forward to hearing the rest of the debate.

Faulty Tumble Dryers (Fire Risk)

Margot James Excerpts

Tuesday 13th September 2016 Commons Chamber

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

This debate has been very illuminating for me. I am sorry that the hon. Member for Hammersmith (Andy Slaughter) was alarmed by my response earlier at BEIS questions. I congratulate him on obtaining this important debate. If that is how he speaks as a newcomer to a subject, goodness knows what he is like when he is focused on a subject on which he is an acknowledged expert. Listening to his speech, I learned a great deal.

I thank other hon. Members for their contributions. The hon. Member for Swansea East (Carolyn Harris), chair of the all-party parliamentary group on home electrical safety, made the point clearly that safety is paramount. Her view is that the system is not delivering. I was struck by the remarks of my hon. Friend the Member for South Leicestershire (Alberto Costa), who is justifiably outraged that his letters to the chief executive of Whirlpool have met with no response, which is at odds with my own experience. I seem to have obtained a letter from Mr Pettorino unsolicited. I propose to share some of that letter with the House so that hon. Members can take a view as to the veracity of its contents, which I found reassuring. I asked one of my officials to contact the relevant authority— Peterborough trading standards —to check the contents of the letter, and I was reassured that they felt it was a true and fair picture.

I should first, of course, mention that I was very shocked to hear about the terrible fire in Shepherd’s Bush and the fate of Debbie Defreitas, without whose prescient action the situation could have been a lot, lot worse. I read the fire officer’s report to the effect that the fire occurred at about half-past four in the afternoon. Had it occurred in the middle of the night, he feels certain that there would have been fatalities. There is no doubt that it was a very serious incident, and I send my sympathy to the constituents of the hon. Member for Hammersmith—particularly those who have not even been able to return to their homes.

Although the number of tumble dryers in use continues to rise, the number of fires resulting from their use has remained constant. I did quote some figures at BEIS questions earlier today. Although we have heard terrible reports this evening, I really should put it on record again that, of the five Whirlpool products that are mainly sold in Britain, 5 million were sold over the course of a year. There were 750 fire incidents, most of which were contained within the machine. That represents 0.02% of all the sales of each individual product. That is a very small percentage, but I accept that 750 fires is a high number, even though most of them were contained within the machine.

[Jim Shannon]

Another example—not to do with white goods—is cars where there is a safety issue. The manufacturer recalls every one of the cars—every one of the models—irrespective of how many there has been a problem with. With respect to the Minister, the firm should be recalling every one of these models, not just a small percentage.

[Margot James]

The hon. Gentleman is quite right that there are circumstances where a fault identified in a car would result in a complete product recall; indeed, there are circumstances that would lead to a complete product recall of white goods as well. It does depend on the nature of the fault in the car, as it does depend on the risk assessment with the white goods.

[Kevin Foster (Torbay) (Con)]

Will the Minister give way?

[Margot James]

I will give way once more, and then I really must conclude my remarks.

[Kevin Foster]

Would the Minister agree that one of the big issues is that, even where there is a recall, the average success rate in the UK is 10% to 20%? Despite websites like the one run by the Electrical Safety Council through its Electrical Safety First charity, if there is only a 10% to 20% success rate, we are, even with a recall, still going to have many products out there.

[Margot James]

I thank my hon. Friend for that very helpful intervention. I did speak to the Hertfordshire trading standards authority about another firm’s tumble dryer in August. It pointed out that total product recalls are never total, and my hon. Friend quoted the statistic. One can be lulled into a false sense of security by a total product recall, which is in fact, using the statistics my hon. Friend quoted, getting back only one in four goods—just a quarter. It is not easy to reach enough of the population who may have purchased one of these machines.

I am going to come on to the work that is being done following the Lynn Faulds Wood report, which was mentioned very helpfully by the hon. Member for Makerfield (Yvonne Fovargue). In response to the question from the hon. Member for Hammersmith, the steering group has met twice. It is industry-led, but it also has representation from the Chief Fire Officers Association. The group works closely with officials from my Department who provide a secretariat function. It is primarily focusing on three work strands: establishing a centre of excellence, or official website, for business and the public, very much along the lines that the hon. Member for Makerfield called for; considering how to ensure that we have more reliable, detailed guidance on product recalls, which would, I hope, improve the rate of recall from its current one in four success rate; and establishing a mapping process whereby all organisations involved in product recalls can have access to better data and information sharing.

There will be regular updates on the work of the group, including progress on the new website. Hon. Members will be able to see that information posted on gov.uk very shortly. As a result of this debate and what I have read in the press prior to coming here this evening, I have asked my officials to arrange for me to meet the chair of the steering group and the member from the Chief Fire Officers Association. Although they have set themselves a timeline of reporting within two years, I will be asking them at least to produce an interim report, in a much shorter timeframe, with measures that the Government can then consider implementing without further delay.

I will say a little word about Peterborough Council’s trading standards. I accept that there can be an issue, in that we have very good, well-qualified expert people working for a relatively small organisation in Peterborough dealing with a large multinational company. However, trading standards in this country is respected around the world, so I would not want to dismiss its expertise for one minute. It has been the lead regulator for Whirlpool and has agreed the full risk assessment carried out by the company.

[Alberto Costa]

I would not wish to cast any aspersions on trading standards. I am sure that the Minister is as familiar as I am with washing one’s clothes and placing them in a tumble dryer. Is it safe to put clothes in a tumble dryer only if one is present while they are drying, as we have been told? If she agrees that it is not practicable with today’s lifestyles to stand looking at one’s tumble dryer, then surely she will agree that the product is not safe and that she should therefore communicate again with trading standards on a more appropriate response to this matter.

[Margot James]

I have been in contact with trading standards, and to date I have been satisfied with its approach. The advice and guidance through the process of modification that Whirlpool is implementing whereby one has to attend the tumble dryer while it is carrying out its operation is certainly inconvenient—I would be the first to admit that. If one has dual meters so that machines can be put on overnight, that does not help with energy conservation. However, I am not yet persuaded that the product is necessarily unsafe, because the very few fires overall in terms of the 5 million machines that have been sold have mostly been contained within the machine. On being present, bearing in mind what trading standards believes to be a very low risk, I think that the advice is reasonable given that a total product recall is unlikely to get back more than one in four machines.

[Andy Slaughter]

rose—

[Margot James]

As it is the hon. Gentleman’s debate, I will give way one last time.

[Andy Slaughter]

I am grateful to the Minister for giving way, but she has not dealt with the point that I emphasised in my speech. In the Shepherd’s Bush case, which nobody says was anything other than one of the most serious fires, the machine was observed. I think she will be aware that in Australia, where the machines have exactly the same fault, the advice is that customers should cease using the product immediately. The solution to one in four being recalled is to improve the registration system, and the solution to knowing what is in Whirlpool’s mind is for it to publish its risk assessment. Those are the questions that need to be answered.

--- Later in debate ---

[Margot James]

I thank the hon. Gentleman for clarifying one of those points. I will most certainly raise what he has said with the chairman of the steering group and the fire officer when I meet them.

I want to share with the House the key points made to me by the chief executive of Whirlpool. Following its acquisition of Indesit in 2014, its global safety experts worked to review the product portfolio, proactively engaged with trading standards, shared with it all relevant information available and sought its determination on what action to take. Trading standards subsequently determined that corrective action was required and that a modification programme was necessary to resolve the issue. Since then, Whirlpool has been in continual dialogue with the trading standards authority. Alongside a wides- pread safety alert and information campaign, including adverts in the national press, it rapidly engaged with customers and set up a dedicated phone line and websites and an online model-checker for consumers to instantly find out whether they had an affected appliance. It is continuing its efforts to identity all owners of the affected models and to contact them directly by all of the usual means. In addition to direct consumer outreach, it has continued to work with retail and trade partners to identify the machines involved and to communicate with owners.

[Alberto Costa]

But it ignores MPs.

[Margot James]

In reading this out, I am acutely conscious that my hon. Friend has not received a reply to his letter. Whirlpool engineers are visiting more than 4,000 homes a day across the UK and, as of today, it has resolved more than 805,000 customer cases. I am assured by Peterborough trading standards that that is true and, although the mood in the Chamber tonight is hostile to Whirlpool, that is quite a creditable performance and not to be lightly dismissed. It is continually looking into additional ways to improve the efficiency of the programme, and I am sure that tonight’s debate will have illuminated a few of those additional ways. It is increasing the number of engineers all the time—it has increased its team of engineers by more than 45%.

It is true to say that Whirlpool, for all its faults in communicating with my hon. Friend, is making a concerted effort to deal with the safety of these appliances. I accept from everything that has been said in this debate that we need rapidly to get on top of the issue. I will, as I have promised the hon. Member for Hammersmith, meet the relevant people, talk specifically to representatives of Peterborough trading standards, and convey to them the mood of the House and the concerns of hon. Members. Although statistically the risk of the 5 million machines that have been sold may be very low, people have been killed by them. As the Minister with responsibility for consumer rights, that is obviously something that I will take extremely seriously. In conclusion, I thank the hon. Gentleman again for this timely debate.

Question put and agreed to.

Oral Answers to Questions

Margot James Excerpts

Tuesday 13th September 2016 Commons Chamber

[Andy Slaughter (Hammersmith) (Lab)]

8. If he will take steps to support the London fire brigade's Total Recalls campaign on the implementation of changes to the product recall system by manufacturers of white goods.

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

Consumer product safety is a Government priority. We have an effective system of product recall and have established a steering group to consider the recommendations in Lynn Faulds Wood’s 2016 product recall review. We will engage with the London fire brigade on its campaign as part of our regular dialogue with them.

[Andy Slaughter]

The Minister will be aware of the major fire in a Shepherd’s Bush tower block last month that was caused by one of an estimated 5 million defective Whirlpool tumble dryers. The tenant was in the same room as the dryer but could do nothing to stop the fire destroying her home and damaging 25 others. Does the Minister agree that Whirlpool’s advice that such dryers can continue to be used if not unattended is irresponsible and dangerous? Will she get it changed?

[Margot James]

I was shocked to hear about the serious fire in the hon. Gentleman’s constituency and understand his concerns about the safety of tumble dryers. However, the advice provided by Whirlpool is based on a full risk assessment of the product that has been agreed with Peterborough City Council trading standards, which is the lead enforcement authority for Whirlpool. Trading standards will continue to monitor the situation and has powers to order further action if appropriate.

[Mr Philip Hollobone (Kettering) (Con)]

There are three tumble dryer fires each day in this country—almost 2,500 since the start of 2012. Will the Minister ensure that fireproof labels containing make, model and serial number are attached to all tumble dryers, so that machines can be traced to the manufacturer when fires do occur?

[Margot James]

Although there have been serious fires, they represent less than 0.2% of the total number of tumble dryers sold, so we must keep things in perspective. Lynn Faulds Wood’s review provides an overview of the current consumer product recall system, and the independent recall review group, composed of industry safety experts and the Chief Fire Officers Association, will complete the work on the recommendations.

[Rehman Chishti (Gillingham and Rainham) (Con)]

9. What assessment he has made of recent trends in the sale and supply of laser pens.

--- Later in debate ---

[Melanie Onn (Great Grimsby) (Lab)]

Can the Secretary of State guarantee that all employment protections currently enjoyed by British workers will be maintained after Brexit, and will he back my Bill to do just that?

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

We will certainly look carefully at the hon. Lady’s Bill. Employment protections are a priority for this Government.

[Nigel Adams (Selby and Ainsty) (Con)]

The financial viability of many low-carbon on-site heat and power technologies is under threat owing to the reduction in the biogas tariff. Will the Department consider a separate tariff for the new gasification technologies, rather than treating them the same as other technologies such as anaerobic digestion?

Draft National Minimum Wage (Amendment) (No. 2) Regulations 2016

Margot James Excerpts

Thursday 8th September 2016 General Committees

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

I beg to move,

That the Committee has considered the draft National Minimum Wage (Amendment) (No. 2) Regulations 2016.

It is a pleasure to serve under your chairmanship, Mr Wilson. The purpose of the draft regulations is to increase the hourly rate of the national minimum wage for all workers, and to increase the maximum amount for living accommodation that counts towards minimum wage pay, in line with recommendations from the Low Pay Commission.

The national minimum wage is designed to protect low-income workers, and to provide an incentive to work by ensuring that all workers receive at least the hourly minimum rates set. The minimum wage also helps business by ensuring that competition is based on the quality of goods and services provided, and not on low prices based on low rates of pay.

Following advice from the Low Pay Commission, the Government are uprating the minimum wage from 1 October 2016, so that the main rate for 21 to 24-year-olds will be £6.95 per hour, which represents an increase of 3.7%. Young people aged between 18 and 20 years old will be entitled to a minimum of £5.55, which is a 4.7% increase on the rate now in force, and those aged between 16 and 17 years will have a minimum wage rate of £4.00 per hour. For apprentices aged 19, or those aged 19 and over in the first year of their apprenticeship, we are increasing the minimum wage by 3%, to £3.40.

Turning back to the rate for 21 to 24-year-olds, the increase is the largest cash increase in the main rate of the national minimum wage since 2008. As a result, people working full time—35 hours a week—on the national minimum wage will see their earnings increase by about £450 a year.

The new main rate of the national minimum wage is expected to be at its highest level ever when accounting for the general increases in prices, surpassing its pre-recession peak. In all, we estimate that about 500,000 workers will benefit from all the national minimum wage increases this year.

The accommodation offset was introduced in 1999 and provides a mechanism to offset the cost of providing accommodation for workers against the national minimum wage. Following advice from the Low Pay Commission, we are increasing the accommodation offset significantly, by 12%, to £6.00 per day from 1 October 2016.

Since the introduction of the national minimum wage in 1999, it has been a success in supporting the lowest-paid UK workers. On the whole, it has increased faster than average wages and inflation, without an adverse effect on employment. It continued to rise each year during the worst recession in living memory, and the new main rate is expected to be at its highest ever real value.

[Jessica Morden (Newport East) (Lab)]

May I raise with the Minister the issue of Marks and Spencer workers? There is a campaign to press M&S during its consultation on reducing premium pay for Sundays and bank holidays and on reducing pension contributions—changes that would hit some of the longest-serving staff hardest. Does she agree that it is unacceptable for companies to contemplate making such changes in light of the national living wage coming in?

[Margot James]

I thank the hon. Lady for her intervention. I propose meeting Marks and Spencer to discuss a range of matters, including some of the points that she makes. It is important to remember that, by law, as long as companies pay the national minimum wage and, in future, pay those over 25 the national living wage, there will be a limit to what the Government can do, apart from expressing a keen concern that employers should operate within the spirit, as well as the letter, of the law.

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

There is a real issue with enforcement. The National Audit Office said that, last year, 209,000 workers in the UK were not being paid the national minimum wage and that 56,000 were owed arrears. Will the Minister outline the Government’s plans to enforce the national minimum wage better throughout the UK?

[Margot James]

We are doing a great deal to improve enforcement. Sadly, there will always be cases of employers who have the very immoral intent of getting round this law, but the powers of investigation of Her Majesty’s Revenue and Customs are increasing, and we are increasing the expenditure on HMRC’s enforcement team. I will come on to make other points about enforcement; there are various other things that we are doing to increase it. Every single complaint made by an employee is automatically investigated by HMRC’s enforcement team. This year, we have increased the budget from between £13 million and £14 million to £20 million. We are serious about cracking down on employers that try to flout the law. I shall return to enforcement in due course, because I agree with the hon. Gentleman that it is crucial.

The Low Pay Commission has proved that a rising minimum wage can go hand in hand with rising employment. However, the carefully considered independent advice from the commission is central to this. The Government’s 2016 remit for the commission asked it to make recommendations for the new rates, based on maximising the wages of the low-paid without damaging their employment opportunities. The commission has made its recommendations following thorough consultation with business, workers, and their representatives, and extensive research and analysis.

The Low Pay Commission’s remit is clear: when considering the pace of increases to minimum wage rates, it should take into account the state of the economy. The commission has stated:

“the labour market had continued to perform well, with robust employment growth in low-paying sectors”.

Although the referendum result may have cast some uncertainty over forecasts and assessments made before June this year, we should remember that the labour market performed robustly during the worst recession in living memory.

The increases to the minimum wage rates are, of course, in addition to the national living wage for those aged over 25, which we implemented in April. It is the Government’s ambition for a national living wage to reach 60% of median earnings by 2020. In addition, the national minimum wage cycle will be aligned with the national living wage cycle from April 2017. That will reduce the burden on businesses of having to update their workforce’s pay more than once a year and will mean that the statutory pay floor for all ages is uprated simultaneously.

[Michael Fabricant (Lichfield) (Con)]

Is my hon. Friend aware that in the US, which had a minimum wage before we did, the rate is currently $7.25 an hour? That is only £5.50 at the current rate of exchange. Does that not put into context how good our minimum wage is, let alone the living wage?

[Margot James]

I thank my hon. Friend for his informative intervention. The fact that it is more or less dollar for pound indicates that we in Britain are doing as much as we possibly can to protect the interests of low-paid workers, and to pay them the maximum that the economy can afford without damaging their employment prospects.

[Chris Stephens]

Since the Government announced their version of a living wage for those over 25, there has been no explanation of why the age of 25 was chosen. Will the Minister outline why that age was set for a living wage, rather than 21?

[Margot James]

The wages of young adults between the ages of 21 and 25 are protected by the minimum wage regulations, which will continue to apply. It is felt that prior to the age of 25, people in employment are gaining experience, and that the most important thing for them is to be in work and looking at their prospects in the workplace. I am sure that is felt by the Low Pay Commission, which advises the Government on such matters, while having a remit of having regard to the state of the economy as a whole and a mission to not damage people’s employment prospects. Those factors informed the Government’s decision to pick the age of 25 for the national living wage.

I point out to the hon. Gentleman that a lot of employers—particularly in the retail sector, for which I am responsible—are finding the prospect of a national living wage a huge challenge. If we lowered the age or dramatically increased the rate, there would be a grave danger to young people’s employment prospects, which it is the Government’s duty absolutely to protect.

If I may make some progress, I will come on to the issue of enforcement, which I know is of interest to the hon. Gentleman. We are absolutely clear that anyone entitled to the national minimum wage or the national living wage should receive it. The enforcement of the minimum wage is essential to its success, and we are committed to cracking down on employers who break minimum wage law in all sectors across the economy. That is why we have increased HMRC’s enforcement budget, as I was saying earlier, to £20 million from £13 million last year. This will bolster HMRC’s resources and ensure that it continues to respond to every worker complaint.

The Government will continue to take a tough approach to employers that break minimum wage law, and will continue to name eligible employers in the vast majority of cases. From April this year, the Government have also significantly increased the national minimum wage penalty, taking it from 100% to 200% of the arrears owed to the worker, up to a maximum of £20,000 per worker. HMRC will continue to refer the most serious cases of wilful non-compliance for criminal investigation.

In conclusion, the Government believe that the rate set out in the regulations will increase the wages of the lowest-paid while being affordable for business.

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Wilson. The Minister set out the good news about the 3.7% rise in the national minimum wage that is before us. She acknowledged that it has been some time since there have been significant rises; the regulations start to rectify the fact that rates have fallen behind over many years. This good news for young workers is tempered by the fact that if someone is under 25, they do not get the national living wage. The Scottish National party spokesman asked why; I am afraid that I do not find the Minister’s answer at all convincing, any more than we did when the national living wage first came through.

[Margot James]

I am sorry to interrupt the hon. Gentleman so soon in his speech, but will he acknowledge that young people aged between 21 and 24 will be paid, through this increase in the minimum wage, £6.95 per hour? Would he not agree that the difference between that and the national living wage is fairly small?

[Bill Esterson]

Perhaps the Minister has just told us that she has no intention of putting up the so-called national living wage by very much. I remind her that the Living Wage Foundation says that a living wage in this country is £8.25, or £9.40 in London—not the lower smoke-and-mirrors figure of £7.20 that the former Chancellor introduced.

--- Later in debate ---

[Michael Fabricant]

I thank the hon. Gentleman for that question. The analysis done by the Low Pay Commission and others suggests that unless we have different wage rates by age, people under the age of 24 or 25 will be unemployable. That is the problem. For example, if we set the rate too high, it would be a disincentive for companies to engage people in apprenticeships.

[Margot James]

Will my hon. Friend give way?

[Michael Fabricant]

Of course I give way to my honourable and very real Friend the Minister.

[Margot James]

I thank my hon. Friend for his enlightening comments and for giving way. To amplify his point about the difference between those under and over 25, he might be interested to know that unemployment among those 25-plus is just 3.7%, but it is still 13.6% for 16 to 24-year-olds. I agree with the Low Pay Commission that increasing those rates further for under-25s would put their employment prospects in serious doubt.

[Michael Fabricant]

Yes. Also, people pay a premium for experience, and the younger people are, the less experienced they are. Although 13%—was it 13%?

[Margot James]

It is 13.6%.

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[Margot James]

I thank hon. Members for the interesting points they have made. I will take the issues turn by turn, starting with the valid points raised by the hon. Member for Sefton Central about the national living wage. He quoted the other organisation for a real living wage, whose deliberations I follow. However, the Government follow the recommendations of the Low Pay Commission, rather than those of the other organisation. The Low Pay Commission is independent of the Government and, as I said, it makes its recommendations on the basis of what the economy can afford without damage to the employment prospects of young people.

I also mentioned the increase represented by the national living wage, which will rise over the next few years, as we all know. We on this side of the House think that is a very good thing. A lot of employers, particularly in the retail sector, are seriously concerned about their future viability with this new cost; for example, we have already identified that people in the social care sector, which several hon. Members mentioned, are very concerned. The Government are right to follow the recommendations of the Low Pay Commission, for those good reasons.

[Chris Stephens]

Will the Minister give way?

[Margot James]

I am going to make some progress, but if I do not cover the point the hon. Gentleman wants to make, he can intervene later.

I will say a little about enforcement, which was mentioned by the hon. Member for Llanelli; I very much agree with where she is coming from, and I thank her for her comments. As I said earlier, the Government are absolutely committed to cracking down on employers who break the national minimum wage law. I mentioned the budget increase for HMRC’s enforcement team; we have also increased the minimum wage underpayment penalties from 100% to 200% of the arrears owing to workers.

Employers who have underpaid their workers by more than £100 are eligible to be named. We name the vast majority of those employers: 700 have been named to date. I will make sure that that operation continues and is put on an expected footing of quarterly naming and shaming. I assure hon. Members that naming impacts on firms’ reputations, especially locally, because the local media always pick these stories up. It is a serious deterrent.

We are also creating a statutory director of labour market enforcement—I hope to have the individual in place by the end of the year—who will establish a single set of priorities for all enforcement bodies, and will back up the work of the HMRC enforcement team. The increased budget for HMRC will enable it not just to continue to investigate every single employee complaint, but to carry out more targeted inspections that do not depend on employee complaints.

I recognise that some employees, particularly in small firms, are worried about their future employment security if they make a complaint. There is the facility to make confidential complaints—people can complain directly to HMRC or they can call the free helpline that ACAS operates—but there is still that worry and fear at the back of people’s minds. I had someone come to my constituency surgery about it; they were so worried, and I took the matter up on their behalf. To ensure that that worry is not a barrier to enforcement, HMRC will carry out targeted inspections across various sectors of the economy.

That point leads me on to the care sector, which several hon. Members mentioned and which is a priority for the Government. HMRC is already undertaking targeted inspections: so far, it has made inquiries into almost 500 social care companies operating in the sector. It is worth pointing out that many of those inquiries result from targeted inspections; they are not dependent on employees making complaints. We have also enabled local authorities to charge a precept of up to 2.5% on council tax to provide considerably more funding for the social care sector, because we are concerned by what we have heard from companies operating in that space.

Hon. Members mentioned prosecutions—an issue that causes me concern. So far, HMRC has brought just 12 successful criminal prosecutions. I think we would all agree that that is a small number, but there is a good reason why HMRC prefers the civil remedy. It is far quicker; it is also cheaper, and we must have an eye on cost. Each criminal prosecution costs, on average, £50,000, and some cost considerably more. We need to make sure that criminal prosecution is in the armamentarium of HMRC, for the serious repeat offenders and employers who go out of their way to break the law. They should be the subject of criminal prosecution, but there is much more we can do, and hon. Members should not forget that when a civil remedy is pursued, the employees get their arrears immediately, whereas with a criminal prosecution they have to wait—and, of course, if it is not successful, they receive nothing.

I think I have dealt with most of the matters that the hon. Member for Sefton Central raised, including the Low Pay Commission. On the point about the disparity between people aged under 25 and those aged over 25, I listened attentively to the hon. Member for Llanelli, who obviously has expertise on the issue, and I accept that there is a difficulty in terms of strict equality between someone aged 18 and someone aged 37. I do not accept that they necessarily have the same costs, but there is an issue.

Let us not forget that the figure is a floor—a minimum. A lot of good employers who can afford it pay younger and older workers equally, and I think we would all like that to happen; but we must accept that the position of younger people in the labour market is different, and among the differences is the fact that sometimes they are training, or they need experience. I have already pointed out the significant difference in the unemployment rate.

I do not think that the provisions are a licence for exploitation. I think it is a realistic acknowledgement of the different position of different age groups, and the need to incentivise employers to employ younger people who do not have experience. Employers must have some kind of benefit from doing that. If they are in highly competitive and low-paid sectors that are under threat, such as the retail sector, which as I have mentioned is under severe threat for all sorts of reasons, they need that cushion, and that is what the Low Pay Commission recommends.

[Chris Stephens]

Some of those companies in the retail sector are multinationals making millions of pounds of profits. Is the Minister also looking at some of the companies that are changing contracts and taking away other premium payments to enforce the living wage? In debates in the House, evidence has been given of companies taking away other payments and changing hours and shifts to try to get round the living wage. Is the Minister looking at that issue?

--- Later in debate ---

[Margot James]

I am looking at that. I mentioned earlier that I was meeting one of the major retailers to discuss it. I will restate the Government’s position, which is that we expect companies to follow the spirit of the national minimum wage and the national living wage, and not just the letter of the law.

I accept that some large multinationals—and I do not suppose that this is confined, by the way, to multinationals—try to get round the minimum wage in the way described. It is a difficult matter, because it is a minimum wage, and although personally I think it is mean-minded of an employer to choose to reduce someone’s hours, or affect their privileges in some way, and I do not advocate it, using the law to intervene would be a challenge. However, we will keep the situation under review, and if we find there is wide abuse of the spirit of the law, I hope we will do more than just look into it.

I thank hon. Members for their valuable contributions to a crucial debate. The regulations will, as I have said, increase the national minimum wage for about 500,000 people from 1 October, and will ensure that low-paid people share in the benefits of economic growth without, importantly, damaging their employment prospects. The independent Low Pay Commission plays a crucial role in advising the Government about the minimum wage, and I thank it very much for its detailed report and recommendations. Various points were made in the debate, and I feel I have responded to them.

Question put and agreed to.

Resolved,

That the Committee has considered the draft National Minimum Wage (Amendment) (No. 2) Regulations 2016.

Draft Pubs Code (Fees, Costs and Financial Penalties) Regulations 2016

Margot James Excerpts

Monday 18th July 2016 General Committees

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Margot James)]

I beg to move,

That the Committee has considered the draft Pubs Code (Fees, Costs and Financial Penalties) Regulations 2016.

It is a pleasure to serve under your chairmanship, Ms Ryan. The regulations, like the Pubs Code etc. Regulations 2016, which were debated last week, are made in exercise of powers under part 4 of the Small Business, Enterprise and Employment Act 2015, which regulates the dealings between pub-owning businesses and their tied tenants in England and Wales. The regulations are much shorter and less complex than last week’s regulations, and I will deal with them as briefly as possible. They have two purposes: to set fees and cost limits for arbitrations and market rent only disputes referred to the adjudicator; and to set a maximum penalty that the adjudicator may impose for a code breach following an investigation. I will take each area in turn.

On fees, the regulations set out the applicable fees payable by a tenant for referrals of pubs code breaches to the Pubs Code Adjudicator for arbitration, and by a tenant or pub-owning business for referrals of market rent-only disputes. They also make provision about the maximum amount that a tenant may be required to pay a pub-owning business following arbitration by the Pubs Code Adjudicator. Finally, the regulations regulate payments to be made by large pub-owning businesses—defined in the 2015 Act as those owning 500 or more tied pubs—and their tied pub tenants by way of fees and costs in relation to market rent only disputes and arbitrations of pubs code disputes.

The fees and costs provisions largely mirror the arbitration or mediation arrangements in the existing industry voluntary code and have therefore not generated much comment. The financial penalties are not an aspect of that voluntary code and may be imposed by the adjudicator only after an investigation. Financial penalties are just one form of enforcement available to the adjudicator following an investigation. Under the Act, he may make recommendations about what a pub-owning business should do to comply with the pubs code and the time by which it should do that. He may also require the business to publish information relating to the investigation.

Where the adjudicator imposes a financial penalty, the regulations specify what the maximum penalty should be. The adjudicator has complete discretion as to whether he imposes a financial penalty and in what amount, up to the maximum stipulated. The nature and effect of the breaches will inform the exercise of that discretion. Accordingly, we expect the maximum penalty to be applied only in extreme cases, for very serious breaches of the code. Where the maximum penalty is awarded, its purpose is clearly to have a marked and serious effect on the pub-owning business. It is therefore entirely appropriate that the maximum should be 1% of the UK turnover of the whole group to which the pub-owning business belongs, not just the turnover of the part of the group that owns tied pubs.

In summary, the regulations make provisions in respect of fees, costs and financial penalties that are fair and proportionate to the intended purpose. I commend them to the Committee.

[Ian C. Lucas (Wrexham) (Lab)]

May I compliment the hon. Lady on her presentation, congratulate her on her appointment and wish her all the best in Victoria Street? That is an excellent place for a Minister to be—I was there once. There is even someone behind her, supporting her, who was there when I was too.

[Margot James]

I thank the hon. Gentleman for his kind words, and know that I have a number of sources of advice if I require any, as I am sure I will over the coming months.

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[Margot James]

I thank the hon. Gentleman for his kind comments. He asked whether the level of fees is set by the adjudicator. It is, in fact, set by the regulations, and the adjudicator has discretion within the regulated amount set out in the regulations.

The hon. Gentleman asked me to keep in mind the potential for pub-owning companies to fragment their business such that large sections fall just beneath the threshold of 500 or more tied pubs as set out in the regulations. In that respect, we will certainly keep the operation of the code under review. The adjudicator must report on cases of avoidance if he thinks that unfair practices are going on. There will be some protection by the fact that the level of fines—the 1% of group turnover—applies to the entire group, no matter how many small subdivisions the pub-owning company might establish.

Finally, the hon Gentleman mentioned the issue of resources for the adjudicator. I agree that there is no point having an adjudicator if he is not sufficiently resourced to tackle the many cases that might come before him. We think that the resources established will meet the likely demand, but that will be kept under review. I hope I have answered all the hon. Gentleman’s questions. If I have left one out, perhaps he would like to intervene.

[Bill Esterson]

indicated dissent.

Question put and agreed to.