Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 20th November 2018 Commons Chamber

[Kelly Tolhurst]

Let me be clear: it is illegal not to pay the national minimum wage to workers who are entitled to it. This Government have been very clear. We are looking at and currently reviewing the Taylor review recommendations—we will be implementing the majority of them—and the Government will be responding soon with what we will do.

[Rachel Reeves (Leeds West) (Lab)]

Following on from the question from my hon. Friend the Member for High Peak (Ruth George), last week yet another employment tribunal found in favour of workers getting the minimum wage and other workplace rights—in this instance, at Addison Lee—but too many firms continue to label workers as self-employed when they are not. When will the Government finally bring forward this long overdue legislation and—as the Taylor review, the GMB union and the Business, Energy and Industrial Strategy Committee have argued—ensure that all workers are paid the minimum wage?

[Kelly Tolhurst]

The hon. Lady will remember that it was this Government that set up the Taylor review. We have been very clear. We are committed to enforcement; we have doubled the enforcement budget for the national minimum wage. In fact, the arrears recovered in the last year totalled £15.6 million, affecting more than 200,000 workers. This Government are committed and we will respond in due course. We are committed to making all workplaces fair for all.

Nuclear Power: Toshiba

Rachel Reeves Excerpts

Monday 12th November 2018 Commons Chamber

[Greg Clark]

My hon. Friend is a great champion of the nuclear sector in Cumbria. It has a bright future. As he knows from the sector deal, there is investment in the supply chain and in reducing the cost of new nuclear, which will be essential if it is to compete with other sources of power. There are also great opportunities through decommissioning, not just in this country, but in selling expertise around the world. Cumbria is the centre of that expertise; it has a strong strategic role in our economy; and we will back it all the way.

[Rachel Reeves (Leeds West) (Lab)]

We are now entirely reliant on foreign investment to support new nuclear build in our country. If businesses abandon their plans, as Toshiba has done, that will affect the generation of new electricity supply and the costs borne ultimately by consumers. What is the Government’s alternative plan if foreign investors do not support the new nuclear build we need in the UK?

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 17th July 2018 Commons Chamber

[Claire Perry]

Again, I thank all respondents to the consultation, including many high-quality responses from the unions. We will respond to the consultation in due course.

[Rachel Reeves (Leeds West) (Lab)]

One in six workers in our economy is now self-employed. Some are bogusly self-employed—not entitled to the basic protections that we should all expect when we go out to work every day. Matthew Taylor’s review into good work was published more than a year ago. When are the Government going to respond and bring forward legislation to end this abuse?

[Claire Perry]

The hon. Lady, as always, makes a powerful point. We are taking action by prosecuting companies that are not paying the national minimum wage and we are ensuring that those basic rights are enforced. We want to get this right because this legislation will have to last not just for six months or a year, but for many years as our economy develops.

Carillion

Rachel Reeves Excerpts

Thursday 12th July 2018 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House has considered lessons from the collapse of Carillion.

I am grateful to the Backbench Business Committee for scheduling the debate for today, which is timely. This Sunday it will be six months since Carillion entered liquidation. When it collapsed, it employed 42,000 people, more than 19,000 of them working in the United Kingdom. It held liabilities of £7 billion, including a £2 billion liability to 30,000 suppliers and subcontractors, and it held just £29 million in cash to meet those liabilities. In the past six months, nearly 2,500 Carillion workers have been made redundant and more than 1,000 have voluntarily left what remains of the business. Projects have been mothballed and suppliers have faced ruin.

Since the collapse of Carillion, five Committees have looked into the issues surrounding its collapse. Along with the Work and Pensions Committee, my Committee—the Business, Energy and Industrial Strategy Committee—has considered the causes of the collapse. The debate is also timely because this morning our Committees published a special joint report containing 24 responses to our original report. It gave those criticised in the report, and those with a significant interest, a chance to respond ahead of the Government’s formal response to our findings. In the time that I have this afternoon, I shall set out what my Committee found, and what needs to change. I thank fellow members of the Joint Committee, some of whom are in the Chamber today, for their work to uncover the lessons from Carillion.

When it collapsed, Carillion had been in existence for 19 years. It was the second largest construction company in the UK, having grown through large and frequent acquisitions and Government outsourcing. Carillion’s directors, and those who know the construction industry, told us that it was a low-margin industry, and part of a highly competitive market with inherent risks. Businesses do collapse every day, and the process of business creation and failure is part of any well-functioning modern economy, but warning lights should have been flashing when such a big business was on the brink. We should demand the highest standards of corporate governance to help to ensure that British businesses are well run, but that did not happen with Carillion.

Despite its catastrophic failure, the Carillion directors, when they sat in front of our Committee, continually claimed that the business was sound, even after it had gone into liquidation, and that only a handful of contracts had brought it down. They even said that everything was fine until just a few months before the collapse. As late as the day before Carillion went into liquidation, the directors thought that they could avert the collapse. They seemed to have a sense of entitlement, and a belief that the Government would step in and bail out their failed business. In their evidence to us, they blamed everyone but themselves. They blamed the Bank of England, the Canadian construction market, Carillion’s suppliers, and professional designers of concrete beams.

However, the collapse of Carillion has meant that our Committees have been able to see the board papers and minutes from company meetings, many of which we have published. Looking inside the company, we have seen a business that acquired other businesses, and relied on unrecoverable “goodwill” to prop up its balance sheet; a company that kept increasing senior salaries and bonuses, and ensured that a dividend was paid regardless of its own health; a company that was paying suppliers late, and bidding for contracts that it could not afford to deliver on time or on budget.

Carillion’s largest acquisitions—of companies such as Mowlem, Alfred McAlpine and Eaga—allowed it to put “goodwill” on its balance sheet. Those notional values of each acquisition, totalling almost £1.5 billion, were allowed to sit on the balance sheet for year after year, without any link to reality and the real value. When the company collapsed, the goodwill was wiped out, too, showing its true value—a value of zero. Carillion’s board needed healthy balance sheets to continue its dividend policy of increasing its payout to shareholders, but the truth is that it paid those dividends regardless of whether it had the cash flow required for them. Right up to the spring of 2017, it was promoting its growing payout with little challenge—no challenge—from directors as to whether the money might have been better spent supporting the pension fund, for example, or any part of the failing business.

Despite the growing pensions deficit, there is one area where directors felt able to spend money, and that was on growing salaries for the leaders of the business. Its remuneration committee increased payouts on the basis of industry averages, rather than the performance of the business Carillion. A responsible business would see payment by results, not payment by averages.

When Carillion’s directors needed to prop up their balance sheets, they did so by putting pressure on the suppliers. Carillion was, ironically, a signatory to the Government’s prompt payment code, promising suppliers they would be paid within 60 days. When the code was launched in 2013, Carillion was already known to Government as being poor payers, but the National Audit Office report into the company showed that in signing it up to support the policy the Government seemed to turn a blind-eye to Carillion’s failure to meet its duties to suppliers.

We heard on our Committee from the Federation of Small Businesses that some businesses were waiting more than 120 days for payment and Carillion had become notorious as late payers. Carillion managed to use this to its advantage, arranging an early payment facility with the banks, meaning suppliers could receive payments earlier than Carillion’s 120-day terms but they would have to face a cut in what they were owed in order to do so. Carillion was effectively borrowing from its suppliers, propping up its balance sheets again without a care for the state of the balance sheets of the thousands of businesses relying on it and doing its work.

[Stephen Kerr (Stirling) (Con)]

rose—

[Rachel Reeves]

I give way to my fellow Committee member.

[Stephen Kerr]

The hon. Lady is making a powerful case for what we found in the inquiry. As evidence of this house of cards that she is describing, which it undoubtedly was, Richard Adam, the former finance director, told the inquiry that not only did he sell all his shares when he left the business, but he would not be prepared to put his own money at risk by being a shareholder.

[Rachel Reeves]

I absolutely agree. The directors of the business were not invested in the business. They were not part of the pension fund that collapsed and, as the hon. Gentleman said, Richard Adam, the finance director who oversaw the accounting practices that helped to contribute to the collapse of the company, sold his shares as soon as he could because he knew what we all now know: this business was a failing business that would not be around for much longer.

What we found in Carillion was a board focused on short-term fixes and growing payouts, with no plan for what would happen when the illusion was shattered. Looking at the poor treatment of suppliers when the company was solvent and the trail of destruction the management of the company has caused, I cannot see how Carillion’s directors can make any claim that they had anything other than their own personal interests at heart. In the latest responses that we have published today, Carillion’s directors continue to refuse to demonstrate any culpability for the state the company was in. They have denied that our report is accurate, but have given no evidence whatsoever to support their case.

Let me be clear: the directors of Carillion are culpable for the company’s collapse. They should be ashamed of their performance and they should not be allowed to take the helm of a company ever again.

[Kelvin Hopkins (Luton North) (Ind)]

My hon. Friend is making a first-class speech. Does this not bring to mind the quotation from John Maynard Keynes that capitalism rewards bad behaviour?

[Rachel Reeves]

I thank my hon. Friend for that intervention. Bad behaviour was being rewarded at Carillion, but the people being rewarded were not the people investing in the business, or the people working for it and saving for their pensions with the business; the people being rewarded were those making the decisions about where the money went—making the decisions about whether to plug the pensions deficit or pay dividends to shareholders. Those are the people who should be paying the price, but under the system we have today, they walk away with their bonuses and their dividends intact. It is other people—the people who are not responsible and did not make the decisions but who did the work—who are paying the price, and that is what needs to be reformed.

When corporate governance is failing, there should be checks and balances, but our inquiry found a regime that was not up to the job of doing that. The first line of defence should have been those who were auditing and advising the company. KPMG, Carillion’s auditors for 19 years, continued to give a clean bill of health to the business, even just a few months before the July 2017 announcements that heralded its swift but painful decline. In the report we have published today, KPMG’s chairman, Bill Michael, denies any issues with the clean bill of health that his company gave to Carillion just months before it began to publicly collapse. Mr Michael is burying his head in the sand, which reflects badly on his understanding of the impact of Carillion on the reputation of his company, and of the future of audit as an industry. The status quo is simply not sustainable, and the big audit firms must understand that and respond to it.

Competition in industry is supposed to drive up quality and bring down costs. It is not working in the audit market, where a cosy club of four hoover up huge fees before, during and after any corporate failure, yet their audits and accounts, as one investor put it to our Committee, read like a mystery novel—a fiction, with the reader searching for scant clues on what is really happening. The big four firms audit all the FTSE 100 businesses and all but a handful of the FTSE 350 top businesses, as well as providing them with advice on a range of services. There are conflicts of interest at every turn, and it was left to the least conflicted, PwC, to clear up the mess during the liquidation process.

[Kelvin Hopkins]

My hon. Friend is making an important point about the audit companies. Is it not a major problem that they are ostensibly there to represent the shareholders’ interests against those of the managers but that they are actually employed by the managers, and that if they do not give the managers what they want, they will not get the next contract?

[Rachel Reeves]

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

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

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

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

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

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

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

[Rachel Reeves]

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

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

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

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

--- Later in debate ---

[Rachel Reeves]

It has been a real privilege to have this debate in the Chamber today, and I welcome the contributions from all hon. Members, including the Front-Bench spokespeople and the Minister. As Chair of the Business, Energy and Industrial Strategy Committee, I get to see the best of British business, but sadly also the worst, and Carillion was the very worst of business. We now need to learn the lessons, because we saw the impact on small businesses, pensioners, workers and investors. I urge the Government, when they respond to the Committee’s report—the response is due on Monday 16 July—to respond in detail to the points on corporate governance, regulation, audit market reform and outsourcing. We need those changes, and we need them urgently, if we are to ensure that we learn the lessons of the collapse of Carillion, get justice for those affected and ensure that we see more of the best of British business and less of the worst.

Question put and agreed to.

Resolved,

That this House has considered lessons from the collapse of Carillion.

Energy Policy

Rachel Reeves Excerpts

Monday 25th June 2018 Commons Chamber

[Greg Clark]

My right hon. Friend is correct to point to the amortisation. As someone who has spent a career in finance, he is aware that in discounting the value of earnings in future generations, the great majority of the value is in the earlier years, and that has been the standard basis of the assessment made. What has not been taken into account is the prospective decommissioning cost of the proposed lagoon, which has been estimated at £1 billion. That has not been included in the analysis, but it would be a further liability for the taxpayer.

[Rachel Reeves (Leeds West) (Lab)]

I have to say that I am slightly surprised by the Secretary of State’s tone. In answer to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), he said that this project was “so out of kilter” with other ways of producing energy and that the costs are much higher. In that case, can I gently ask why on earth it has taken five years to come to this decision? What lessons has the Secretary of State learned from the decision-making process around the tidal lagoon project? Frankly, a lot of effort has been put into this project by business, the Welsh Government and others, and I think that many people have lost confidence in the Government’s programme for renewables because of this.

[Greg Clark]

The hon. Lady will know, as Chair of the Business, Energy and Industrial Strategy Committee, that the Government’s programme of renewables has resulted in the biggest reduction in the cost of the deployment of renewables that we have seen in this country, and that deployment has increased threefold. The success of that strategy is evident. I was asked by many Members, the Welsh Government and many businesses to make sure that every aspect that could contribute to a value-for-money case had been considered —the impact locally, the prospects for exports and the prospects for innovation—and it was right to do so and to leave no stone unturned. I think that that was the right approach, and when the Select Committee scrutinises the decision, I think it will regard the process as having been exhaustive and rigorous.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 12th June 2018 Commons Chamber

[Greg Clark]

I am grateful to my hon. Friend for the question. It is a very important market. Obviously, recent oil price rises have had an impact at the petrol pumps. It is important that prices are competitive and not, as he implies, subject to rising quickly and then taking a long time to decline. The Office of Fair Trading last looked at this in 2013, but I expect its successor, the Competition and Markets Authority, under Andrew Tyrie, a noted consumer champion, to keep this under close review.

[Rachel Reeves (Leeds West) (Lab)]

Up to 200,000 customers do not benefit from the warm homes discount because they get their energy from smaller energy suppliers. Is it not time to extend the warm homes discount, especially since energy bills are going up and we are trying to crack down on rip-off tariffs?

[Greg Clark]

The hon. Lady, Chair of the Business, Energy and Industrial Strategy Committee, makes a very important point. We are reviewing whether the threshold for exclusion is appropriate; I know that she will welcome that.

Nuclear Power

Rachel Reeves Excerpts

Monday 4th June 2018 Commons Chamber

[Greg Clark]

My right hon. Friend is absolutely right. He contributed with distinction as an Energy Minister and therefore recognises that if we are to achieve not only the full cost benefits but the industrial and employment benefits, it is necessary to show that we have a pipeline that is being delivered in a steady and orderly way. If we do that, as we have done with offshore wind, in which he was instrumental, we can establish an industry that not only supplies to UK consumers at a lower cost but offers a big export opportunity.

[Rachel Reeves (Leeds West) (Lab)]

A thriving nuclear sector depends on the ability to move nuclear materials around safely and securely. At the moment, we do that via our membership of Euratom. What assurances has the Secretary of State been able to give Hitachi about our future relationship with Euratom, about nuclear co-operation agreements with other nuclear states and about the ability of the Office for Nuclear Regulation to recruit the safety inspectors we need?

[Greg Clark]

The hon. Lady will know from her involvement in the scrutiny of the Nuclear Safeguards Bill that we have made very good progress both on the proposed agreements with other nuclear countries and on our intended association with Euratom. I regard this as an area in which it is clearly in everyone’s interest to have the greatest possible continuity of the existing arrangements. That is no secret; it is known to any partner and any investor, including Hitachi.

Office for Product Safety and Standards

Rachel Reeves Excerpts

Wednesday 9th May 2018 Westminster Hall

[Carolyn Harris (Swansea East) (Lab)]

I beg to move,

That this House has considered the role of the Office for Product Safety and Standards.

It is a pleasure to serve under your chairmanship, Sir David.

The Minister will be familiar with my interest in electrical safety and, in particular, household electrical goods. I am sure he has familiarised himself with all my previous debates and correspondence on the issue. I am grateful for the opportunity to discuss the new Office for Product Safety and Standards, and I am keen to hear from him what he will do with some of the serious issues around product safety, and specifically electrical goods. Disappointingly, there has been no parliamentary scrutiny of the functions of the office to date, and I was disappointed that no Minister came to the House to explain what it would be. It was irritating that the Government made the announcement on a weekend; perhaps today we can hear an explanation for that.

The previous Minister, the hon. Member for Stourbridge (Margot James), came to the all-party parliamentary group on home electrical safety in December last year, to explain and to listen to the way forward that members of that group wanted. I pay tribute to the hon. Lady for her work as Minister and her willingness to listen to parliamentarians and stakeholders about the changes required to electrical product safety in the UK.

The APPG on home electrical safety is an excellent forum for many parliamentarians and stakeholder attendees to discuss the priority issues concerning electrical safety. Stakeholder attendees include Electrical Safety First, which assists me with the administration of the group, the London fire brigade and the Chartered Trading Standards Institute, of which I am a vice-president, the Anti-Counterfeiting Group and others. I would like to think that our combined effort and knowledge have kept these matters high on the parliamentary agenda.

Special mention should also be given to my hon. Friends the Members for Hammersmith (Andy Slaughter) and for Poplar and Limehouse (Jim Fitzpatrick), who have both worked for a long time to protect people from fires and white good damage in their homes. The APPG’s next meeting is next Tuesday, and I extend an invitation to the Minister to come and listen to a presentation from eBay on what it is doing to prevent counterfeit electrical goods from being sold on its platform—an issue that has got wildly out of control in recent years and, if I am honest, piqued my initial interest in the subject when I held my first debate on this matter in this very room.

I welcome the creation of the office, which is long overdue, and I hope it will help not only to co-ordinate across Government, but to bring together a range of stakeholders to help and advise the office, such as Electrical Safety First, the British Standards Institution, the fire brigades, CTSI and Which?, and many others that are on the frontline of preventing fires caused by faulty products, and that exist to educate the public. The office now needs to reach out to those organisations. I question what it will do to engage stakeholders.

The Minister will be aware that I have previously corresponded with the Department on what I think should be the priority areas. Although I appreciated the Minister’s response, I wonder whether today is an opportunity to share when the strategy will be published and whether electrical product safety will be a priority.

Electricity is one of the biggest causes of fires in our homes, but I see no real Government strategy to help mitigate that risk. Is the office working on a cross-Government strategy? The Home Office has its own “Fire Kills” campaign, but there needs to be a longer, sustained campaign, which Electrical Safety First has been calling for. What is the priority consumer campaign to prevent electrical fires in the home—or where is it? I would like to know what discussions the office is having with the Home Office about fires caused by faulty electrical goods. The Home Office seems to have its own unit, and now the Office for Product Safety and Standards exists, so where is the co-ordination? Can we have some reassurance that there will be joined-up thinking?

I note from the office’s website that one of the first announcements last month was on teaming up with BSI, the UK’s national standards body, to launch the first Government-backed code of practice for product safety recall in the UK. That is a welcome step and is backed by Government, but can the Minister outline whether there will be a Government campaign for consumers on product safety in the strategy? Although initiatives such as “Register my appliance” exist, where is the Government-backed consumer campaign on electrical goods?

There have been significant consumer awareness campaigns from organisations such as Electrical Safety First and the London fire brigade, particularly on plastic-backed fridges, white good fires, counterfeit electrical goods and why recalled goods are openly being sold. The office must get to grips with that issue. From my personal perspective, I do not think it is right that counterfeit electrical goods are sold openly online by the likes of Amazon and eBay. As I have said, the latter will be given an opportunity next week to reassure the APPG meeting, but Amazon has consistently refused to engage and washed its hands of any responsibility, and even though it was invited to next week’s meeting it has declined to respond.

At the last debate, the previous Minister promised a roundtable discussion with Apple, BaByliss, ACG and others to discuss the serious problems they face with counterfeiting and its safety aspects. I keep saying to Ministers that this goes beyond intellectual property; it is about the safety of the public. It is about fire in their homes. It is about the death of my constituent Linda Merron, who bought an electrical product on eBay that burned her house down. It is unacceptable that eBay and Amazon can sell goods that are unsafe and basically get away with it. That would not be allowed on the high street, and the issue will only get worse with the collapse of high street electrical stores such as Maplin, which shows that consumers are increasingly buying online. I want to hear today that the office will tackle those companies that break the law by selling substandard, counterfeit or recalled products.

A closely related problem is the private sales of electrical goods via eBay and Amazon, particularly on Amazon Marketplace. It is my understanding that the Consumer Rights Act 2015 does not cover private sales, so anything faulty could be sold person to person without legal protection. Can the Minister look into that and perhaps write to me about the situation regarding private sales of electrical goods between two individuals, their rights and the consumer legislation? If there is a loophole, I would expect the office to look at it.

It is all very well my calling for greater attacking of the issues and enforcement, but who will enforce this? As the Local Government Association stated in its trading standards review, between 2010 and 2015 there have been cuts of more than 40% to local government, and trading standards has taken the brunt of those cuts. As CTSI has informed me,

“the Office for Product Safety and Standards is a step forwards for consumer protection in the UK. However; there is still a pressing need to ensure frontline trading standards services have the resources to fulfil their duties to protect the public as was noted by the BEIS Select Committee, Lynn Faulds Wood and the National Audit Office.”

[Rachel Reeves (Leeds West) (Lab)]

I congratulate my hon. Friend on all the work she has done to identify these serious issues. She mentions trading standards. The National Audit Office has identified the funding gap there, but I think there is another issue. Local trading standards are responsible for businesses in their area. In Peterborough, where Whirlpool is based, the local trading standards office is responsible for the quality of goods for Whirlpool nationwide. There is a conflict of interest and it does not work, because the local trading standards office does not have the resources to police a multinational company such as Whirlpool.

[Carolyn Harris]

I totally agree with my hon. Friend. It is my understanding that Peterborough actually has fewer than three trading standards officers.

Will the Minister please outline how trading standards will be boosted and supported by this new office? Will there be moneys for the training of more trading standards officers? Surely the Government realise that more people are needed on the ground, and now. Will any support for trading standards be backed up with a proper database of injuries that stakeholders can access?

--- Later in debate ---

[Stephen Kerr (Stirling) (Con)]

It is a pleasure to serve under your chairmanship, Sir David. I pay tribute to the hon. Member for Swansea East (Carolyn Harris) and congratulate her on securing this important and timely debate.

Product safety standards is a subject on which we should all be focused. It is not so long ago that I wrote a column for my local newspaper, the Stirling Observer, which focused on product safety—especially of tumble dryers. I received an unexpectedly high response to that article compared with others I had written on more current constitutional issues that we might debate in the House and in Scotland.

I also reflect on the first ever surgery I attended as a newly elected Member, in the Mayfield Centre in Stirling. We advertised the event but only two constituents came along to speak to me, so I had some time to speak to the caretaker. He was delighted to speak to his new MP, because he wanted to point out to me an issue that, so far as he was aware, no one was speaking about: the regulation and safety of tumble dryers. Little did I know that, within a few weeks of that, I would be a member of the Business, Energy and Industrial Strategy Committee and that we would be conducting an inquiry into the safety of tumble dryers.

This is an important subject, as has already been mentioned by the hon. Member for Swansea East. Our inquiry found, as can be read in the published report, that companies such as Whirlpool have not made enough of an effort to take responsibility for their products and the consequences of their use when they are deemed dangerous. In fact, the report identified that a million faulty tumble dryers are in everyday use in this country. We also identified in the report gaps in the regulatory regime.

I should mention that, during the hearings that we conducted, Whirlpool made commitments about its willingness to respond to the concerns that we raised. We asked it to resolve issues with defective machines within two weeks. It said that it would do it within a week, but we have no way of measuring whether the company has been true to the commitment that it made and put on the record.

[Rachel Reeves]

I thank the hon. Gentleman for his work on our Select Committee in probing Whirlpool and Ian Moverley, who gave evidence—or at least answered a few of our questions, but not all of them. On the 1 million faulty tumble dryers that Whirlpool knows about, is the hon. Gentleman also concerned that Which? said that it had found as recently as last month through its mystery shopping that customers with these faulty tumble dryers were still being given the wrong advice? That means there are potentially still 1 million tumble dryers in our homes that could catch fire, like the ones we in the Committee heard about and the ones other hon. Members have given evidence on.

[Stephen Kerr]

I am grateful to the Chair of the Select Committee—I have the privilege of serving on it—for her intervention. She is absolutely right, and I share all those concerns—specifically in relation to the Which? report of recent weeks that suggested that Whirlpool customers were being advised that they could continue to use their defective models, even though they were known to be defective and presented a danger to the safety of the people who lived in homes where they were in use.

Similarly, I am also concerned to hear that the BBC and Which? have reported that some of the machines that have had their defects corrected have then caused fires. This is a significant issue and, as I said earlier, is something that should concentrate all our minds—particularly those of Ministers. I am sure that the Minister will wish to address these specific issues in his reply.

Questions need to be asked, and it is vital that the regulatory regime that we have meets the need that we currently place on it. As we take more products into our lives and rely more on technology, the more we need a regulator with teeth. The new Office for Product Safety and Standards is a promising development, but it will need to be tested against reality—the lawyers and the corporate spin machines that defend the spin cycles of the manufacturers.

I should at this point deviate to tell the House that I had a most interesting experience in the last few minutes while visiting a constituent of mine who is here in Parliament. She is at a drop-in event in Portcullis House sponsored by Genetic Alliance UK, which is a charity that works to improve the lives of patients and carers. I told her that I was coming to Westminster Hall to participate in a debate on tumble dryers—that is how I expressed it, even though the debate is broader—and she volunteered that her tumble dryer had been faulty. It was a different make from the one I have discussed. She returned the machine and was offered £100 and a new machine, but that machine was faulty. This product seems to have endemic issues.

I hope Members will forgive me if I dwell a little more on an issue that has bothered me a great deal since being elected: the apparent ineffectiveness of regulators. For example, Ofgem constantly failed to take on the electricity markets, which were obviously broken, and I have found Ofcom to be generally unresponsive to the wireless telephony and broadband connectivity issues of my rural constituents. The list goes on. The debate is not about that, but I am concerned that the new office could be another ineffectual regulator—toothless, ineffective, and sometimes even, sad to say, supine—instead of a body that the Government, and us as parliamentarians, have put good faith in to defend the best interests of people.

In some cases, regulators fail not because they do not have enough power but because they lack the will and suffer from organisational atrophy that causes inaction. The regulator in this field, the OPSS, must not fail. If it does, there is the possibility of lives being lost—actually, that is beyond a possibility; it is a fact—consumers being ripped off with faulty goods, and untold damage being done to property.

The situation regarding Whirlpool, which I have already mentioned, is one in which our Select Committee expected action on the part of the company. To our knowledge, that has not been forthcoming. Its actions have been inadequate. Instead of responding to the concerns that we raised with it and those of my constituents and others who have raised issues with me that I have passed on, it has resisted action and, in my view, done the bare minimum that it can get away with. An activist regulator would put paid to the inaction, and a test of the ability of the new regulator will be how it pursues this. It is essential that when questions are raised about products, companies act transparently. That is what we would expect, and what we would expect a regulator to insist on.

I look forward to hearing the Minister’s response to the debate.

Domestic Gas and Electricity (Tariff Cap) Bill

Rachel Reeves Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 30th April 2018 Commons Chamber

[Antoinette Sandbach]

I rise to speak in support of amendment 9, which is in the name of the Chair and some of the members of the Business, Energy and Industrial Strategy Committee; I know that the Chair of the Committee is also going to speak to the amendment. Its purpose is to ensure that there is adequate protection for vulnerable people while the cap is in force and beyond and to probe the Government and the Minister on the matter.

During the prelegislative scrutiny of this Bill in January, the Committee heard evidence from the chief executive of Ofgem. When I asked him about the need to protect vulnerable customers, he conceded that

“there is likely to always be a need to protect customers who would not be fully able to engage even in a…more competitive market.”

What is more, Mr Nolan admitted that Ofgem had

“not done as well as we could have”

when it came to its statutory duty to protect vulnerable customers. In fact, he apologised to the Committee for Ofgem’s failure to act appropriately to protect vulnerable customers.

The sheer number of people on standard variable tariffs was quite shocking to the Committee, and many of those people will be vulnerable customers. I note that the Minister agreed, saying that

“the regulator also needs to change. It also needs to use the powers it has more effectively.”

That evidence session did not fill me with confidence about Ofgem’s effectiveness at protecting vulnerable customers. I believe that the amendment will act as the necessary encouragement to the regulator to do just that. The amendment will also ensure that in the longer term, those who are least able to afford high bills get greater protection. That is because the amendment continues the requirement for due regard beyond the length of a cap.

I want to push the Minister on working with DWP colleagues and others to mitigate the impact of the general data protection regulation. Although the amendment targets the regulator, the Government are well equipped to handle this area. They need to ensure that the required data exchange can take place, so that vulnerable customers can be identified and offered the support that the Government want to make available to them. I am sure that the Government agree with the principle behind the amendment, and I hope that the Minister will address my concerns in full.

[Rachel Reeves (Leeds West) (Lab)]

It is a privilege to follow the hon. Member for Eddisbury (Antoinette Sandbach) in this debate. I want to speak to amendment 9, which is in my name and those of hon. Members from across the House who are members of the Business, Energy and Industrial Strategy Committee. As the Minister knows, the Committee did a large amount of work on the prelegislative scrutiny of the Bill, and we are all pleased that it has reached Report and Third Reading in time to ensure that the energy price cap is in place for next winter.

During prelegislative scrutiny, the Select Committee proposed several changes, all of which were either accepted by means of amendments to the Bill or accepted in principle. We welcome the collaborative approach of the Minister and her team. Amendment 9 addresses an outstanding concern relating to vulnerable customers that I know the Minister shares. As she knows, 83% of people in social housing, 75% of people on low incomes and 74% of disabled customers are on standard variable tariffs. The aim of the Bill is to ensure not only that everybody has a price cap, but that it will help the most vulnerable, who are predominantly on the standard variable tariffs.

One million vulnerable customers are already on Ofgem’s safeguarding tariff. The Select Committee’s first recommendation, as part of its prelegislative scrutiny, was for the Government to provide details on plans to protect vulnerable customers from overcharging when Ofgem’s safeguarding tariff and the Government’s price cap are lifted. My concern, and the concern of other members of the Committee, is what happens when the whole-of-market price cap comes in for standard variable tariffs. Will Ofgem continue with the safeguarding tariff at the same time?

In response to that recommendation, the Government gave a long list of laudable policies that are today in place for vulnerable customers. We of course welcome that list of policies, but concerns linger. Ofgem has been clear, including in a decision letter on 7 December last year, that it plans to do away with the safeguarding tariff when the whole-of-market price cap on standard variable and default tariffs comes in. Ofgem has said that the warm home discount safeguarding tariff will end in December 2019 if it has not already been replaced by other price protection—that is, the price cap we are debating and voting on this evening.

Some might say that that is fine, because the new price cap will replace the safeguarding tariff for customers on the warm home discount. That will only be the case, however, if the new price cap is at the same level or lower than the safeguarding tariff already in existence today. If it is not, then energy bills will rise for the 1 million most vulnerable customers when the price cap comes in. That would mean that the very legislation to protect consumers may hurt those who most need protection, and I know that the Minister, along with Members across the House, does not want that to happen.

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

My hon. Friend knows very well that in Leeds we have set up White Rose Energy, a municipal energy company. Its main mission is to protect those vulnerable consumers. When consumers move away from the cheapest tariff, it informs them repeatedly to ensure that vulnerable consumers are protected. Is that not a model of good practice for all energy companies?

[Rachel Reeves]

I am pleased that my hon. Friend and fellow Leeds MP mentions White Rose Energy, which is doing fantastic work. It ensures that customers in Yorkshire have a greater choice of energy companies and genuinely puts customers first. During prelegislative scrutiny, we heard from other small companies, including Bulb and Bristol Energy who are also trying to support their customers.

No one in this House wants a situation where the most vulnerable customers see their prices rise because of the price cap. Perhaps Ofgem could operate the safeguarding tariff and the price cap we are debating today simultaneously. That seems entirely possible and desirable to try to avoid the issues that National Energy Action and others have raised from coming into effect.

I hope we will receive assurances from the Minister this evening that these risks will not be allowed to materialise. In that case, I will not press this amendment to a Division. Let me urge the Minister, however, to ensure that the Bill does its job of protecting customers and that energy companies are not able to use any loopholes that would mean prices rising for the most vulnerable customers: those we have the greatest duty to protect.

[Stephen Kerr]

It is a great privilege to follow the hon. Member for Leeds West (Rachel Reeves), the Chair of the Business, Energy and Industrial Strategy Committee.

There was no shortage of energy—or capping of energy—at yesterday’s Stirling Scottish marathon. There was, however, a lot of evidence of determination, particularly as competitors approached the finishing line despite the agonies that some were obviously going through. There was a great deal of grit on display. In addressing amendment 9, it is a lack of grit and determination—almost supine passiveness—that is causing me to have grave concerns about how Ofgem goes about its business.

During prelegislative scrutiny of the Bill, the Select Committee held an evidence session, to which my hon. Friend the Member for Eddisbury (Antoinette Sandbach) referred earlier. I am sorry to have to say this, but I was unimpressed by the evidence presented in January by Dermot Nolan, the chief executive of Ofgem. He did not come across as a person with an appetite for what I feel needs to be done. He lacked that grit and determination. He admitted to my hon. Friend that, in respect of Ofgem’s statutory duty to protect vulnerable customers,

“I accept the point that we could and should have done better on vulnerable customers. We have relatively recently put in place principles for vulnerability, which will give a stronger level of protection.”

When the hon. Member for Hove (Peter Kyle), who is not in his place, challenged Dermot Nolan on what was in effect an admission of failure on his part to fulfil his statutory responsibility towards the protection of those who are vulnerable, he answered:

“We have not done as well as we could have. I fully accept that.”

This perturbs me. It perturbed me then and it perturbs me now. The hon. Gentleman, who is an esteemed member of the Select Committee, seemed to me to hit the nail firmly on the head when he said to Dermot Nolan:

“If you do not mind me saying, throughout the testimony here and before, you have been describing what is happening in the market; you are the single most important player in the market, because you have the most extraordinary powers as a regulator, yet your testimony sounds so incredibly passive. Do you ever just roll your sleeves up and get stuck in? I do not really see the evidence of that.”

I share the concerns expressed so vividly by the hon. Gentleman.

Since becoming a Member of this House last year and having the privilege of being appointed to the Business, Energy and Industrial Strategy Committee, I have had the opportunity to hear first-hand evidence and testimony from a number of regulators. I have, in all honesty, been underwhelmed by every one of them.

Sainsbury and Asda Merger

Rachel Reeves Excerpts

Monday 30th April 2018 Commons Chamber

[Andrew Griffiths]

As always, my hon. Friend makes his point extremely well. He is absolutely right that everybody benefits from a vibrant marketplace and increased competition. He will also understand that with my other hat on—as the Minister responsible for small business—I am keen to ensure that any merger such as this protects small suppliers and SMEs, which make up 99% of our business community and form the backbone of all our constituencies. Competition—yes, but it is hugely important that we have an eye to protecting those suppliers.

[Rachel Reeves (Leeds West) (Lab)]

Following on from the question asked my right hon. Friend the Member for Leeds Central (Hilary Benn), Asda has been headquartered in Leeds for 50 years. It is a huge part of our civic and economic life and our infrastructure. Given the Minister’s answer and the lack of assurance that he has received in his conversations with Asda and Sainsbury’s, people working at the Asda head office will be incredibly concerned about their future. The industrial strategy is about rebalancing the economy away from London and the south-east. What assurances can he give that the merger will not rebalance the economy away from Yorkshire and towards London?