Enterprise and Regulatory Reform Bill

Richard Fuller Excerpts

Monday 11th June 2012 Commons Chamber

[Vince Cable]

My hon. Friend makes the point in a fair and balanced way, and he defines exactly what we are trying to achieve.

[Richard Fuller (Bedford) (Con)]

I am grateful to my right hon. Friend for saying that he will have no truck with compensated no-fault dismissal, but with many businesses, through the Institute of Directors and the Federation of Small Businesses, making the case for compensated no-fault dismissal, what representations has he had on that? Why has he been so strenuous in saying that he will have no truck with it?

[Vince Cable]

I am happy to go back and look at the correspondence, but the Federation of Small Businesses, as well as the Engineering Employers Federation, made it absolutely clear that they did not think that was a sensible approach for business.

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[Mr Umunna]

I acknowledge the hon. Gentleman’s great wisdom and experience, but I respectfully disagree with his overall depiction of employees blackmailing their employers willy-nilly. I say that as a former employment law solicitor who has advised business people like him, but employees too.

[Richard Fuller]

May I point out that this is the Secretary of State’s Enterprise and Regulatory Reform Bill, not mine? I am sure that mine would be somewhat different. The shadow Secretary of State talks about job protection, and about the recession and demand, but does he accept that it goes a little deeper than that? Recent experience in the UK and the US shows that when we have recovered from recessions, we have not created jobs as swiftly as we did in the ’50s, ’60s and ’70s. In that context, does he not think it is worth looking at the recommendation made by Beecroft?

[Mr Umunna]

I am not sure exactly which proposal the hon. Gentleman thinks it is worth having a look at. If he is talking about the proposal to allow no-fault dismissal in firms of fewer than 10 employees—which I believe is what he spoke about earlier—the answer is no. I do not agree that it is worth looking at, partly because there is no evidence that having no-fault dismissal encourages or helps firms to grow, as was previously made clear in business questions by the Minister responsible for employment relations, the Under-Secretary of State, the hon. Member for North Norfolk (Norman Lamb).

I do not deny that employment law and regulation more generally are matters of concern for small businesses. It would be absurd of me to make such a claim, and I am not making it. However, it is the state of our economy that has been consistently identified by small and medium-sized enterprises as the main barrier to their success. We know this because that is what they have been telling Ministers. In the Government’s latest “SME Business Barometer”—which I think the Secretary of State mentioned earlier—32% of SME employers said that the state of the economy was the main obstacle to the success of their business, followed by issues such as cash flow, taxation and finance. Just 7% cited regulation as the main obstacle to their success.

Let me be absolutely clear: we on this side of the House will not countenance watering down the rights that every constituent of every Member of this House enjoys in the name of growth. I should also note that Conservative Members—nobody has made this comment today, but they have before—have been keen to present this as solely a union issue. It is not: it affects just about every working person in this country, regardless of whether they are a member of a trade union. While everyone else has been worrying about losing their job—thanks to the Government’s economic incompetence in my view—their rights at work have, frankly, been used as a political football in the Government, among Departments and between the two governing parties. That does nothing to dispel the overall impression of shambles that hangs over the Government. However, Minsters and those who have been briefing the media on their behalf should also reflect on the huge worry that such briefing on employment law is generating among those who work in our businesses, with all the talk of further liberalising our labour market, which is one of the most liberalised labour markets in the western world.

--- Later in debate ---

[Richard Fuller (Bedford) (Con)]

As our national economy searches for growth, we look for direction. As our small businesses, our shopkeepers and our entrepreneurs struggle with unyielding burdens, they look for relief. As many who are unemployed, both short-term and long-term, continue their search for employment, they ask for hope. And so we turn for inspiration to the Enterprise and Regulatory Reform Bill. Here was our chance to send a clear message that we were going to roll back the European regulation that is calcifying the spirit of enterprise. Here was the opportunity to come forward with new ideas and initiatives for new funding sources to assist in dealing with the gap in funding for our small businesses. Here was an opportunity to press for changes in the jobs tax and to look for more tax deductions for people who wish to put their capital at risk in our small businesses. Here was an opportunity indeed to send a clear message to our local bureaucrats, with their pettifogging rules and regulations which are causing more misery to shopkeepers in our town centres, that they should stand back a bit and understand how hard it is in many town centres for small businesses to make progress. This Bill was the opportunity to address all those things, and I look forward to hearing in Committee how we have done on all of them.

I wish to address one part of the Bill, and it relates to what has been termed “hire and fire” and what has been termed “compensated no-fault dismissals”. I do this because I do not feel that Adrian Beecroft’s proposals have been given due consideration. There are strong arguments on both sides as to whether or not we should implement them, but we have not investigated the issues sufficiently carefully and it is wrong to dismiss the proposals with ridicule, with abuse or with fearmongering. Let me explain why that is.

If we look at the issues in developed economies, particularly those of the United Kingdom and the United States, relating to how we recover from recessions, we discover that our economies are finding it tougher to create jobs as we recover. In the period before the 1990s, it took on average about six months from the economy recovering for it to reach full employment. Since the 1990s, the figure has gone from an average of six months’ further delay to one of 15 months or more. The United States is a much better economy at recovering from recessions than the United Kingdom is. In the US, it takes on average four to five years for the economy to bounce back, but in the UK it takes eight to 10 years. There are therefore two strong reasons for examining why the UK is not as good at recovering employment as other countries are and why, even in those countries, it is becoming more difficult to associate growth with employment.

[Mr David Anderson (Blaydon) (Lab)]

Interestingly, the OECD has the UK as the second worst country out of 36 in the developed world for employment rights—only the US is worse—yet the record shows that countries such as Germany, with much better employment rights, have come out of recession faster. Is that not the lesson we should be learning tonight?

[Richard Fuller]

I appreciate the intervention, but I am not as clear as the hon. Gentleman is about those particular statistics and I am not sure that they paint the correct picture for the United Kingdom. The shadow Secretary of State cited the World Bank earlier when he looked at the overall statistics on doing business and said that they had—surprisingly—got better under the previous Government. If we look at the same World Bank statistics and the issues to do with the labour markets, we find that this country declined from 17th to 34th position in the period from 2007 to 2010. In terms of the need for change in the labour markets, it has been shown that we need to get a little better.

[Sandra Osborne]

Will the hon. Gentleman give way?

[Richard Fuller]

Very briefly; I, like others, will not then use up more time.

[Sandra Osborne]

Statistics are extremely interesting, but what is the connection between what the hon. Gentleman is talking about and no-fault dismissal? Where is the evidence for that?

[Richard Fuller]

Many people look at the “dismissal” part of no-fault dismissal, whereas for Government Members and some Opposition Members the other part is how willing employers are to take someone on when they understand what the risks may be of having to hold on to them. That is the connection. My focus is not on the fear of what might happen in firing situations, which has rightly been expressed by Opposition Members, but on dead-weight costs and the number of people who have not been hired because employers are not prepared to take the risk with their businesses. All hon. Members and all businesses are concerned about achieving growth. To achieve growth, businesses need certainty, but equally they need to have certainty that any additional staff they hire will work out well. For a small business of three, four, five or 10 employees, hiring one person is an incredibly big decision. As my hon. Friend the Member for Stourbridge (Margot James) said about a business in her constituency, such costs have a significant impact on cash flow and perhaps viability.

For those reasons, I hope that in Committee we can look again at the issues that Adrian Beecroft has raised, although I think the Secretary of State has dismissed them. I hope we do so by saying, “We aren’t yet sure what the right answer is, but we are not going to be put off by scaremongering tactics.” We need to understand whether such proposals will have an impact.

Those are the main issues. If we are to achieve growth in our country’s economy, it must be founded on a better approach to getting people back to work quickly. We do not have the answers from our recovery from recessions of the recent past. I believe that making it easier for people to understand the risk involved when they hire people will be a major step forward in that regard.