My Lords, why have we introduced this Enterprise Bill? A dynamic, open, enterprising economy is a priority for this Government. We want this Bill to help create a better business culture, in which the harmful effect of late payment on small businesses is recognised. It is a major concern to us all that the level of late payment debt owed to small and medium-sized businesses stands at £27 billion.
Despite the progress we have made, businesses still suffer from red tape, especially red tape from regulators, which hitherto has not been routinely monitored. This Bill will change that and help us to continue our battle against red tape. We are also determined to make apprenticeships a success. We want to make sure that everyone can have confidence that an apprenticeship offers a high-quality career route, consisting of employment with training.
There are three key elements to this Bill: the Small Business Commissioner, who will have a vital role to play in changing the culture around late payment; deregulation; and apprenticeships. There are also some other provisions. Small businesses make up 99.3% of all UK businesses. They account for around half of UK jobs in the private sector and a third of turnover. They are vitally important to our economy. Timely receipt of money is crucial for small businesses. It is wrong that, as research in January 2015 showed, the average UK small business waits for £31,900 in overdue payments. Late payment has a damaging knock-on effect on their ability to manage cash flow and plan for growth; and in the worst case, it threatens their very survival.
We have already legislated, of course, through the Small Business, Enterprise and Employment Act, to introduce a tough and transparent new requirement for the UK’s largest companies to report their payment practices and performance on a six-monthly basis. I believe that publishing these reports online will ensure transparency and help to bring about a major shift in culture. We have also strengthened the Prompt Payment Code to introduce a 60-day maximum payment term for all signatories. And now, this Bill will make it easier, quicker and cheaper for small businesses to settle payment issues with larger businesses by setting up a Small Business Commissioner. His or her role will be focused on helping small firms resolve disputes with large businesses they supply, and in particular tackling payment issues. This could be through providing advice and information, pointing them towards mediation or handling complaints and, of course, acting as a real disincentive to unfair behaviours.
This measure complements our other work to date to support small businesses, such as extending small business rate relief for a further year from April 2015—saving millions for small businesses—cutting £2,000 from the national insurance bills of small firms through the new employment allowance, and much else.
Under current law, there is no obligation for insurers to pay valid insurance claims to businesses within a reasonable time. These payments are vital for a business struggling to survive after an unexpected tragedy, such as a fire, break-in or flood. In the most serious cases, a business waiting for a late insurance payment can collapse. The Bill will make sure that insurers are under a legal obligation to pay up within a reasonable timeframe. Where this does not happen, they will be liable to pay damages. This provision is based on careful and detailed recommendations from the Law Commission, which worked closely with stakeholders to develop the criteria in the Bill and our proposed approach.
Another theme of the Bill is deregulation. The Government are absolutely determined to reduce costly, unnecessary bureaucracy for businesses. In the last Parliament, we reduced that burden by £10 billion through a wide range of savings, large and small. The business impact target created in the Small Business, Enterprise and Employment Act 2015 requires government to measure and report on the economic impact to business of any regulatory changes. However, business consistently tells government that the actions of regulators are at least as important as the content
of legislation. In a recent survey, nearly half of businesses said that preparing for regulatory inspections and dealing with inspectors is burdensome, and nearly three-quarters of scale-ups said that they would be able to grow faster if dealing with regulators was easier—a frightening figure. The Bill will extend the business impact target to cover the regulatory functions of not just Ministers but regulators. This means that regulators will be required to assess the economic impact of new or amended regulatory activity in the scope of the target, and to obtain independent verification of the economic impact of those measures.
We will also be introducing new annual reporting requirements for regulators which are subject to the growth duty and the Regulators’ Code, thus increasing transparency and accountability for their actions in respect of these measures. We introduced the Regulators’ Code in 2014 to support regulators to design their policies and procedures in a way that suits business needs. The growth duty, which is due to be implemented in 2016, will require regulators to have regard to economic growth. By introducing these reporting requirements, we will be able to build a body of evidence on how the code and duty are operating, and make amendments to them as necessary. The new reporting requirements will apply to regulators subject to the Regulators’ Code, the growth duty, or both. Currently some 70 national regulators are subject to the code. We are planning to consult on the scope of the growth duty in the new year.
Primary Authority allows businesses to form partnerships with a local authority, giving them access to robust, reliable advice on a whole array of regulation to help them run their day-to-day businesses. Other authorities must then take this into account when carrying out inspections or addressing non-compliance, even if the firm trades across several local authority areas. Since its introduction, Primary Authority has doubled in size every year. There are now close to 8,000 Primary Authority partnerships, 85% of which are with small and medium-sized enterprises. In effect, the Bill amends and consolidates the existing legislation that underpins the scheme for ease of comprehension by enforcers and businesses, as can be seen in the Bill as published. It will give businesses the opportunity to receive tailored, assured advice from a primary authority in relation to key regulations affecting them. Pre-start-up enterprises, those regulated by only one local authority, and more groups of businesses—such as members of franchises or trade associations—will now be able to benefit from the scheme.
The Bill will also improve the business rates appeals system in England to make life easier for business. I am afraid that the current system is simply not working and appeals are taking too long to resolve, with speculative claims clogging up the system. This creates costs and uncertainty for businesses and is unfair to those who are owed a reduction in their rates bills. By introducing a more structured and rigorous system which is easier to navigate, cases can be resolved at an earlier stage and refunds paid out more quickly.
The Bill will also allow sharing of some Valuation Office Agency information with local government, saving businesses time and money as they will not
be required to provide the same data twice over. These changes complement the Chancellor’s recent announcement on business rates, but the provisions, which are about improvement to the system, will still be needed.
I am glad to say that the Government have committed to delivering 3 million new apprenticeships during this Parliament. Investing in skills is a vital part of the Government’s plans to boost productivity in the UK but as the apprenticeship brand grows, we recognise that there is a risk that the term “apprenticeship” could be misused and applied to lower-quality courses. That is exactly the opposite of what we want to achieve. In our recent consultation exercise, we received evidence of people who thought they were doing an apprenticeship when in fact they were doing low-level qualifications and were not employed in a real job. We want to give employers, parents and apprentices confidence that apprenticeships are genuine and high-quality opportunities. The term “degree” is protected in legislation and by applying a similar protection for “apprenticeship” we will help safeguard the apprenticeships brand from misuse. When I was in retail, we used to have a special ceremony for graduating apprenticeships. I would like to see that sort of celebration and recognition everywhere.
We want to make sure that the public sector leads by example in the important area of apprenticeships. Across Whitehall there are already hundreds of apprentices learning the skills they need to be effective in the Civil Service, including one in the Permanent Secretary’s office at BIS and one in my own Enterprise Bill team. To pave the way to meeting our target of 3 million, the Bill will introduce apprenticeship targets for public sector bodies in England.
As we announced in our manifesto, we will also be putting a stop to six-figure, taxpayer-funded exit payments in the public sector. Only very recently, there was a payoff to a senior NHS manager worth more than £400,000. We simply do not believe that such huge exit payments, which are far in excess of those available to most workers in the private sector and wider economy, are fair or offer value for money to the taxpayer who funds them.
Finally, we are amending the Industrial Development Act 1982 to bring it up to date. First, the Bill will introduce an additional power to fund broadband projects across the country—a topic close to my own heart. This is on top of wider efforts to achieve 95% broadband coverage by 2017, which includes £1.7 billion of public investment to make superfast broadband available in areas where it would otherwise not be if left to the commercial sector. Secondly, we will increase the per-project threshold for providing financial assistance to businesses to reflect inflation since the 1982 Act was passed. This means that outside assisted areas, where different rules apply, it will be possible to provide a project with up to £30 million before a resolution from the House of Commons is required.
This Bill will contribute to the Government’s vital objective of making life easier for small businesses. We are progressing the Government’s commitment to backing businesses and not drowning them in red tape. It
supports apprenticeships so that we invest in the skills we need now and achieve the objective, which I believe we all share, of 3 million quality apprenticeships. We have achieved a great deal already, mainly thanks to the enterprise, drive and hard work of businesses large and small, but it is now important to keep up the momentum. I commend the Bill to the House and I beg to move.
3.34 pm