Bill Esterson
MP for Sefton Central · Labour · United Kingdom
“As the Prime Minister said on Tuesday, our energy supply and our energy security are not a question of having either oil and gas, or renewables; they are about both. It is a great pity that proper process was not followed in 2022 or 2023. [ Interruption.”
“I warmly welcome my right hon. Friend’s commitment to continuing Britain’s global leadership on climate action, including by going to COP31. I also welcome his focus on breathing space for people and businesses, but, as he said, it will take a lot more than that to deliver the growth and reindustrialisation that he is so committed to.”
“Last week the Committee heard from Claire Dykta, the director of strategy and policy at NESO, who told us: “Operational decisions are taken by authorised, trained personnel only.” Her comments were confirmed by Alastair Martin, the chief strategy officer at Flexitricity, who, in the same session, said: “I do not think the idea that the he…”
“As the Minister has just said, new nuclear is essential for energy security. It is also essential as an alternative career for workers in oil and gas.”
“Paul and Susan Robinson each worked for the Health and Safety Executive for more than 40 years. They have not been able to plan for their retirement since finishing work last year; they have been living off their savings and the small loan that they have had. They are typical of the dozens of constituents who have contacted me.”
“Hudson primary school in my constituency does a brilliant job. It is a family hub, it specialises in support for children with SEND and autism, and it has a nursery, but its building, which is 80 years old, suffers from a high water table that brings damp, mould and structural problems for the building—as does occasional flooding.”
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“For microbusinesses, that figure rose to 42%. It was 32% for small businesses and 25% for medium businesses. Some 48% of SMEs had difficulty accessing finance through bank loans. For Government grants, it was 53%. It seems odd that the small business commissioner’s remit would be so narrow as to overlook such a basic issue faced by so many SMEs. Most small businesses who talk to me say that late payment is the No. 1 issue, but that is closely followed by a lack of access to finance, as borne out by the Federation of Small Businesses, which is why this is such a potentially important area of interest for somebody called a small business commissioner.”
“When we talk about the small business commissioner’s remit being extended to cover complaints about access to finance, it is not so much about dealing with specific complaints about specific funding applications, but about having someone who will listen to small businesses’ concerns about access to finance, who can signpost them to help them navigate the system—one of the roles that the Government do envisage for the commissioner—who can take complaints about flaws in access to finance and who can advocate at a high level for small and medium-sized enterprises, something which the US Small Business Administration does extremely well. In the 2014 Department for Business, Innovation and Skills small business survey, 39% of SMEs said that they had difficulty in getting the money they wanted when applying for finance.”
“Welcome to our deliberations, Ms Buck. It is a pleasure to serve under your chairmanship. This group of amendments and new clauses covers access to finance, cash retention, the enterprise investment scheme and seed enterprise investment scheme, and how they relate to the small business commissioner.”
“The scheme held—at least when my notes were written—more than a million deposits. It is funded by the interest earned on the deposits and any excess profit is channelled into a charitable foundation to be used to raise standards in the letting sector of the property industry. I am informed that the CEO of the scheme has already expressed his interest in expanding the scheme for the purpose of depositing retention moneys. Therefore much of the new clause reflects the requirements of the Housing Act 2004 in so far as they relate to tenancy deposit schemes.”
“Construction firms already have a statutory right under part 2 of the Housing Grants, Construction and Regeneration Act 1996 to suspend their work for non-payment. The retention deposit scheme could be modelled on the tenancy deposit schemes introduced by regulations issued under the Housing Act 2004, as amended by the Localism Act 2011. Currently, three tenancy deposit schemes are Government-approved. Landlords of shorthold tenancies must place tenants’ deposits in one of these schemes. Tenants’ deposits are provided as security for the performance of the tenants’ existing and future obligations; retention moneys serve the same purpose. One of the schemes is run by a not-for-profit enterprise. The Dispute Service Limited, not surprisingly, operates a scheme called the Tenancy Deposit Scheme.”
“It should be noted that retention moneys legally belong to the party from whom they have been withheld. They are required to be released to that party—half on handover of the work and the other half normally 12 months later. In practice, the period is considerably longer. I mentioned Jenkins, a firm in my constituency where that has often been the case, but where it is common for it to take three or four more years. Subsection (1) of new clause 12 states that unless the party withholding retention moneys deposits them immediately in a deposit retention scheme, any contractual clause enabling such withholding has no legal effect. Any moneys previously deducted must be returned in full.”
“In practice, the prime motivation for the withholding can be to improve the working capital of the withholding party. In our deliberations this morning, we talked about some of the problems of late payment being used as a form of working capital, or to support treasury in the public sector; a similar point applies in the construction sector. Cash retentions are ultimately funded by small and medium-sized enterprises in construction supply chains. Each year, small businesses lose millions of pounds of retention moneys because of upstream insolvencies or because they give up chasing the release of the moneys. New clause 12 is designed to ring-fence retention moneys by placing a statutory obligation on organisations withholding retentions to deposit moneys in a retention deposit scheme.”
“That is an interesting point. I am sure that the Minister will have some theories in response to that intervention. This was debated at length in the Lords, and the Minister there accepted that cash retentions are an important, separate set of issues. I am sure the Minister will talk in detail about why the Government have agreed to set up a review of the issue and make proposals. These are very much probing amendments to consider this particularly acute issue of late payment within the construction sector. That is why we have tabled the amendments and why the Lords spent so long on this issue and a similar amendment. Cash retentions in the construction industry are withheld as a form of security to encourage firms to return to remedy defects.”
“It is really important that we get to grips with that as well. Please understand the importance of the amendment and what it is driving at. The Minister commented on the schemes and their advertisement on the gov.uk website. I understand that. The point I made earlier was that not enough businesses are finding them. That is why if the small business commissioner has a signposting role, he or she should use it as much as possible. Perhaps the Minister will take that away and consider it.”
“Let us deal with access to finance and the EIS and seed schemes. The Minister needs to read the whole of amendment 38 to consider where it is going. If the word “complaints” were replaced by the word “representations”, it might be easier to follow. The point is for the commissioner to make recommendations to Government about improving access to finance; that is the intention behind the amendment, as I thought I had explained. That is also in the explanatory statement that came with the amendment, but I will not pursue the point by pushing it to a vote. When the Minister says that late payment is the priority, I understand that. Clearly, one has to start somewhere and that is what the Government want to do. However, as I said in my opening remarks, the second issue—it is a very big second issue—is access to finance.”
“That is a fair point. I will come back to some of the challenges and our concerns about the portals. Many small businesses do not use the web, so encouraging greater digital use is one of the many challenges for the Government. There is great concern about retentions. The amendment has cross-party support, and hon. Members who spoke made their points extremely well. Often, between 2.5% and 5% of moneys are retained under the cash retention system, so it is massively difficult for small businesses to be as effective as possible. The hon. Member for Kilmarnock and Loudoun made a point about businesses not taking part in apprenticeships and not investing in the future as a result of the scale of retention.”
“We will wait and see for now, but if the review is finalised in March, the Bill’s Report stage may happen at about the same time. I leave this thought with the Minister: if there is the opportunity, will she consider tabling amendments to take that into account? Let us challenge her Department and officials to table such amendments on Report to satisfy Members on both sides of the House. With that, I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn, Clause 1 ordered to stand part of the Bill. Schedule 1 agreed to. Clause 2 Small businesses in relation to which the Commissioner has functions Question proposed, That the clause stand part of the Bill.”
“It is incredibly important that that happens as quickly as possible, but SNP Members are in the same position as us: we are ultimately dependent on the Government for this to work, so we have to take the Minister’s bona fides. She is now on the record as saying that she will take action. I made the point that the recommendation was first made 52 years ago and it has been made on numerous occasions since. The problem is that businesses do not understand why we are waiting and why the Government and Parliament are taking so long to act. It is probably not until we come to this place that we start to understand why. The Minister said it is too soon. A similar point was made in the Lords, and Labour peers accepted similar comments from Baroness Neville-Rolfe.”
“One fifth of UK small businesses—more than 1 million firms—have experienced or come close to insolvency as a result of a total estimated by BACS to be £26.8 billion in outstanding late payments. Sage estimates a significantly higher figure—I cannot remember it.”
“Beyond the technical definitions laid out in the clause are the owners of 5.2 million small UK businesses. If they are not watching this debate, they will still feel over the coming months and years the outcome of whether we focus on limited support for the specific challenge they face or whether we take this chance to offer meaningful answers to some of the key issues that stifle their growth and prosperity—and by extension, the growth and prosperity of the local economies in which they operate. We would like the small business commissioner’s remit to go much further than the one in the Bill. Even if we just focus on late payments, it does not take a great deal of prodding of the definitions to see how limited the scope of support is.”
“It could serve the businesses that are struggling with not only late payments but investment challenges, ongoing legal disputes, access to finance, lack of mentoring and difficulties with public sector and private sector clients. The clause captures a body of people whose challenges go far beyond late payment and who need far more than supportive words and signposting to systems that, as time has shown us, simply have not tackled the problem. All the challenges they face are tackled by specialists in big companies, but the definition in the clause demarcates a group who largely are so busy keeping the wheels of local economies turning that they do not have time to be legal or financial experts. The Bill is an opportunity for us to provide them with real support.”
“The Bill is for those who deserve our support on late payment, which is one of the most vexing issues facing small businesses today and one that we simply have not done enough to resolve. It is also one of the issues that my wife lobbies me on almost daily. The Bill presents us with an opportunity radically to change the outlook for some of the most important contributors to our economy. It offers the small businesses in the definition some level of support or guidance on late payments, but it could serve the business owners or the budding entrepreneurs also captured in the definition who have brilliant ideas but do not have the knowledge base needed to grow.”
“The debate is an opportunity to speak about the importance of small businesses, but the Bill carries an opportunity to boost the prospects of companies all over the UK. What are we talking about when we lay down these technical definitions of a small business? There are now thought to be 5.2 million small businesses in the UK. They employ 48% of the UK’s workforce and, on the back of sheer hard work, account for 33% of private sector turnover. The definitions laid out in the clause single out incredibly hard-working people. My wife still runs a small business and is a constant reminder to me of how much effort and how many sleepless nights it takes to start, grow, run and maintain a business—all those things and more.”
“The clause deals with the definition of small businesses. I do not intend to detain the Committee for long on this subject, but it is important to consider what it says. There have been wide-ranging debates in the Lords and here about what the small business commissioner ought and ought not to do. The clause, which defines the small business commissioner and who they will serve, is an opportunity to reflect on the importance of exactly that remit. Although debate on the Bill has covered a variety of issues, I believe that on both sides it has had at its heart the recognition of the value of small businesses to the UK economy. Members across the House have had an opportunity to offer valuable support to the companies and entrepreneurs that fall within the definition laid out in the clause.”
“That remains unclear.” —[ Official Report , 2 February 2016; Vol. 605, c. 828.] That is just the website, which the Minister mentioned. The small business commissioner will employ only a handful of staff, and there is nothing in the Bill to say that they will be legal, financial or even business experts. We have to be honest when we look at the definitions laid out in the clause. The aspiration to support small business is lofty and laudable, but it prompts a question: without the legal clout of the Australian small business commissioner or the wide-ranging agreement with the US Small Business Administration, and without anything like the budget or staff numbers of either of them, how many such companies is the legislation actually likely to help?”
“I thank my hon. Friend. The Government’s proposed small business commissioner is likely, according to the Government’s own predictions, to help just 500 small businesses a year. The commissioner will serve as a signposting service to mediation services that already exist and have failed to deal with the crippling problem of late payment in the past. In fact, it was the Minister’s colleague, the hon. Member for Huntingdon (Mr Djanogly), who said on Second Reading: “On capacity, the new £1.1 million SBC website should handle 390,000 disputes from 70,000 businesses, yet the SBC will deal with only 500 complaints a year. That gives rise to the question of what will happen with the rest of the disputes and what the real impact of the proposal will be. Could the site cope with the workload of significant numbers qualifying for assistance?”
“I beg to move amendment 40, in clause 3, page 3, line 10, at end insert— “(d) tax rates, allowances and thresholds of relevance to small business owners.” This amendment would extend the general information and advice that may be published by the Commissioner to include tax rates, allowances and thresholds of relevance to small businesses.”
“The start would be to equip the commissioner with the tools to advise and signpost on the main issues that matter to small businesses—we talked about access to finance in our debate on the last group of amendments—so that the commissioner can in turn equip entrepreneurs with the knowledge necessary to access the support available to them. The amendments deal with some of those issues.”
“The group of amendments and new clause 14 look at tax rates, payday loans, the small business commissioner’s complaints scheme and other remedies, at ensuring that the commissioner has power to act on his or her recommendations, and at providing information to local authorities. We want the small business commissioner to have not only a broader remit as the office develops, but greater powers to investigate, to mediate and to advocate for small businesses on regulation and legislation. If the Government want the commissioner to be a signposting service, we at least need the remit for it to be broader.”
“Local authorities will also no doubt appreciate that, not least because it will plug the gap left by so many of the Government’s cuts to councils and to national schemes designed to give advice to small businesses.”
“This is a simple one: make sure people know that the office exists and use the local authorities as an ideal vehicle for raising that awareness. Raising awareness is not done straight from the small business commissioner and it is not currently done from the Groceries Code Adjudicator to the many people they are trying to help. That would not be possible, given that, under the small business commissioner, we are talking about reaching more than 5 million companies. By equipping local authorities with the understanding of the post, they need to triage small local businesses into signposting the small business commissioner where appropriate, and in that way we can make light work of spreading the news. The website on its own will not do it.”
“I thought the Minister might say that. However, we have included it precisely because it does not seem to happen every time. After the introduction of the Groceries Code Adjudicator, both the GCA herself and commentators found that the take-up of her services by suppliers was hampered by the fact that not enough people knew about her and the services she provides. It is a simple issue of communication, or good marketing, but it takes more people than the postholder himself or herself to ensure that an awareness that they exist and an understanding of what they do reaches more than 5 million small businesses. On a whole host of issues that we will come to later in another new clause, it seems that the Government are going to great lengths not to learn important lessons from the introduction of the Groceries Code Adjudicator.”
“The Minister talked about constituents contacting us via our websites. I have constituents who contact me via my website, too. I have an electorate of something like 68,000. [ Interruption. ] That is quite a small electorate, but not all 68,000 contact me via my website.”
“—[ Official Report, House of Lords, 26 October 2015; Vol. 765, c. GC137.] That was something of a shock to the company, which had invested all that time and effort in dealing with its tax affairs in an attempt to pay the right level of tax. That is why it is important that the small business commissioner is involved in helping businesses to understand tax rates and to pay the right tax so that they are not dependent on HMRC, which does not always act as we might reasonably expect. As that was a probing amendment, I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn.”
“It is actually about ensuring that local authorities know that the small business commissioner exists and what he or she does so that they can work together to improve life for small businesses. It is a shame that she did not grasp that. On tax, in my experience most small businesses want to pay tax; they just want to ensure that they pay the right tax. Whether that is true of some rather larger businesses, we can all speculate from time to time. To pay the right tax, however, businesses sometimes do not find that the advice from HMRC is what they need. In the Lords, we heard an example of a business attending a seminar organised by HMRC so that it could get its tax right and when, having followed HMRC’s advice, it approached HMRC to say what it thought it should be doing, HMRC disagreed and said: “We are not bound by our own advice”.”
“We can also measure how many people are looking at a website. I do not have the technical know-how to do that, but some do. I know that 68,000 people do not visit my website or anything similar to that, and 250,000—the borough’s voting population—do not visit Sefton Council’s website, either. I do not think that websites are therefore anywhere near the answer to providing access to the small business commissioner. The Minister talked about new clause 14, which is not about getting local authorities to work on how they access business, much as I want them to do all the things that she talked about. I do not disagree with that, but that is not what the new clause is about.”
“I look forward to hearing the Minister’s response.”
“The Australian Government are undertaking to absorb the role into the proposed small business and family enterprise ombudsman, but the legislation is clear about mediation. The value of mandatory mediation is not only in enabling the small business commissioner to see a complaint through to resolution but in ensuring that both parties follow a process that minimises cost and the risk of the complaint ending up in court. The balance of power must not be so weighted against the small business supplier that it is put off pursuing a complaint for the lack of cheap, accessible dispute resolution, something which we discussed earlier. This is about fairness, ensuring a level playing field, reducing costs, and producing commercially realistic solutions to disputes, including those involving late payment.”
“Section 17 of the Small Business Commissioner Act 2013 states: “If an application is made to the Commissioner for assistance in resolving a complaint or other dispute involving a small business and the Commissioner decides to deal with the complaint or dispute, the matter to which the complaint relates or the dispute may not be the subject of any proceedings before any court unless and until the Commissioner has certified in writing that alternative dispute resolution services provided by the Commissioner under this Act have failed to resolve the matter or dispute.” There are various other requirements in other sections of the Australian legislation. At a national level, the Australian small business commissioner has similar powers.”
“The office of the Australian small business commissioner says: “Mediation is so successful that most of all matters referred to us for mediation are resolved prior to having a court decide the matter… The mediation process is essential in minimising the costs of business and commercial disputes.” Compulsory attendance at mediation in the Australian model is enshrined in the legislation that set up the New South Wales small business commissioner.”
“In Australia, attendance at mediation may be legally required by a court, and the small business commissioner may insist on mediation after the initial consideration of the complaint. Any decisions or agreements reached during mediation are signed by both parties and are returned to the small business commissioner, who can hold them to account if they do not keep their side of the agreement. Mandatory mediation is vital as far as the Australian model is concerned.”
“In the foreword to the July 2015 BIS publication “A Small Business Commissioner”, the Minister said: “In Australia, the Victorian Small Business Commissioner is having a real impact on the ground.” She told us earlier about her meeting with him. One reason why that commissioner is having an impact on the ground is that he has so many more powers than is proposed in the Bill. One such power involves being able to insist on mediation and to ensure that unfair payment practices are dealt with on a case-by-case basis. That is not what is being proposed here. If the Minister really wants the United Kingdom’s small business commissioner to match the performance we see in Australia, she must give them the same tools and powers to do the job. The staff of the New South Wales small business commissioner are formally trained in mediation.”
“I beg to move amendment 42, in clause 3, page 3, line 29, at end insert— “(5A) The Commissioner may assist small businesses by taking an active and direct role in resolving, mediating or facilitating the resolution of disputes.” This amendment would give the Small Business Commissioner the power to take an active role in resolving, mediating or facilitating the resolution of disputes. We are talking about the important topic of mediation and facilitating the resolution of dispute, which is sometimes known as alternative dispute resolution. The amendment looks to learn from what goes on in Australia and would provide the commissioner with the opportunity to insist on mediation as a better way of solving disputes between two business parties than going to court, for example.”
“Well, we will find out in time whether that works. The reason for quoting the Australian example is that both parties have to accept that mediation will have consequences. I think I am right in saying—the Minister will correct me if I am wrong—that if a party refuses to engage in mediation, there may be penalties if matters end up in court. That is an interesting approach.”
“If that is not sufficient in time, I hope that she and the Secretary of State—she may by then be the Secretary of State—will decide to give the small business commissioner those additional powers. Perhaps then we will have made further progress in helping to achieve the outcomes we want in reducing the level of late payments. As she quite rightly says, ideally we want it to stop being the problem that it is now. I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn. Clause 3 ordered to stand part of the Bill. Clause 4 The SBC complaints scheme”
“While I do not dispute what Members on both sides of the Committee have said—that plenty of mediation services are available—if the system was working well, businesses would be finding those mediation services and using them. Something is not quite right, because it sounds like that is not happening. The constituents who have come to me have certainly not been taking advantage of such services; they have been suffering in silence when it comes to challenging those who owe them money. I agree with the Minister; we need to change the culture. I have no doubt about that, but the question is how best to do it. This probing amendment was about doing just that. We absolutely need to raise awareness of the services that exist.”
“That is interesting, but we come back to the huge problem of late payment that we are still grappling with after all these attempts. The Minister mentioned the number of pieces of legislation that have attempted to help with that. The Minister has mentioned a number of times, including on this matter, her concern about not duplicating. If we have things that are not working, we need to consider new approaches; that is at the heart of the creation of the small business commissioner. However, it is about making the commissioner as effective as possible. That is why we have looked at mediation in the way we have. The amendment does not make the power compulsory, but it gives the commissioner the opportunity to be one of the services available.”
“Although any business has a fundamental right of control over positioning and maximising its business opportunities, that right does not extend to engaging in unfair business practices. This is not just about situations where small businesses cannot pay; it is also about situations where they choose not to. I could not understand from the explanatory notes why the Government have not included complaints made by small businesses in the remit of the small business commissioner. The amendment would set that straight.”
“Behind a problem in payment from one small business to another, there often lies a chain in which larger businesses and, indeed, the public sector are the real problem. A small business cannot pay another small business if it is owed money itself. That was addressed in detail in the Lords. In Grand Committee in the Lords, we found out that 70% of small businesses trade with other small businesses. The amendment is an attempt to unpick some issues and challenges that enable the commissioner to be as effective as possible. It would protect small and medium-sized businesses and enhance competition, creating a fairer environment for all businesses. Government involvement in small business matters should aim to ensure that prospective and ongoing small businesses have sufficient knowledge to make informed business decisions.”
“I beg to move amendment 47, in clause 4, page 4, line 25, at end insert? “or is made by a small business (“the complainant”) which has an agreement to supply, or has supplied or may supply, goods or services to another small or medium sized business (“the respondent”), which has the same meaning given by section 7(1) in the Small Business, Enterprise and Employment Act 2015.” This amendment would extend the Small Business Commissioner’s remit to complaints made by an SME against another, to which it is providing goods or services. One day, someone else will be moving an amendment, but not today. Amendment 47 is about the remit of the commissioner and the ability to consider complaints made by one small business against another, which can be due to supply chain issues.”
“The Minister rightly makes the point about the imbalance in bargaining power, but I repeat that 70% of trade is with other small businesses and that when a larger firm is behind the problem due to delays elsewhere in the supply chain, there does not seem to be a mechanism for addressing that. Perhaps she can take that away, if she is resisting our attempts to include small businesses: how can we deal with problems in the supply chain that come ultimately from a large or medium-sized business? With those comments, I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn.”
“I beg to move amendment 48, in clause 4, page 4, line 26, after “(4))” insert “or relates to allegations of unfair treatment or unfair contracts”. This amendment would empower the Small Business Commissioner to investigate allegations of unfair treatment or unfair contracts.”
“We move to the topic of unfair treatment or unfair contracts and how they are or might be dealt with by the small business commissioner, starting with amendments 48 and 54. The issue is similar to some of the problems faced by consumers that were dealt with in the Consumer Rights Bill—is it an Act now?”
“Thank you. Whips always know. I think that there was an agreement in Committee on that Bill, which is now an Act, that microbusinesses have a lot in common with consumers, and that there is merit in considering them in the same way when they are purchasing goods and services, and certainly those that are not their core business. Examples include a hairdresser, who would buy shampoo or scissors as part of the business, whereas an individual would perhaps buy such things from Boots. When the hairdresser was buying coffee or a kettle for staff, however, it would perhaps be reasonable for them to be treated as a consumer. One-off business-to-business purchases made by a small business, such as somebody who is self-employed, should attract the same protection as would be afforded to consumers.”
“Nevertheless, I take the Minister’s points and, as the amendments were intended to be probing, I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn.”