Small Business, Enterprise and Employment Bill

Public Bill Committee, 6 November 2014.

John Robertson (Labour, Glasgow North West)

We now come to the last day of line-by-line consideration of this Bill. [Hon. Members: “Hooray!”] I thought you would be sad.

Clause 138 - Amount of financial penalty for underpayment of national minimum wage

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 238, in clause 138, page 126, line 16, leave out “£20,000” and insert “£50,000”

John Robertson (Labour, Glasgow North West)

With this it will be convenient to discuss the following:

Amendment 240, in clause 138, page 126, line 24, at end insert—

“(7) The Secretary of State may by regulations devolve the enforcement of the National Minimum Wage to local authorities.”

New clause 12—National Minimum Wage—

‘(1) Section 17 of the National Minimum Wage Act 1998 (Non-compliance: worker entitled to additional remuneration) is amended as follows—

(2) In subsection (2) after paragraph (a) insert—

“(b) the relevant remuneration related to any holiday pay or other related pay connected to the worker, and”.”

Ian Murray (Labour, Edinburgh South)

I cannot hide my disappointment that this is the Committee’s last day, particularly with you in the Chair, Mr Robertson.

I am delighted that amendment 238 is so wonderful that it was printed twice. I hope the Minister will see its wonderfulness and decide to support it. Opposition Members will never tire of reminding the House that the national minimum wage was one of the previous Labour Government’s greatest achievements, raising pay at the bottom with increased productivity and wide industry support, and without job losses. The national minimum wage was originally designed to prevent exploitation and extreme low wages.

I am delighted that every party in the House now accepts that the national minimum wage is a part of the economy that we should keep, nourish and improve. However, it has not always been that way. In 1997, the current Secretary of State for Work and Pensions told the House that, if we introduced the national minimum wage,

“it will negatively affect, not hundreds of thousands but millions of people.”—[Official Report, 4 July 1997; Vol. 315, c. 526.]

He said that those people would be out of work.

In the same year, the current Secretary of State for Defence told the House that the Conservative party had “always resisted” the minimum wage and that he thought there were “other better solutions” to address extreme low pay. The current Leader of the House said that the minimum wage would be

“either so low as to be utterly irrelevant or so high that it would price people out of work.”—[Official Report, 17 March 1997; Vol. 308, c. 618.]

Those negative arguments were made in 1997, and I am glad that the Conservative party has come round to accepting the national minimum wage, and that we no longer see people in this country earning as little as £1 an hour.

Toby Perkins (Labour, Chesterfield)

I am grateful to my hon. Friend for reminding the Committee of the history of the national minimum wage. Does he agree that although the Government now talk about accepting the minimum wage, they find numerous ways to undermine it, such as through the huge increase in unpaid internships and workfare? People are actually working below the national minimum wage in all sorts of ways. These important amendments would address abuses.

John Robertson (Labour, Glasgow North West)

I hope that hon. Members will remember that this is the Small Business, Enterprise and Employment Bill and link all their points towards it.

Ian Murray (Labour, Edinburgh South)

That was a timely intervention by my hon. and physically close Friend the Member for Chesterfield. I have no idea why we have decided to sit on two chairs between three people, but he raises a good point. It is critical that we properly enforce the national minimum wage. There have been attempts in the past few years to undermine the national minimum wage, which has fallen significantly in value compared with wages. We have heard about other issues in the past few weeks. Lord Freud suggested that some people should not be paid the national minimum wage, and the Exchequer Secretary to the Treasury and various Conservative Back Benchers have called the national minimum wage into question. People have also said that it should be scrapped altogether, or that small businesses should be able to opt out. I am not sure whether that is the message that the House should be sending.

Andy McDonald (Labour, Middlesbrough)

I want to share the concern of a constituent who came to me in March. She had taken up a two-week trial position, which grew into a two-week job at 42 hours a week for £40. There was no payslip, no tax and no national insurance. That was properly reported through the pay and work rights helpline run by Her Majesty’s Revenue and Customs, and she was told in May that the reason why she was still waiting was that there was a backlog of cases. To this day we are still none the wiser as to whether there will ever be a prosecution of that terrible case. Is it not right that we should focus on enforcement issues? The principle is there; we should ensure that the prosecutions are made.

Ian Murray (Labour, Edinburgh South)

My hon. Friend is right. As we have said on a number of occasions in the Committee, there is no point in having regulations that are not enforced. The amendment would be a greater deterrent to people who do not pay the minimum wage. My hon. Friend gave the example of someone working 42 hours a week for £40, who reported that to enforcement but is none the wiser as to whether the law will be enforced. I hope that the Minister will take on some of those cases and look at them in great detail. While members of the coalition undermine the national minimum wage, employers use that as a smokescreen and do not pay what they are legally obliged to.

Let me move on to the different problems and challenges of too many people in this country working hard for not much pay. Poverty pay is one of the scourges of the modern-day economy. Figures show that more than 5 million people, which is almost one in five employees, are low paid. That problem, which has been building for years, has got worse under this Government. On average, people will be £1,600 a year worse off. The national minimum wage, as I have already said, has declined in real terms since 2010.

It is worth noting—we fail to do this regularly in this House because of the rhetoric of some of the people in it—that three quarters of people who claim social security in this country are in work. That in itself shows the problem that we have with low pay, and we should robustly challenge it.

Stephen Doughty (Labour, Cardiff South and Penarth)

My hon. Friend is making a strong point and is characterising the situation that many people in this country find themselves in. Just a couple of weeks ago, in Grangetown in my constituency, I met some constituents who were working many hours, but on very low pay. They were really struggling to cope with the cost of living, their bills, and their food costs, and struggling to try to provide for two young daughters and give them a better life. It is those real stories, as well as enforcement and the improvement of the situation of people on low pay, that the Committee needs to be concerned with.

Ian Murray (Labour, Edinburgh South)

I am grateful for my hon. Friend’s intervention because it highlights the issue. We talk in Committees and in the House about the generalities of legislation and regulation, but it is the real-life issues that my hon. Friends have raised that matter. When we read those stories and talk to people who are involved in those situations, it is pretty shocking. We need to ensure that we put regulations in place that allow that to be robustly addressed.

There is no doubt that even if people are paid the minimum wage and are not exploited, there is a feeling around the economy that the national minimum wage is fast becoming the maximum wage for too many people. We should address that, particularly this week, as it is living wage week. We should be promoting the living wage as much as we can. I applaud the City of Edinburgh council, which took the decision some time ago to ensure that all its employees were on the living wage. Many councils across the country have also taken that step. I would encourage public authorities, where they can, to pay the living wage and set a strong example.

Iain Wright (Labour, Hartlepool)

I may be pre-empting my hon. Friend, but on amendment 240, I point out to him that if local authorities enforced the national minimum wage, Hartlepool would be able to do a lot more. Some 55.9% of women are paid below the living wage in my constituency. That is a real scandal and needs to be tackled; amendment 240 would help to do that.

Ian Murray (Labour, Edinburgh South)

It would. This is very much a gender issue. On local authorities being involved on the ground—a point that I will come on to some time around 3 o’clock this afternoon in this contribution—we see that local authorities are in the best position to enforce the national minimum wage, particularly working in partnership with HMRC. They are on the ground, talking to businesses all the time, and they know the local geography and the local business practices. With regard to deterrents, although the national minimum wage enforcement section does an incredibly good job, it does seem distant. If local authorities also had a role in enforcing the national minimum wage, they would be local and more visible, which would mean that the deterrent was much stronger.

Andrew Griffiths (Conservative, Burton)

I am grateful to the hon. Gentleman for mentioning living wage week. Will he join me in congratulating our colleague, my hon. Friend the Member for Warwick and Leamington? He has secured this afternoon’s Opposition day debate and will be leading Parliament’s calls for the living wage—[Hon. Members: “Opposition day?”] Sorry, I meant the Back-Bench business debate. Does he agree that that shows cross-party support for the living wage?

Ian Murray (Labour, Edinburgh South)

Perhaps we have just had a bit of a premonition from the hon. Gentleman, because in six months’ time he will be calling Opposition day debates. I am delighted that the Backbench Business Committee has scheduled a debate on the living wage for this afternoon, and the Opposition will certainly participate robustly. Notwithstanding that, I do not understand why the Government will not support the Labour party’s policy of “make work pay” contracts, which would encourage employers to pay the living wage and share in the benefits, so that all the gains do not go to the Treasury, and so that businesses get their share as well.

Chris White (Conservative, Warwick and Leamington)

Will the hon. Gentleman give way?

Ian Murray (Labour, Edinburgh South)

I am happy to give way to the hon. Gentleman, who wants to tell us about his Opposition day debate.

Chris White (Conservative, Warwick and Leamington)

I thank my hon. Friend the Member for Burton for surprising me while I was going through my speech for this afternoon. I would welcome contributions this afternoon from all Members of the House. In living wage week, we all appreciate how important it is to recognise so many of our constituents who are on low incomes. Across parties, we should do all we can to support the promotion of the living wage this week.

Ian Murray (Labour, Edinburgh South)

I could not agree more with the hon. Gentleman. I am delighted that he has just managed to rehearse the first paragraph of the speech that he was reading when he was surprised by the hon. Member for Burton. While we are offering congratulations on the promotion and paying of the living wage, I refer the Committee to the Register of Members’ Financial Interests. I am a director of Heart of Midlothian football club, which has just come out of administration and last week made the decision to pay all its employees the living wage. That is a significant step forward for which it should be congratulated. I hope that it is a trailblazer, and that other companies follow suit and pay the living wage.

Bill Esterson (Labour, Sefton Central)

I congratulate Heart of Midlothian on coming out of administration and being a living wage employer. I am sure that Government Members’ support for the living wage is a prelude to them supporting the fine amendments before us. The enforcement of the minimum wage is a very serious issue for people working in the care sector. One reason why it is so important to localise enforcement is to deal with the scandal of the 15-minute visit, the way that travel time is not paid, and the reality that many people working in the sector with the most vulnerable people in our society—the elderly and the disabled—do not get decent pay. They receive very much below the minimum wage, let alone the living wage. Proposals such as those in the amendments will help to deal with the scandal of low pay for such vital workers.

Ian Murray (Labour, Edinburgh South)

Absolutely. My grandmother was a health care worker—a home help, as they used to be called—and she took great pride in her job. When she was visiting her clients she was able to not only deal with their daily needs but provide social interaction. We have seen that that is no longer the case because of how social care has developed over the past few years. As social care is now given in 15-minute visits and there is clocking in and out, there are questions about not only whether care workers are paid the living wage but whether they are even paid the national minimum wage. I hope that the Minister will reflect on those kinds of issues.

We all appreciate that local authorities are under significant financial stain and have taken much of the burden of the Government’s cuts in percentage terms, but we must ensure that we treat the people who look after the most vulnerable, the elderly and the disabled with the respect that they certainly deserve. I am sure that we will return to the issue often between now and the general election campaign.

Toby Perkins (Labour, Chesterfield)

Does my hon. Friend agree that it would strengthen the case made by the hon. Member for Warwick and Leamington in this afternoon’s debate if he was able to refer to his supporting the minimum wage by voting for the amendments? It will be hard for him to go into a debate on the living wage if he has just voted against legislation to strengthen the minimum wage.

Ian Murray (Labour, Edinburgh South)

There is a strange irony here. I am delighted that the hon. Member for Warwick and Leamington has a Back-Bench business debate on the living wage; we should commend him on that. However, it is strange that he will stand up in the House of Commons this afternoon promoting the living wage after voting against amendments that would strengthen the enforcement of the national minimum wage. Perhaps we can persuade him to return the favour of our support for part 4 of the Bill, on pubcos.

Toby Perkins (Labour, Chesterfield)

My hon. Friend should have a little more confidence in himself, because he is making a persuasive case. I hope that the hon. Member for Warwick and Leamington will listen, be persuaded and vote with my hon. Friend. Get your head up, son; I think you can win this.

Ian Murray (Labour, Edinburgh South)

My hon. Friend is getting cocky because he has managed to win two amendments. One, admittedly, was agreed to because the Government were asleep when the vote was taken, but he and the hon. Member for South East Cornwall won the vote on pubcos. The Government have been defeated twice in this Committee, and I hope my powers of persuasion will defeat them a third time, so that the hon. Member for Warwick and Leamington can go to the House of Commons Chamber this afternoon and confidently say, “I am a champion of not only the living wage but the national minimum wage.” Would that not be great?

Stephen Doughty (Labour, Cardiff South and Penarth)

Another argument in favour of the amendments is the situation of women on low pay. My hon. Friend will recall that it was equal pay day on Tuesday. The statistics are shocking for the whole country, and particularly for Wales. They show that women are on average paid only 82p for every pound that a man is paid, which is simply unacceptable in this day and age. We must strengthen the minimum wage, the living wage and all related measures.

Ian Murray (Labour, Edinburgh South)

Absolutely, and I believe that the gender pay gap has the same effect as female employees not being paid between this Monday and the end of this year; we must address that in this Committee. The Minister herself said in our debate on Tuesday that if people were paid significantly above the national minimum wage—in fact, if they were paid the living wage, which we will hear about this afternoon from the hon. Member for Warwick and Leamington—we would not need national minimum wage enforcement because nobody would cross the line between paying the national minimum wage and not paying it, and the grey areas would be removed.

Let us be clear about what we are trying to do. The measure would also be good for employers and the economy. Hon. Members may ask why, so I will give an example. I was an employer of many dozens of staff when I ran my own small businesses—I do not know whether I have mentioned that fact yet. I paid my staff well above the national minimum wage and ensured they were on proper contracts, with the hours they wanted, but I was struck by the fact that many rival employers did not do the same, which made it uncompetitive. Enforcing the national minimum wage and ensuring that people are paid properly is therefore good not only for employees but for business. It would create the level playing field that we all want, and would enable businesses to compete on quality and cost, rather than having a race to the bottom as regards their employees’ terms and conditions. That is an important distinction.

Bill Esterson (Labour, Sefton Central)

My hon. Friend’s point about the quality that comes from paying people properly is incredibly well made. In the care sector, the local authorities that invested in becoming living wage employers found that their quality increased, and they made savings because of the increased commitment and performance of their staff. The minimum wage pays for itself, which makes perfect business sense in a number of sectors, including the care sector. I hope Committee members will support the amendments as a means of ensuring that, at a local level, there is enforcement to support achieving quality through decent pay.

Ian Murray (Labour, Edinburgh South)

Absolutely. We have a productivity problem in this country, which might be explained by the fact that although unemployment has dropped by 500,000 in the past 18 months or so, the tax take to the Treasury has been completely flat, even though a 6.5% increase had been predicted. That reveals the kind of economy the Government have created. The productivity problem we have is due to people being low-paid in insecure jobs. We have to deal with that, and that enforcement is wanting. I appreciate that intervention.

Turning to the amendments and what we are trying to do by imposing proper deterrents and enforcements. We have to reflect on the fact that the Government have failed to ensure that there is proper enforcement of the national minimum wage so that the most vulnerable are protected. We mentioned on Tuesday that Ministers have announced the naming and shaming policy on four occasions. I believe, from the Minister, that it has been used about 30 times recently and that more cases are on the way. We appreciate that the Government are trying to move in the right direction with the naming and shaming of those who flout the national minimum wage.

However, there is a problem with national minimum wage enforcement. My hon. Friend the Member for Middlesbrough described how people have reported problems with pay through the helpline, but they do not seem to be acted on. That is not a slight on the national minimum wage enforcement section, because it does a tremendously good job. I have often met officers and senior members of that section to discuss some of the problems they come across.

It is very difficult when there are potentially 300,000 people being paid less than the national minimum wage and the HMRC enforcement section has only 150 staff and 100 front-line officers. It is difficult for it to cope with that. That is why, in debating amendment 240, we might consider whether local authorities can play a role in enforcement to supplement that staffing complement.

The report “Settle for Nothing Less”, published last year by the Centre for London, found that only two employers in four years had been prosecuted for paying below the national minimum wage. I ask the Minister to reflect on why that is. It may be because the national minimum wage legislation has made it too difficult for employees to take action where there might be unscrupulous employers.

I recall that an amendment tabled by Liberal Democrats was made to the national minimum wage legislation, but I have been unable to find the justification for the amendment and the speeches in favour of it. As I understand it, it meant that national minimum wage enforcement by prosecution required proving that someone had wilfully not paid it. A host of case law can be built up around whether someone has wilfully not paid it. Perhaps we need to consider whether that definition in legislation is helpful, given the very low number of prosecutions.

HMRC has investigated 10,777 firms since 2009 for allegedly breaking the law on low pay, collecting £15.8 million in arrears payments and imposing just over £2 million in fines. The “Settle for Nothing Less” report that says there has been systematic failure in how the national minimum wage is policed. That is not the Opposition saying that; it is a report by the Centre for London.

It would be uncharitable to suggest that the Minister had done nothing about enforcement, because she did raise the fines to £20,000 via statutory instruments that went through the House last year, and she has said clearly that under the Bill that will now apply to each worker. In amendments 238 and 239 we suggest that the figure should be £50,000. We can all pluck figures out of the air for the level of fines, but at the moment someone can be fined £50,000 for fly-tipping but not for non-payment of the national minimum wage. Steve Turner from Unite said at our evidence session that someone could be fined £50,000 for selling a fake Manchester United replica top outside Old Trafford—given what is being sold in that example, perhaps the fine should be much higher. If someone can be fined £50,000 for fly-tipping or selling a replica shirt, when there is no detriment to an individual, why is it a £20,000 fine in this case? We think that it should be of equal value to fines for those other offences, if not greater. We therefore tabled the amendments to suggest increasing those fines to £50,000.

Amendment 240 proposes more effective enforcement by giving local authorities new powers to enforce the national minimum wage through working alongside their colleagues in HMRC. My hon. Friend the Member for Hartlepool raised that issue earlier. HMRC does a great job in enforcing what it can, but there is limited scope in the funding and numbers available to it. Local authorities are on the ground visiting businesses all the time, perhaps through environmental health officers or health and safety visits. In some industries they visit licensed premises such as restaurants on a more regular basis. Local authorities are already on the ground visiting those high-risk businesses where there is more likely to be infringement of the national minimum wage.

Local authorities know their own patches very well. In terms of local geography and the make-up of local businesses, they might receive complaints about other issues that allow them to have more eyes and ears on the ground and effectively look at whether businesses are paying the national minimum wage. The amendment would give the Secretary of State the power to bring forward regulations, if he or she wished, to devolve enforcement powers to local authorities. It would certainly be the right thing to do. It is Labour party policy to bring that forward when we go from opposition to government, and when the hon. Member for Warwick and Leamington goes from Back-Bench debates to Opposition day debates in just over six months’ time.

Andy McDonald (Labour, Middlesbrough)

Does my hon. Friend agree that local authorities are extremely well placed because of their knowledge on the ground? They can be knowledgeable about cases of wages being undermined. For example, if the agreed hourly rate in the scaffolding industry is £13 an hour, employers might bring in workers from elsewhere at £8 an hour and then charge them horrendously high rents. That effectively depresses the wage below the national minimum wage, exploits those workers and totally and utterly undermines the local job market. Should that issue not receive the attention of all of us? Local authorities are best placed to identify those hot spots.

Ian Murray (Labour, Edinburgh South)

I agree. Local authorities are on the ground, so they can see these kinds of thing happening. This is also about reporting. I am sure that businesses and, indeed, employees and workers would have much more confidence reporting these issues to the local authority—with which they are familiar—than reporting them directly to national minimum wage enforcement through a helpline that might not even deal with it.

Iain Wright (Labour, Hartlepool)

I want to pick up on the point made by my hon. Friend the Member for Middlesbrough. Is the shadow Minister aware of the excellent report on umbrella companies by the Union of Construction, Allied Trades and Technicians? It makes exactly that point about skilled workers in the construction industry who are paid £13, £14 or £15 an hour but then deducted fees that take them below the minimum wage. Under amendment 240, local authorities would help to address the problem of umbrella companies, particularly in the construction industry but also beyond.

Ian Murray (Labour, Edinburgh South)

Absolutely. We should commend UCATT for that report. It has done much to bring the issue of bogus self-employment to the authorities’ attention, and we will hopefully be able to deal with that issue. On the issues of bogus self-employment, forced self-employment and non-payment of the national minimum wage, it is clear that there are unscrupulous employers out there using every possible loophole they can find to obfuscate their responsibilities as employers. Their responsibility is not only to their employees and workers, but also to the Exchequer in terms of paying tax and paying for the public services on which they and their employees rely.

It is absolutely right for local authorities to be an integral part of the process. I could use a simple hypothetical situation, such as a hospital being built, to highlight the issue. We could also look at how Newham council, UCATT and the trade unions dealt with the building of the Olympic park. A major construction project went on in that council’s backyard, but it was able to work with trade unions and employers to ensure that health and safety was dealt with properly, people were paid properly, and the terms and conditions of the people on that site were in line with the legislation we currently operate under. It was deemed a tremendous success.

Sheila Gilmore (Labour, Edinburgh East)

I do not know if my hon. Friend was present in the Chamber earlier for business questions, but I am sure that he will be interested to hear this. My hon. Friend the Member for Bridgend (Mrs Moon) gave an example of a way of potentially getting around the minimum wage. A constituent came to her who worked in a call centre, and who had received a wage slip with a £50 deduction for toilet breaks. Those are the sorts of scam that some employers are up to.

Ian Murray (Labour, Edinburgh South)

Absolutely. I was not in business questions, but I will look at Hansard. That is the kind of thing that must be dealt with. In that particular example, the employee has gone to their Member of Parliament to seek advice, but all that they can do at the moment in terms of enforcement is to call the same helpline that the constituent of my hon. Friend the Member for Middlesbrough called, not knowing whether any action will be taken. A local authority is much closer to where the action is taking place, so it would be better to report the situation to a local authority and allow it to determine what should happen. There is also a direct democratic link in the local authority through local councillors, which gives added impetus to dealing with such enforcement issues. It is pretty extreme if a deduction for toilet breaks takes someone below the national minimum wage. I would hope that my hon. Friend the Member for Bridgend would bring it to the Minister’s attention so that she can deal with it directly.

New clause 12 would allow enforcement officers to calculate holiday pay alongside any non-payment of national minimum wage. In all the discussions that I have had with national minimum wage enforcement officers, one of their biggest frustrations has been the inability to include holiday pay in their calculations, which has diminished and diluted their ability to calculate any losses applicable to employees on that basis. Section 17 of the National Minimum Wage Act 1998, “Non-compliance: worker entitled to additional remuneration”, says:

“If a worker who qualifies for the national minimum wage is remunerated for any pay reference period by his employer at a rate which is less than the national minimum wage, the worker shall be taken to be entitled under his contract to be paid, as additional remuneration in respect of that period, the amount described in subsection (2) below.

(2) That amount is the difference between—

(a) the relevant remuneration received by the worker for the pay reference period; and

(b) the relevant remuneration which the worker would have received for that period had he been remunerated by the employer at a rate equal to the national minimum wage.”

Essentially, the relevant pay is all down to the period in question. Our amendment would ensure that section 17 includes everything in a normal pay period, including holiday pay and all the other issues, so there is no dilution of the compensation due to an employee when an employer is found not to have paid the national minimum wage by virtue of their calculation of holiday periods and so on. I have encountered a case in which an employee had clearly not been paid the national minimum wage, but as he had been on holiday for one week out of a four-week period, when the three weeks were divided by the amount of pay that he had received, he had been paid more than the minimum wage, because the holiday pay element had been subtracted from the calculation. That does not seem sensible when it is clear that someone has not been paid properly under the terms and in the spirit of the national minimum wage legislation. I commend the amendments to the Committee.

Matthew Hancock (Conservative, West Suffolk)

I have listened carefully to the hon. Gentleman’s long and largely thoughtful speech. Can he bring himself to congratulate us on what we are introducing in the Bill to strengthen the minimum wage, which we strongly supported? Given what he said, it is surprising that after not having taken that action during 13 years in government, the Labour party in opposition has not explicitly congratulated the Government on doing so in the Bill.

Ian Murray (Labour, Edinburgh South)

If the Minister had been listening for the last 35 minutes, he would know that I was not being uncharitable to the Government. I have said so on a number of occasions. I congratulated him on introducing £20,000 fines for each employee into the Bill. If he had been listening, he would have heard me do so. I am delighted at this conversion by the Minister, who is now such a proud supporter of the national minimum wage, given that he was an adviser to the very Chancellor whose party, in opposition, voted against the Government’s introduction of the national minimum wage back in 1997.

Matthew Hancock (Conservative, West Suffolk)

That was quite a long time ago.

Ian Murray (Labour, Edinburgh South)

The Minister says it was a long time ago, but he starts every intervention with “In 13 years of Labour Government”. Perhaps his memory is slightly more refreshed. I was just about to sit down before he decided again to throw his toys out of the pram without listening to the actual debate. However, I am delighted to have taken that intervention, because it allowed me to reiterate my congratulations to the Under-Secretary for the things that she has done on the national minimum wage. In the spirit in which the Committee has conducted itself in the past few weeks, I am merely trying to strengthen what was already a reasonably good Bill, and I hope that the hon. Member for Warwick and Leamington, who has his living wage debate this afternoon, will support our amendments.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Even if other hon. Members were not saying that it is a shame that this is the last day of the Committee, I would be with you, Mr Robertson; it is a shame that this is the last day and we should make the most of it. Who knows how late we will be here this evening?

I thank the hon. Member for Edinburgh South for his amendments, which have given us the opportunity to discuss the important issue of the national minimum wage and how it is enforced. He rightly pointed out that the minimum wage was a strong achievement of the past Labour Government; I do not have any difficulty in saying that. It was supported by my colleagues who were elected as Liberal Democrat MPs at the time and it is absolutely right that we have it as a basic minimum protection for workers, although we obviously encourage employers to pay above the minimum wage. It is a “minimum” and in living wage week in particular it is appropriate that we discuss this issue.

I welcome the fact that there will be a debate later today, led by my hon. Friend the Member for Warwick and Leamington, on the living wage, for which there is great cross-party support. Ensuring that we can encourage employers, through a range of methods, to pay remuneration that is higher than the national minimum wage is sensible. We recognise that there will be some employers for whom that is difficult, and we do not want jobs to be under threat as a result. However, there is no doubt that many employers currently paying the national minimum wage perhaps could pay more.

It is a positive sign that employers increasingly make a virtue of the fact that they pay more than the minimum wage. I am sure that, like me, other hon. Members will have noted various adverts around Westminster tube station about a particular employer promoting the fact that it is a living-wage employer. That is to be commended. Of course, the Government have also been doing other things to help people on low pay—not least cutting income tax for low earners, taking 3.2 million people out of paying income tax entirely. A range of activities are in place.

In his remarks, the hon. Member for Edinburgh South became slightly less uncharitable; he turned from saying that I had not done nothing on the issue to actually congratulating me, which was a slightly more positive way of framing it. I am glad that he said that, because it is absolutely right that this Government have done a considerable amount to strengthen the national minimum wage. We have increased the budget on enforcement by 15% and we are increasing the penalty for non-payment of the national minimum wage to £20,000 through the legislation we are debating today. We are increasing the penalty so that it can be charged per worker rather than as an overall total.

We have also introduced the revised and much stricter naming and shaming criteria, so that the default position becomes this: if an employer does not pay the minimum national wage, they have to pay not only the arrears owed to the worker but the penalty—indeed, they will be named and shamed for having got that wrong and not having complied with the law in the first place. That is a strong record. It is right that we do these things, because it is important that the basic national minimum wage is properly enforced.

I turn specifically to the amendments. Amendment 238 —notwithstanding the fact that it was printed twice—is designed to increase the maximum civil penalty from £20,000 to £50,000 per worker. I welcome the fact that the Opposition recognise that there is a need to increase these penalties. However, I hope I can convince the hon. Gentleman as to why we have considered £20,000 to be the appropriate level. The impact assessment sets out that 6% of cases in the last year where HMRC issued a notice of underpayment involved total arrears in excess of £20,000. The amount paid and the penalty are directly calculated as a result of the amount of arrears.

Employers who have not paid properly are charged a penalty equivalent to the amount of the arrears owed. That has increased: it used to be 50%, but now it is 100%. However, if they pay the arrears quickly, they can get a discount. We have already increased the percentage of the arrears that is paid, but because it is done on that percentage basis, just raising the maximum amount in itself does not increase the penalties unless there are cases in which the overall arrears are greater.

The 6% of cases in which the total arrears were more than £20,000 involved 13,000 workers, with an average of 478 workers a case. The average arrears per worker ranged from £148 to £321. Only a tiny number of cases involve arrears of more than £20,000 for any individual worker; in fact, in the past year there have been only three such cases. Two were close to the £20,000 maximum in any event, so it would not have made a significant difference, and the third, which was an exceptional circumstance, was an underpayment that took place over many years. That was higher, but that was still nowhere near the upper limit suggested by the Opposition’s amendment.

The clause will provide for a penalty to apply on a per-worker basis. Because of that, £20,000 is a perfectly fair amount. In cases where many workers have been underpaid significant amounts, the total to be paid by an individual employer could be far in excess of £20,000; it depends on how many workers have been underpaid and by how much.

Our actions mean that, in almost every case in the past year for which HMRC has issued a notice of underpayment, the employer would have been issued with a penalty equivalent to the total amount of arrears owed and the £20,000 cap would not have come into play at all. That is why there is no need to set a higher cap of £50,000.

It is also worth noting that, as well as having little impact on the penalties in such cases, there would also be no impact on the individual workers, because they will get the amount of arrears owed regardless of the cap on the overall penalty. I say to the hon. Member for Edinburgh South that if in future evidence shows that a higher maximum cap is needed, that change could be made through secondary legislation. I imagine that such a change will be necessary in the passage of time owing to inflationary pressures. However, at the moment the £20,000 figure deals with the cases coming through, which is why we have gone for that amount.

A few points were raised by various hon. Members about enforcement. The hon. Member for Middlesbrough mentioned the pay and work rights helpline case as reported by his constituent. Every complaint that is reported is investigated. I do not know the specifics of his constituent’s circumstances in terms of the date when that was reported, where the investigation has got to and what facts have been found, but if he writes to me with the details, I will happily look into the matter.

Mr Wright rose—

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I give way to the former Minister.

Iain Wright (Labour, Hartlepool)

I am grateful. Will the Minister articulate what “investigation” means in that scenario? Does it mean logging and taking a brief viewpoint? What is the score?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Certainly. It is not a case of simply logging and that is it. Clearly steps are needed to identify whether there is merit to the complaint being made, which involves a degree of record checking, and there will be a conversation with the employer. However, it will depend on the circumstances.

It is important to recognise that people may make complaints anonymously. In performing such an investigation, the investigator will not typically ring up the employer and say, “About your employee, Mr Bloggs, what are the pay records specifically related to him?” because in anonymous complaints that would not be appropriate. The employer’s records can be checked and sometimes the employee will also be able to provide certain evidence—payslips or time sheets and so on—and that evidence will be considered.

It is not the case that every complaint made leads to a finding of a breach of minimum wage law; that depends on the specifics of the case. When we are talking about a number of hours worked and an amount of pay received, the matter is straightforward, but sometimes, given accommodation offset and deductions for purchasing uniform and so on, things can get slightly more technical. It is not that people are necessarily making unfounded complaints, but sometimes the facts of the case will show that the law has been complied with.

Andy McDonald (Labour, Middlesbrough)

We are waiting on the case I mentioned. If a prosecution was successful—we do not know whether it would be, which is why I am being a little guarded—its power would be enormous. It would send out a message in the locality that people cannot get away with these exploitative wage practices. If I provide the Minister with the details, perhaps she will have a look into the case.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I am happy to look specifically at that case. The hon. Gentleman is right that, to increase the number of employers who are named and shamed, the Government have not only dealt with specific cases to make sure people get the arrears they are owed, but sent out the much wider message to employers that they need to focus on getting this right.

If employers paid people a significantly higher rate, it would perhaps not matter if they got the number of pence per hour wrong by one or two digits, because they would still comply with the national minimum wage legislation. However, if they are going to pay the national minimum wage, they need to make absolutely certain that their records are accurate, their payment processes are top-notch and they definitely pay people what the law requires.

I want briefly to mention the case in Bridgend, mentioned in business questions. Again, the circumstances sound pretty horrendous. I do not know whether the case has been reported to the pay and work rights helpline. I would encourage all hon. Members who come up against such cases to report them. If they are concerned about the level of enforcement by HMRC, they are always free to write to me, as the Minister responsible.

Iain Wright (Labour, Hartlepool)

The Minister is being very generous in giving way. I understand what she says about naming and shaming, but my concern is that a business that is breaking the law by not paying the minimum wage will probably be more amenable to fraud, such as doctoring pay slips. What investigation of fraudulent activity will be undertaken?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

The hon. Gentleman makes a fair point. If I may say so, he also makes a good point about why amendment 240, well intentioned though it is, is not the right way to tackle this issue. HMRC is the enforcer in this area, and it has significant expertise in understanding company records, investigating and being forensic in going through documentation, so it is the right body to do the enforcement.

Clearly, it is not acceptable for a company to doctor records, and HMRC has powers more generally regarding the information kept by companies, which must, for example, maintain information for tax purposes. If an employer that HMRC investigates has not kept proper national minimum wage records, that might well ring alarm bells about whether the company has kept proper records in relation to taxation and all its other responsibilities.

It is important to deal with issues relating to the national minimum wage, but there may sometimes be a route whereby we can look at wider issues, such as whether fraudulent record keeping is a practice at a company and whether other taxation issues need to be explored. I encourage employers to recognise that if they are not able to produce accurate records for the HMRC national minimum wage team, that may lead to a more intensive forensic investigation of other aspects of their business.

The hon. Member for Chesterfield raised the issue of unpaid interns. I absolutely agree that that is a real issue. There has been far too much exploitation of individuals who have, effectively, been workers, but who have been working for free. Obviously, there are cases where individuals are genuinely volunteering; that happens in the charity sector. Indeed, I am sure that every member of the Committee, including yourself, Mr Robertson, relies on selfless volunteers who give up their time for the political parties we belong to.

There is a role for volunteering in society, but it is also important that somebody who is working in a job, and who is required to turn up on time and do specific tasks, is paid at least the national minimum wage. I pay tribute to the work done by the right hon. Member for Salford and Eccles (Hazel Blears) on this issue. I had the pleasure of working with her and the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) on setting up the Speaker’s parliamentary placement scheme. That has helped to galvanise change in the House on what is deemed to be acceptable and on its culture, so that we do not have unpaid internships, which are so damaging to social mobility.

The culture is changing in other sectors of the economy as well. Enforcement has an important role to play. HMRC, for example, as well as investigating individual cases when complaints are made about unpaid internships that should have been paid, has made proactive investigations into industries such as the fashion industry, where such internships were a particular issue. HMRC has contacted companies advertising unpaid internships to make it clear that they need to be careful to comply with the law. Significant work is therefore going on—not only in Government, but because of increasing realisation in industry more generally, which I welcome, about the ethics and the legal position of people who are working needing to be paid.

The hon. Member for Sefton Central raised the important issue of travel time, especially for care workers—not exclusively, but it is a particular issue in that area. Travelling to and home from a place of work is not included in the national minimum wage, but for jobs in which someone is required to undertake several appointments and therefore to travel between those appointments, travel time must absolutely be captured and paid for national minimum wage purposes.

Significant investigations have been made into the social care sector. HMRC undertook some between 2011 and 2013, and some are still ongoing. It found a high level of non-compliance, approaching 50%, though not purely as a result of the travel time issue, because in some cases other issues were involved. We certainly recognise, however, that travel time is significant.

As a result, a range of work has gone on with care sector bodies to improve understanding of what compliance means and to design payroll systems to ensure that workers will be prevented from being underpaid minimum wage in the first place. Guidance for local authorities was published recently by the Department of Health as part of the secondary legislation accompanying the Care Act 2014. The guidance includes a chapter on “market-shaping and commissioning”, which explicitly states that

“local authorities should…have evidence that contract terms, conditions and fee levels…will not…compromise the…provider’s ability…to pay at least minimum wages”.

Bill Esterson (Labour, Sefton Central)

I am pleased that the Minister has spent some time on the issue of travel between appointments, especially in the care sector. It was not quite clear whether she accepts that such travel time should always be paid. As things stand, the exploitation that goes on is undermining the minimum wage—will she be clear about her position and that of the Government?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I am happy to be clear. Yes, travel time should be paid, with the distinction that it is for travel between appointments during the day, rather than for the initial journey to work in the morning or the final journey at the end of the day, because travel to and from a place of work is not paid. In between those times, travel time absolutely should be paid. We are not prepared for that to undermine the national minimum wage. It is concerning that that has happened in some cases.

It is not that the law is unclear; the law is very clear. We are ensuring that the published guidance and the work done with care bodies, local authorities and the Department of Health are in place to supplement the law, but we also have the power to act now, which is why investigations have already been undertaken by HMRC, some of which are ongoing because, as can be imagined, some of the cases are incredibly complex and involve hundreds of workers. In order to do proper calculations, we have to look at time sheets and all the individual travel journeys in the working day. Things are happening but, as I am sure the hon. Gentleman recognises, some of the work is forensic and to do it for hundreds of employees to ensure that any notices of underpayment are issued properly takes time and it is being worked through now.

The issue is important and it cannot be used as a way of getting around national minimum wage law. The national minimum wage must be protected, which is why we are determined to act.

Iain Wright (Labour, Hartlepool)

The Minister is making a powerful point. What work have the Government and HMRC been doing in respect of travel within a work-related activity and of reimbursement of travel expenses? I am concerned that some care workers are required to pay for their own petrol, even though expenses incurred are wholly, exclusively and necessarily related to the work that they are carrying out. What work has been done with regards to that?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Again, where costs are incurred by employees, as the hon. Gentleman says, wholly and necessarily for the purposes of their employment—whether petrol or uniforms—and not reimbursed, those fall under the national minimum wage. If employers are paying far in excess of national minimum wage and the national minimum wage applies, even if such sums are removed, then ultimately that becomes a contractual issue for individuals to decide with their employer. However, it is not acceptable for deductions to be made that would take the most vulnerable workers who are on the low wages of the national minimum wage, below the national minimum wage level. Such issues are already investigated by HMRC in great detail. As part of its calculations, HMRC will issue a notice of underpayment as part of the overall arrears, which will factor in and include any deductions wrongly made.

Toby Perkins (Labour, Chesterfield)

I am glad that the Minister has clarified that. Does she also recognise that there is a danger in the care sector particularly, where local authorities are contracting care companies to provide half-hour or one-hour appointments and travel time is not being considered? In such instances, people who require the care end up being short-changed. Does she fear, as I do, that for many care companies the solution to this will be to make all their carers self-employed, employing them on a self-employed basis and circumventing minimum wage legislation that way?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

We would not want there to be the kind of avoidance that the hon. Gentleman describes. He may be aware that we are already undertaking a review of different worker types that exist. There has obviously been a big increase in self-employment, which we want to understand more and dig down into. It is important that such issues are considered; I am not dismissing what he says in any way. We are considering the issues at the moment and what he describes does not seem to be happening. Again, the commissioning guidelines and the guidance that has been worked on with the Department of Health and local authorities is an important part of that, because ultimately local authorities are in the position of making decisions about who to give contracts to. While I recognise that they are under pressure in terms of finance, it is not acceptable to have a race to the bottom, where some of the most vulnerable people in society, who require social care, are effectively, as the hon. Gentleman says, not getting care of the standard that everybody would wish them to have, because care workers are being paid less than the national minimum wage. That is unacceptable.

In commissioning decisions, local authorities have a responsibility to ensure that they are not letting contracts at a level that it is impossible for any bidding company to fulfil while complying with national minimum wage law. Local authorities should certainly look at any kind of avoidance in terms of self-employment.

It is also important to recognise that, when such cases are investigated, it is not a defence for a company to say, “Oh, this person is self-employed,” putting that label on them and ticking a box; the facts of a specific case are considered, to find out whether a person is actually self-employed or whether the facts show that they are effectively an employee. Obviously, it will depend on circumstances, which is why HMRC is able to investigate cases. It is not sufficient for somebody to have a piece of paper saying that they are self-employed: the characteristics of self-employment have to be fulfilled for that to be the case.

Iain Wright (Labour, Hartlepool)

Is the Minister concerned about certain sectors? The construction industry has a systemic bad case of bogus self-employment, which many people have mentioned. Is she concerned that, in terms of subcontracting, the nature of much of industry lends itself to bogus self-employment? What are the Government going to do about it?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

Concerns have been raised in respect of various sectors, particularly the construction sector, including in a recent report by the Union of Construction, Allied Trades and Technicians on some of these issues, which we need to look at in more detail. That is why we have announced that we are reviewing different employment statuses. There are clear differences between an employee and a worker, but individuals might not always be clear what their status is. Until tested in an employment tribunal, it is not always possible to be 100% certain of that status. Indeed, self-employment is another element of that debate. We have seen the shape of the economy change in many ways through the financial crisis and difficulties, and it is important that we take stock and look at whether our different employment statuses still serve the right purpose and are properly defined. People must have enough clarity. That review is under way at the moment and is due to report within the next few months. It is an important piece of work which will help to inform this debate.

Prosecution comes up quite regularly and has been mentioned by various Members. In a sense, I have sympathy with the instinct that says, “If people are breaking national minimum wage law, they should be prosecuted.” That sounds a simple and automatic solution. However, I would like to outline the complexity of that discussion and why we mainly use civil sanctions to deal with enforcement of the national minimum wage. First, we want to ensure that the worker gets what they are owed. The advantage of a civil sanction is that it can enforce that the worker gets paid what they are due. When it comes to the national minimum wage not being properly complied with, the most important thing is that the worker who has done the hours, undertaken the work and not been properly paid gets the money they are owed. The difficulty with prosecution is that it does not help the worker get their money, and that is one reason why civil sanctions are the best response.

In terms of criminal prosecutions, there is a wider issue. It is not okay to not pay the national minimum wage. It is in no way acceptable or excusable. That is why we must rightly force the arrears to be paid and impose a penalty that is equivalent to the value of those arrears. In some cases, that is a smallish amount of money and in others it will be larger. We also have naming and shaming, which is a powerful driver from a reputational point of view. However, employers who have not properly complied with the law have often made a genuine mistake. There might have been a mistyped letter in their payroll system, or they might not have noticed that an apprentice’s birthday has come round and they are therefore now eligible for a higher rate of pay. In the main, they are not wilfully trying to get round the law. We want employers to be careful. We want them to recognise that they have to get this right. However, a criminal prosecution would be an overly extreme response for most employers. The tough penalties and sanctions that we have are the right approach, and I hope that Members will agree with that.

I have already said that I do not think amendment 240 is the right enforcement approach. I appreciate the intention of ensuring that our enforcement is as strong as possible. However, I do not think that local authorities are better placed to undertake that. As I said to the hon. Member for Hartlepool, HMRC has expertise in this area and a strong track record, so it can deal with the enforcement issue. Since 1999, HMRC has identified more than £54 million in arrears for over 229,000 workers during more than 65,000 investigations. It investigates every complaint made to the pay and work rights helpline. I remind the Committee, as I always take the opportunity to, that the number is 0800 917 2368. HMRC also does risk-based enforcement, looking at particular sectors where there is a risk. It is a central enforcement body with a consistent approach across the whole of the United Kingdom, a high-quality service and a brand that everyone recognises. In terms of employers that we are already familiar with, HMRC is the key body in charge of ensuring that taxation is properly complied with. It is in the best and strongest position to do this, rather than local authorities, and that is why I will reject amendment 240. However, I welcome the opportunity to discuss that.

New clause 12 covers holiday and other pay in the context of the national minimum wage. The Working Time Regulations 1998 entitle the worker to a week’s pay for each week of leave. Where holiday pay has not been paid, workers already have a right to take action under regulation 30 of those regulations or under section 13 of the Employment Rights Act 1996 for unlawful deduction of wages. Both claims are brought in the employment tribunal. Workers already have rights of redress and access to early conciliation, which may negate the need for formal enforcement action. That is the right way to deal with enforcement on this matter. It must be right to focus on early conciliation and to try to get swifter responses to such disputes. That is the best way forward. There is still the backstop of right to redress through the tribunal system if necessary.

Given that, we do not believe that it is necessary to extend the enforcement powers under the National Minimum Wage Act. What we have is sufficient. On that basis, I hope that the hon. Member for Edinburgh South will be happy to withdraw the amendment.

Ian Murray (Labour, Edinburgh South)

I appreciate the Minister’s explanation. As a result, with the Committee’s leave I will withdraw the amendment, and will not press amendment 239, which is on the same issue, or new clause 12 to a vote.

I want to test the will of the Committee on amendment 240, however—the amendment on the role of local authorities. The Minister is right to suggest that responsibility for enforcement should stay with HMRC. Amendment 240 would not change that but would mean that the Secretary of State would bring forward a report considering whether local authorities should be involved in the process, in partnership with HMRC. HMRC’s enforcement ability would not be diluted by amendment 240, which is simply suggesting that it is probably best that the capacity for people to report incidents of non-payment of the national minimum wage is at the local level, through local authorities working in partnership with HMRC.

Although I appreciate the Minister’s explanation, amendment 240 simply asks the Secretary of State to bring forward proposals that could allow that to happen. It would not replace the HMRC enforcement section but would add a reporting mechanism, after we had looked into whether local authorities should be able to carry out enforcement. I will help the hon. Member for Warwick and Leamington, who has a debate on the living wage this afternoon, and will not press the other measures in the group to a vote—I would hate him to have to vote against them and then have to explain that vote in the House—but I want to test the view of the Committee on amendment 240.

I beg to ask leave to withdraw the amendment.

Clause 139 - Exclusivity terms unenforceable in zero hours contracts

Ian Murray (Labour, Edinburgh South)

I beg to move amendment 237, in clause 139, page 126, line 17, at end add—

“(3A) The provisions in this section shall be enforceable by the employment tribunal system. The Secretary of State shall make regulations that determine—

(a) the length of any qualifying period;

(b) the involvement of early conciliation at ACAS;

(c) the level of any fee payable by the worker;

(d) the imposition of penalties on the employer; and

(e) the remedies available to the workers;

The Secretary of State shall make such regulations by affirmative resolution procedure.”

John Robertson (Labour, Glasgow North West)

With this it will be convenient to discuss the following:

Government amendment 30.

Amendment 242, in clause 139, page 127, line 11, at end insert—

“(4) For this purpose, an employer will be legally obliged to offer a fixed hours contract when a worker has worked regular hours over six months of continuous employment, where the worker will have an option to refuse the offer.

(5) The Secretary of State shall by regulations make provision for the determination of “regular hours” under subsection (4).”.

Amendment 243, in clause 139, page 127, line 13, leave out “may by regulations” and insert

“shall bring forward regulations to”.

Amendment 241, in clause 139, page 128, line 4, at end add—

“(f) extending provisions to prevent “effective exclusivity” through conferring further rights on zero hours workers.”

Amendment 244, in clause 139, page 128, line 4, at end insert—

“(5A) For the purposes of section 5(c), the Secretary of State shall require an employer to pay compensation to workers when—

(a) the said worker is requested to work, turns up for work, and is subsequently given less than minimum level of hours worked; or

(b) the said worker is requested to work, but the work is cancelled at short notice.

(5B) The Secretary of State shall by regulations define “compensation”, “short notice” and “minimum levels” under this section.”

Amendment 245, in clause 139, page 128, line 4, after subsection (5)(e) insert—

“(f) extending provisions to prevent “effective exclusivity” through conferring further rights on zero hours workers.”

Amendment 229, in clause 139, page 128, line 25, at end insert—

“27C Power to make further provision in respect of transparency of zero hours workers terms and conditions

(1) The Secretary of State may by regulations make provision to require employers to provide basic information about terms and conditions to all zero hours workers within two months of their start date.”

Ian Murray (Labour, Edinburgh South)

I am incredibly disappointed that the hon. Member for Warwick and Leamington did not vote for our amendment. Perhaps some of us will intervene during his Back-Bench debate later and ask him to explain why he did not.

I will give a little background to the group of amendments. Too many people across the UK face the fear of insecurity in their employment. Zero-hours contracts have come to define that fear in recent years. Under this Government, there has been a massively rising tide of job insecurity. The number of people who feel insecure in their work was shown by a poll by YouGov only recently. It has doubled in the past three years from 6.5 million to almost 12 million. On top of that, as was mentioned in our debate on the previous group of amendments, people on average wages are earning £1,600 less than they were in 2010. They are working just as hard, but for much less. They are working just as hard, but for much less. They have been hit by the cost of living crisis, as we have discussed on several occasions.

Mark Garnier (Conservative, Wyre Forest)

I have always been curious about the much cited figure of the £1,600 reduction. This is only a technical question and I am not trying to make a political point, but does that include the tax cuts that have been made as a result of increasing the tax-free limit?

Ian Murray (Labour, Edinburgh South)

It includes everything. It is about wage growth against increased inflation of prices, so it takes into account the tax system, including the massive increase in VAT, which, before the election, the Conservative party promised would not happen. People are £1,600 worse off because of that combination of Government decisions and announcements and the fact that wages have not kept up with the increase in inflation. That comes to approximately £1,600.

The hon. Gentleman may want to question the figures, but the Government should be hanging their head in shame for making people—mainly working people—in this country worse off—[Interruption.] The Minister, from a sedentary position, says “Oh dear.” I would like him to explain to my constituents, who are feeling worse off, that they are indeed worse off, particularly because of what the Liberal Democrats called the Tory tax bombshell.

Matthew Hancock (Conservative, West Suffolk)

Does the hon. Gentleman agree with the shadow Chancellor that the great recession—otherwise known as Labour’s great recession—was a central cause of the fall in living standards? When an economy shrinks so too does the wealth of those within it.

Ian Murray (Labour, Edinburgh South)

There is no doubt that the Minister is an intelligent individual who has been promoted rather quickly in the Government. However, if he thinks the great worldwide recession was Labour’s recession, I am sure the people in Japan are equally of the view that it was the UK’s recession, as are the people in America, Germany and right across the world. It was a worldwide economic recession.

The Minister has not told the Committee that, at the general election in 2010, the UK economy was growing and unemployment was falling, thanks to the previous Government’s actions. He has had four and half years to grow the economy and there has been three years of dither and delay. He has failed on all counts.

Sheila Gilmore (Labour, Edinburgh East)

I am sure that my hon. Friend agrees that the Minister cannot have read the very first Office for Budget Responsibility report that came out after the election of 2010 because that showed an expectation of growth based on the growth that was already happening. That is precisely what did not happen because of the measures that were taken by the incoming Government.

Ian Murray (Labour, Edinburgh South)

Absolutely. My hon. Friend makes a good point. The growth figures from the OBR, which is supposed to be an independent organisation set up by the Government, have been downgraded time after time. It has assessed the decisions by Government over a period of time and has had to reduce its forecasts on that basis. Let us not forget that the Chancellor promised to eradicate the deficit by 2015, but it is still going up. That shows that the Chancellor’s decisions are making the deficit worse. [Interruption.] That sounds very much like the ghost of deficit past going by because the deficit is continuing to rise.

Mark Garnier (Conservative, Wyre Forest)

While we are exchanging estimates, the hon. Gentleman will be aware that the International Monetary Fund has recently been increasing its estimates of the performance of the British economy. It has been going back and saying that it had got it completely wrong when it said that the measures brought in by the Government would lead to austerity. Things are much better than the IMF thought.

Ian Murray (Labour, Edinburgh South)

I am absolutely delighted because it seems that the Government’s whole proposition to the Committee today is that everything is all right; everything is rosy in the garden. The Government deserve credit for everything that is happening. To the people who are on zero-hours contracts, unable to earn a living, get hours, pay rent, pay their mortgages, to know whether they will be able clothe and feed their children or heat their house rather than eat, that seems to be the proposition. If it is, it is completely unacceptable. The Government should support the amendments to ensure that people who are underemployed in this country are dealt with fairly and properly. It is not just a recovery for those at the top, but for everyone.

Mark Garnier rose—

Ian Murray (Labour, Edinburgh South)

I will give way to the hon. Gentleman again because perhaps when he gets to his feet he will apologise to the people who are unable to earn a living in this country.

Mark Garnier (Conservative, Wyre Forest)

The hon. Gentleman has made two points that are worth addressing. The first was about Labour’s economic legacy leading up to the financial crisis, and the second was to do with mortgages. The bubble that was created in the lead-up to the economic crisis was created on the backs of hard-working households. Household debt went up by £1 trillion.

John Robertson (Labour, Glasgow North West)

Order. We are straying off the Bill and the amendments. Although I appreciate the arguments, can we get back to where we should be? That means not answering the last point.

Ian Murray (Labour, Edinburgh South)

Absolutely, Mr Robertson. That is why we are dealing with zero-hours contracts. The Minister responsible and his colleague need to reflect on the fact that this is not a recovery for everyone; it is a recovery for the few at the top. That is very relevant to what we are talking about today because zero-hours contracts are a symptom of that economy. If I could reflect on what I said earlier, although unemployment is dropping, tax take to the Treasury is flat when under the Government’s projections it should have been rising substantially. That tells us something about the employment that has been created.

As an aside, the Minister for Business and Enterprise, who is not listening to the debate but will probably intervene later anyway, was an adviser to the current Chancellor who agreed with Labour’s public spending right up to 2010, and indeed called for less regulation of the banks. While we are putting the record straight, perhaps the Minister would like to get to his feet and deny that is the case.

Bill Esterson (Labour, Sefton Central)

It struck me while listening to interventions from Government Members that they mentioned subjects completely unrelated to zero hours because they want to cover up the fact that they have supported the disgraceful exploitation of the poorest people in our society by their total failure to act on zero hours. That is why the amendments are so important.

Ian Murray (Labour, Edinburgh South)

Absolutely. In the spirit that we have always had in this Committee, we agree with the provisions in the Bill but do not think that the Government have gone far enough. I will skip some of the interventions and get on to the crux of the matter. This is a real opportunity to deal with the problem of underemployment in the labour market. The Government have done a reasonable job in bringing forward issues around exclusivity but, as I shall discuss shortly, that is not enough and is a missed opportunity.

I am happy to give way to my hon. Friend for Cardiff—Central? South and Penarth?

Stephen Doughty (Labour, Cardiff South and Penarth)

I cannot remember which part of Edinburgh my hon. Friend is from, either. Going back to the real experience of people in our constituencies, does he hear regularly, as I do, from people with their tales of zero-hours contracts, waiting for texts to come, low wages and insecurity? They are sick of hearing the Government banging on about all the wonderful jobs that have been created and that it is all right Jack. That attitude is in complete contrast to their daily lived experiences.

Ian Murray (Labour, Edinburgh South)

I appreciate that intervention That goes back to what we discussed with the national minimum wage. This is about real life: the real experiences of people in the modern labour market that the Government preside over. They are not getting the hours or pay they require. Some are working two or three part-time jobs, underemployment is a real issue, the state is subsidising wages through tax credits to employers who refuse to give people proper hours. The benefits bill goes up as tax take stays flat. That is a simple equation that shows that people going back into the labour market are going into low-paid jobs when they would like higher pay and more security of employment. That is a simple equation that even the Minister could agree with. If he does not, perhaps he could justify that view.

Sheila Gilmore (Labour, Edinburgh East)

In looking to strengthen the Bill, the crux of zero-hours contracts is whether people have control. If the choice to give or withhold the hours is completely in the hands of the employer, the employee is not choosing what they are doing. I think my hon. Friend would agree that there has been some confusion between those who have a real choice and those who do not.

Ian Murray (Labour, Edinburgh South)

That intervention is incredibly timely. Opposition Members recognise that zero-hours contracts have their place in the UK economy as part of the patchwork of employment opportunities that are currently available, but it must be a matter of choice. Zero-hours contracts will work for some industries and people, who should be entitled to have those kinds of contracts if they choose. However, there are people at the lower end of the labour market who are forced on to zero-hours contracts and exploited by unscrupulous employers on that basis, and we should make regulations in this place to ensure that that stops. I make no apology for seeking to regulate in these areas, because we are talking about real people’s lives.

We should reflect on the words of Martin Smith from the GMB, who said when he gave evidence a few weeks ago that zero-hours contracts are about not flexible earnings but “chaotic earnings”. We should think about that. We are all paid salaries that we know will land on the same day, we know roughly how much they will be, and we are able to plan on that basis. Imagine a scenario in which, with a family, with rent or a mortgage to pay, and with other responsibilities, someone has no idea from one week to the next how much money they will be paid and whether they will have any hours to work.

We support the thrust of the Government’s position on the exclusivity of zero-hours contracts, but it seems to be a significantly wasted opportunity to go further and really deal with the problem once and for all. The issue is becoming increasingly complex as people are forced into self-employment—we have bogus self-employment and problems with the loopholes in the agency workers directive. People at the lower end of the income table and of the labour market are being hit the hardest.

Do not take it from the interventions of colleagues and my contributions in Committee that zero-hours contracts are a problem; we heard the Economic Secretary to the Treasury give evidence with the Minister a few weeks ago, and, in answer to a question about the tax take and whether the Treasury is better or worse off in trying to reduce the deficit with people in work, she said that the Treasury’s view was that “better contracts” would give more tax take. There is obviously a clear issue if even the Treasury is saying that, with regard to tax take, it wants people on “better contracts”.

Mark Garnier (Conservative, Wyre Forest)

The hon. Gentleman is being very naughty. He is well aware that the Economic Secretary clarified that point later. He has the transcript in front of him, so I am sure that he will be happy to read back her comment on that.

Ian Murray (Labour, Edinburgh South)

Let me read what she said—she was responding to the Chair inviting her to introduce herself for the record:

“I am Andrea Leadsom, Economic Secretary to the Treasury.

“In answer to the question, of course the Treasury is always keen to see increased tax revenues”—

who would have thought otherwise?—

“but, equally and even more importantly, it is very keen to see more people in decently paid jobs. That has been the focus of this Government right from 2010. Of course, there will be a correlation: if we see a reduction in zero-hours contracts and people are employed on better contracts where they have regular hours, we expect we will see”––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 16 October 2014; c. 123, Q282.]

the tax take going up.

Let us look at that paragraph. We can set aside the fact that the word “better” was used by the Economic Secretary and simply look at the fact that the Treasury says that if we get people on to better contracts with more regular hours and pay, there will be more tax take for the Treasury. That is the whole point of trying to deal with zero-hours contracts. I will repeat myself: unemployment has dropped, which is good, but if that has not brought more tax take into the Treasury, there is obviously a problem with people being underpaid, underemployed, and on zero-hours contracts. The Government must recognise and deal with that. Even their own Economic Secretary is saying that the tax take would be increased if people were on better contracts that were not zero-hours or underemployment.

Andy McDonald (Labour, Middlesbrough)

Does my hon. Friend agree that if someone is on a contract that varies between 10 hours and 20 hours a week, or perhaps 25 hours or five hours a week, a permanent contract for 37.5 hours a week is better?

Ian Murray (Labour, Edinburgh South)

It is a better contract because the person is able to earn, plan and pay tax into the system like everyone else. That is exactly what the Economic Secretary said. She was asked why the country’s tax take is flat if unemployment is dropping. The answer is because of underemployment and poor pay. The hon. Member for Wyre Forest is correct that she clarified her remarks later, but she talked about the therapists on zero-hours contracts who worked for private clients, whom she knew when she was involved with a charity. We have never denied that people should be able to choose to be on a zero-hours contract—in some instances, it is essentially freelancing—but we must deal with the people who are forced to be on zero-hours contracts because they have no other opportunities.

The Economic Secretary talked about better contracts. The hon. Member for Wyre Forest said that she clarified her use of the word “better”, but she used it in that context. However, she was clear that this issue is about the overall tax take to the Treasury, which she admitted is harmed by the contracts that people are on.

Mark Garnier rose—

Ian Murray (Labour, Edinburgh South)

I see that the hon. Gentleman has the transcript in front of him. No doubt, he is going to selectively quote something. In the interests of fairness, I am happy to give way to the hon. Gentleman, who is frantically reading that piece of paper, so he can tell us what the Economic Secretary actually said.

Mark Garnier In question 312, I said:

“The economy needs x hours to be worked, and if some people are on zero-hours contracts and some people are on fixed-hours contracts, the aggregate will be the same.”

The response was:

“Yes, I absolutely agree. My point is more that the Treasury’s interest is to see more people in work, on any form of hours”.––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 16 October 2014; c. 131, Q312.]

That absolutely clarifies the point about the tax take. The tax take is irrelevant because, whether people are on fixed-hours or zero-hours contracts, the same number of hours are worked. The Opposition seem to be struggling with that simple economic point.

Ian Murray (Labour, Edinburgh South)

I appreciate the opportunity to respond to that intervention. The hon. Gentleman is trying to clarify the issue, but I think he is fundamentally wrong. I give him two out of 10 for trying. I have the transcript in front of me, and he is right that he said:

“The economy needs x hours to be worked, and if some people are on zero-hours contracts and some people are on fixed-hours contracts, the aggregate will be the same.”

That is not true, is it? If 100 people work a certain number of hours and are below the tax allowance and 20 people are on 35-hour contracts, the tax take will not be the same. The 100 people do not pay tax until they reach the tax allowance threshold, but those who are on the 35-hour contracts do. Therefore, the hon. Gentleman’s point is not correct. If the tax take to the Treasury is the same, we should deal with people on zero-hours contracts because one person’s gain should not be somebody else’s loss. We should make it fair for everybody. I hope the hon. Gentleman will reflect on the fact that the tax take is certainly not the same.

Some companies use the tax credit system, in terms of the number of contracted hours they give employees, to maximise the tax credit system. The tax system is actually subsidising employers to pay poverty wages to their employees, who are the most important part of the business. At the same time, there have been significant cuts to corporation tax. We must put mechanisms in place to ensure employees are paid proper wages. I hope I have clarified that issue.

Amendment 237 would enable the Government to introduce regulations to allow employment tribunals to enforce the provisions on zero-hours contracts. Let me tell the Committee why we tabled the amendment. I have the transcript of our debate during which I questioned the Minister for Business and Enterprise on this issue. He did not seem to know what the consequences will be for people who are on exclusive zero-hours contracts. Although we agree that exclusivity is part of the problem, it is only a small part of the jigsaw of the problems that arise from zero-hours contracts. The Minister for Business and Enterprise singularly failed to understand that if somebody who is on an exclusive zero-hours contract has no way of enforcing their rights against their employer, there is no point in the regulation. It is like saying murder is illegal, but if a person murders somebody there is no way of taking action against them. It is like saying, “Just don’t do it because it would be bad.”

When I asked about enforcing the rights against exclusive zero-hours contracts, the Minister for Business and Enterprise said that they would be enforced through the normal employment tribunal system—in fact, he did not go as far as to say the employment tribunal system, but said the normal regulatory system. I said:

“But you lose your job. How do you enforce against the loss of your job in the example you have given?”

That is, if someone is offered a zero-hours contract but refuses to take it under the law, how is that enforced? The Minister replied:

“In the same way that you enforce against any loss of job if it is not done properly.”––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 16 October 2014; c. 124, Q287.]

I asked: “In what way?” The Minister said:

“Employment law applies in order to ensure that if people lose their job in an inappropriate way, there is redress against that.”––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 16 October 2014; c. 125, Q288.]

But that is not included in the Bill.

How can there be redress? If an employer says to a potential employee, “Here is your contract of employment”, and it is a zero-hours contract including an exclusivity clause, the potential employee says, “Hold on a second, exclusivity contracts are illegal.” The employer can say, “What are you going to do about it?”, or, “Take it or leave it.” In essence, we end up having exclusivity by the back door. That is an extreme example, but people are frightened of exercising their rights with an employer, and even if they decide to exercise their rights, how can they do so in the circumstances, because there is no ability to have redress with the zero-hours contracts?

I hope the Minister will resolve some of the issues. That is what our amendment is about. We are asking the Secretary of State to come back with regulations to allow us to see how things will be enforced. They might state the length of the qualifying period, which is two years at the moment, so someone would have to be on an illegal exclusive zero-hours contract for more than two years. Will the early conciliation process at ACAS be included, which is a legal requirement now? Will any fee be payable to enter an employment tribunal to enforce those rights? Will an imposition of penalties on the employer be among the remedies available? At the moment, the legislation does not include any of those matters. Sarah Veale of the TUC said:

“It is actually quite extraordinary to have a breach of employment rights proposed in a Bill without any kind of penalty”.––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 14 October 2014; c. 71, Q162.]

That is what we are trying to address about exclusivity contracts.

Let me move on to the right to fixed hours. Amendment 242 is a probing amendment about when a person who is employed on a zero-hours contract has in effect worked those fixed hours regularly for a period of time and should therefore be entitled to request a contract that defaults to those hours. The Opposition is clear that employees should have a right to demand a regular contract if they are in practice working regular hours for a certain period of time.

There is indeed a case to be made for people having an automatic right to a fixed-hours contract after a certain period. It is unacceptable that people can be on zero-hours contracts for years and years on 35 to 40 hours a week, but not even be offered a full-time contract if they are doing the regular hours. In response to the questions on internships and work experience, the Under-Secretary said that if people are working regular hours for a regular time doing a regular job, they should be paid a regular salary. The same applies with regard to zero-hours contracts.

Peter Cheese of the Chartered Institute of Personnel and Development came to speak to us during our evidence sessions. Research from the institute has shown that 83% of staff on zero-hours contracts have been engaged for longer than six months and 65% have been engaged for two years or more. Another witness commented:

“We have a situation, then, in which 65% of staff on zero-hours contracts have been there for two years or more. That is not short-term need”.––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 14 October 2014; c. 27, Q54.]

The whole point of zero-hours contracts was to deal with short-term need and fluctuations in seasonal employment or because of emergencies. We appreciate that there are situations in which employers require workers on a zero- hours basis. However, under amendment 242, employers would be able to refuse a request only if they were able to demonstrate that their business needs would not be met by any other form of contract. As I said, seasonal work would be an example.

Amendment 243 is fairly minor, but would none the less make a crucial change. The Secretary of State would have to bring forward regulations to make provisions to secure the position that zero-hours contract workers are not bound to an employer by any form of exclusivity. The Bill says that the Secretary of State “may” bring forward regulations. I know the change is slightly technical, but we think that the issue is so important that “may” should be changed so that the Secretary of State has to bring the regulations forward in this instance, to examine some of the issues and the position we are in.

Amendment 244 is on compensation. The shadow Business Secretary, my hon. Friend the Member for Streatham (Mr Umunna), said on Second Reading that we should ensure that those on zero-hours contracts have the right to compensation if shifts are cancelled at short notice. That is the right thing to do. People may have arranged child care, travelled, or altered other plans, only to be told at short notice that they are not needed that day. There should be some compensation for that.

John Robertson (Labour, Glasgow North West)

Order. As the Committee is due to meet again this afternoon, would the Government Whip like to move that we adjourn?

Graham Brady (Conservative, Altrincham and Sale West)

I remind the Committee that with this we are discussing the following:

Government amendment 30.

Amendment 242, in clause 139, page 127, line 11, at end insert—

‘(4) For this purpose, an employer will be legally obliged to offer a fixed hours contract when a worker has worked regular hours over six months of continuous employment, where the worker will have an option to refuse the offer.

(5) The Secretary of State shall by regulations make provision for the determination of “regular hours” under subsection (4).”.

Amendment 243, in clause 139, page 127, line 13, leave out “may by regulations” and insert

“shall bring forward regulations to”

Amendment 241, in clause 139, page 128, line 4, at end add—

“(f) extending provisions to prevent “effective exclusivity” through conferring further rights on zero hours workers.”

Amendment 244, in clause 139, page 128, line 4, at end insert—

‘(5A) For the purposes of section 5(c), the Secretary of State shall require an employer to pay compensation to workers when—

(a) the said worker is requested to work, turns up for work, and is subsequently given less than minimum level of hours worked; or

(b) the said worker is requested to work, but the work is cancelled at short notice.

(5B) The Secretary of State shall by regulations define “compensation”, “short notice” and “minimum levels” under this section.”

Amendment 245, in clause 139, page 128, line 4, after subsection (5)(e) insert—

“(f) extending provisions to prevent “effective exclusivity” through conferring further rights on zero hours workers.”

Amendment 229, in clause 139, page 128, line 25, at end insert—

“27C Power to make further provision in respect of transparency of zero hours workers terms and conditions

(1) The Secretary of State may by regulations make provision to require employers to provide basic information about terms and conditions to all zero hours workers within two months of their start date.”

Ian Murray (Labour, Edinburgh South)

Mr Brady, I am delighted to see you in the Chair for what is disappointingly our last sitting. Remind me never to play poker with you—your face looked as though you were genuinely disappointed. You missed a wonderful sitting this morning, probably the best we have ever had. I will not recap what we went through, unless you wish me to do so.

When we broke for lunch, I had just got to amendment 244, and I was about to say that my hon. Friend the shadow Business Secretary, the Member for Streatham (Mr Umunna), said on Second Reading:

“We would...ensure that employees on zero-hours contracts...had a right to compensation if shifts were cancelled at short notice.”—[Official Report, 16 July 2014; Vol. 584, c. 925.]

People often turn up to work at great expense—they could be arranging child care and could already have paid for travel, and these things take time to organise and cost money. We have heard instances of people receiving texts within a few hours of the shift starting, or when they have just arrived at their place of work, to say that they will not be needed that day. That is unacceptable.

Peter Cheese, the chief executive of the Chartered Institute of Personnel and Development, told us in the evidence session:

“another area where we could see there were some concerns amongst people on zero-hours contracts was if they were called in to work at short notice and that work was then not subsequently provided. So, for example, they had to travel for half an hour, arrive for work and then be told, ‘Really sorry, but the shift is not available.’ We think there should be some form of compensation for that. Again that is a reflection of what we saw as good practice around zero-hours contracts. We see a number of employers that already do that as a matter of course.”––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 14 October 2014; c. 65, Q146.]

By ensuring that workers can seek redress, unscrupulous employers will be dissuaded from cancelling work at short notice. That is something that the CBI has also recognised and supported. In its March 2014 zero-hours briefing, it stated:

“A ban on offering shifts at short notice...is not in the interests of the workers on zero hours contracts, whose interests are best served by always being offered work opportunities with the freedom to decline them. An intervention which creates a simple formula for compensation due to zero hours employees when a shift is cancelled at short notice—two hours pay for example—would be better targeted.”

What consideration has the Minister has given to a compensatory element for people who are travelling to work or have turned up for a shift to be told that there is no work available? Will she respond directly to the CBI’s and the CIPD’s claims that a compensatory element would be progress towards trying to deal with some of the more extreme elements of zero-hours contracts?

Amendment 229 aims to bring clarity to workers on zero-hour contracts by allowing the Secretary of State to introduce regulations requiring employers to set out the terms and conditions of that contract. It is important that people know what their rights are at work, because if they do not know their rights, they can never enforce them. We have seen in some of the analysis of zero-hours contracts that a significant proportion of people do not even know that they are on such contracts. We heard the story of someone who had worked on a zero-hours contract for some considerable time and who gone to her GP to seek advice on an illness. She had been told that being off work would be okay, because she would be signed off work and paid sick pay. She was then told that her contract did not allow that—she was on a zero-hours contract that did not allow for sick pay. She had left work on a sick note but could not be paid.

Peter Cheese, the chief executive of the CIPD, said:

“First, we see that many workers do not fully understand all of their rights and terms and conditions. We think it is a good thing—and we saw evidence of companies doing this as a matter of course—for businesses to give their contract workers their terms and conditions, which should call out some of the things that we are describing through the Bill.”––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 14 October 2014; c. 64, Q146.]

The CIPD’s research has shown that there is a considerable lack of awareness among employees with regard to their contracts.

In conclusion, we need to see a recovery built on slightly more than a drop in unemployment achieved by zero-hours contracts and underemployment. We need a recovery for the many, not the few. I could not agree with the Economic Secretary more: we aspire to better contracts for people. We hope that the Minister will reflect on some of our helpful changes to this part of the Bill and use the opportunity to deal with the scourge of zero-hours contracts and their exploitation. If the Minister refuses, it will be up to the next Labour Government in May 2015 to deliver on that promise.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

We know that there are parts of the economy where individuals are on zero-hours contracts. The Office for National Statistics labour force survey reports that about 622,000 individuals are on such contracts, and separate ONS survey works shows that there may be 1.4 million of these contracts in existence. The two figures are not the same because there might be some individuals who are on more than one zero-hours contract, and it is of course possible that some individuals are on a zero-hours contract but, because of confusion around their employment status, they do not recognise it as such. The number of individuals might lie between those two figures.

We recognise there are problems. The hon. Member for Edinburgh East, who is no longer in her place, mentioned control within a relationship. Clearly zero-hours contracts have a place in the labour market. There are many individuals for whom they work well, and they have flexibility as a worker to decide when they work. In our evidence sessions, we heard even from the TUC that there are individuals who work happily under a zero-hours contract model. The suggestion from some quarters—not the Opposition Front Bench—of totally banning this form of contract because of the difficulties with it might have a superficial attraction, but when one digs into it, one finds there are many individuals for whom the model works well.

In addition, there is the question of definition and what a minimum number of hours should be. If individuals do not want to work every week or a minimum number of hours, this sort of contract can give flexibility. The key is to ensure that it is used in a genuine reciprocal arrangement with flexibility on both sides of the relationship, rather than the control being only in one direction. In the legislation we are taking forward we are trying to deal with that issue.

Iain Wright (Labour, Hartlepool)

Given how up to date I am with contemporary music, I have no idea of a One Direction song, so I cannot quote back.

The Minister made the point that there is a place for zero-hours in the economy. I agree, but does she think that the substantial rise in the number of zero-hours contracts in the past four or five years is good or bad for the economy, society and our citizens?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I think the hon. Member for Middlesbrough made the point that it is always better to have a full-time contract, but I think that depends on the individual. Some people will be very happy with the arrangement. CIPD research shows that most people are happy and do not wish to work more hours than they currently receive on a zero-hours contract. It is important to note that the average number of hours on such contracts is 22 a week. The contract is about having a flexible approach and that can be good.

A rise in flexibility in the labour market can be a good thing, but it depends on the circumstances of the individual. There are clearly some people for whom it is not a good thing. They do not necessarily have that choice about whether to accept a shift. For me, it is not about saying the rise in zero-hours contracts is good or bad. The judgment should be based on individual circumstances. Where employers use zero-hours contracts in a responsible way that is fair and good. Where they are abused and people are exploited, whether there is a rise or not, that is not good.

Anne Marie Morris (Conservative, Newton Abbot)

My hon. Friend is right. Tourism is a huge part of the economy in my constituency and this sort of contract helps businesses manage their trade, which is inevitably not as predictable as they would like, given the weather. So I think there is definitely a place for them.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

The hon. Lady makes the sensible point that there are different sectors of the economy and parts of the country where flexibility is helpful and enables local economies to thrive.

Iain Wright (Labour, Hartlepool)

The Minister has obviously had a very good lunch, because she is being incredibly generous. [ Interruption. ] It was meant to be a compliment. Is she as concerned as I am that sectors of the economy that previously had full-time, stable employment seem to be moving towards zero-hours contracts? In sectors such as further education and universities, people are not being paid in the summer holidays and constituents have written to me to say that that is becoming the norm. Does she agree that that is unacceptable?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

On whether I had had a good lunch, I hope that the hon. Gentleman was not intending to cast aspersions. The hon. Member for Edinburgh South suggested from a sedentary position that I had had a liquid lunch. I confirm that I sat in the Members’ Tea Room and had a cup of tea and a can of Lilt.

Iain Wright (Labour, Hartlepool)

I was trying to be nice.

Jo Swinson (Liberal Democrat, East Dunbartonshire)

I am sure that the hon. Gentleman was trying to be nice, as he always does. He asked whether zero-hours contracts should be the norm in certain sectors. I have a degree of concern if such contracts are the default for everyone in a sector. Clearly the ability to respond to short-term demand and seasonal conditions—if a firm gets a sudden big order and so on—are examples of circumstances in which it is perfectly reasonable to have a degree of flexibility. However, in some parts of our economy this practice has become the norm and that is a concern. That is why in addition to the measures proposed in the Bill, we are pursuing non-legislative measures to try to get to an agreed view from business in different sectors about what responsible use of zero-hours contracts looks like.

Amendment 237 seeks to provide a route of redress for zero-hours workers through an employment tribunal, allowing for regulations to set out the details. I am happy to assure the Opposition that that will be possible through the order-making power in proposed new section 27B(5) of the Employment Rights Act 1996.

The Government have recently consulted on potential avoidance and routes of redress. That consultation closed on Monday and we will consider the 70 or so responses before we make a decision. If those responses suggest it is necessary, we will consider redress as part of our response. To give the Committee clarity on the types of redress that could be made in such regulations as are already included in the Bill:

“Provision that may be made by regulations under subsection (1) includes provision for…imposing financial penalties on employers; requiring employers to pay compensation to zero hours workers; conferring jurisdiction on employment tribunals; conferring rights on zero hours workers.”

A range of different types of redress are already provided for in the Bill, so the amendment is not necessary.

Amendment 242 would force employers to offer fixed or minimum hours contracts once an individual has worked regular hours over six months of continuous employment unless the individual chooses to refuse. It is important to set out some of the action that the Government have taken in this area.

On 30 June the Flexible Working Regulations 2014 came into force, which made changes to extend the statutory right to request flexible working to all employees with 26 weeks’ continuous service, so that they can make a request to change their working pattern. As was discussed in oral evidence, an individual hired on a zero-hours contract can be an employee. In response to the point made by the hon. Member for Edinburgh South, the Minister for Business and Enterprise wrote to the Committee on 22 October to clarify that point. As such, employees can make a request to change their working pattern under those amended regulations, which could include regular shifts. That is a major step forward.

However, zero-hours contracts are used for a range of different business reasons and, as my hon. Friends have explained, they can be justified. That flexibility might be negatively affected if there was an automatic conversion from zero hours to a guaranteed number of hours at an arbitrary point.

Ian Murray (Labour, Edinburgh South)

That is an interesting point. Would I be right to suggest that someone who has the continuous service period under the flexible working arrangements and who is on a zero-hours contract would have the right to request, and that the request would be turned down only if there was a reasonable business reason for doing so?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

The hon. Gentleman is absolutely correct. That is the case, because the Government have introduced that useful provision.

If there was an automatic changeover to a guaranteed number of hours, there would also be a risk that employers could decide either to let people go or to offer no work after a period of time in order to avoid having to convert the contract. We do not want to go down a route that might lead to such unintended consequences. I believe that our response to the situation is proportionate and appropriate.

I have been slightly chastised by the Opposition for saying that we talk about semantics in Committee. It is quite right that we do so, and line-by-line scrutiny is important. Amendment 243, which would change the discretionary element of the Secretary of State’s order-making power, is one such example. Currently, the Secretary of State may produce regulations, but the amendment is designed to ensure that they must do so. We have consulted on the matter, and because we still need to assess the responses to that consultation, we need to retain the flexibility that the current wording allows. If the responses to the consultation indicate that regulations are not necessary, we will not introduce them. However, I give the Committee an assurance that if regulations are required, we will act.

Amendments 241 and 245 are both designed to enable the Secretary of State to expand or amend the definition of exclusivity. The thinking behind that is that the current definition is too narrow, but I think that the definition in proposed new section 27A(3) of the 1996 Act is sufficiently broad. It covers any provision in a zero-hours contract that prohibits working for others, as well as any requirement to seek permission to do so, or any requirement for someone to be available at all times. Therefore, I do not think that the proposed extension of the definition is necessary.

Ian Murray (Labour, Edinburgh South)

Does the Minister acknowledge that in a normal workplace, someone could be offered an exclusivity contract and if they turned that contract down, they would not get the job or they would be zeroed out? Does she realise that that would be a practical conclusion for employers who do not think that the measures can be enforced? In addition, if I have been in work for four months and have a contract that contains exclusivity, how can I possibly enforce that?

Jo Swinson (Liberal Democrat, East Dunbartonshire)

This goes back to the earlier amendment. We have consulted on the question of what redress should be available to individuals to ensure that there can be no avoidance of the ban on exclusivity in zero-hours contracts. It is right for us to look at and assess the 70-plus consultation responses that have come in and introduce specific measures on how we can avoid the sort of circumstances that the hon. Gentleman has outlined. I absolutely understand his point.

Amendment 244 would provide for a system in which employers pay compensation to workers when they cancel shifts at short notice. Late-notice cancellations are clearly an issue for some individuals, as we heard in the evidence sessions, so I have some sympathy with the spirit of the amendment and the thinking behind it. Responsible employers will not expect people to be on call or to turn up, having made other arrangements and incurred the cost of travel, and then be randomly sent home without having earned any money. It is fair to recognise that the definition of short notice may differ in different circumstances, depending on the type of work or the length of an individual’s journey to work, and that is not an easy definition to get right in secondary legislation. Similarly, the amount of compensation might have to differ to ensure that it was meaningful and act as a deterrent to that behaviour without being disproportionate.

We should also recognise that there could be unintended consequences. We do not want employers to avoid planning shifts too far in advance in case they have to cancel them, and instead to invite people into work at short notice. That would also be pretty disruptive for individuals, who may have to arrange child care or make other changes in their life. That could mean that they were less able to take advantage of the work that was offered. We must ensure that we do not have such unintended consequences, but I recognise that there is a genuine issue, which is why the legislation we are bringing through is only part of the Government’s response to the issues raised by zero-hours contracts.

As the hon. Member for Edinburgh South said, business organisations such as the CBI and the CIPD have also recognised that there are issues with how these contracts are sometimes used. That is why we want to introduce sector-specific codes of practice on what the responsible use of zero-hours contracts looks like. I am sure that we will work closely with a range of representative bodies, including employee representatives, to provide guidance that can be more bespoke, specific and tailored to individual sectors.

Amendment 229 is designed to ensure that individuals on zero-hours contracts have the right to written terms and conditions. Currently, everyone on a zero-hours contract who is an employees is entitled to a written statement of particulars within two months of starting work, as a result of section 1 of the Employment Rights Act 1996. I understand the principle behind the amendment, because knowing one’s employment rights, and one’s employer knowing what they have to do, depends on knowing one’s employment status and therefore whether one is an employee or a worker, which can sometimes be complex and confusing to determine.

That is why last month, as I mentioned, my right hon. Friend the Secretary of State for Business, Innovation and Skills announced a review of employment status to seek ways to clarify the current framework and assess whether employment rights—such as the right to written terms and conditions—are getting to the right people. The issue of written particulars raised in the amendment will be considered as part of the review; indeed, it will be considered more broadly than only in the context of zero-hours workers, because it is relevant more widely.

I was asked about the issue of sick pay in relation to zero-hours contracts, which is an interesting one. If someone is an employee, being on what looks like a zero-hours contract does not mean that they do not have the employment rights of an employee. If the facts are that they are actually an employee working regular hours, their right to sick pay and so on exists as a result of what is actually the case, rather than what is written down. Such an employee is eligible for rights, which can of course ultimately be enforced. Nevertheless, we recognise the need for further clarity, which is why we are undertaking a review.

Having dealt with the Opposition amendments, I want to explain Government amendment 30, which although somewhat technical is still legally important for a specific reason, which I hope to explain. The intention behind clause 139 is to protect individuals who work under zero-hours contracts from unfair practices. There is obviously broad agreement that exclusivity terms in zero-hours contracts are unfair, and that we should therefore make them unenforceable. However, since the Bill was introduced, we have recognised that that could have an unintended consequence, which is what the amendment addresses.

There is a risk that the provision on exclusivity clauses could, in a small number of cases, create a situation wherein the individual on a zero-hours contract is less able to show they have the employment status of employee when things go wrong. That could make the difference between whether the individual is deemed to be an employee or worker, and so affect whether they get the additional rights associated with that status. Employees work under a contract of employment; workers who are not also employees work under a contract for service, which is different.

When things go wrong, employment status is usually decided in court, where a range of factors—not only the contract—is considered. One factor that a court can take into account is the mutuality of obligation between the two parties. For a contract of employment to exist, both the employer and the individual have to commit to something. In that situation, the commitment to remain exclusive to a single employer could be used by the court to strengthen the case for mutuality of obligation and therefore to determine that a contract of employment exists with the associated additional rights.

The intention behind the amendment is to ensure that courts can consider an exclusivity clause in a contract when they are trying to determine whether a contract of employment exists, even though the clause itself is unenforceable. I want to reassure the Committee that the change will deal with what we think will be a very small number of cases. None the less, we do not want to reduce people’s ability to put their case and get their rights as employees. Exclusivity clauses will still be unenforceable. The purpose of the amendment is to protect individuals in a specific circumstance. I hope that the Committee will support the Government amendment, and that the hon. Member for Edinburgh South will withdraw his amendments.

Ian Murray (Labour, Edinburgh South)

From the Minister’s response, it seems that the Government are conducting a number of reviews into how zero-hours contracts operate. I hope they will reflect on the robust and lively discussion we had before lunch, in which the Opposition spoke about how we feel about zero-hours contracts and about the steps that have to be taken to ensure people are paid properly for a day’s work and are not exploited. We unanimously agree that zero-hours contracts have a place in a modern economy. The Minister mentioned the mutuality of obligation, and there must be a mutuality of obligation on the employers to ensure they provide work to people on those contracts. Our amendments would push it a little further to ensure that happens.

I am delighted that the Minister confirmed that the new flexible working arrangements will allow someone with six months’ continuous service to request a contract. In a number of instances, that may happen. If people on zero-hours contracts work an average of 22 hours, many may come forward, and it should not cause problems for the way that businesses operate. However, I am disappointed that the Minister did not accept the compensatory element, which the CIPD and the CBI think is an incredibly good idea. It is clearly unacceptable for people to turn up and not be offered any work.

Finally, I am still unclear about how the measures will be enforced. The other Minister, the right hon. Member for West Suffolk, got himself into an incredible tangle during the evidence sessions when he tried to explain how they will be enforced. There is a big issue about people being zeroed out—that is the terminology—which means that they end up with no hours after challenging their employer about their contract, so they are essentially left unemployed.

I will not press amendments 242, 243, 241, 245 and 229 on the basis of the Minister’s explanations. We will reflect on them and we may come back on Report. However, I wish to test the view of the Committee on amendment 237, on enforcement, and amendment 244, on the compensatory element.

Clause 140 - Regulations in connection with public sector exit payments

Matthew Hancock (Conservative, West Suffolk)

It is a pleasure to be back on my feet again, Mr Brady.

Clauses 140, 141 and 142 are designed to enable the recovery of exit payments when a high-earning individual returns to the same part of the public sector shortly after their exit. The Government have taken difficult decisions to support the economic recovery. Sometimes, that has necessitated the restructuring of the public sector. In doing so, exit payments have played a vital role in supporting those public sector employees who have, voluntarily or otherwise, left public service. Such payments have helped support them while they have moved into retirement or found new work.

Between March 2008 and March 2014, for every job lost in the public sector, three have been created in the private sector. However, it is unacceptable that highly paid public sector workers should be able to receive a generous redundancy package and then shortly rejoin the same part of the public sector, with no obligation to repay some of the payment. Exit payments, made at public expense and the taxpayer’s expense, should not be regarded as an added bonus when there is a swift return to work. Clause 140 will therefore provide the Treasury with powers to make regulations to ensure a consistent approach within the public sector, so that exit payments made to high earners will be repaid to the public sector.

Ian Murray (Labour, Edinburgh South)

It is a delight to see the Minister back in his place. Is it not the case that with these clauses the Government are closing the door after the horse has bolted? Part of the reason why they are doing this is their botched privatisation of the national health service, and their top-down reorganisation that at the general election they promised would not happen.

Matthew Hancock (Conservative, West Suffolk)

Of course, this will apply across the public sector but the changes that we have made to the NHS have saved £1.5 billion every year and reduced the number of managers. That money has been put straight back into the front line, which is why the number of doctors and nurses has risen. What would be more interesting would be to hear whether the hon. Gentleman supports the idea of making sure that public sector exit payments for people who then re-enter the same part of the public sector are paid back. We have not heard a word on whether they should pay it back. He chose in his intervention to say something completely different rather than to express support for a change that most people across the country would regard as only fair.

It is intended that the provisions will apply only to high earners. Those who rejoin public sector employment within a month will repay the whole of the payment. Those who rejoin after a month, but less than a year, will be required to repay less, proportionate to the time they have spent outside public sector employment. It is also intended that the regulations will only bite on those who stay within the same part of the public sector, such as a senior local government employee taking on a job with a different authority. The measures will not apply to those who move between different parts of the public sector—for instance, if someone in the armed forces decided to become a teacher. The regulations will set out in detail the moves that will be caught, and the Government will provide the draft regulations during the Bill’s passage through Parliament.

Members will note that the measures extend to the UK as a whole. The Government are aware that the provisions impact on devolved responsibilities, and we are in discussions with the devolved Administrations to seek their support for legislative consent motions. The provisions will underpin, rather than replace, measures being taken forward by individual employers, who may choose to go further in some cases. The intention is to apply these rules to the widest possible range of public bodies, including local government, independent and arm’s length bodies, and companies owned by the Government. The Government believe that to be necessary to ensure fairness and consistency across all public sector employers.

Ian Murray (Labour, Edinburgh South)

The Minister ran through the devolved and public sector bodies that the measures will cover. Will the regulations cover a situation whereby a council makes workers redundant and an outside contractor then provides the same service, taking back on those particular workers if they have not been TUPE’d across?

Matthew Hancock (Conservative, West Suffolk)

The regulations have not yet been published but will be during the passage of the Bill. This is about the public sector in the first instance, but I am sure the hon. Gentleman will set out his thoughts on that in more detail.

Clause 141 sets out further details of the powers contained in clause 140. To answer the hon. Gentleman’s question, exit payments may require repayment from individuals returning to a specified public sector office or as an employee or contractor of a specified public sector authority. Subsection (3) sets out a number of provisions that the regulations may include. I shall not repeat them all, but I would like to highlight a few, which will answer his question more directly. First, the regulations will provide for consequences for individuals who have failed to repay when required to do so. We think that it is proper and fitting for those individuals who try to flout the rules to be held responsible. Secondly, they will enable regulations to place an obligation on an individual to provide certain information about prior exit packages. That will assist employers in ensuring that repayments are made when due.

Thirdly, regulations will provide for the ability to exempt individuals from full or partial recovery of the exit payment in specified circumstances. That may be necessary to enable swift moves within Government to address a crisis, and could be used in individual cases where exceptional circumstances apply. Fourthly, the regulations can require a person to repay less than the whole amount, enabling repayment to be in proportion to the time that has elapsed between the two jobs. For instance, a high earner who spends nearly a year out of work in the public sector will not have to repay as much as a high earner who is only absent for a week. Taken together with clause 140, that will provide the Treasury with powers to regulate the recovery of exit payments for high earners who return to a prescribed part of the public sector within a defined period.

Ian Murray (Labour, Edinburgh South)

The Minister is reading out a whole host of regulations on how this would work, but I am still unclear. If someone is made redundant from the national health service and the Government then privatise that part of the national health service, that person might be taken back at a senior managerial level. Is that covered, on the basis that the public purse still pays their salary because it signs the cheque to deliver the service? The private company might require someone to be in that position.

Matthew Hancock (Conservative, West Suffolk)

Yes. We are looking to catch those returning as contractors but also where it is within the same part of what is ultimately public service. Clause 142 confers on the Secretary of State a power to waive the requirement of the payment recovery system provided for by clauses 140 and 141. It sets out specific circumstances in which payment recovery could be waived for an individual or specified categories of worker. Subsection (4) provides for that power to be delegated to Scottish Ministers, the Department of Finance and Personnel in Northern Ireland and Welsh Ministers, where the function falls within those devolved competencies.

Toby Perkins (Labour, Chesterfield)

Would the Minister clarify? If a public sector worker left one part of the national health service and went to work for a different part, would he, to use the Minister’s description, be caught by this, or is it only if they return to the same institution?

Matthew Hancock (Conservative, West Suffolk)

It is not only if they return to the same institution. The regulations will specify in more detail how the same part of the public sector, which is the phrase used, is defined. It is not necessarily only within the same organisation. For instance, a senior officer in one local authority who is made redundant and moves immediately, or very shortly, to another local authority would be covered. Within the NHS, if they stayed within the area of health, they could be covered. That will be specified in more detail in the regulations.

We recognise that the recovery procedures may sometimes be too prescriptive, for instance if there is a sudden change in the machinery of Government which requires the abolition of a body or where it might be in the wider public interest, or offer value for money, to waive the exit payment. Alternatively, there may be situations where it is important to recruit key personnel or where recovery would cause hardship. We anticipate that the waiver will only be used in exceptional circumstances and it will be subject to robust transparency requirements. Where exit payments are not a devolved matter, the power is vested in Ministers accountable to Parliament. Where exit payments have been devolved, the clauses provide for parallel lines of accountability within the devolved authorities.

There are additional controls in the clause. The regulations may contain provisions for the Treasury to exercise direct control over the waiver by a consent regime or, alternatively, to prescribe in Treasury directions the circumstances in which they will be used.

I commend the clause to the Committee. It ensures that we can tackle the challenge of those who are given high exit payments and then move to the same part of the public sector.

Clause 143 - Consequential amendments, repeals and revocations

Matthew Hancock (Conservative, West Suffolk)

I beg to move amendment 209, in clause 143, page 130, line 35, after “Act” insert

“(other than section (Exclusion of home businesses from Part 2 of the Landlord and Tenant Act 1954) as it applies in Wales)”

Graham Brady (Conservative, Altrincham and Sale West)

With this it will be convenient to discuss the following:

Government amendments 210 to 215

Government new clause 11—Exclusion of home businesses from Part 2 of the Landlord and Tenant Act 1954.

Matthew Hancock (Conservative, West Suffolk)

New clause 11 will help further support the growth of home business. The Government amendments that are grouped with it are consequential and technical. It will support that growth by removing the current incentive for landlords to bar tenants from operating a business from their home. There are some 4.9 million small and medium-sized businesses in the UK and of those, around 2.9 million are home businesses. Businesses operated from home are of growing importance to the economy with an increase of half a million since 2010. As technology improves, the broadband roll-out continues and the internet becomes ever more part of our lives, we can only expect that trend to move in that direction.

Of course, there are obstacles to those wanting to run a business from home. We want the sector to continue to flourish so we are committed to do what we can to remove those obstacles. It is all part of our larger goal to make Britain the best place in the world to start and grow a business. For those who rent their home, things can be particularly complicated. Many tenants state that landlords can be wary of letting them run a home business. Indeed, residential tenancy agreements often include a prohibition on business use. One reason is that the current legislation encourages landlords to do so. Section 23 of the Landlord and Tenant Act 1954 provides that where there is a business use of a property, a business tenancy exists. Because business tenancies enjoy greater security of tenure, residential landlords are keen to avoid them as they fear it will be more difficult to get their property back at the end of a lease. New clause 11 is intended to address that by amending part II of the 1954 Act to exclude home businesses from its provisions.

First, we are inserting a new subsection into the 1954 Act. It deals with the instance whereby a landlord initially includes a prohibition on business use, but subsequently agrees to home business use, defined as a business of a kind that might reasonably be carried on at home.

Secondly, the new clause will add new section 43ZA, which applies where a dwelling is let as a home and the tenancy allows a home business use from the outset or subject to the landlord’s consent. The amendment establishes a basic definition of a home business to ensure that only businesses that would reasonably be carried out in a home benefit from the exemption in relation to part II of the 1954 Act.

For the avoidance of doubt that pubs that incorporate living accommodation are not a home business, section 43ZA(5) provides that the sale of alcohol for consumption on the premises is not to be treated as a home business. The regulation-making power in subsection 43A(6) allows cases of what is and is not a home business to be prescribed. I think, though, that the main provision is sufficiently clear that the use of this power may not be needed.

I should also make it clear that the provisions will not interfere with existing tenancies. Under subsection (5) of the new clause the provisions apply only to tenancies entered into after they come into force.

Subject to the National Assembly’s agreement to a Legislative Consent Motion, the provisions will apply to both England and Wales. Amendments 209 to 215 provide for the coming into force and regulation-making powers associated with new clause 11 to be exercised by Ministers in the Welsh Government.

I hope that the provisions will give certainty for both residential landlords and tenants, make landlords more amenable to home business use, and remove an obstacle to tenants in the rented sector enjoying the benefits of running a home business. It is difficult to argue against that, and I hope that all members of the Committee will see that the new clause and amendments are a sensible updating of the law to reflect how we increasingly use our homes.

Clause 144 - Transitional, transitory or saving provision

Clause 145 - Supplementary provision about regulations

Clause 147 - Extent

Clause 148 - Commencement

Matthew Hancock (Conservative, West Suffolk)

I beg to move amendment 191, in clause 148, page 132, line 22, at end insert—

“() in Part 5, section (Funding for free of charge early years provision);”

Graham Brady (Conservative, Altrincham and Sale West)

With this it will be convenient to discuss Government new clause 7— Funding for free of charge early years provision .

Matthew Hancock (Conservative, West Suffolk)

New clause 7 is intended to support the introduction of the early years pupil premium. The Government have committed £50 million of additional funding in 2015-16 to the early years pupil premium to provide extra support of £300 per pupil for up to 170,000 of the most disadvantaged three and four-year-olds. That creates a joined-up policy commitment to closing the gap that provides additional support for the most disadvantaged children, and it supports other measures in the Bill that are supportive of closing the educational gap for two, three, and four-year-olds.

The proposed amended power will be used to support the extension. From April 2015, all early years settings will provide a funded early education place to a disadvantaged three or four-year-old and will receive this additional premium. The key thing is that the amendment allows local authorities to use HMRC tax credit data and DWP benefits data to check the eligibility of children and ensure that early years providers receive the additional funding relating to the early education entitlement.

As we have discussed before in this Committee, high-quality early years education can make a real difference to academic attainment and can close the gap. The Sutton Trust has estimated that there is a 19-month gap in school readiness between the most and least disadvantaged children. The provision will complement an additional set of policies and target funding towards those three and four-year-olds who will most benefit from the additional investment.

For the premium to work, it is essential that local authorities can identify eligible children. This amendment will make it easier for them to do so, allowing local authorities to allocate funding to schools, nurseries and other providers who have eligible children in their setting. Without the change, local authorities would have to implement complex and burdensome paper checks in order to assess eligibility.

The change was supported by 75% of respondents to a recent consultation. The data will be secure. Local authorities already access relevant tax credit and social security data without problems to assess eligibility for the entitlement for two-year-olds and for free school meals. The clauses are consistent with the Data Protection Act 1998. The data will be accessed only by the Secretary of State, local authorities or individuals acting on their behalf. Moreover, the data will be disclosed only for the purpose of checking eligibility for the additional funding for free early education and for the early years pupil premium. In addition, the legislation provides for a criminal sanction if the data are misused.

Finally, amendment 191 amends clause 148 to ensure that the provisions contained in the new clause come into force upon the Bill’s receiving Royal Assent.

New Clause 1 - Small and medium sized businesses: information to finance platforms

New Clause 2 - Sections 4 to 5: interpretation

New Clause 3 - Small and micro business regulations: further provision

New Clause 6 - Shadow directors: provision for Northern Ireland

New Clause 7 - Funding for free of charge early years provision

New Clause 8 - Sections 110 to113: further amendments

New Clause 11 - Exclusion of home businesses from Part 2 of the Landlord and Tenant Act 1954

New Clause 4 - Government impact on small business performance: duty to report

Toby Perkins (Labour, Chesterfield)

I beg to move, That the clause be read a Second time.

As members of the Committee will know from what they have heard over the past few weeks, the Opposition strongly believe that Ministers should be accountable to Parliament for their performance in supporting British businesses and British small businesses in particular. Ministers must be accountable to Parliament for their performance in managing the national health service. As the lifeblood of our economy, businesses require the same focus and support from Government.

For that reason, we have tabled new clause 4, which builds on the principles in clause 14, already passed by the Committee. That clause creates a duty for the Secretary of State to report on progress on streamlining company regulations. The new clause would create a duty for the Secretary of State to make a statement to the House at the end of every financial year outlining what the Government have done to support British small and medium-sized businesses in the previous 12 months.

The new clause would focus the mind of the Government and all future Governments not just on supporting the economy in general terms but on what they are specifically doing to support small businesses and ensure that their concerns are taken seriously. There would be pressure on this and all future Governments to think, as they head towards that annual statement, about what they were doing and what they could say in that report to Parliament about their support for small business. That would be a useful tool in ensuring that the Government were held to account regularly and that the House had an opportunity to assess the Government’s record in that specific way.

Britain’s small businesses are at a competitive disadvantage in some ways, because of the serial problems with lack of access to finance, the issue of skills and the many other matters we have debated in this Committee and many others. The new clause would ensure that the Government and, more importantly, the next Labour Government have the opportunity to come to the House and, I hope, speak proudly about their record. In the event that there were concerns that Members of Parliament wished to raise, there would be a day in every year when the focus of parliamentary debate would be on the Government record on small businesses, and we would hold Ministers to account.

I do not wish to detain the Committee any longer. The new clause is pretty straightforward and obvious. It is one of those things that, once we have read it, we wonder why we have not done it already. It is so simple that it is brilliant. Without further ado, therefore, I humbly ask the Committee to consider my new clause and, I hope, to give it their wholehearted and full-throated support.

Matthew Hancock (Conservative, West Suffolk)

The hon. Gentleman has made several contributions and I have enjoyed listening to all of them at great length. He has made a suitably short contribution just now to say that the new clause is so simple it should be easy to support. Indeed, it is so simple that it is in large part already law. All Departments in Government must already produce an annual report.

However, I am grateful for the opportunity to reiterate the Government’s support for small businesses. As the hon. Gentleman will know, this Government are strongly committed to supporting small businesses to innovate, grow, create jobs and compete, which is why we have before us the first ever small business Bill. For instance, we introduced the employment allowance and retail rates release, cut corporation tax, reduced the burden of regulation and made it easier to employ people. We have a more stable economy thanks to our long-term economic plan.

The hon. Gentleman did just mention that it would be more important to have the report under a future Labour Government. It is certainly true that should the Labour party ever come back to office, many small business people up and down the land would rue the day and worry about what it would hold. I am pleased to reassure him that every Department is already required to produce an annual report to consider and cover its achievements over the past year; they are chock-a-block these days.

Such reports are scrutinised by the relevant Select Committees. I highlight in particular the work of the Select Committee on Business, Innovation and Skills, which ensures that my Department is held to account for delivering support for small businesses. One focus of my time as the Minister for Business and Enterprise has been to ensure that all Departments consider their impact on smaller businesses. Departments must already report on material policies, so all Departments involved in small business policy include that information in their annual reports.

I am absolutely clear that the Department for Business, Innovation and Skills is committed to producing a report on the impact on small businesses. We had one last year when we published “Small Business: GREAT Ambition” on the first Small Business Saturday, introduced by this Government, and we are committed to doing so in future. There are a host of welcome opportunities to debate business policy before the House. Does the hon. Gentleman want to intervene?

Toby Perkins (Labour, Chesterfield)

I thought the Minister would never ask. I have two things to say briefly. First, he focused on my remarks about the next Labour Government. For his diary, the date will be 8 May 2015. The reason why I made that point is that in terms of the passage of the Bill, that is when the first such annual statement would be made. Secondly, saying that it is already being delivered because the Department does a report in general terms shows that he has not entirely understood what we are proposing.

Matthew Hancock (Conservative, West Suffolk)

No, indeed. The annual report is important. Our report last year, “Small Business: GREAT Ambition”, was about doing precisely that, and I am clear that BIS will do so in future. There is a legislative requirement, but more than that, there is the enthusiastic will on both Front Benches to do so. I agree with the hon. Gentleman that under a Labour Government it would be even more important, given the enormous damage done to small businesses’ prospects by past Labour Governments, and we would not want that repeated should Labour ever get back into office, which is looking increasingly unlikely. On that basis, I hope that hon. Members have found my explanation reassuring and will withdraw their amendment.

Toby Perkins (Labour, Chesterfield)

The Minister’s speech apparently combusted at the very mention of the word “Rochester”.

Matthew Hancock (Conservative, West Suffolk)

I did not hear the word “Rochester”.

Stephen Doughty (Labour, Cardiff South and Penarth)

He will be hearing it.

Toby Perkins (Labour, Chesterfield)

Yes. They used to claim to be a listening Government, but now they cannot even hear the word “Rochester”.

In conclusion, I am grateful for what the Minister has said about the importance of reporting back to the House regularly. He is right to say that it is important for all Governments of whatever stripe—to be non-partisan for a rare moment—are held to account on the matter. I think that this would be a useful provision, so I would like to test the will of the Committee. It would be helpful, if the Minister is saying, “Actually, yes, we did this last year and we intend to do it in future years,” to get that on the statute book and make it a regular thing so that all Governments are held to account for their record in supporting small businesses in particular, as opposed to their more general record in terms of what they do.

New Clause 5 - Companies: dealing with suppliers

New Clause 9 - Duty to keep register updated

New Schedule 1 - Abolition of requirements to hold meetings; opted-out creditors - ‘Part 1 - Company insolvency

Part 2 - Individual insolvency

Matthew Hancock (Conservative, West Suffolk)

On a point of order, Mr Brady. I would like to take the opportunity to thank you and your fellow Chairmen for your exceptional chairmanship of the Committee. At this point, it is normal for the lead Minister to say, “It has been a pleasure to serve under your chairmanship,” and it really has been. Your guidance to those of us who were new to the experience of leading a Bill through Committee has been—how shall I put it?—necessary, and extremely gratefully received.

This is the first ever small business Bill, and I thank first and foremost my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood), who has supported me as my Parliamentary Private Secretary and is recovering well; my hon. Friend the Member for Newark, who stepped in when she was taken ill and is sitting behind me now; and our Whip, my hon. Friend the Member for Central Devon, who has worked hard, along with the Opposition Whip, to keep us to time. There has been much collaboration on the logistical arrangements, if not always on the votes.

Furthermore, I extend my thanks to those who have worked behind the scenes to help the Committee to run smoothly, including the Clerks, Hansard, the doorkeepers and especially my officials from the seven Departments involved in this Bill: the Department for Business, Innovation and Skills, the Treasury, HMRC, UK Export Finance, the Department for Education, the Cabinet Office, the Department for Communities and Local Government, and particularly my Bill team, who have been tremendous and worked incredibly hard during preparation of the Bill and for whom there is yet more fun to come.

I thank all members of the Committee, not least for the way in which we have conducted our proceedings and debates, which in almost their entirety has been positive. We have had good and thorough debate. Finally, I thank my fellow Minister. The teamwork at ministerial level has been enjoyable and successful.

We have scrutinised the Bill thoroughly and in full. We have not been constrained by time.

“Some people see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon.”

So said Sir Winston Churchill. He was a great man and he was right.

We are committed to seeking the best ways to support small businesses to make Britain the best place in the world to start and to grow businesses. I look forward to the Bill’s continued scrutiny on Report as we continue in this task. I thank all involved and look forward to the Bill’s swift passage into law.

Toby Perkins (Labour, Chesterfield)

I would like to add my thanks on behalf of my hon. Friends to you, Mr Brady, and to the other Chairs. You missed a real treat in a sitting that Mr Robertson chaired, but you will have to read about that in Hansard. All the Chairs have done a tremendous job.

I also thank all the people who have supported the Committee’s work, including the people on the Bill Committee team who have supported us with many excellent amendments that the Government have chose not to support and the one they did support, even if that was inadvertent. I thank the Minister’s Bill team. I had the impression that we were often hearing speeches at exactly the same time as he was. It was good that he was at least able to follow them. That helped the smooth running of the Committee.

Finally, I thank everyone who has been on the Committee, which has been conducted constructively and helpfully. We look forward to its further passage and hope that it continues to be in that constructive vein. There is no question but that small businesses are incredibly important to the future growth of our economy. They are the lifeblood of our economy and we should all be working as hard as we can to give them the support they need to help Britain on its path towards recovery.

Graham Brady (Conservative, Altrincham and Sale West)

I add my thanks to the Clerks, those who have supported the Committee and members of the Committee for good humour and good manners, at least when I have been in the Chair. I have one last, pleasant duty to perform: to put the final question.