Jon Mendelsohn on the government’s painfully slow progress in providing real support for SMEs
The Enterprise Bill will have its Second Reading in the Lords on Monday. Touted by BIS as a demonstration of the government’s commitment to back British firms, the legislation seeks to cement the UK’s position as the best place in Europe to start and grow a business.
Despite the title of the Bill giving the impression that its contents mainly relate to enterprise, the focus of the legislation is rather more varied. It ranges from the establishment of a Small Business Commissioner (SBC) to regulators and business impact targets, from the extension of the Primary Authority Scheme to apprenticeships, late payment of insurance claims, non-domestic ratings and industrial development, and last but not least public sector exit payments. If that isn’t enough, Treasury media briefings have suggested that the new Sunday trading laws could be introduced into the Bill at some point – although this may in fact end up being sneakily introduced into the Cities Bill without Peers being given a proper chance to scrutinise the detail.
Labour welcomes the introduction of a Commissioner. Indeed, we fought for stronger rights for SMEs during the last session of Parliament, both in the Consumer Rights Act and the Small Business, Enterprise and Employment Act. Our attempts however, were constantly batted back by Ministers, with promises of future legislation that time and time again prove hollow or disappointingly piecemeal. Especially when it came to helping reinforce the position of those small firms who regularly have to deal with late payments from large companies – something that frankly is a national scandal.
The establishment of the SBC is a step in the right direction. The Commissioner has the power to provide general advice about dispute resolution, and can consider complaints about payment related matters and publish recommendations. But in a strange twist, those companies that continue to delay payments will not be legally bound to follow those recommendations, with nothing to prevent them from whole-heartedly ignoring the Commissioner’s will. In fact, the government had not applied a single lesson learnt in the establishment of similar roles across the world to the Bill, which means it is devoid of the key powers that led to success. On late payments for example, the Australian model is only just starting to properly address the acute problem they have, using reporting requirements that we suggested here during the passage of the Small Business Bill.
Bizarrely, there is even a clause in the Bill which gives the Secretary of State the power to abolish the Commissioner with the swift stoke of an administrative pen – something that goes against everything the legislation is meant to stand for. We have become used to Ministers offering up shoddily drafted Bills in the Lords in the course of this Parliament – on childcare, devolution, and energy reform – but some of what it is included in this one defies logic.
Measures elsewhere in the Bill to strengthen the quality of apprenticeships are welcome but the related website is illustrating this ‘change’ with little more than a rebranding of traditional, low-paid school-leaver jobs in catering, clerical and retail work. Instead of placing resources into hitting a meaningless, numerical target, the government should concentrate on providing something a little more high value and high quality.
The most alarming aspect of the Bill is the proposal on public sector exit payments. Ministerial rhetoric suggests these provisions are aimed at pay-outs to senior members of staff on high salaries. Yet there seems to be no lower cap to protect those on more moderate incomes, for example midwives, social workers and youth support workers. Many long-serving staff in these roles could find their employment terminated close to what would have previously been a retirement date.
There are so many important issues that would make a real difference to business and enterprise that are waiting on the government to develop sound practical policies. Labour therefore, will not hesitate to pursue amendments to achieve the Bill’s objectives, whether through improving insolvency law to ensure that there are no longer incentives to close companies as the taxpayer picks up the tab, or by providing a greater chance to rescue jobs by protecting viable but distressed firms. We will also address cyber security and the millions of criminal acts of fraud that target the operation of markets and UK businesses.
As is often the case in the Lords, Peers from all sides will approach this legislation with a view to improving what are broadly welcome plans. But surely Ministers will certainly see the irony that their principal argument in resisting firmer action has been the importance of ‘cultural change’. Not least, as they have had three disappointing attempts at doing so – via three separate Bills – in the past two years.
Lord Jon Mendelsohn is Shadow BIS Minister in the House of Lords
Published 8th October 2015