Enterprise Bill [ Lords ] (First sitting): 9th February 2016

Bill Esterson
I thank my hon. Friend for her intervention. The whole area of the supply chain and whether the Government have thought through some of the implications of exactly that example are among the challenges that we have tried to deal with not just through this group of amendments but elsewhere by giving the small business commissioner the opportunity to be as effective as possible. One of the problems of the commissioner only dealing with larger businesses is that they miss an opportunity and may be constrained in many ways, an example of which my hon. Friend has just given.

This group of amendments seeks to remove a potential obstacle to the small business commissioner’s being as effective as possible. Other amendments attempt to do the same thing with other elements of the way in which the Government have structured the office.​

The Bill allows for the appointment and dismissal of the commissioner by the Secretary of State, yet the relationship between the Government and small business is one concern raised by small businesses. If we want to address the difficulties faced by small businesses, we need to do so in full. For the commissioner to be as effective as possible, we need them to feel able to challenge the Government, particularly given that contracting with and late payment by the Government are problems raised by small businesses. If a commissioner has at the back of their mind the thought of their potential removal —indeed, if the appointment of a commissioner is on the basis that Government relationships with small businesses will not be challenged—the independence of the commissioner may well be in question.

The amendments seek to avoid the potential conflict of interest by using an existing arrangement—a Crown appointment—which is in place for appointments of the Information Commissioner and of the Parliamentary Commissioner for Administration, who is appointed by the Crown on the advice of both Houses of Parliament. The experience of Crown appointments suggests that for the small business commissioner to be as effective as possible, they will need to maintain the confidence of all stakeholders and all those in the process. The position should not just be an instrument of government, but be able to work collaboratively and collectively with the Government, small business, the media, academics and other stakeholders in the economic cycle.

In Australia in 2003, Victoria’s small business commissioner was established. Over the entire period—during which all the other states have adopted a small business commissioner, and there is also a federal one—an effective commissioner has marshalled the arguments, evidence and capacity of a body established by the Government in order to be most effective, to build the confidence of business, and to be a body capable of acting separately from the Government. We want to see that model but we are concerned that the structure, as defined in the Bill and the explanatory notes, suggests that the position is no more than a rebadged office of the Department.

If the position of small business commissioner is to work and to provide valuable, long-term strength to the small business environment, it needs to be fully independent. We need an effective small business commissioner, and one of the most important things that will make that person effective is the ability to appoint their staff. The Lords amendment allowing the commissioner to appoint their own staff was an important step in the right direction, and we hope that the Government will not attempt to remove it. In fact, they have not tabled any attempt to do so but we will see whether they try to later, and we hope that they will not.

The Minister for Small Business, Industry and Enterprise (Anna Soubry)
indicated assent.

Bill Esterson
I am pleased that the Minister is confirming that from a sedentary position.

If the small business commissioner is to be as effective as possible on late payments, we need someone who can work not on the basis of a press release or the exhortations of Members of whichever House but constructively ​with businesses, learning the right lessons and creating the right solutions. That means not being an appointee of the Secretary of State, doing the Secretary of State’s bidding or wondering whether the Secretary of State will intervene with the potential for abolition.

It is important to note that the Institute of Directors has been forthright in its support of the amendments. The institute represents many directors, owners and operators of small businesses, so I suggest that it is worth listening to what it has to say:

“Together, these amendments would give the Small Business Commissioner a stronger footing from which to be a champion for small business. We fear that the possibility of abolition by the Secretary of State could potentially negatively impact the ability of the Small Business Commissioner to challenge that same Secretary of State. We hope for and anticipate a positive working relationship between the Commissioner and the Secretary of State”.

Lucy Frazer (South East Cambridgeshire) (Con)
It is a pleasure to serve under your chairmanship, Sir David. I want to ask the hon. Gentleman a question, for clarification. Do these two clauses stand alone, or are they conjoined? Would the hon. Gentleman be pressing for the appointment he suggests if there were not a successful amendment to include public authorities?

Bill Esterson
We are debating the first set of amendments, which are about appointment and dismissal. We will come to public bodies later. However, it is relevant to speak about them both; I have done so because the independence of the commissioner enables small businesses to have confidence that they can deal with the commissioner and that the commissioner will not be constrained by their relationship with Government, either in relation to other businesses or the public sector.
 
Mary Creagh
It is, of course, a pleasure to serve under your chairmanship, Sir David—my apologies for failing to pay that courtesy earlier.

Is there not a wider point about public appointments and open competition? The Groceries Code Adjudicator was appointed after open competition. The great merit of putting out an advertisement and seeing who wants the job is that all sorts of people apply who may not be on the cocktails and canapés circuit frequented, perhaps, by the Secretary of State for Business, Innovation and Skills. Is there not also a gender equality point, which is that people sometimes appoint in their own image and we end up, sadly, with an establishment group of figures who all—dare I say it— tend to look like many of the MPs in this place? We end up with a self-perpetuating group of people who may not be acting in the interests of the entrepreneurs. Many of the new entrepreneurs who have started will be young, tech savvy people. To see one of the usual suspects appointed to this position might risk alienating some of the people who might have need for his or her services.
 
Bill Esterson
I thank my hon. Friend for reminding us about the difference in how the Groceries Code Adjudicator has been set up. We will talk about the Groceries Code Adjudicator at a number of points during our deliberations. Indeed, we will be discussing an amendment later on the need to review the performance of that office so far.
 
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
It is a pleasure to serve under your chairmanship, Sir David.

Does my hon. Friend share my view that this is such an important issue for small businesses because we know that the issue of late payment, in particular, is a real challenge for them? It is in the Government’s interest that this body is as influential and powerful as it can be and that those small businesses see it as a visible presence and feel that it is their champion, not the Government’s or anybody else’s.

Bill Esterson
My hon. Friend is absolutely right. This is why we have tabled not just these amendments, but others, which are about making the post as effective as possible, so that it really is about championing business. This is the Enterprise Bill: it is about promoting enterprise as best we can. Small businesses are absolutely critical to driving enterprise, pushing forward productivity and improving the overall state of the economy. Getting this post right is a great opportunity to do just that. The interventions of both my hon. Friends just now demonstrate the importance of getting that appointment process right, so that the best person possible is appointed. As my hon. Friend the Member for Wakefield said, opening it up to the widest field possible is an important way of doing just that.

The commissioner will be someone whose terms of reference are quite clear. As things stand, he will be the creature of, and appointed by, the Secretary of State, and will have little security of employment, given the ability of the Secretary of State to dismiss him or her at the drop of a hat. He will be capable of being thrown out at the whim of a Minister. It would afford the business community a sense of confidence if our amendments were adopted. A small business that has problems with payment and other concerns about administration will find that this place person is in a job that affords the small business little or no protection or opportunity for redress of an independent character. At the end of the day, the operation of the office, as things stand, will be subject to the most minimal scrutiny and the report will be given, not to Parliament, but to the Secretary of State alone, which leaves one with grave concerns.

In the other place, the Minister said that if the commissioner was ineffective, there would be grounds for abolition. Surely the point is to set the post up in the first place to ensure that it is effective by giving him or her the necessary powers and independence. That means being outside the control or remit of the Department or the Secretary of State.

The Regulatory Reform Committee made an assessment which said:

“We therefore consider that it is inappropriate for the Bill to confer on the Secretary of State a Henry VIII power to abolish the Small Business Commissioner without any of the procedural restrictions (beyond the need for an affirmative resolution in each House) of the nature set out in the Public Bodies Act 2011, particularly that requiring consultation”.

I am concerned, as are my hon. Friends, that the general perception of how this provision was planned and developed under-appreciated the role that the body should play. The estimate is that it will deal with 500 complaints. I mentioned the Victoria commission in Australia. It dealt with 430 complaints of a comparative ​nature in its first year. Victoria is a state with 5.8 million people, a GDP perhaps one-tenth the size of that of the UK and with perhaps one-fifteenth of the number of small businesses. It had 430 cases, while our commissioner is planning to handle 500. That does not seem very ambitious for the role of the small business commissioner. Perhaps that is related to the way that it has been set up as part of the Department, reporting directly to the Secretary of State.

If the small business commissioner is set up only to address a tiny amount of work, it might raise the question how serious the Government are about making a difference to small businesses. Some might even suspect that the Government do not really intend for the office to be a great success and that therefore they will be in a position to deliver abolition down the line. It would be a great shame if that were the case.

The Government say that they envisage the role of the small business commissioner evolving over time. The workload grows and as businesses grow accustomed to the idea that there is someone to turn to, that is a likely development. If that happens, how will the office cope with the increased workload? Perhaps the Minister will consider that in her response. Remember, BIS faces sizable budget cuts. How will the small business commissioner be protected from those cuts, let alone be in a position to recruit additional staff?

We know that late payment is a significant problem, as my hon. Friend the Member for Newcastle upon Tyne North reminded us in her intervention. The 500 anticipated cases a year will be the tip of the iceberg. What will happen if the small business commissioner does not have the opportunity to expand his or her office? The issue of who appoints and whether the office can be abolished by Ministers is part of the wider question of whether the office will be effective or not, a point made very well on Second Reading by the hon. Member for Huntingdon (Mr Djanogly). It was also made many times by Members of the other place across the parties.

Catherine McKinnell
My hon. Friend is making a very important point. I wonder whether the Government have considered the importance of the role of the small business commissioner and the number of businesses that are likely to get in touch with them, because there is such a gap in the market for advice for small businesses. I know that from my constituency postbag, many small businesses come to me looking for advice and signposting for where they can get help and advice. My hon. Friend rightly points out that the proper resourcing and independence of the post are important for businesses to feel confident in the service provided.

Bill Esterson
My hon. Friend is right: businesses will expect this office to be able to handle their complaints. We might reasonably expect the level of complaints to be significantly higher than 500 from a small-business population of well over 5 million. It is not a good idea when standing on one’s feet, Mr Amess, to calculate the proportion of small businesses that would be involved if more than 500 out of 5 million were to approach the small business commissioner. I am sure somebody can work it out and give us the figure at some point. It is certainly a very small number.

Catherine McKinnell
To clarify, I feel the reason so many businesses come to me as an MP for advice on this issue is because the support and assistance provided to small businesses under the previous Labour Government disappeared in 2010. That has had a huge impact on small businesses and their ability to understand and navigate the system to find help and advice. Therefore, they come to their MP. I am always pleased to hear from businesses but it is a gap in the system in that they do not know where to go locally.

Bill Esterson
That is an excellent point. Like my hon. Friend, I find myself performing some of the roles and responsibilities set out for the small business commissioner on behalf of my constituents. Having been owner of a small business, I have sometimes been able to point them in the right direction. We would expect the small business commissioner to be in a position to give advice, support and encouragement. Later amendments will look at how that might be achieved if that office is to be given additional responsibilities.

Hannah Bardell (Livingston) (SNP)
It is a pleasure to serve under your chairmanship, Sir David. Does the hon. Gentleman share our concern? We are aware that the Government have targets for prompt payment but, as some Governments do, they have occasion to miss those targets. If the commissioner does not have the power in that jurisdiction, he or she cannot bring the Government and other larger organisations into line.
 
Bill Esterson
I thank the hon. Lady for her intervention, with which I agree. We will deal with that point in more detail in the next set of amendments, although it does have an impact on the appointment and dismissal process, as she rightly points out.

We want the commissioner to be effective. We want him or her to be able to help with late payments and to look at what other functions might make good additions as the office evolves, and that includes the point made by the hon. Lady.

The Federation of Small Businesses, the Institute of Directors and the British Chambers of Commerce often offer good advice, legal services and access to discounted business products such as insurance, and they are also good at helping businesses with disputes, but they are member organisations. Not every small business has a lawyer or accountant who is able to offer the full range of services. Many small businesses will need the office of the commissioner—just as an advice service was available under the previous Labour Government for businesses that had nowhere else to go—to provide advice, support, encouragement and dispute resolution directly, rather than just signposting elsewhere.

If the Minister expects the small business commissioner to signpost to those excellent organisations, she will need to ensure they can cope, because they might face a deluge of additional work. They have raised that concern with me, and no doubt also with the Minister. She will need to ensure that every business that approaches the small business commissioner wants to go to a membership organisation, where, of course, they will have to pay a fee—because I suspect that the Institute of Directors, the Federation of Small Businesses and the chambers of commerce will continue to charge for their services, as ​will solicitors, accountants and other professionals, if that is what the intention is when it comes to signposting. The small business commissioner will therefore also need to be in a position to develop his or her own capacity to help with disputes, whether related to late payment or not, to consider developing an advice and support function, and to look at areas such as procurement in the supply chain.

The ability to explore the options as the office develops will be restricted if the small business commissioner is, in reality, restricted by his or her relationship with the Department for Business, Innovation and Skills. We want the small business commissioner to have the chance to be as effective as possible, and an important part of developing that effectiveness will be the way in which the small business commissioner is set up and his ability to operate as independently as possible. Otherwise, the question will remain whether the small business commissioner has the teeth to deliver for business and do the job of enabling enterprise to flourish.

The amendments to make the small business commissioner a Crown appointment are based on the legislation that set up the office of the Information Commissioner. The Information Commissioner is a public body, sponsored by a Department—the Ministry of Justice. In the case of the small business commissioner, we propose that BIS would sponsor the small business commissioner, so that he would not simply be part of the Department, answerable only to the Secretary of State. The Information Commissioner reports directly to Parliament. The office cannot be abolished by the Secretary of State; the individual office holder cannot be removed by the Secretary of State. The office’s decisions are supervised by the courts, not the Department. That is the level of independence afforded by a Crown appointment, and that is what is needed for the small business commissioner to be as effective as possible and to deliver for small businesses and enterprise.

The Australian model, for example, is not an appointment by a Minister; it is an appointment by the Governor-General, the Queen’s representative. That is the direct equivalent of what we are proposing. Three significant steps in the right direction were taken in the other place on this matter. The first was the designation of the small business commissioner as a corporation sole. The second was the amendment to have the small business commissioner appoint his own staff. The third was the new requirements on the Secretary of State to consult on any proposal to abolish the role. That is certainly a sign that we are moving in the right direction. It is a heartening indication that there is a shared sense that the small business commissioner needs to be free to act in the interest of small business. [Interruption.] I am fascinated to know what the Minister thinks is interesting, having heard what she has just said—she is very welcome to intervene and tell me. She is going to wait until her response.

Late payments and unfair payment terms are a long- term problem and they call for a long-term solution, with a role that is absolutely protected from the outset. These amendments to strengthen the independence of the small business commissioner offer that protection. The current commitment to establishing the role—the commitment to championing the interests of small businesses—is laudable. By strengthening the independence of the small business commissioner, our amendment ​would capture that commitment and change the conditions of appointment, removal and abolition of the post, which, as they stand, may leave the small business commissioner vulnerable in future.

That is a level of protection that remains even if the small business commissioner’s role sets him on a collision course with the Government of the day, as happened with the Information Commissioner over NHS IT programmes and the citizen information project. The Information Commissioner disagreed with the Government and did so publicly. We need that protection for the role of the small business commissioner—a clear statement in the legislation that says, “This post is here to stay and it will stand independent of Government, no matter the political priorities or budget constraints of the day.”

Establishing the small business commissioner as a corporation sole is a step in the right direction, but a corporation sole is more about the continuity of the post. It allows the post to pass without interval from one office holder to the next. It lays powers and legal status with the office, not the office holder, securing a level of continuity as the post passes from one person to the next. It gives the office holder some guarantee of independence, but the level of independence needed for the small business commissioner is not guaranteed purely by virtue of a designation of corporation sole.

Removing the ability of the Secretary of State to abolish the role is the key. If the small business commissioner is not appointed by, cannot be removed by and cannot be abolished by the Secretary of State, then he really achieves independence. This is the distinction between a corporation sole and a Crown appointment, and that is why our amendments are so important.

Anna Soubry
It is a pleasure to serve under your chairmanship, Sir David. I hope that I am right in this, but I would like somebody to check: I note that 50% of the members of this Committee are men, which means that membership is half men and half women. I do not know whether that is a first, but it certainly must be for a business Bill going through this House. It is a welcome development. Too often, in my experience, the highest levels of businesses tend to be dominated by men. I just thought I would say that.

Catherine McKinnell
I very much agree with the point that the Minister has made, but I must say that it is Labour that has upped the ante in terms of female representation on this Committee. As ever, in terms of 50:50, the Government are letting us down.
 
Anna Soubry
I am not responding to that; the hon. Lady may be right.

I will address my comments to the amendment moved by the hon. Member for Sefton Central. I will rebut much of what has been said by establishing the history of how the small business commissioner came to be placed within the Enterprise Bill. I agree with everything he said about the value to the economy of small businesses. We are absolutely and utterly agreed on that. We understand their huge value and their importance to building a successful economy.​

The idea started with the Conservative party manifesto commitment to consider setting up a conciliation service specifically on the point of late payment, which as we all know is a serious matter for concern, notably for small businesses. Having come into office, as I considered how to achieve that, it became obvious that there are already a number of ways to supply such a service. That is the sort of matter that we will undoubtedly debate in this Committee. Having learned of the great workings of the Australian small business commissioner—hon. Members will hear much about the work of Mark Brennan; I have spoken to him at length—I came to the conclusion, and I assure hon. Members that my Secretary of State absolutely agreed, that a small business commissioner should be created specifically to address the problem of late payment.

I put it on the record clearly: it would be utterly bizarre of this Government to want to positively create an office with the apparent intention of abolishing it at some later date. The idea has come from me and the Secretary of State; it is a position that we want. We would love for the position to abolish itself in time, because we would love it if there were no complaints about late payment. Unfortunately, we think that is an ideal that we will not achieve, however much we might strive.

Kevin Brennan
The Minister is making a reasonable point, but she knows that she cannot fetter what future Administrations of any party do. Neither can we, but we can ensure that the body cannot be abolished at the whim of a Minister rather than by going through some other due process.

Anna Soubry
It would not be abolished at the whim of any Minister.

Catherine McKinnell
I agree that the Minister is making a reasonable point, but does she accept that the Government are being cautious in setting up the body, possibly out of fear that it could become more powerful than she anticipates? If it begins to direct any concern towards the Government or state changes that the Government ought to be making to support small businesses, it will run the risk of a conflict of interest with the Government’s direct appointment of the commissioner.

Anna Soubry
It may be a surprise, but I do not agree with the hon. Lady. I can understand why she might raise that concern, but I honestly believe that because of how we are introducing the office—it will be a public appointment just like any other—the sort of proposal made by the hon. Lady through the shadow Minister would not make much difference, if any, to the person appointed. I am going to explain why that is.

It is also important that we understand the history of the Australian small business commissioner, which is very different from the history of what we hope to set up with our small business commissioner. In many ways, it was not just a quasi-judicial appointment: he—as it turned out, it was a he—was making decisions on rent and other valuations. That is not what we ​anticipate the role of this commissioner to be. That is really important when we look at powers, appointment and so on.

There is another thing I want to quash. It could be said that if either I or, indeed, the Secretary of State for Business, Innovation and Skills were to appoint somebody in our own image, that might be a good thing, given that I am the daughter of a small businessman and, of course, my right hon. Friend the Secretary of State is the son of a Muslim bus driver who became an outstanding small businessman himself.

We all know that it is absolutely agreed that the person who is appointed will be incredibly important. We know that that person must be independent; that they will have the integrity and ability to command the respect of those large businesses that they will often be tackling, but at the same time have the confidence of small businesses. We know that that person and their abilities are vital, and that is certainly not lost on me or the Secretary of State.

Hannah Bardell
The right hon. Lady is making a powerful speech and strongly advocating for the commissioner. We support the notion of the commissioner, but does she agree that if the commissioner does not have the powers or the teeth to enforce its decisions, it cannot ultimately do justice to its office?

Anna Soubry
That is not part of these amendments, and I want to confine my comments to these. We will have that debate later, as we discuss other amendments.

Mary Creagh
Will the hon. Lady give way?

Anna Soubry
Very briefly.

Mary Creagh
The hon. Lady says that she wants the person appointed to command not just the respect of the large companies and organisations that will be accountable to this person, but the confidence of small businesses. Is not the lesson from the Groceries Code Adjudicator that it is imperative to gain the confidence of small businesses and small suppliers, and that any perception—real or imagined—that this person is the creature of big business would be devastating to this office? This person’s authority comes from the office that they will hold.

Anna Soubry
Hon. Members on both sides need to have confidence in the system that exists, whereby the person we appoint will have all the qualities that we know they must have in order to do the job. That person is going to be the most critical factor in the success of this office. We absolutely know that.

Catherine McKinnell
rose—
 
Anna Soubry
I am not going to give way; otherwise, we will be full of interventions.

Kevin Brennan
She’ll just make a speech if you don’t.

Anna Soubry
I am sorry, but we need to make some progress. The appointment of the small business commissioner by the Secretary of State will not compromise his or her independence. It will be a public appointment, ​subject to all the usual public appointments rules and procedures. There would be little material difference to the appointment process if this were a Crown appointment.

Catherine McKinnell
While the Minister is on her feet, will she clarify exactly why this should not be a Crown appointment, rather than a ministerial one? Will she clarify that for the Committee and members of the public, because it is not clear why that is the case?

Anna Soubry
I absolutely will. A Crown appointment is made on the advice of Ministers. Effectively, we get exactly the same process, but with a different stamp on it. This will be a public appointment that will go through the usual procedures. It will be advertised. As for the idea that this is going to be somebody from the cocktail and canapés circuit, forgive me, but those days have long gone. That is certainly not the way that I operate or that my Secretary of State operates. We take considerable care to make sure we get the right person in place. I actually take a little exception to the idea that I go to cocktail and canapé parties to select someone. I personally make a great effort to ensure that we have people who represent the diversity in our society. I am quite robust in my views, as I am rather anti-establishment, and I will bend over backwards to ensure that we get the right person in place. I am confident that when we advertise this job, a large number of people will come forward with exactly the sort of qualities we need.

The amendments made by the Government in the other place have already increased the independence of the commissioner by giving him or her a separate legal identity as a corporation sole. As we know, the commissioner can appoint staff and receive public funding. Those are the key hallmarks of an independent body. Nothing stands to be gained in practice from the suggested amendments, which would only add considerable delay and complication to getting the commissioner up and running. It is normal practice for the Secretary of State to be able to terminate public appointments. The Secretary of State cannot dismiss a commissioner at will, but only if the individual is unable, unwilling or unfit to perform their functions.

It is good that we are having this debate so that we can give people the confidence in what we hope to achieve and in the mechanisms by which we will make the appointment to get what we all want—an independent small business commissioner who will be utterly focused on looking at late payments, free from any form of interference or abuse of office. The commissioner will have an independent spirit but will come from the right background, so that they have the confidence, most importantly, of small businesses to be their champion in solving the problem of late payments.

Anna Soubry
Again, I shall keep my comments specifically to the amendments. The small business commissioner’s main role will be to address the problem of late payments, and the biggest problem that small businesses face with late payments is bigger businesses not paying them in the way that they want. However, ​there is also a problem with the public sector. Our consultation made it clear that people did not want a duplication of existing ways and means by which small businesses can ensure that public bodies pay on time. If we expanded the small business commissioner’s remit to include public bodies, we would duplicate pre-existing ways of raising a complaint and dealing with the problem.

Caroline Flint
rose—

Mary Creagh
rose—

Anna Soubry
I am going to continue. I will take some interventions, but not yet.

This Government are on the side of small businesses and, in the Public Contracts Regulations 2015, we now have strict rules obliging central Government to ensure that 80% of undisputed invoices are paid within five days. As a result, I am pleased to say that my Department paid 98.6% within five days and 99.5% within 30 days. The first quarter statistics for 2015-16 show that, on average, central Government Departments paid 89% of undisputed invoices in five days. We have set clear rules for how we expect all public authorities to deal with small businesses in particular.

However, notwithstanding the regulations that we introduced, the strong messages that we are sending out and the way in which we are putting into practice what we preach, there is evidence that that does not necessarily go all the way through the supply chain. I think that was the point that the hon. Member for Wakefield was making, and no doubt the concern of the hon. Member for Doncaster—

Caroline Flint
Don Valley.

Anna Soubry
The hon. Member for Don Valley, rather.

Caroline Flint
Right honourable.

Anna Soubry
Sorry, the right hon. Member for Wakefield—

Mary Creagh
No.

Anna Soubry
Oh, she’s not right honourable. Anyway, that was their point, and it is important. At first blush, it looks like a good idea, but there are pre-existing ways of tackling the issue. If we were to extend the small business commissioner’s powers, the danger is that we would duplicate existing ways of curing the problem. It was made clear in our consultation that that was exactly what small businesses did not want. For that reason, I urge hon. Members not to support what looks, at first, like a good idea. The Public Contracts Regulations 2015 are in place, and the guidance is absolutely clear to everyone involved in the spending of public money through public authorities, whether local government or hospital trusts.

If the process is not working, there are ways of curing mischiefs. First, any small business will the ombudsman service available to it. The local government ombudsman is a good example of a pre-existing body that can take up complaints. The second—although I accept that it may not be well known—is the mystery shopper service. I completely accept that its title does not give much clue ​about the huge work it can do, but we know that it is working. I refer hon. Members to one of the excellent speeches—in fact, all her speeches were excellent—of my noble Friend Baroness Neville-Rolfe, who is a Minister in my Department. In Committee in the other place, she gave a really good example from the Ministry of Defence of where a small business in a supply chain had found it was not being paid in the way it should have been. It used the mystery shopper service, which can be done anonymously. The problem was solved and that small business got exactly the result it wanted.

I have no difficulty with ensuring that the influence and investigatory powers of the mystery shopper service are made more widely available. It is a good example of the pre-existing means and methods by which small businesses can take action against public authorities other than going to law. No doubt we will come to this in debates on further amendments, but we have to be very careful, because if a company has agreed to a contract and seeks redress, it will have to go to law. We are looking at alternatives to that, because of what we know about companies pursuing things by way of legal action.

Mary Creagh
I am delighted to hear about Baroness Neville-Rolfe’s conversion to being on the side of the small company, given that she spent most of her career working for Tesco, which has just been censured by the Groceries Code Adjudicator for its massive, systematic non-payment and late payment of small businesses, which was a clear use of late payment for treasury management and an abuse of its suppliers in asking them to pay up-front fees for the privilege of supplying Tesco. There is more joy in heaven over one small sinner that repented, as the prodigal son parable tells us.

I would expect the Department for Business, Innovation and Skills to pay its suppliers on time. If the Government Department charged with looking after small businesses does not do it, what hope is there for the rest of Government? Where is the evidence that the regulations brought in last year have forced changes in payments? For example, is there any evidence of that in the case of the largest purchaser of goods, services and equipment, the Department of Health?

The Chair
Order. This is an intervention rather than a speech, so will the hon. Lady come to a conclusion?

Mary Creagh
I now regret not making a speech—this only came to me as I was listening to the Minister. Is there evidence of any behaviour change towards small businesses in national or local government? Will she set out, for the record, what the mystery shopper service is, because I am sure that people reading Hansard will be keen to know.
 
Anna Soubry
I thought I had read out the figures that show a huge change; I am happy to read them out again. I am resisting all temptation to say that it is rather strange that the Labour party seems to have done diddly squat during the 13 years when they could have solved all these problems. This Government have made a significant change. For the purposes of Hansard, I repeat that BIS paid 96.8% of those undisputed invoices ​within five days and 99.5% within 30 days. I am happy for us to get all the statistics, if they exist, that show the real strides we are taking.

Caroline Flint
rose—

Catherine McKinnell
rose—
 
Anna Soubry
I will give way in a moment. I know that it is difficult for Labour Members—they can dish it out, but they can’t take it. There is real evidence that we are seeing this trickling all the way down. However, as I have conceded—I am being as fair as I hope to be—I am concerned that it is not going all the way down through the supply chain. I have conceded that the name of the mystery shopper service may be a little not brilliant, but what is important is whether it delivers. There is absolute evidence that it does.

I think my noble Friend Baroness Neville-Rolfe would take exception to the rather cheap dig made about her, because she is absolutely on the side of small businesses. I know that she has been involved with a number of small businesses. For the record, she was not on the board of Tesco when it behaved in that unacceptable way. Thank goodness that a Conservative-led Government introduced the Groceries Code Adjudicator to bring Tesco to book—but we are going off the point. She gave a good example from the Ministry of Defence of exactly how the mystery shopper service is working. The more we advertise it, the better.

Caroline Flint
Of course, as head of public affairs, Baroness Neville-Rolfe spent a lot of time defending how Tesco treated farmers and everyone else. The problem is not going to go away, whatever the outcome of these proceedings.

Can the Minister, to help the Committee, provide us with full details in writing of the record of every Department, and maybe also some other parts of the public sector, on payments? The issue is not just about payment from a Department to one supplier; often other, smaller suppliers are subcontracted as well. It goes way beyond that. It is a missed opportunity, particularly for the number of areas of the country, including my own, in which small and medium-sized businesses depend on the public sector in all its variety, not to include them in the Bill.

Anna Soubry
If those figures exist, of course I am more than happy to share them. However, as I have said, the first quarter statistics for 2015-16 show that on average, central Government Departments paid 89%—we have exceeded our own target—of undisputed invoices within five days. However, I absolutely agree with the point that the right hon. Lady was trying to make, which is—

Caroline Flint
Will the Minister give way?

Anna Soubry
At least let me finish my point. My point is that the problem may well exist within the supply chain. We know that regulations from central Government are hugely important in driving the change ​required. We also know three things. First, there are ombudsmen who can absolutely assist in curing such mischief. That is the first place where many small businesses can go. Secondly, there is the mystery shopper service, which, as I have said, is already providing evidence that it is curing the problem.

The third way in which we ensure that cultural change occurs—we must be honest about this—is when a small business comes to us as constituency MPs: we are in a unique position to go to our local authorities. We usually do so rather quietly; it does not have to involve bells and singing and dancing. We speak to the leadership of our local authorities, both officers and councillors—often of our own persuasion, although that matters not—to say, “I have an example of a small business. I won’t give you their name, but I have evidence, and I am concerned. Let’s change the culture within our local authority and do something about it.”

For example, somebody has approached me with a problem relating to a construction project of which I am aware. As the Minister, I am taking that up directly with the chief executive of the hospital trust involved to ensure that the trickle-down of cultural change goes all the way through the supply chain.

Caroline Flint
The Minister makes an interesting point about the role of MPs. One could say the same about MPs going to businesses in communities and making the point there, but the Bill offers support for the small business commissioner to deal with the private sector.

On the point that the Minister made about the percentage of undisputed bills that are sorted, does she not agree that the extent of business that goes on varies enormously across Government? I gently suggest that it might be interesting to compare the transactions between the Department for Business, Innovation and Skills and SMEs with the volume and size in monetary terms of the contracts between the Department of Health, for instance, and the small business community. I would say they are very different. I hope she will write to the Committee to provide more detail about volume and monetary value, because 89% in BIS may be very different from, say, 70% in the Department of Health or elsewhere.

Anna Soubry
The Department of Health, no doubt, has very few contracts because it is not the Department that delivers, but the clinical commissioning groups and hospital trusts. It is important that the Labour party understands how the Government and business work. The Government and the previous Conservative-led Government simplified public sector procurement and abolished the pre-qualification questionnaires for low-value contracts, to back up and assist small businesses and make our lives considerably easier. Those are examples of the real-life things that we have done.

Alan Brown
On the previous point about the trickle-down effect, the Scottish Government are trialling a project bank account system for public procurement, whereby payments to the main contractor go into a project bank account and smaller payments that would normally​trickle down to the supply chain are ring-fenced for sub-contractors and other people in the supply chain. They get their money right away without going through middle men or the main contractor. Is that something that the UK Government will consider in due course?

Anna Soubry
As I said, I am going to try to confine my remarks to the amendments.

Lucy Frazer
The Minister is making a very good point about why public authorities are in a very different position from private entities, but does she agree that the duty of candour in litigation is an additional reason why they are different? When a case is taken against a public authority, it has a duty not to fight it as a commercial entity; fairness, not commercial success, must prevail at the end of the day. That is an additional reason why public authorities are in a different position.

Anna Soubry
I am grateful for my hon. and learned Friend’s very sensible contribution. She reminds us that this is not necessarily about Government. Public authorities are a huge sector in our society, and they rightly have different levels of accountability.

I remind hon. Members of Lord Mendelsohn’s words when this matter was debated in the other place:

“Of course, the origins of the Small Business Commissioner in Australia…came from very different circumstances and functions. In fact, late payment was never really part of the role. It still does not do that much.”—[Official Report, House of Lords, 26 October 2015; Vol. 756, c. GC116.]

We can learn from that experience, but we need to understand that it has different roots and seeks to tackle different problems. We can learn much from it about the qualities needed in the small business commissioner. We must ensure that he or she focuses on the real mischief, which is late payment between bigger and small businesses. We are determined to tackle that problem.

Bill Esterson
There has been a very interesting series of exchanges during the Minister’s remarks. She mentioned the Australian experience and quoted Lord Mendelsohn’s analysis of what happened. The Australian small business commissioner was set up not to resolve late payment, but to deal with a number of other matters, including advice, complaints, mediation and small business support. Mark Brennan, the Victorian small business commissioner, advised that this approach should not be used to go after late payments.

Anna Soubry
I am sorry, Sir David. I did not intend to intervene, but this is important. I spoke to that gentleman, and he gave the most outstanding advice about and support for the small business commissioner’s ability to deal with late payments. He advised me about the qualities that the commissioner needs to act as effectively as he did. It is important that I put that on the record.

Bill Esterson
Lord Mendelsohn had a long meeting with that commissioner and spoke to him a number of times. The clear sense we were given was that the success in Australia has been about other matters; actually, when it comes to late payment, there has not been a ​success. There has not been the progress on late payment and Australia is probably not the place to go to learn about action on late payment. That was the evidence that was taken and very clearly set out by Hansard in the Lords. That is, of course, one reason why we are tabling these amendments: they are about learning from the success that Mark Brennan has had and the advice he has been able to give on those matters.

The Minister talked about success. As my right hon. Friend the Member for Don Valley said in an intervention, we would expect BIS to pay every invoice on time—of course we would. It would be not just bizarre but quite disturbing if BIS did not have a very high success rate when it came to undisputed invoices being paid on time, but that does not take away from the fact that, right across those four Departments, a significant level of late payment still exists. The Federation of Small Businesses figures for 2012 show 27% in local government and 29% in national Government, and my hon. Friend the Member for Newcastle upon Tyne North cited a higher figure of 34%. There is still a phenomenally big problem of late payment in the public sector when it comes to small businesses.

The Minister cited the example of trying to support a construction firm involved with the NHS—I commend her for trying to solve the problem, as others of us have tried. She will have found it almost impossible, I suspect, to prevent the NHS trust from knowing the identity of that construction firm when she took that complaint to them. There is always the risk, as I said earlier, of a loss of business later on. That is one of the concerns expressed again and again by small businesses: that when they complain and put their heads above the parapet, they lose future business. It damages the business relationship irreparably. This is one reason why it is so important that there should be an independent opportunity. We will come to anonymity and confidentiality later.

A large number of small businesses are still involved. The Minister mentioned the point about prequalification questionnaires having been removed. I am sure that she speaks to businesses, as I do, who say they consider it a complete and utter waste of their time to even try to get business directly with the public sector. Their experiences and the experiences of associates, friends, business competitors and collaborators alike, has been of a lack of success in the past.

I do not think we have had an adequate response. I do not think we have dealt with the issues around the supply chain or with the problems around the scale of the problem of paper invoices for small businesses. We did not get an answer about how the mystery shopper scheme works; it is something of a mystery, the Minister seemed to say. I do not think she sounded confident in it herself.

Anna Soubry
I am; it works.

Bill Esterson
I would love to know what the remedy is when the scheme identifies a problem, but we did not hear about that; perhaps we will later. With those remarks, I would like to press the first amendment in the group and test the will of the Committee.

Question put, That the amendment be made.