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Jonathan Djanogly seeks detail on Small Business Commissioner role

2nd February 2016

Speaking in a debate on the Enterprise Bill, Jonathan Djanogly seeks assurances and clarification over the roles of the proposed Small Business Commissioner.

Mr Jonathan Djanogly (Huntingdon) (Con): I declare my interests as stated in the Register of Members’ Financial Interest.

I am always happy to welcome Conservative-proposed legislation that is aimed at assisting the conduct of business, particularly small business, not least because I represent a constituency with one of the largest proportions of small business ownership in the country.

I want to address the role of the small business commissioner proposed by part 1 of the Bill. I am not concerned about the concept of the new role per se—I thoroughly welcome it—but I want to explore its scope and interaction with existing schemes.

On capacity, the new £1.1 million SBC website should handle 390,000 disputes from 70,000 businesses, yet the SBC will deal with only 500 complaints a year. That gives rise to the question of what will happen with the rest of the disputes and what the real impact of the proposal will be. Could the site cope with the workload of significant numbers qualifying for assistance? That remains unclear.

I am also concerned that the background papers are light in identifying what is currently being done to give advice and information to small firms. In other words, is this going to be a consolidation of various existing advice givers, or will it be something new, delivered in a new way?

The law already forces large companies to report payment practices on a six-monthly basis. Likewise, the prompt payment code has been strengthened to start a 60-day maximum payment period. Importantly, the Government have been leading the way by imposing strict payment terms on themselves. All of that is very good, but it would be helpful to further assess whether those issues are working and where the remaining gaps are. I am surprised that the remit of the SBC covers only large private organisations, not public sector ones. I am not sure why that is.

There is also a regime for statutory interest on late payments where there is no contractual provision. Should we not be asking why that has not worked? Can we assume that to be the case, given this proposed legislation? If so, should we not be getting rid of the old fixed interest legislation? Indeed, where it applies, is it simply being ignored by large firms that might be threatening small firms that try to enforce it?

It is impressive that we have a Small Business Minister—the role in itself is a statement of this Conservative Government’s support for small business—and she is doing an excellent job. However, it would be interesting to hear a little more about how the Minister and the commissioner will interact and divide their jobs.

That leads us on to examining what the SBC will actually do. The SBC will take a non-legislative approach and will not give legal advice. There are no proposals to change court rules, and nor do we propose to go down the statutory route for enforced interest or penalties. That is my position, but it would be helpful to hear further justification for discounting the alternatives.

What has been proposed is more mediation and general advice, the complaints procedure and a statutory means for the SBC to make recommendations to the Secretary of State about the publication or provision of advice and information to small businesses. The question is whether the SBC should offer mediation, and the Government are saying no. My concern is that both parties need to agree to mediation, so if the late payer sees that mediation will remain as the low-cost option after a debt summons has been issued against it, why would it bother settling early, especially if one has to pay for mediation recommended by the SBC? I think the position might need to be reviewed. If the position is maintained, it might be smarter to have some kind of penalty or cost implication if one party has refused to attempt mediation before court.

I am also slightly unsure how the SBC will be encouraged to engage in signposting help at an early stage. We will need to tread carefully so as not to allow signposting to become legal advice. On the other hand, the SBC will be able to consider complaints by small companies at an early stage, and that could provide room for conflict. When it comes to providing advice, will that be generic or relevant to the sector in which a company operates, where, for instance, invoice payment times may vary significantly?

The notes focus on late payment advice, but that is only one aspect on which small businesses need help. For instance, a small business may well not have the resources or manpower to check the environmental or child labour practices of a large foreign supplier. Will the SBC help on such an issue? A lot of such signposting activity is currently carried out by business organisations, such as the Federation of Small Businesses and chambers of commerce. Will the SBC be expected to work closely with such organisations?

On the complaints side, the SBC can demand and order little. For example, the commissioner will not be able to order the production of documents from a company that has been complained about. Given the lack of hard powers for the SBC, the question is how effective they will be. I think that a big part of the answer will be the SBC’s ability to name and shame. Will the Minister explain how that will be carried out and publicised? The other key issue will be to have a charismatic leader, who will not be overwhelmed by the number of businesses involved or the lack of powers that go with the job.

That leads to the broader question of what the SBC should be about. In the other place, there was a description of the broader powers of the Australian SBC, and the Minister, Baroness Neville-Rolfe, responded that despite the success of the position in Australia, the Government had deliberately decided not to give our SBC as wide a remit. However, she did not really explain why that was the case, and an explanation would be helpful. Are there, or will there be, provisions in the Bill that will allow the role to be adapted, as is likely to be required? I know that the FSB wants there to be an advisory panel for ongoing consultation. Will that be provided?

Of course, it is not only Australia that has a champion for small businesses. The United States has had a Small Business Administration since 1953, and I once had the pleasure of visiting it in Washington DC. With more than 3,000 staff and a series of forthright commissioners who happily make a huge fuss about proposed Government regulations on business, it is pretty formidable. It has many other roles. Importantly, it leads on efforts to deliver 23% of prime federal contracts to small businesses, and it provides loan guarantees of up to 90% to small businesses. Although I am not saying that we should necessarily copy those foreign small business commissioners, will the legislation enable an ongoing review of what is required for the SBC to ease the way through the difficulties and regulation that we know hinder all small business?

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